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Sharpen Your Pencil – And Put These Three Stocks on Your "Shopping List"

Ask any of our gurus for advice on how to survive a stock-market sell-off – or even a whipsaw period like the one we’re navigating now – and you’ll get a surprising answer.

Keep a shopping list ready, they’ll tell you…

  • Featured Story

    Gas Prices Spike: Ease the Pain of $5.00 Gas with UGA, USO, COP, XLE

    February is typically a month when gas prices recede - but not this year.

    Average gas prices currently are about $3.69 according to AAA's Daily Fuel Gauge Report. That's higher than the average for the whole of 2011, which was the priciest year ever for gasoline.

    The average price for U.S. gas has climbed more than 10% in just the past two months. This suggests a trajectory that could produce a spike of 60 cents a gallon or more by May.

    "I actually believe that prices will be moving higher than 60 cents a gallon on average," Money Morning energy expert Dr. Kent Moors recently told Executive Editor William Patalon III. "By mid-summer, in fact, we could see $5 a gallon being reached in certain regions of the U.S. market."

    Here's why we could be facing the most painful year at the pump - and how you can offset record-breaking gasoline costs.

    What's Driving U.S. Gas Prices to $5 a Gallon

    Usually, higher gas prices result from low supply and high demand, but that's not the case this year. Even with consumption growing in emerging markets like China and India, the current surge in gas prices isn't based on increased demand for crude oil.

    In fact, according to Tom Kloza, chief oil analyst for the Oil Price Information Service (OPIS), demand for oil is at its lowest point since April 1997.

    Instead, there are a new set of factors pushing U.S. gas prices higher, including:

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  • Strait of Hormuz

  • Iran is Now a Full-Blown Crisis, Stage Set for $200 Oil Just when it looked like we could take a breather from the Strait of Hormuz, all attention is back on Iran.

    There are three reasons for this - all happening within the last week:

    1. First was Tehran's successful launch of a satellite, viewed by all in the region as being for military intelligence.
    2. Second, in his toughest talk to date, Iranian Supreme Leader Ayatollah Ali Khamenei voiced defiance to Western sanctions and pledged open retaliation if they are instituted.
    3. Finally, last Thursday, U.S. Secretary of Defense Leon Panetta expressed concern that, if matters continue, Israel could attempt an air-strike takeout of Iranian nuclear facilities within a month. Iran has been frantically moving essential components of its nuclear program underground to withstand such an attack.
    All of this is, once again, leading to a rise in crude oil prices.

    What's more, the EU decision to stop importing Iranian crude starting July 1 will cripple any chance Tehran has to combat escalating economic and political turmoil at home.

    Yet Khamenei's defiant tone during his Friday prayer meeting speech indicates that Iran's religious leadership will not wait for the system to unravel.

    And that is what makes this both a full-blown and an intensifying crisis.

    Brinksmanship in the Straits of Hormuz

    So what's being done?

    Washington has little - leverage, save its ability to temper an immediate escalation by Israel (leverage the U.S. can still apply, at least for the moment). It also has some indirect influence on what the E.U. does.

    Meanwhile, Saudi Arabia also is a wild card. It will not tolerate a nuclear Iran.

    And yes, there are ample indications that American and Israeli intelligence have concluded Iran will achieve the ability to develop nuclear weapons in the next 18 to 24 months.

    Some elements of that process will be available earlier, but remember: A weapon is of little value unless it can be controlled and delivered. The logistical and infrastructure considerations need to be in place first.

    Yet with such an inevitable conclusion staring them in the face, the West has decided to embark on a risky path...

    The target here is not the nuclear project at all (over which there is less and less outside control). Instead, it has become about creating massive domestic instability to bring down a regime.

    Now, this is not about ending the theocracy. With or without Mahmoud Ahmadinejad as president or Ali Khamenei as supreme leader, Iran will remain a Shiite-dominated country. Religion decisively controls politics, and the clergy oversees the society.

    The West is seeking a more moderate application of what will remain the Iranian cultural reality.

    However, as the brinksmanship intensifies, so will the price of crude oil. Tehran, in this dangerous game of international chicken, really only has one card to play - the Strait of Hormuz.

    There has been much misinformation circulated about the strait. Here are the facts.

    On any given day, 18% to 20% of the world's crude oil passes through it.

    According to the Energy Information Administration, the Strait's narrowest point is 21 miles wide; however, the width of the shipping lane in either direction is just two miles, cushioned by another two-mile buffer zone.

    Of greater significance, though, is the fact that most of the world's current excess capacity is Saudi. (This is the oil that can be brought to market quickly to offset unusual demand spikes or cuts in supply elsewhere.) And, unfortunately, Saudi volume must find its way through the same little strait.

    If we're unable to access the Saudi excess, that loss guarantees the global market will be out of balance. That will intensify the price upsurge - an upsurge that is already happening.

    Now for the question I'm being asked several times a day in media interviews...

    Just how bad can it get?

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  • Should We Be Worried About Iran? If the Iranian government makes good on its recent threats to stop oil shipments through the Strait of Hormuz, oil prices would shoot up $20 to $30 a barrel within hours and the price of gasoline in the United States would rise by $1 a gallon.

    Such a steep spike in crude oil prices would plunge the United States and Europe back into recession, said Money Morning Global Energy Strategist Dr. Kent Moors.

    Iran just concluded a 10-day military exercise intended to prove to the West that it can choke off the flow of Persian Gulf oil whenever it wants.

    The world's fourth-biggest oil producer is unhappy with fresh U.S. financial sanctions that will make it harder to sell its oil, which accounts for half of the government's revenue.

    "Tehran is making a renewed political point here. The message is - we can close this anytime we want to," said Moors, who has studied Iran for more than a decade. "The oil markets are essentially ignoring the likelihood at the moment, but any increase in tensions will increase risk assessment and thereby pricing."

    One reason the markets haven't reacted much to Iran's latest rhetoric is that although it has threatened to close the Strait of Hormuz many times over the past 20 years, it has never followed through on the threat.

    But a fresh wave of Western sanctions could hurt Iran's economy enough to make Tehran much less cautious.

    The latest sanctions, signed into law by U.S. President Barack Obama on Saturday, will make it far more difficult for refiners to buy crude oil from Iran. And looming on the horizon is further action by the European Union (EU), which next month will consider an embargo of Iranian oil.

    "The present United Nations, U.S. and EU sanctions have already had a significant toll," said Moors. "They have effectively prevented Iranian access to main international banking networks. Iran now has to use inefficient exchange mechanisms."

    Because international oil trade is conducted in U.S. dollars, Moors said, Iran must have a convenient way to convert U.S. dollars into its home currency or other currencies it needs, such as euros.

    Pushed to the Brink

    The impact of the sanctions combined with internal political instability has driven Iran to turn up the volume on its rhetoric.

    "Tehran has limited options remaining," Moors said, noting Iran has historically used verbal attacks on the West to distract its population from the country's problems. "The Iranian economy is seriously weakening, the political division among the ayatollahs is increasing, and unrest is rising."

    Analysts worry an Iranian government that feels cornered would be more prone to dangerous risk-taking in its dealings with the West. So while totally shutting down the Strait of Hormuz isn't likely, Iran could still escalate a confrontation beyond mere talk.

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