William Patalon III
But it's been an even bigger wakeup call for investors.
Years from now, investors will look back at this period as a turning point - the start of the greatest profit opportunity of this generation. And that's not all. The post-oil-spill period will go down in history as the period during which the United States was finally able to break its dependence on foreign oil, says Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world.
Investors who understand the energy-sector shifts that are taking place "will make more money in energy investments over the next several years than in any other sector during any other period in their lifetimes," says Dr. Moors, who is also the editor of the Oil & Energy Investor newsletter. With the changes he's currently projecting, "a large measure of energy independence for the U.S. becomes possible. And I'm not just talking about a mere economic 'recovery' here. We'd be looking at a standard of living that's 60% higher, an economy expanding at 5% to 7% a year and - most important of all - a future that we could dictate."
At its core, the Deepwater Horizon explosion and oil spill is a human tragedy: 11 workers were killed, others were injured and now many Gulf Coast residents will end up losing their homes and livelihoods.
But that's not all that has Dr. Moors seeing red: The accident that resulted from BP's incomprehensible risk-taking has killed an energy bill that could have set the U.S. economy on a course for energy freedom, and is going to summon the heavy hand of government in a way that will cost American consumers dearly while also keeping regular U.S. investors from reaping green.
And in today's markets - whipsawed by worries emanating from virtually every major market around the globe - a defensive-investing plan needs to include protective stops, inverse funds, high-yielding dividend shares, "sin stocks, and investments in oil and other value-storing commodities," Keith Fitz-Gerald, the best-selling author who is Money Morning's chief investment strategist, said in an interview this week.
With the world markets in flux, Fitz-Gerald sat down with Money Morning Executive Editor William Patalon III to talk about defensive-investing strategies. What follows is the full text of that interview.
That concept is based on the notion that the May-to-November span provides a weak environment for U.S. stock market investors. According to Jon Markman, a best-selling author and contributing writer to Money Morning, that viewpoint started gaining traction in late April. And why not? The major U.S. indexes were already up a lot more than anyone expected, making that a seemingly convenient point to take profits.
Those who didn't follow that strategy probably now wish that they had.
Traders said that a growing confidence in the strength of the U.S. rebound was a key rally catalyst.
But Money Morning's Shah Gilani was worried.
Money Morning Contributing Editor Peter Krauth - a noted commodities expert and editor of the Global Resource Alert advisory service - says he's found that "just right" catalyst. He's calling it the "Great Global Commodities Grab," and says it's being engineered by some of Wall Street's biggest investment banks.
But here's the key point: Because Wall Street is essentially "gaming" the system, this commodities grab is a chance for investors to reap bigger returns than they would get with the leverage afforded through options and futures - but without the risk.
Investors have reached the point where this physical commodities grab "gets really interesting," Krauth said in an interview with Money Morning. "JPMorgan Chase & Co. (NYSE: JPM) now owns ships overseas and storage tanks in Canada, Asia and Europe [that hold] millions of barrels of oil. And it's far from being the only one. Back in December, one report stated that if all the tankers being used as offshore storage tanks were placed end to end, that string of ships would stretch 26 miles."
Added Krauth: "We're talking about oil supplies being physically taken off the market... that can't help but affect market prices. And that's just with oil - Wall Street investment banks are taking major physical stakes in such commodities as gold and other precious metals, too."
Krauth - a highly regarded market analyst and expert in metals, mining and energy stocks - recently sat down with Money Morning Executive Editor William Patalon III to talk about how the "Great Global Commodities Grab" is going to ignite a rally in the prices of oil, gold, other precious metals and even agricultural commodities. During the question-and-answer session, Krauth also:
- Detailed how two leading investment banks just spent more than $2 billion to buy precious-metals-storage companies.
- Talked about how gold, throughout history, always ends up taking over for fiat (paper) currencies.
- Explained how the aggressive price forecasts Wall Street investment banks have made for both oil and gold are certain to become self-fulfilling prophecies.
- And described two companies - one an energy player and the other a junior miner - that he recently recommended to his advisory service, using them as illustrations to underscore his commodity-price predictions.
In July 2008, in his weekly "Buy, Sell or Hold" column, Money Morning's Horacio Marquezhad a better idea of his own: Buy Ford.
Investors who took heed of that advice have done quite well - Ford Motor Co. (NYSE: F) shares have soared more than 180% since they were recommended on July 28, 2008, at $4.75 a share. Ford's stock closed Thursday at $13.45 - for a gain of 183%.
That's the question investors have been asking since U.S. stocks essentially bounced off of their March 2009 post-crash lows - only to be launched into one of the strongest rallies in U.S. market history.
More than a year later, U.S. investors still don't know what to believe - or what to expect, says Jon D. Markman, a market commentator and best-selling author who is also a Money Morning contributing writer. The most recent sentiment poll by the American Association of Individual Investors, or AAII, showed that only 41% of investors are bullish. Cash flows at mutual funds that invest in U.S. stocks are telling a similar story, with a $5.1 billion monthly outflow, Markman says the most recent data shows.
According to a new estimate by the Congressional Budget Office (CBO), if the United States continues along its current path, U.S. public debt will reach 90% of the nation's economic output by 2020.
Given that federal debt has already zoomed to 53% of gross domestic product (GDP), this projected additional escalation seems outrageous.
Unfortunately, it's only a piece of the story.
In the midst of that chaos, Money Morning's Shah Gilani made five predictions, anticipating five looming "aftershocks" he said were certain to come true.
He was correct on all five counts - every prediction came true.
This wasn't the first time Gilani has made such bold predictions - and been proven right. In July 2008, for instance, when crude oil was trading at a record high of $145 a barrel, he predicted that the "black gold" was destined for a major fall - even though many pundits were calling for prices to spike as high as $200, $250, $300 and even $500 a barrel.
Once again, Gilani was right.
Gilani, a retired hedge-fund manger, Money Morning columnist and noted expert on the global credit crisis, has been able to do this time and again for one simple reason: He understands the power and profit potential of the global financial market's "capital waves."
"Capital waves create some of the biggest trading opportunities in the markets today," Gilani said in an interview last week. "Investors who are able to spot capital waves and identify their likely impact have a huge advantage over those who don't."
And the profit plays that loom are shaping up as the biggest and best, yet.
Earlier this week, Fitz-Gerald's prediction acquired a powerful new disciple: Goldman Sachs Group Inc. (NYSE: GS) Chief Economist Jim O'Neill.
In an essay that's part of a report published Friday for Chatham House, a London-based foreign-affairs researcher, O'Neill wrote that China's yuan is destined to become a global reserve currency on par with the U.S. dollar or European euro.
Here's how to protect - and grow - your money, even as the debt bomb explodes...