By 2020, more than 75% of us may be fat.

I had to put down my Big Mac with extra cheese and push my supersized order of fries aside to type this article today.

(My hot fudge sundae will just have to wait until after my editor sees it.)

The obesity epidemic has reached a level where it's affecting things like plumbing and public transportation...

Hospitals across the United States are replacing wall-mounted toilets with floor models to support the weight of obese patients, according to Reuters.

The Federal Transit Administration is requiring buses to be tested for the impact of heavier riders on steering and breaking. 

There's been talk about imposing a "fat tax" on the root of the problem: sugar-heavy soft drinks and processed and fast foods.

A new British Medical Journal study says a 20% tax would help curb obesity:

Economists generally agree that government intervention, including taxation, is justified when the market fails to provide the optimum amount of a good for society’s well-being. [This] include[s] a failure to appreciate the true association between diet and disease, time inconsistency (preference for short-term gratification over long-term well-being), and not bearing the full health and social costs of consumption.

Let's be honest here: People will not eat any better if you tax their burgers and milkshakes at a higher rate.

And we certainly don't need some bureaucrat telling us which foods have been deemed "bad for us."

Folks will continue to hit the drive-thru and buy the supersize portion...

And as they look to weight loss drugs to regain control, savvy investors should look to this sector to line their pockets.

Why We're Still Buying Hand over Fist

I told readers to buy into Arena Pharmaceuticals (ARNA) this month based on a heavily watched FDA decision on an obesity drug.

I recommended hedging with the June 2012 2.50 calls and puts...

Two days later, the hedge was up more than 112%:

We took those gains straight to the bank.

This wasn't the first time we've traded Arena Pharmaceuticals. On March 19th, I recommended jumping into the stock and the July 2012 1.50 call options, as the company faced a near-term FDA panel review of lorcaserin for obesity.

While we were only hoping for a small move in the underlying stock, we got more than 50% instead — and close to a double on the calls in just days!

It doesn't hurt that European regulators recently agreed to allow ARNA to seek approval for the obesity drug a few weeks ahead of FDA panel review...

And it won't be the last time we trade it.

Big Loss Leads to Biggest Gains

Final approval could come as early as June 27th of this year.

If the FDA approves Arena's drug, it'll be the first new weight loss drug to reach market in years.

As we've noted in the past:

The price of a biotech and pharmaceutical company will go up as the date in questions draws closer. As an FDA decision date, Phase III result date, or conference nears and people expect to hear good news, crowds of speculators and traders start coming in to buy the stock, sending the stock up.

This happens over and over again with many biotechs and pharmaceuticals. The only key is having the information in as far in advance as you can...

Even if the FDA decides to delay its final vote by three months (as it did with Vivus), we'll be alright — because we're simply looking to profit from a spike in the options premium as the date draws near.

Vivus' FDA decision date is July 17, 2012.

We're looking to trade this, too, following a three-month FDA delay.

I expect both to move even higher heading into their respective FDA decision dates...

While you can always just buy the underlying stock and hope for a small bump, we're looking for a triple-digit gain with options.

Stay ahead of the herd,

Ian Cooper
Analyst, Wealth Daily

Editor's Note: "If Facebook was smart, it'd shelve its IPO plans," Ian said in late 2011.

“In what’s likely to be a dramatic first day of trading, investors would be smart to pay close attention to the downward death spirals of Facebook’s buzz-heavy competitors... Stay away from this stock.”

Unfortunately, his warning fell on deaf ears. Ian was called an idiot by more than one reader, and his email inbox saw a backlash.

But as Ian points out, Facebook has been nothing short of a flop so far. The stock ended its first day only 23 cents above the IPO price. The stock dropped another 12% on day two. On day three, it was down to $30 and change...

On day four, Ian found this gem:

News reports indicate that big institutional investors received information about Facebook’s difficulty generating revenue shortly before the stock debuted, information that apparently wasn’t shared with other investors.

Facebook had dialed back its revenue expectations in a revised prospectus on May 9, but in a non-specific way. Reports out in the past 24 hours indicate that someone at the tech company gave Morgan Stanley and analysts at other underwriters more specific information about its revenue struggles. One investor was told revenue could slip as much as 5% below the bank’s previous estimates, the New York Times reported.

Retail investors simply got caught up in an over-hyped stock trading at 100x earnings and more than 25x sales.

And through it all, the "backdoor trades" Ian recommended in the run-up to the IPO have been doing just fine...

A real revolution is quietly taking hold across the nation.

No, I'm not talking about some sort of social reform or governmental upheaval.

I'm talking about the kind of thing that actually takes care of business, creates jobs, bolsters industry, increases quality of life, and even brings back the sort of prosperity we once thought was gone forever.

An acquaintance of mine, an attorney living and working in North Dakota, recently told me during a phone conversation, “If you're able-bodied, can get your butt out here, and want a job... you've got a job.”

He's not talking about some minimum-wage-paying type of slave labor scrubbing dishes or toilets...

He's talking about work that pays close to a six-figure average in his hometown of Williston.

The unemployment rate there as of the end of last year was a stunning, almost surreal -2%.

Yes, ladies and gentleman... that's a negative.

It means that there are more jobs than people. It means teenagers are being courted and even getting signing bonuses for jobs at Wendy's and McDonald's restaurants.

But that's all old news.

Unless you've been living under the motionless rear end of an Occupy Wall Street protester, you probably already know at least something about the oil-shale boom going on in the Western United States and Canada.

What I want to tell you about today is the newest phase...

The next step in America's steady return to the top of the global energy food chain centers not on crude oil, but on natural gas.

And it has the same technology to thank.

Hydraulic fracturing and horizontal drilling, which have given a new lease on life to the North American oil production industry, are now doing the same number on natural gas.

Already number one in global production of natural gas (with Russia a close second), new technologies are boosting production levels even higher...

The state of Pennsylvania, for example, has multiplied its nat gas production sevenfold — from 500 million to 3.5 billion cubic feet per day in the last three years alone:

For a closer look at just how dramatic such an expansion looks, check out this interactive map.

But this industrial resurgence isn't localized to a single spot on the map — or even unique to a single region.

~~wd_nat_gas~~

In Kansas and Ohio, the new age oil and gas boom has returned prosperity to areas that had all but given up on old American concepts like rapid upward mobility, free enterprise, and abundant work.

Recent discoveries in the Mississippian Limestone formation have boosted the state's total well count by 1,200% in just the last year, with literally trillions of dollars in recoverable oil and gas resources just waiting to be tapped.

The practical result of this is a near-zero unemployment rate — with high school graduates earning an average that's already surpassed $60k per year.

And the secondary economic impact of all this is even greater...

Today, in certain parts of Kansas, it's nearly impossible to find a vacant hotel room.

The result is that real estate is once again on the rise — driven by aggressive, forward-thinking entrepreneurs who saw their industry hit the lowest of the low just four short years ago.

In Harper County, Kansas, rent has gone up 500% in the last year alone.

Workers have taken to parking their RVs and camping out in parking lots.

And guess what? They're happy to be doing it.

This is still merely scratching the surface as far as the long-term effects of this boom go...

Major land-owners in these regions, namely the farmers (many of whom faced foreclosure between 2007 and 2009), are leveraging mineral rights to these oil and gas companies and making as much as $1,250 per acre, per year, plus royalties — turning simple, hardworking Americans into multi-millionaires.

Farmers now entering the rarefied 1%.

And the same thing is going on in Texas, the Carolinas, and all across the Midwest.

I wonder if that's what the OWS horde has in mind as it stomps, kicks, and screams about unfairness.

Frankly, I don't know anymore.

What I do know is that while thousands of professional complainers are busy tweeting, YouTubing, Facebooking, and otherwise broadcasting their version of a revolution, North America has come roaring back to the forefront of global energy production.

To your wealth,

~~WD_brians_signoff~~

We know the song and dance all too well.

It begins with a few notes about eliminating U.S. dependence on foreign oil entirely, followed by a two-step over renewables alleviating a very serious decades-long addiction to crude.

It's been done eight times since Nixon took the oath of office in 1969 — and with every repeat performance, we nod our heads and clap along.

It should be noted that the presidential dedication to energy independence doesn't come without a bit of humor...

The 32 solar panels that Carter installed on the White House were promptly taken down as soon as Reagan took a seat in the Oval Office. In fact, it was one of his first executive decisions.

So where are we today, 36 years into listening to the same broken record?

It appears the next 25 won't be much different:

So what's the solution to our energy independence that the last eight U.S. leaders have missed?

It's so simple, it's complicated: access to cheap energy.

Granted, our move away from oil won't happen overnight (and I wouldn't pay much heed to anyone saying it will)... but it will happen.

Over the last year, investors have been successful banking on future LNG exports.

U.S. LNG is the bandwagon everyone's jumping on — and the same place they could end up getting burned.

So far, our Commander in Chief has been supportive of LNG exporting projects.

(Were you expecting anything different during an election year?)

But here's the catch: Obama doesn't have to openly oppose it. Because buried deep in the government's archives is a particular piece of legislation that's been tucked away for decades...

The Export Administration Act of 1969 effectively gave the president the authority to limit or suspend exports of U.S. commodities (among other things) in the interest of national security, short supply, and foreign policy.

I can think of a few individuals who consider our domestic energy supplies — specifically, our cheap natural gas — an interest to national security.

~~wd_nat_gas~~

Right now, natural gas costs roughly the same as a $15 barrel of oil.

When the first shipments of LNG depart from Gulf Coast facilities, the inevitable outcome would be rising domestic natural gas prices.

When that happens, how long until political pressure reaches a boiling point for the current president?

More importantly, is there a way for us to properly prepare for the upcoming shift to natural gas?

On the one hand, low prices have been crushing North American gas producers; on the other, future LNG exports could be nipped in the bud by pushing the right political buttons.

Prepare Your Portfolio for the Flood

There's a better way to invest in natural gas — and it isn't from potential exporters whose shipments could be cut with the snap of presidential fingers.

Just as we saw in the early days of the U.S. petroleum industry, the real investment potential lies with infrastructure. 

According to EIA data, there are more than 210 natural gas pipeline systems and over 300,000 miles of transmission pipelines across the United States:

Add to that 1,400 compressor stations, 11,000 delivery points, 24 market hubs, and over 400 underground storage facilities... and we're still not prepared for the transition from oil.

Though we've covered several of these infrastructure plays recently, the real money here is in supplanting oil's domination in the transportation sector.

When millionaires are filling up their trucks for $1 a gallon, it's a no-brainer to hop aboard.

That's the direction we're headed. 

~~keiths_signoff~~

This article was originaly run on our sister site, Energy and Capital.

Please forward to your CEO.

Why don't you promote an industry that doesn't destroy the environment and doesn't pollute the water supply?

Promoting the fracking industry identifies your company as a member of the 1% that will do anything to make a profit including destroying the water supply that everyone needs just to survive.

Sincerely,
One of the 99%

You think she pollutes her lungs doing mad bong hits?

Ah, yes, one person's pollution is another's nirvana.

But let's get down to brass tacks: Had Ms. Birkenstock done a little digging, she would've discovered that a few years ago, this company published a book titled, Investing in Renewable Energy: Making Money on Green Chip Stocks.

That’s an inconvenient fact.

And extreme environmentalists never let facts get in the way of their agenda — or their happiness.

Ever notice how these people are always pissed off, pessimistic, and depressed?

There's so much oppression in the world!

But here's some good news for Ms. Birkenstock...

Earlier this month, the U.S. Environmental Protection Agency said drinking water is safe to consume in a small Pennsylvania town that has attracted national attention after residents complained about hydraulic fracturing for natural gas.

The EPA recently completed testing water at 61 homes in Dimock, Pennsylvania, in the Marcellus Shale region, where residents have complained since 2009 of cloudy, foul-smelling water.

Dimock became popular after amateur film-maker Josh Fox released the documentary Gasland, which highlights footage of residents who were able to light their tap water on fire just by holding a flame next to a running spigot.

It should be noted that methane has been found seeping to the surface in parts of the Marcellus Shale in Pennsylvania since the late 1790s.

According to historical records of Susquehanna County, Pennsylvania:

Early reports from those who settled the area indicate that plenty of methane (in addition to brine) found its way up to the surface as well — so much methane, in fact, that records suggest the water was flammable dating as far back as 1795.

Susquehanna County isn’t the only place in the Marcellus where this has been occurring for centuries...

William Hart is credited with drilling the world’s first natural gas well in 1825 in Fredonia, New York. (Fredonia is about a four-hour drive northwest from Susquehanna County.)

Drilling a well 27 feet deep into shallow shale rock, Hart struck gas.

How did he know where to drill?

He listened to the Indians, who identified a place known as "Burning Creek" where methane had been bubbling up and igniting for decades.

I doubt any of this will change the minds of the anti-fracking crowd. They're true believers.

As I’ve said many times before, if God Himself came down from the heavens and declared fracking safe — and that it would be done in the future using fairy dust, unicorns and rainbows — the environmentalists would accuse Him of being bought off by the fossil fuel industry.

But we need not wait for divine intervention...

~~wd_nat_gas~~

Next to Pennsylvania is Ohio, where the Utica Shale exists.

Last week it was announced that a new and safer method of fracking will be tested on two wells in the Utica region in Ohio by the end of this month.

If this method works in the Utica, it will be a game-changer.

You see, a recent report by state geologists released some mind-blowing estimates on the Utica Shale in the Buckeye State.

If we are to assume that the Utica Shale play in Ohio holds one-third of its volume in natural gas and two-thirds of its volume in crude oil, recovering just 1.2% of these hydrocarbons would result in 3.75 trillion cubic feet of natural gas and 1.31 billion barrels of oil.

If we increase the recoverable rate up to 5%, the estimated recovery jumps to 15.7 trillion cubic feet of natural gas and 5.5 billion barrels of oil.

So we could be looking at another Bakken-type play — that’s how significant this is.

And it all hinges on one tiny company’s revolutionary new fracking technology.

In fact, many in the industry are calling it everything from a “magic frack” to the “key to America’s energy independence.”

I’m calling it “Fracking 2.0.”

And deservedly so. This fracking company's drilling technology is so superior to current drilling methods, it produces between 50 and 80 percent more oil and gas than a conventionally-fracked well.

It produces so much more oil and gas from wells, in fact, that many of North America’s major oil and gas companies have partnered with this company for rights to use their drilling technology.

This is the future of shale drilling — period.

That’s why this company’s drilling method received the Technological Innovator of the Year Award for 2011.

I’ll have a full report on this emerging situation in the coming days. Be on the lookout for it.

The original bull on America,

~~WD_brians_signoff~~

Wedbush just started Facebook with an outperform rating before the IPO even materializes, and Stern Agee initiated coverage with a Buy rating. But these initiated buys are just too funny — and blatantly consistent with the theme of the shills.

You know that. I know that. And they know that.

Remember when Motor Trend magazine gave the Chevy Volt its “Car of the Year” award before the car pulled off the assembly line?

Remember how much of an embarrassment it must have been for the magazine when the car became an abysmal failure?

Well, Facebook's fate will likely be worse than the Chevy Volt...

And it was worse. It was a disaster.

The stock got down to $30 a share this morning... and could fall even more.

Nice call, Wedbush and Stern Agee. Your clients must be thrilled with your advice.

Here's what's interesting.

Lead underwriter, Morgan Stanley cut its revenue forecast for the company shortly before the IPO.

“The change in Morgan Stanley's estimates came on the heels of Facebook's filing of an amended prospectus with the U.S. Securities and Exchange Commission (SEC), in which the company expressed caution about revenue growth due to a rapid shift by users to mobile devices. Mobile advertising to date is less lucrative than advertising on a desktop,” says Reuters.

"This was done during the roadshow - I've never seen that before in 10 years," said a source at a mutual fund firm who was among those called by Morgan Stanley, according to the same report.

"Successful investing is anticipating the anticipations of others."

— John Maynard Keynes, 1st Baron Keynes of Tilton

There is perhaps nothing quite as agreeable as a warm spring day, laughing children, and burning burgers.

And despite my best intentions, I burnt them black and crisp.

I'm not sure what the connection is between investing and burgers, but it's there...

Warren Buffett reportedly eats cheeseburgers and fries alone in his office before making an investment decision.

Bill Gates ritually ate burgers and shakes for lunch at Microsoft in 1981 in a two-story building right next to the Burgermaster drive-in.

World's Best Burger

Lee Iacocca knew how to make history's best burger.

For those who don't know, Lee produced the Ford Mustang, the Chrysler minivan, and the K-car.

The story goes that Henry Ford II, Lee's boss, used to complain that he couldn't get a burger as good as the ones served in the executive dining room at Ford.

So before Iacocca had a cookout, he went into the kitchen one day and asked the chef what his secret was...

The chef took out an inch-thick New York strip and put it in the meat grinder, mashed up a patty, and tossed it on the grill.

He smiled and said, “Amazing what you can cook up when you start with a five-dollar hunk of meat.”

It's more like $25 today, but I digress. As I said, I had the best of intentions this weekend when I mixed Old Bay with grass-fed beef to make my patties.

And perhaps I was distracted by a young whippersnapper who dumped a bucket of water on me from a second-floor window, but the end result is best described as hockey pucks.

Good Intentions

And so it goes with John Maynard Keynes' quote above.

In his magnum opus, "The General Theory of Employment, Interest, and Money" published in 1936, Keynes argued that demand — not supply — is the key to growing economic activity.

And what better way to increase demand than to punish savers through low interest rates and create vast amounts of government deficit spending.

The idea of the General Theory is to spend during economic downturns and save during boom periods.

Of course it sounds great; no one objects to saving for a rainy day.

The problem is that economics have to deal with humans in mob form...

And we humans are weak.

We make mistakes. We lie, cheat, and game the system. Spending in bad times becomes spending in good times. Burgers get burnt.

The good news for us Yankees is that in the old country, they are cooking with gasoline.

~~wd_nat_gas~~

The Mighty Dollar

Oil prices continue to drop. WTI is at $91.95. Brent is down to $107.40 (an 11% drop this month).

Gold has bounced a bit to $1,592 an ounce after selling off for weeks.

This move has been caused by two factors: First and foremost, the U.S. dollar has rallied on new worries over spending in Euroland. It is a flight to quality, and the dollar is now the best of a bunch of really bad currencies.

The second factor is that crude oil inventories at the Cushing, Oklahoma, storage hub reached a record 45.1 million barrels on May 11th after rising 16.9 million barrels since January 13th.

This is a new phenomenon and is different from the flat level of inventories from January through April in recent years. It is due to increased production in the Midwest and Canada.

According to the EIA, “Monthly data show the Midwest received about 350,000 bbl/d (25 percent) more Canadian crude in January and February of 2012 than they did in the first two months of 2011.”

Last week in Crisis & Opportunity, we took a number of profits — including 410% gains from Africa Oil (AOI.V).

I received two emails worth sharing with you today:

My $7 stop loss triggered today on African Oil Corp. I bagged 350%. Should have had my stop loss at 6.95, I know.
Is there a buy in level one should be looking to get back in?


Mr. DeHeamer and C&O Team,

I won't lie. Seeing my suspicions confirmed with my email in your letter put a big ol' smile on my face that was hard to wipe off... especially since I made a 375% gain from your Africa Oil recommendation. A sizzling feedback is the only heat you should be taking.

The renewed Keynesian spending in Europe — coupled with large oil production in North America — has boosted the dollar at a time when oil inventories are bursting at the seams.

I have taken profits in my oil positions and am looking for other investment avenues.

Boom Times Ahead

Cheap oil and a strong dollar are good for U.S.-based manufactures, the U.S. debt, trade balance, inflation, and mortgage prices.

The 10-year Treasury fell to another new record low of 3.75% this week.

It could be that massive amounts of deficit spending around the globe is the precursor to a devastating economic crisis in the future...

~~wd_nat_gas3~~

All the best,

~~chris_signoff~~

“In what’s likely to be a dramatic first day of trading, investors would be smart to pay close attention to the downward death spirals of Facebook’s buzz-heavy competitors.”

“Ian, you're an idiot,” I was told. “Anyone with half a brain will buy shares of Facebook when it IPOs. It's a guaranteed winner. “When your recommendations blow up in your face, and Facebook explodes, I'll be asking for my money back.”

But the warnings fell on deaf ears.

And retail investors – like my adoring fan – simply got caught up in an over-hyped stock trading at 100 times earnings, and more than 25 times sales.

So far, Facebook has been nothing short of an embarrassment.

It ended its first day up 23 cents cents above the IPO price. And the stock is already down another 12% on day two. And to be honest, I don't see much upside here in the near-term.

D'oh!

As I said Friday:

If the stock drops as fast as it goes up on the first day, none of us will be surprised.

The glitz of the social network has worn off for me, and I wonder if that will be true for millions of other users.

The business is real — nobody is contesting that. And it's generating great revenue ($3.7 billion in 2011).

But I still can't wrap my brain around a $100 billion valuation.

Facebook is already bemoaning revenue pressures and there are concerns about slowing growth and sky-high valuations.

Profit margins may have peaked. Users aren't trusting of Facebook...

General Motors has already pulled $10 million in advertising, suggesting even GM doesn't have faith in Facebook's operating platform.

Stay away from Facebook. Stay far, far away.

After all, we were among the first investors to recognize the incredible potential of this unique shale oil formation... and Wealth Daily readers have gotten the profitable details on top Bakken oil producers since 2007.

So, you may be interested to know that the latest assessments flowing out of the Bakken suggest there is much more light, sweet crude there than previously believed...

I'll to get right to the point.

Here are a couple quotes from two of the biggest oil companies in the Bakken, Continental (NYSE: CLR) and EOG Resources (NYSE:EOG).

From Continental's CEO Harold Hamm:

"The latest game changer is the Three Forks lower benches. We've literally found an additional oil saturated reservoir in the Bakken that again, makes this world-class oil play bigger and better."

From Continental's President Jeff Hume:

"I believe we just have a larger petroleum storage system than we previously thought, and the reserves will increase as we get that data in hand, and that will be later this year."

From Continental's Senior VP Jack Stark:

"Continental acquired 6 cores of the entire Three Forks formation in 2011 and discovered there were up to 3 additional layers within the Three Forks formation. The significance of this discovery, and what makes it such a game changer, is that the volume of oil in play for the field almost doubles with these added reservoirs."

And from EOG CEO Mark Pappas:

"...we have more potential upside and growth opportunities than we've previously indicated... we're much more excited than we were a year ago about our remaining Bakken and Three Forks potential."

These insiders are estimating Bakken recoverable oil reserves may be 60% higher than currently thought... and it all has to do with layers.

Shale is a sedimentary rock, meaning it is layered. Further exploration keeps turning up deeper layers of oil-producing shale.

At first it was just the Bakken, the upper level. Then they found the Three Forks Formation beneath the Bakken. Together, the Bakken and the Three Forks have around 3.5 billion barrels of recoverable oil.

More recent drilling revealed the Sanish formation under the Three Forks, which has another 1.5 billion barrels of oil.

But now companies are finding more oil below the Sanish level — and they're pretty excited about it.

Continental is in the process of selling off other assets and plans to focus all of its future spending on its Bakken holdings.

That's right, Continental — the same company that drilled the very first Bakken well in 1995 — is going "all in" on the Bakken.

Knock, Knock: This is Opportunity

The vast majority of investors have never heard of the Bakken.

Even those who know about the Bakken don't know that there could be 60% more oil there.

This is what you might consider "breaking news."

The U.S. Geological Survey is currently reassessing the Bakken's recoverable reserves. Results are due in 2013, but I guarantee the "whispers" will begin circulating sooner than that. In fact, they may have already started.

Oil prices have dropped sharply over the last few weeks as investors are terrified of what the lunatics in Greece will do next...

And they've pushed my favorite Bakken stocks down to the point where they trade with P/Es of 7, even 5! If reserve estimates jump 60%, these P/Es would effectively be 3 and 4.

But don't worry — those ultra-low P/Es won't last...

Stay tuned,

Briton Ryle
Analyst, Wealth Daily

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Buy This Silver Stock Right Now: Silver Stocks are the Cheapest I've Seen in Years
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You Should Be Bullish in the Bakken: Now is the Time to Buy
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How investors can take advantage of the presidential control over U.S. natural gas supplies.

When you feel passionately enough about something, you go to great lengths to get your hands on it.

But what about the Iraqi dinar?

Why are people so crazy about it these days? Is it really so unique and exotic?

In the case of the dinar, none of that really matters too much.

One simple aspect of human nature will explain this little mystery...

No one – passion driven or not – willingly turns down an ideal investment opportunity where the potential for great reward surpasses any associated risk.

The Iraqi dinar is a currency that has acquired quite a bit of popularity since the Iraq war began in 2003. That popularity has increased tenfold amidst speculation that it will dramatically increase in value. Why else would the United States government be hoarding more of it than any other nation on the planet (excluding Iraq)?

Did Bush know something we didn't when he asserted that the “war would pay for itself”?

Recent Dinar Developments

In 2011, Iraq's economy supported the rising value of the dinar: business was booming and the U.S. dollar was falling. Iraq's GDP grew at least 12 percent...

But what about all the NEW news reports screaming “DEPRECIATION!”?

Buyers Beware!

Rumors of extreme deprecation have become a complex issue, as many sources have bantered back and forth over the past year, entertaining the idea that a serious devaluation may be underway.

However, the Central Bank of Iraq attempted to extinguish that notion recently when it publicly announced an imbalance of the Iraqi dinar exchange rate while simultaneously denouncing rumors that the dinar will soon experience a sharp decline in value.

Earlier in mid-April, the finance committee in the Iraqi Council of Representatives warned investors and Iraqi citizens how the low exchange rate of the dinar compared to the U.S. dollar would be detrimental to Iraq's economy. Strict regulations were then mandated on the sale of dollars based on trade restrictions with Iran and Syria.

The Central Bank was expected to withdraw dinars from the market in masses...

Two days later, everything changed....

Iraq has officially suspended all previous plans of dropping three zeros off the value of bank notes of its currency, claiming that the economic climate isn't yet “suitable” for such a dramatic restructuring procedure.

To withdraw the 30+ trillion dinars currently in circulation would be an overwhelmingly tedious process that is not on Iraq's agenda and will not be a priority “until further notice,” according to the cabinet secretary.

Here's a closer look at the change in exchange-rate from July 2011 to present day:

It's a curious story, indeed. Speculating on something so volatile – one day devaluation is imminent and the next it's not to be spoken of “until further notice” – feels fruitless.

In times like these, investors are wise to hedge themselves accordingly and make sure their portfolios include some sure-winners, like physical precious metals.

Until next time,

Brittany

“An unexpected state barrels past Alaska and now trails only Texas in crude production.”

That state is North Dakota, the very “unexpected” oil-producing state we've been talking about for the last umpteen years...

The same place that has returned hundreds of thousands of dollars in profits for our readers for years on end. 

I was all set to bash the press for being late to the party, but then I received this note from a reader in reference to my Facebook IPO article of last week:

Ian, you're an idiot.

Anyone with half a brain will buy shares of Facebook when it IPOs. It's a guaranteed winner.

But you're buying Groupon [in Options Trading Pit] and Zynga instead?

When your recommendations blow up in your face, and Facebook explodes, I'll be asking for my money back.

Groupon is a garbage stock stuck in a downtrend. It's over for that stock... over.

I found it quite amusing. Because as much as I love fan mail, I love the hate mail even more.

Shortly after I received that note in my inbox, Groupon would rocket from $10 to more than $15 in less than five days — returning more than 70% and 196% gains in less than four days for my options readers.

I have yet to hear back from my critic.

As for the other recommendations noted in that Wealth Daily article:

• Zynga (NASDAQ: ZNGA) ran from less than $8 to close to $9.

• GSV Capital (NASDAQ: GSVC) ran from $16.25 to close to $19.

• Firsthand Technology (NASDAQ: SVVC) ran from $27 to more than $30.

• And the Global X Social Media Index ETF (NASDAQ: SOCL) is up marginally so far.

Even our First Trust IPOX-100 Index (FPX) December 2011 trade has rocketed from $23 to $29.

These are the only Facebook-related trades you want to own going into today's IPO.

~~options~~

Don't Buy the Hype

As a mere retail investor, we'd have to duke it out with the Big Boys in a volatile session.

I'm not willing to risk my money — or your money, for that matter — in the first few weeks of its existence.

Paying 99x earnings is insane. The initial gap could be insanely high.

And if the stock drops as fast as it goes up on the first day, none of us will be surprised.

The glitz of the social network has worn off for me, and I wonder if that will be true for millions of other users.

The business is real — nobody is contesting that. And it's generating great revenue ($3.7 billion in 2011).

But I still can't wrap my brain around a $100 billion valuation.

Facebook is already bemoaning revenue pressures and there are concerns about slowing growth and sky-high valuations.

Profit margins may have peaked.

Users aren't trusting of Facebook...

General Motors has already pulled $10 million in advertising, suggesting even GM doesn't have faith in Facebook's operating platform.

According to Forbes.com:

Click-through rates are much lower on Facebook than they are on the internet generally, or on Google, according to WordStream (which manages search ads on Google and thus has a conflict of interest):

Facebook: 0.051%
Google: 0.4%
Average: 0.1%

Worse, CEO Mark Zuckerberg doesn't seem to understand that making profits should be the primary goal for a public company, not a secondary...

"We don’t build services to make money; we make money to build better services,” he says.

Look, I've seen and called many bubbles in this crazy market, and I'm telling you to stay away from this stock.

It's over-hyped.

I'll look to buy it when the sky is falling.

~~ians_signoff~~

The United States is producing more natural gas than it has in years...

Last year at this time, there were 1.736 trillion cubic feet (tcf) of gas in storage. Right now, there are over 2.576.

The EIA says we'll have 4.096 trillion cubic feet in storage by October, which is pretty close to maximum capacity of 4.103 tcf.

Fracking is growing so fast, we're drilling a record amount of wells each year. Last year saw a record 16,000 fracked wells. The estimate for this year is 19,000 new wells.

The Chinese and Europeans have spent billions upon billions in joint ventures and acquisitions to learn how to frack from us.

Because of the abundant production, natural gas prices are now the lowest they've been in a decade. And that's created some problems for companies that make their profits based on the price of the commodity.

Just ask Chesapeake Energy (NYSE: CHK) shareholders who've lost 45% of their value in the past year as fracking came of age.

But the shale boom has been a boon for other companies involved — especially for those that get paid no matter how low the price of natural gas goes.

Heart of Fracking

Water is at the very heart of fracking.

Each fracked well can require as much as 22,000 cubic meters of water. That equates to 140,000 barrels — or 5.88 million gallons.

After they're used, those 5.88 million gallons turn into a chemical-laced brine that's six times as salty as the sea.

It's not an environmental disaster. It's not going to kill the industry. But it does have to be addressed.

The 16,000 new wells last year required up to 94 billion gallons of water.

The 19,000 new wells this year will require up to 111 billion gallons of water.

All of it needs to be treated.

Water Picks & Shovels

Brent Giles, lead author of a new Lux Research report on the fracking water market, said last week:

Fracking represents a significant water treatment challenge — hydrocarbons, heavy metals, scalants, microbes, and salts in produced and flowback water from shale gas wells represent a water treatment challenge on par with the most difficult industrial wastewaters.

The report notes those challenges will create a $9 billion industry in the next eight years...

And companies are already popping up to take advantage. Clean water is the picks and shovels for the fracking industry.

This is the gold rush for gas.

And just as with the gold rush, it's going to be the providers of picks and shovels who grow richest, not the prospectors.

Clean water is the picks and shovels for the fracking industry.

~~nicks_signoff~~

This article was originaly run on our sister site, Energy and Capital.

That was the year two things happened.

First, Steve Jobs — a then youthful, rebellious computer nerd — and his company Apple introduced the first Mac.

The now famous 1984 commercial they used to introduce the revolutionary all-in-one "computer for the people" during Super Bowl XVIII was the kind of marketing coup de grace Jobs would become known for...

And to this day, it's still considered one of the greatest commercials of all time.

But that's only part of the story...

That same year, one of my favorite movies, Revenge of the Nerds, hit theaters, forever cementing the concept of a "nerd" in our common vernacular as something not to ridicule or laugh at, but to embrace, to respect, perhaps even to fear.

Today, more than a quarter century later, the revenge of the nerds — be it real or fictional — is still going on.

Ever since the first PC booms of the 1980s, the world of technology has been reinvented, shaken to its foundations, redefined, rebuilt, and reevaluated numerous times.

And yet somehow, it always manages to come out more relevant, more aggressive, and yes, more profitable...

Apple apparently "died" in the mid 1980s only to come back stronger than ever 10 years later, ultimately culminating into the monster it is today.

Microsoft — the operating system king that appeared to be on the verge of Congressional crucifixion in the late 90s for its alleged monopolization of the x86-based operating system — is trading today for basically the same price it was trading for going into that potentially destructive legal proceeding. Its emperor Bill Gates remains the second richest man alive.

The hits just keep on coming...

Steve Jobs, who everyone thought had reached and fallen from his peak in the mid 80s, returned to Apple, sending the company on an earning streak unseen anywhere — in any sector — before or since.

Introducing the iPod and iTunes, he redefined the music industry in the first decade of the oughts just as he had redefined the computing industry 15 years earlier and the animation industry in the 90s.

The imprint Jobs left on the tech industry — and on all of our lives by extension — goes so deep that most people don't even know just how far his influence stretches.

Thanks to the work he did developing Pixar, his influence on the entertainment industry will continue to be felt probably for as long as animated movies are made. When he died, Jobs owned $4.6 billion worth of Disney, making him the company's largest shareholder.

~~wd_dividend~~

And then there's the Internet, which I don't even know how to begin to tackle...

Looking at the list of the richest people in the world, it's a veritable roll call at a retirement home, with the mid-50s being the equivalent of a toddler in a sea of 70-, 80- and 90-year-old Scrooges.

And then you hit the 24th and 25th richest individuals on the planet. Both have yet to celebrate their 40th birthdays and both are self-made.

How does that happen?

In a word, Google.

Over the last decade and a half, the Internet has proved to be the fastest and most popular way of making extremely young people extremely rich.

Google is a big and universally-known example, but what about the smaller, still well-known examples like YouTube, Twitter, and Groupon?

All of them made hundreds of millions for their founders — and usually in less time, from concept to buyout — than it takes the average American 20-something to get through three years of a four-year college degree.

What's most amazing about this sector is that while the rest of the economy is questionable at best; while other technologies, resources, and commodities can be the topic of controversy, this one just keeps marching forward — for better or worse — coming up with newer and more surprising ways for us to spend our time... and our money.

In a way, it's a financial mirror to Moore's Law, the decade-old technological axiom that states that every 18 months or so, the density of micro-processors, and therefore the speed at which they operate, effectively doubles.

So where will it take us next?

Futurists like my personal favorite, Ray Kurzweil, say that the event horizon of a technological singularity is drawing near.

They claim the moment when machines become smarter than us is inevitable because that's essentially the end toward which machines have been developed in modern times.

They'll continue to be made smarter and faster until such a moment when they'll be able to make themselves smarter and faster at a rate that surpasses human ability.

After that, the only human role to be played in technological evolution will be one of oversight and control.

At that point, of course, the super-smart machines will either recognize us as useless, stupid task-masters — leading to the inevitable visit from a monotoned Arnold Schwarzenegger in a black leather jacket — or we'll somehow become one with them and live on forever as enlightened cyborgs.

I certainly don't know what will happen.

In fact, nobody knows what the future holds in store.

What we do know is that unlike the case is with oil, or gold, or the retail market, the tech market really has no ceiling, no limits, and no boundaries other than those dictated by human imagination.

In many ways, today feels like 1994: the start of the Internet revolution and the Internet bull market.

And of course, Wealth Daily will be ahead of the curve — just as we were with Peak Oil.

To your wealth,

~~WD_brians_signoff~~

Can you feel it?

I'm talking about the buzz surrounding the Facebook IPO, which is scheduled for May 18th and will likely be valued around $100 billion.

There are a lot of people on Wall Street who are pooh-poohing the valuation, of course.

They say there is no way Facebook should be valued with a P/E of around 100 when Apple and Google have a P/E of 20 or so.

A P/E, or price to earnings ratio, is a value measure of a stock.

The rule of thumb when you buy a private company like a tire shop or a bakery is that you want to pay five times the yearly earnings. This means you make your money back in five years. Simple.

This varies of course due to things like earnings growth, margins, and debt. But it's a solid place to start.

In public companies, the P/E is higher. The P/E on the Nasdaq is 11.09. The Dow 30 is 13.99.

Google had a P/E ratio of 67.5 when it came out. There were plenty of analysts saying it was too richly valued.

Here's how it did the first four years after its IPO...

You'd take a 500% winner in four years, wouldn't you?

Boom, Boom IPO

Back in the boom days of the dot-com bubble in the late 1990s, every bar and restaurant you went into ran CNBC all the time.

Everyone was talking about how much they made in Yahoo, AOL, and Amazon.

Amazon is the only survivor.

You might be surprised to learn that Amazon's P/E ratio right now is 189!

But I'd imagine you'd take a 1,600% gain over the last decade.

Today the local pubs and eateries run ESPN. People talk about the mighty Orioles of Baltimore.

They also talk about Facebook: “Saw your thing on Facebook yesterday,” or “Nice pic on Facebook.”

Or how about the ubiquitous “I don't do Facebook.” It's the new “I don't watch TV” for the too-cool-for-school set.

I hear these types of conversations almost every day.

All these people who are on Facebook, almost 1 billion folks (or 15% of the entire human population) know and understand it... at least, they think they do.

And they will buy it — just like people who eat at Chipotle (CMG) bought that stock (P/E 55.82).

~~vix-box~~

Don't Buy It... Yet

That said, you won't be able to buy it at the expected offer price of $34 to $38 a share. If this IPO follows similar ones, it will be a tough buy for the first six months...

It will launch, sell-off, launch again, and finally after six months — when the insider shares are unlocked — the stock will likely sell off to a buy price.

The SEC makes insiders hold for six months before dumping shares.

Here is a typical IPO chart pattern:

I used to run a service that played these specific moves.

They repeat — and you can make money from this cycle:

1. Initial hype, low number of shares in the float send stock up.

2. The sponsoring broker takes his money out. It's all profit to him.

3. Run-up into earnings; true believers buying back.

4. Insiders unlock. They can and do sell shares... Float increases, stock hits low.

5. Whatever news was held back from the first post-IPO earnings is pushed out in the second quarterly earnings. Stock launches.

My colleague Ian Cooper just made 174% in five days trading this very scenario.

Have a great day,

~~chris_signoff~~

He should know better than anybody else.

Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.

But that's only half of the story...

The original quote is believed to be: "Buy when there's blood in the streets, even if the blood is your own."

This is contrarian investing at its heart — the strongly-held belief that the worse things seem in the market, the better the opportunities are for profit.

Most people only want winners in their portfolio.

But as Warren Buffett warned, "You pay a very high price in the stock market for a cheery consensus."

In other words, if everyone agrees with your investment decision, it's probably not a good one.

I will admit it’s a hard maxim to follow.

It goes against human nature, against your natural instincts.

I mean, it’s counterintuitive to run into a burning house not knowing if you'll come out alive.

And just because I’ve been in the business spanning three decades now doesn't mean there aren't still times when I have to force myself to act against my emotional impulses, when I have to make fear my friend.

This is one of those times.

Right now, investors are running scared.

As you read this, the European Union is literally preparing for Greece's exit from the euro.

If that happens, the Greeks will return back to the drachma. Nobody knows what that really means, or what the outcome will be.

Greece could be the first domino to fall.

The speculation is that Spain is next, where the unemployment rate is a bowel-shaking 25%. After Spain, maybe Italy falls...

If these nations go down, the EU will fall apart.

So there’s a lot of uncertainty in the market. And the market hates uncertainty.

That’s when investors turn to gold and silver.

So I can say with confidence gold and silver stocks will be higher a year from now.

There are rumors that barter and, ahem, gold and silver are the primary and preferred mode of payment in Greece.

~~silver_signup~~

Hear that, Uncle Warren? Demand for physical gold and silver remain high.

However, gold and silver stocks are sitting a multi-month lows — and herein lies our opportunity.

Large cap silver stocks are at the cheapest valuations I’ve seen in years.

And they don’t come any cheaper than Pan American Silver (NASDAQ: PAAS).

Pan American is the second-largest primary silver mining company in the world with seven operating silver mines in Peru, Mexico, Argentina, and Bolivia.

Pan American also owns the Navidad silver deposit, one of the largest undeveloped silver deposits in the world, and is the operator of the La Preciosa silver project.

In this light, you can buy world-class assets at extremely distressed levels.

Here are the company's vitals:

Pan American Silver trades at a market cap of $1.6 billion on trailing twelve-month revenue of $855 million.

Its cash position is $451 million. Its P/E multiple is 4.8 on earnings per share of $3.31.

Plus the company has been growing its revenue like a weed mainlining Miracle-Gro.

Take a look:

Year                     Revenue

2005                     $122

2006                     $255

2007                     $301

2008                     $339

2009                     $455

2010                     $632

2011                     $855  

At these valuations, I believe PAAS is a screaming buy for contrarian investors.

Profitably yours,

~~WD_brians_signoff~~

This is true.

It takes time to understand not just who is lying to you, but what their motive is — and most importantly, how to profit from it.

Believe me; everyone on Wall Street has a motive.

Mine is simple: If I make readers money, they continue with their membership, and therefore I make money. If I don't make readers money, they fire me.

That said, I've been in business for fifteen years and I even have a few readers who go back to the beginning. Of this I am very thankful.

Because in truth, I couldn't do what I love without you. If you don't make money, you fire me. It's that simple.

With this in mind, here are the first ten of my 40 Commandments of Trading.

1. The market is god. This means that the market is always right — even if it's wrong. If you think the market should be in a double dip and it isn't, then that's your problem, not the market's. Your theory is wrong. You missed something. Blaming the market never made anyone any money.

2. Buy the crisis. When a political or economic crisis occurs in a country, the best thing to do is to go to www.adr.com and find the bank, telecom, or brewery that has sold off the most and buy it. When Wall Street fund managers sell ETFs and country funds, they sell these large stocks that act as a proxy for the country as a whole. When the money comes back, it comes back into the blue chips.

3. Vancouver is full of liars, cutthroats, and thieves. When investing in Canadian resource companies, assume they are scams unless proven otherwise. (Update: The Venture Exchange has been selling off for two years. It is down about 50%.)

4. Wall Street's Hippocratic Oath: First do no harm. In other words, it is better not to make money than to lose it.

5. Never apologize for a profit. The goal in investing is to make money. If you make 5% and the stock goes up another 1,000%, it doesn't matter. You still made money, and that's a good thing.

6. There is no success like success. When you make a winning trade, make it again. This means that if you trade dividend announcements, or you trade MACD crossovers, or whatever you do... if it works, keep going back to it until it doesn't. One of the best years I ever had was shorting recent IPOs after the insider shares unlocked. This worked like a dream until it became too popular and IPOs started staggering their unlock dates.

7. Never put money in a hope. If you don't have a clear investment strategy with a simple catalyst for share price appreciation, don't buy the stock.

8. Be your own man. Do your own research and stick to your guns. You know more about the trade than they do.

9. Never step in front of a freight train. This is also known as the "don't catch a falling knife" rule. There are bottom signs in the market. Know them and wait for them.

10. Buy big in stocks that trade less than cash. Every once in a great while, you will come across stocks that, due to margin calls or market crashes, have an income, zero debt, and more cash than their current market value.

I found four of these in November 2009 after hedge funds sold all their gold stocks...

They are now up about 1,200%.

If you only follow one rule, follow number 10.

Until next time,

Christian DeHaemer
Editor, Wealth Daily

Obama's Favorite Gas Stocks: Green Light for Gas Profits
Obama's latest push towards natural gas offers new ways to invest.

Facebook IPO: The Only Way to Trade Facebook
Analyst Ian Cooper explains why investing in Facebook's IPO is a bad idea, and offers several other profitable alternatives.

The Return of Texas Tea: Is the Eagle Ford Bigger Than the Bakken?
Publisher Brian Hicks tells readers about a new oil field on track to produce one million barrels per day this year.

The Greatest Investor of Our Time: Investing Money in Oil Stocks
Just left the Lundin office and the Kenya oil play could be THE story of 2012. The pay zone (official numbers coming out soon) could be massive.

Trump Decries Scottish Wind Power: Donald Trump Laughed Out of Government Hearing
Donald Trump hates offshore wind... and he doesn't care who knows it.

Fracking Water Market: $9 Billion by 2020
Each fracked well can require as much as 22,000 cubic meters of water. That equates to 140,000 barrels, or 5.88 million gallons. All of it needs to be treated... and companies are already popping up to take advantage.

Hidden Costs of the Shale Boom: Finding a Profitable Solution
An end to the hydraulic fracturing debate may be closer than investors might think...

Warren Buffett Thinks You're Stupid: Charlie Munger Thinks You Lack Social Graces
Uncle Warren and his 88-year-old sidekick Charlie Munger are at it again...

Six Reasons to Sell Oil: Oil is Going to $85 a Barrel
Here are half a dozen reasons to sell oil now.

Millionaire Next Door: A No-Nonsense Guide
Saving money is just as important as making it... It's just not as sexy. It's not mainstream. It isn't what the cool kids do.

I said it would move higher on the anticipatory run ahead of the Facebook IPO.

“Only a fool would buy that here,” I was told by more than one reader at the time.

“I'm just going to buy the Facebook stock when it comes out. You have no idea what you're talking about, Cooper.”

FPX would go on to hit a low of about $23 before rocketing to more than $28 a few short months later...

I even recommended buying the Global X Social Media Index ETF (NASDAQ: SOCL) before it ran to $16 a share:

Why am I telling you this today?

Because both are likely to pop again when Facebook goes public.

I'd also sell them on the day of IPO.

Because as we've seen with other social networking IPOs, things don't usually end well.

Wedbush just started Facebook with an outperform rating before the IPO even materializes, and Stern Agee initiated coverage with a Buy rating. But these initiated buys are just too funny — and blatantly consistent with the theme of the shills.

You know that. I know that. And they know that.

Remember when Motor Trend magazine gave the Chevy Volt its “Car of the Year” award before the car pulled off the assembly line?

Remember how much of an embarrassment it must have been for the magazine when the car became an abysmal failure?

Well, Facebook's fate will likely be worse than the Chevy Volt...

On the first day of trading, everyone and their grandmother will run out to buy Facebook shares.

Demand will outstrip supply based on the idea that advertising revenue will prop up the stock going forward.

But as with most highly sought-after stocks, the game is rigged. You are waaay at the back of the line — behind the Big Boys.

We've seen this play out before...

~~vix-box~~

Small investors who took a swipe at LinkedIn (NASDAQ: LNKD) on its first day watched their investments crash and burn:

Groupon (NASDAQ: GRPN) got crushed just weeks after going public:

And RenRen (NASDAQ: RENN), "the Facebook of China," fell 75%.

The glitz has simply worn off. The days of hyper-growth are over.

If Facebook shares price at the high end of the range, they would trade at 99x earnings.

That's far too rich for me. 

The only way to justify the lower end of Facebook's valuation requires the company "to make $40 billion in revenue within the next six to seven years, while maintaining the same profit margins,” according to the Wall Street Journal. And that won't happen.

The company is even seeing a drop-off in demand from advertisers, as expenses increase across the board.

I'm not going to risk my hard-earned money on a company with these issues...

Facebook creators will get richer, but new shareholders will get the shaft. Investors would be smart to stay away.

Smarter Ways to Trade the Social Network

The FPX trade is still your best bet going into the Facebook IPO.

But if you want to diversify — usually a smart, prudent move — here are some other alternatives:

• Zynga (NASDAQ: ZNGA) should benefit from the Facebook IPO because much of Facebook's revenue is tied to this company's gaming software.
• GSV Capital (NASDAQ: GSVC) had about 7% of its portfolio in Facebook in Q1 2012. It also just took a stake in Twitter.
• Firsthand Technology (NASDAQ: SVVC) supposedly owns 600,000 shares of Facebook Class B Common stock.
• The Global X Social Media Index ETF (NASDAQ: SOCL) I told you to buy along with FPX is likely to spike in the first couple days of the Facebook IPO.

I'd buy them all now... and I'd sell them on the day of the Facebook IPO.

I do not expect Facebook's public outing to be successful for long.

If you want to make good money, go in through the back door.

Remember, the Big Boys are at the front of the line... You're not even in the building.

~~ians_signoff~~

The popular culture phenomenon that created the series, however, goes back all the way to the early twentieth century — when the Lone Star State began its ascent to the top of North American oil production...

Starting in 1901 with Texas' first famous "gusher" at the now legendary Spindletop oil field.

While the rest of the world was just starting to get used to the idea of cars replacing horses and internal combustion replacing coal-fired boilers, Spindletop quickly developed into a 100,000-barrel-per-day producer.

Then the rest of the twentieth century unfolded.

Since those first days of "black gold" and "Texas tea," the balance of world oil power has shifted multiple times.

As the first highly-exploited major fossil fuel region in the world, Texas was also the first to peak out, relinquishing its status to places like Kuwait and Saudi Arabia.

And today that balance is shifting once again...

You've probably read or at least heard about North American oil making a major comeback.

Terms like 'shale oil' and 'Bakken Formation' have come to symbolize a new era of North American crude oil domination.

But what you don't hear about nearly as often is the return of an old American icon: Texas oil.

Under our very noses, this one-time behemoth of global oil power is now on its way back.

I want you to burn a specific term into your mind, just like you may have already done with the Bakken...

That term is Eagle Ford.

It's already well on its way to becoming the second coming of Texas's legendary Spindletop.

Like the Bakken, Eagle Ford is a shale formation — meaning it was left completely untouched by the first massive rush of oil production, which began more than 100 years ago.

~~wd_nat_gas~~

This virgin geological structure only recently became accessible to production using modern extraction methods.

It was already producing 60,000 barrels per day in 2011 — or about 60% of what Spindletop was producing when it became the world's first super-oil field back at the start of the twentieth century.

Like everything in Texas, Eagle Ford is big...

At 50 miles wide and 400 miles long, the formation runs through 14 southwestern and south central counties.

And current production levels have only begun to scratch the surface of what Eagle Ford really has in store.

Geologists estimate that within a few years, Eagle Ford could be pumping out as much as 1 million barrels per day.

If that sounds like a lot, that's because it is.

It's more oil than the entire nation of India produces...

It's 60% more than Egypt's entire national production...

And when that number is achieved, it will constitute about 12% of U.S. total daily output.

Like other newly-tapped oil resources in North America, the actual oil this region will produce will only be one prong of its positive effect on the regional and national economy.

In 2011 alone, Eagle Ford created 47,000 new jobs and generated more than $25 billion in the South Texas economy.

By 2021, this mega-formation will have created 117,000 in South Texas — and shifted much of the American oil import market back to domestic production.

But again, this is still just one part of the much greater story.

Whether the topic is Eagle Ford, the Bakken, or the Marcellus Shale formation, the long-term trend here is the same: North American oil is back — and it's back in a big way.

To your wealth,

~~WD_brians_signoff~~

West Texas crude has fallen from around $105 to $97 a barrel.

In London, the price of Brent has dropped to $112 from the low $120s.

The news sources would have you believe this drop has something to do with a new Leftist candidate in Greece.

This is preposterous. We’ve known for more than a year that Greece would default and leave the euro...

They simply can’t afford the payments on their debts regardless of austerity, tax collection, or the price of gyros in South Philly.

Greek equities are down 90% from their highs; Greek banks are down 97%.

Ratings agency Fitch is laying the groundwork by writing: "Greece's exit does not mean the end of the euro.” 

Greece is getting close to a buy, but that’s another article.

There is also a new French president, Francois Hollande, who is going against the conservative budget ideas of his predecessor. He will tax and spend and print.

So despite the fact that the U.S. is creating debt in digits so large that only Carl Sagan can understand them, America is still better than the old country.

The Euro Falls

Above is the five-year euro/dollar chart.

A euro used to buy you almost $1.60. Now you can only get $1.30. This trend will continue.

We will have parity again by next year.

Not only is it a good time to fly to Paris, but as the U.S. dollar goes up, the price of oil (which is priced in dollars) will fall in relative terms.

What's Killing the Price of Oil

1. Inventory Jumps to 23-Year Highs

Last week the American Petroleum Institute said domestic crude stocks jumped to 7.8 million barrels — nearly four times the expected 2 million barrel increase.

For the record, oil was trading at $12 a barrel 23 years ago.

2. The Saudi’s Whine, "Too Much Oil!"

Reuters has reported: “Saudi Oil Minister Ali al-Naimi said in Tokyo on Wednesday there is a surplus of oil in the market. Top oil exporter Saudi Arabia is pumping around 10 million barrels per day (bpd) and is storing 80 million barrels to meet any sudden disruption in supplies, Naimi said on Tuesday.”

3. Department of Energy Boosts U.S. Output

U.S. oil production will average 6.2 million bpd this year — 500,000 bpd higher from last year — according to the DoE.

~~wd_nat_gas~~

4. Iran Is Priced In

Iran is still selling oil to India, China, and Turkey. The Iranian issue is priced in and will likely be an issue for an oil price decline due to cheating.

All of these situations point to a cyclical downturn in oil prices.

But wait, there’s more...

5. Exxon Death Cross

Take a look at ExxonMobil (XOM), our $388 billion oil company...

As you can see by this five-year chart, every time the share price crosses the 100-day moving average (gold line), the price tanks.

This bearish signal just went off again.

Exxon’s share price will drop to $70.

Here is a chart for light crude going back to 1971:

You will notice the chart is showing lower highs and is at the top of its range.

This chart suggests oil prices are going back to $85.

You will also notice that when oil prices sell off, they sell off fast.

And One More...

6. Oil Companies Aren’t Buying

Ernst & Young picked up the phone and found:

... just 31% of the 141 oil and gas executives surveyed in April said they expected to pursue an acquisition in the next 12 months, down from 48% in October 2011, and the lowest figure since the barometer began in 2009.

By contrast, the number of businesses looking to sell assets has risen by more than 27%.

Hmmm, the smart money is selling. That’s doesn’t bode well for higher oil prices.

However, low oil prices will be good for other companies...

A drop in oil prices might just be the ticket to launch the U.S. economy above 3% GDP growth and send the Dow to new highs. There are a number of companies that benefit from cheap energy.

It’s time to switch from the U.S.-based oil producers to the U.S.-based oil users.

~~chris_signoff~~

In an interview last week, Munger told Becky Quick on CNBC: "Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939, but I think civilized people don’t buy gold, they invest in productive businesses."

One might want to remind the old man that people who bought gold a decade ago were far better positioned than those who put their money in Mr. Munger’s company, Berkshire Hathaway...

For the value of a share of Berkshire Hathaway has collapsed over the past decade to barely more than 74 ounces of gold from the 238 ounces it was worth a decade ago.

In fact, blue chip gold miners have outperformed Berkshire Hathaway by nearly a factor of five this past decade.

Munger’s comments come two months after Warren Buffett denounced gold as a bad investment in his letter to shareholders:

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce — gold’s price as I write this — its value would be about $9.6 trillion. Call this cube pile A.

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 ExxonMobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers — whether jewelry and industrial users, frightened individuals, or speculators — must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Now, a skeptical person could easily discount Munger's and Buffett's disdain for gold as “talking their own book.”

You could even call it sour grapes, since gold has crushed Berkshire Hathaway’s performance over the last decade.

But I think Buffett’s hatred for gold is political.

You see, I believe Uncle Warren hates gold bugs...

He hates what they stand for; he hates their views on money, the United States, and the economy.

Go to any gold conference, and you’ll be hard-pressed to find Liberals, progressives, or Democrats among audience members.

That’s because — for the most part — gold bugs are serial savers, anti-government spending, anti-Federal Reserve, and super suspicious of any government action.

Uncle Warren is the complete opposite.

~~vix-box~~

As I write this, gold is sitting around $1,610 an ounce. Silver is below $30.

Gold miners — and especially the junior miners — have puked up blood, sitting at annual lows.

However, demand has never been higher for the yellow metal...

Mainland China’s gold imports from Hong Kong surged more than sixfold in the first quarter, adding to signs that the country may displace India as the world’s largest consumer of the precious metal on an annual basis.

Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period, according to data from the Census and Statistics Department of the Hong Kong government.

Yesterday's data showed shipments in March rose 59% from February.

That’s huge.

According to a Reuters report:

Demand has climbed in the world’s second-largest economy as rising incomes and curbs on property speculation boosted purchases. China may become the biggest user annually this year, according to a forecast from the producer-funded World Gold Council. Last year, total Indian demand including for jewelry and investment was 933.4 tons to China’s 769.8 tons.

The prospect of China becoming the largest bullion user reflects the country’s economic ascendance. Per capita gross domestic product has more than doubled since 2000, according to World Bank data. The country is already the world’s top consumer of copper and biggest producer of steel.

Gold shipments to the mainland climbed in March to 62,913 kilograms, the Hong Kong data showed. That compares with 39,668 kilograms in February and 9,166 kilograms in March 2011. China doesn’t publish gold-trade data. Last year, imports from Hong Kong more than tripled to 431,226 kilograms.

The purchases through Hong Kong may signal that the mainland is accumulating reserves, London-based brokerage Sharps Pixley Ltd. said in February. The nation last made its reserves known more than two years ago, stating them at 1,054 tons.

In light of Buffett's and Munger’s comments arises a necessary question...

Do they think the Chinese are uncivilized for buying gold, or do they reserve their disdain for Americans who are suspicious of the Federal Government?

Right now, junior resource stocks are the cheapest I’ve seen in years, with many selling at or below their cash positions.

That’s an indication that investors in this sector are selling out of fear and panic. And that means these stocks are a screaming buy.

Just ask Uncle Warren.

The original bull on America,

~~WD_brians_signoff~~

I even went so far as to say it would go up 1,000%.

People laughed at me. They pointed fingers, rolled their eyes, and did strange things with their tongues.

Who would buy an oil stock in a landlocked country populated by yurt dwellers?

Here is how that stock did:

Not too shabby.

Oil Profits Laugh With You

Remember Dragon Oil (DGO.L), an exploration company in Turkmenistan, Yemen, and Tunisia?

Here's how Dragon fared:

Kenya Oil

In 2011, I told you about a little-know company that was exploring for oil in Kenya. They also have wells in Somalia.

This part of Africa has the same geology as Saudi Arabia. Scientists tell us that when the continents were linked together as Pangaea some 300 million years ago, a vast ocean stretched from the Arabian Peninsula down the coast of modern Africa.

Untold generations of small creatures lived, died and sank to the bottom, where they transmogrified into hydrocarbons.

Most investors didn't want to hear about the logic behind buying oil exploration companies in Africa. And the numbers proved it: It was one of the worst-selling promotional advertisements we ever had.

My publisher called me a fool...

“No one will buy Somalia oil stocks,” he shouted, throwing his unlit cigar. It ricocheted off the door as I beat a hasty retreat.

Confoundedly, it seems people would rather lose money in name-brand mutual funds and T-bills than make a fortune in oil stocks.

~~wd_nat_gas~~

Leading Horses to Water

Very few people aside from the savvy members of Crisis and Opportunity bought these stocks at the lows.

These are investors who understand the unrelenting logic of black gold and the pure unadulterated greed that motivates men to find and profit from cheep crude, regardless of where it lays.

Here's how that Kenya stock is doing:

On Friday, one of my sources in the oil business sent me an email:

You may be the second person to promise 1,000% gains in a promo and deliver it.

You’re also the first, I think. Just left the Lundin office and the Kenya oil play could be THE story of 2012. The pay zone (official numbers coming out soon) could be massive.

One trading day later, and the stock launched 46% on the open.

Good call.

Speak Lundin with Respect

In case you have never heard of the Lundin Group, you should know that they are the greatest oil and mineral investors of our time. They are, quite simply, a ticket to wealth.

While Warren Buffett has been busy treading water over the past decade, the Lundin Group has been making fortunes.

The company was formed in 1971 by Adolf Lundin with the idea to buy oil and mineral properties for development and resale. Rumors have it old Adolf sold his soul at the crossroads, because his track record is otherworldly.

Here's a list of seven recent projects along with the returns they generated:

Out of seven companies, the Lundin Group is averaging returns in excess of 10,600% over a nine-year period.

I'll give you a secret you can use...

If you really want to make money, get on the Lundin press release list. Buy what they buy.

You can also buy Lundin Petroleum (LNDNF: Pink Sheets), though you might wait for it to drop under $16.

Have a great week,

~~chris_signoff~~