10 Reasons the Next Financial Crisis Will Be Worse than the Last
Markets are far more volatile now in the wake of Brexit and Trump's election. Against all odds, the U.S. has elected Donald Trump as its new president and no one can predict how the next four years will go. As a commander in chief, Trump now has the power to declare a nuclear war and nobody can legally stop him. Britain has left the EU and other European countries are planning to follow their example. No matter where you are located in the western world, uncertainty is in the air like never before.
- The U.S. Government has its Eye on Retirement Accounts. In 2010 Portugal seized retirement account assets to help plug holes with government deficits and debt. Ireland and France did the same in 2011, as did Poland in 2013. The U.S. government has been watching. Since 2011, Treasury has taken money from government workers’ pension funds on four separate occasions to cover deficits in federal spending. Investing billionaire legend Jim Rogers believes that private accounts will be the next ones the government raids.
- Top 5 US Banks Now Larger Than Before the Crisis. You learned about the five largest banks in the U.S. and their systemic importance as the unfolding financial crisis threatened to collapse them. Legislators and regulators promised they would address this issue once the crisis was contained. Over five years after the crisis ended, the five biggest banks are even bigger and more critical to the system than before the crisis began. The government made the problem worse when it forced some of these so called “too big to fail” banks to absorb the failing ones. Any of these banking behemoths failing now would be absolutely catastrophic.
- Danger from Derivatives Threatens the Banks More Now than in 2007/2008. The derivatives that crashed the banks back in 2008 did not disappear as regulators promised. Today the derivatives exposure of the five biggest American banks is a whopping 45% greater than before the economic collapse of 2008. The derivative bubble is over $273 trillion now versus the $187 trillion of 2008.
- U.S. Interest Rates are Already at Abnormal Lows so the Fed has Little Room to Cut Rates. Even after raising interest rates once last year, the Federal funds rate is still in the range of ¼ to ½ percent. Consider that before the crisis erupted in August of 2007, the Federal funds interest rates sat at 5.25%! In the next crisis, the Fed will have less than half a percentage point total it can reduce rates to stimulate the economy.
- American Banks Are Not the Safest Place for Your Money. Global Finance magazine puts out a yearly list of the top 50 safest global banks. Only 5 of those are U.S. based. The top spot an American bank commands is only #39.
- The Fed Balance Sheet is Still Expanded from the Financial Crisis of 2008. The Fed still has nearly $1.8 trillion in mortgage backed securities on its balance sheet from the 2008 financial crisis. This is more than double the less than $1 trillion it held before the crisis began. When mortgage backed securities go bad again, the Federal Reserve has a lot less maneuverability to absorb bad assets than before.
- The FDIC Admits it Lacks Reserves to Cover Another Banking Crisis. The latest FDIC’s annual report shows that they will not have sufficient reserves to adequately insure the nation’s banking deposits for minimally another five years. This stunning revelation admits that they can only cover 1.01% of U.S. bank held deposits, or $1 out of every $100 of your bank account deposits.
- Long Term Unemployment Is Still Higher than Before the Great Recession. Unemployment was 4.4% in early 2007 before the last crisis began. While the unemployment rate has finally reached the 4.7% levels seen as the financial crisis began to ravage the U.S. economy, the long term unemployment remains high and the employment participation rate significantly lower more than five years after the previous crisis ended. Joblessness could be much higher in the wake of the coming crisis.
- American Businesses Failing at a Record Pace. In the beginning of 2016, the Gallup CEO Jim Clifton announced that American business failures are now greater than new business startups for the first time in over three decades. The dearth of medium and small businesses has huge implications for an economy long driven by free enterprise. Bigger businesses are not immune to the problems either. Even American economic heavy weights like Microsoft (reducing 18,000 jobs) and McDonald’s (shutting down 700 stores for the year) are suffering from this dismal trend.
Why Smart Investors are Adding Physical Gold to There Portfolios
- Hedge against inflation AND deflation.
- Limited supply. Increasing demand.
- Safe haven in times of geopolitical, economical and financial turmoil.
- Portfolio Diversification and Protection.
- Store of value.
- Hedge against the declining dollar and money printing policies.
Our Financial Experts Have Spent Over A YEAR Researching Some Of The Best Simple Yet Highly Effective Ways Of Protecting Your Wealth. And As A Result Of This We Can Provide Three Very Positive Solutions. We All Know Deep Down The Economy Across The Globe Is Going To Tank Once Again And Probably For A Little While longer Than We Expect. Goverments In China And India Are Even Advising There People To Invest At Least A Quarter Of There Net Worth Into Gold.
Yet The Western Goverment Never Seems to Advise Anyone On Personal Investment Strategy's, We Wonder Why That Is ? Maybe Because They Do Not Want Us To Think For Ourselves So It Easier For Them To Control And MANIPULATE Us. Who Knows Thats A Personal Thought. But Nevertheless The Strategy Still Counts.
So Below There Are Our Top Three Investment Companies For Gold Unfortunately One Of Them Is Only Available To United States Residents
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There are also two important resources you should always keep an eye on, not just for financial matters, but for changes in World Events too. A wise man once said if you know how to follow the money you should always be one step ahead. The First Resource Is The World Debt Clock. Obviously Well Known Around The World. And Always A Key Component In Knowing Who Will Win The Next World War. Just Look For Who Has The Least Debt. (Napoleon Bonaparte).
Also The Second Resource Is The Gold And Precious Metals Data Excellent Insight Into World Markets. Use Links Below To Access These Websites.
You probably own shares in a mining company or oil producer. But have you thought about investing in commodities themselves?
Few people do. It used to be the realm of major institutional investors or billionaires trying to corner the silver market.
But these days investing in commodities is very easy for anyone. In fact, there are so many ways to do it that the choice can seem overwhelming. You need to make informed decisions about how to invest as well as which metals to choose.
But one thing’s clear.
Now is the time to invest in metalsThe chart below tells you now is the best time to invest in commodities going back almost half a century. Quite frankly, it’s the opportunity of a lifetime.
The chart shows the value of a commodity index divided by the broader market. Specifically, the Goldman Sachs Commodity Index (GSCI) divided by the S&P 500. When it’s high, commodities are expensive compared to the stockmarket. When it’s low, commodities are cheap.
Source: Incrementum AGAs you can see, it’s at the bottom of the range. A surge in commodity prices is a good bet based on mean reversion – a return to historical average.
The last time we were here, the ratio turned upwards on a long bull market. The GSCI quintupled. In 1971 it did the same.
When commodities move like that, it creates an extraordinary stockmarket boom too. During the boom that began in the late 1990s, BHP Billiton’s London share price went up tenfold. Rio Tinto’s quintupled alongside the commodity index. And these are the major producers. Their share prices are supposed to move slowly!
Small cap stocks handed investors far bigger gains. Pick the right minnow and your stock can go from less than a cent to almost $12 as Fortescue Metals did in Australia. Randgold Resources went up tenfold on the London Stock Exchange (LSE).
If you want to bet on a commodity boom, there are a selection of ways to do it. Buying the physical commodity is just one way. You might invest in exchange-traded funds (ETFs) that hold resources. Or perhaps a basket of the world’s leading commodity companies. You could pick the individual companies you like most and buy their shares. Some offer fascinating opportunities.
But before we get to all that, what are the commodities you should take a look at? In this article I’ll be focusing on the precious and industrial metals. And first up is…
GoldGold is a precious metal, not an industrial one. Its value comes from an extraordinary history as money.
A few thousand years ago, an ounce of gold would’ve bought you a toga and sandals in Rome. Today, an ounce of gold is worth about the price of an Italian suit and shoes.
That is the immense power of gold. It’s why wealthy families own the stuff – wealth preservation. There is no asset that does it better.
Unfortunately, pretty much the opposite is true in the short term. Gold has become a financialised asset. Its price is heavily manipulated in the futures market and few in the mainstream financial world acknowledge its power or history.
Despite this, gold dramatically outperformed stocks between 2000 and 2010. You can see how the gold price (in gold) rose more than silver (in silver) and the two major American stockmarket indices (in blue and red) below.
Source: Incrementum AGAs you can see, it’s at the bottom of the range. A surge in commodity prices is a good bet based on mean reversion – a return to historical average.
The last time we were here, the ratio turned upwards on a long bull market. The GSCI quintupled. In 1971 it did the same.
When commodities move like that, it creates an extraordinary stockmarket boom too. During the boom that began in the late 1990s, BHP Billiton’s London share price went up tenfold. Rio Tinto’s quintupled alongside the commodity index. And these are the major producers. Their share prices are supposed to move slowly!
Small cap stocks handed investors far bigger gains. Pick the right minnow and your stock can go from less than a cent to almost $12 as Fortescue Metals did in Australia. Randgold Resources went up tenfold on the London Stock Exchange (LSE).
If you want to bet on a commodity boom, there are a selection of ways to do it. Buying the physical commodity is just one way. You might invest in exchange-traded funds (ETFs) that hold resources. Or perhaps a basket of the world’s leading commodity companies. You could pick the individual companies you like most and buy their shares. Some offer fascinating opportunities.
But before we get to all that, what are the commodities you should take a look at? In this article I’ll be focusing on the precious and industrial metals. And first up is…
GoldGold is a precious metal, not an industrial one. Its value comes from an extraordinary history as money.
A few thousand years ago, an ounce of gold would’ve bought you a toga and sandals in Rome. Today, an ounce of gold is worth about the price of an Italian suit and shoes.
That is the immense power of gold. It’s why wealthy families own the stuff – wealth preservation. There is no asset that does it better.
Unfortunately, pretty much the opposite is true in the short term. Gold has become a financialised asset. Its price is heavily manipulated in the futures market and few in the mainstream financial world acknowledge its power or history.
Despite this, gold dramatically outperformed stocks between 2000 and 2010. You can see how the gold price (in gold) rose more than silver (in silver) and the two major American stockmarket indices (in blue and red) below.
Source: longtermtrends.net Not bad for an inanimate lump of metal.
The gold price’s future is a question of instability elsewhere. Gold doesn’t change and is independent of everything else in the world. It’s just a lump of metal. But if you expect money to devalue thanks to inflation, or the financial system to go into a crisis, gold offers the ultimate protection.
SilverSilver offers many of the benefits of gold, with some added twists. It’s a precious metal as well as an industrial one. The demand splits down the middle.
The history of Britain’s money is very much connected to silver rather than gold. Our very currency bears its name thanks to pounds of sterling silver.
Silver is also important to the industrial world. Its ability to conduct heat and electricity go alongside anti-microbial properties. If you think of a list of booming industries thanks to new technology, it’s a safe bet they need a lot of silver. From batteries and solar power to microchips and medicine, silver is crucial.
The price of silver is far more volatile than gold and open to more manipulation. The Hunt brothers famously tried to corner the silver market, for example. This means the short-term price of silver is an unreliable indicator of trends. Silver is for investors with a strong stomach who can handle volatility. But if you can, outsized gains are possible.
Check out this very long-term chart. It shows the relative performance of gold and silver (in their relative colours) compared to stocks going back almost 50 years. The S&P 500 and the Dow Jones Industrial Average are in blue and red.
The gold price’s future is a question of instability elsewhere. Gold doesn’t change and is independent of everything else in the world. It’s just a lump of metal. But if you expect money to devalue thanks to inflation, or the financial system to go into a crisis, gold offers the ultimate protection.
SilverSilver offers many of the benefits of gold, with some added twists. It’s a precious metal as well as an industrial one. The demand splits down the middle.
The history of Britain’s money is very much connected to silver rather than gold. Our very currency bears its name thanks to pounds of sterling silver.
Silver is also important to the industrial world. Its ability to conduct heat and electricity go alongside anti-microbial properties. If you think of a list of booming industries thanks to new technology, it’s a safe bet they need a lot of silver. From batteries and solar power to microchips and medicine, silver is crucial.
The price of silver is far more volatile than gold and open to more manipulation. The Hunt brothers famously tried to corner the silver market, for example. This means the short-term price of silver is an unreliable indicator of trends. Silver is for investors with a strong stomach who can handle volatility. But if you can, outsized gains are possible.
Check out this very long-term chart. It shows the relative performance of gold and silver (in their relative colours) compared to stocks going back almost 50 years. The S&P 500 and the Dow Jones Industrial Average are in blue and red.
Source: longtermtrends.netAfter leaving the gold standard, the inflation of the 70s in the US made gold and silver surge. Equities caught up in the 90s – keep in mind the chart doesn’t include the tech bubble’s NASDAQ stockmarket index. The 2008 crisis saw gold outperform and silver followed with a dramatic surge in 2012. After that, gold and silver both fell.
But the real lesson here is how undervalued silver is. You can play with the timeline on the Longtermtrends website to change the results of the graph dramatically. But it’s clear that gold, silver, and the stockmarket cross over back and forth.
At the moment, gold and the stockmarket seem to be meeting in the middle. But silver is the clear laggard, since 2012. Silver looks undervalued. Is this an incredible buying opportunity?
Either way, the chart adds to the commodity boom story above because silver is both an industrial and precious metal. Its undervaluation is a sign of commodities generally being undervalued.
PalladiumPalladium is an extremely important industrial metal. Its uses are split between automotive and industrial, with a small amount of jewellery and investment demand.
Palladium was the best performing commodity of 2017, up 55% as inventory at the New York mercantile exchange hit long-term lows. Environmental standards for cars, the Volkswagen emissions scandal and China’s consumer boom mean major companies have been sucking up vast mountains of the stuff. The price even surpassed its sister platinum for the first time since 2001.
But the real lesson here is how undervalued silver is. You can play with the timeline on the Longtermtrends website to change the results of the graph dramatically. But it’s clear that gold, silver, and the stockmarket cross over back and forth.
At the moment, gold and the stockmarket seem to be meeting in the middle. But silver is the clear laggard, since 2012. Silver looks undervalued. Is this an incredible buying opportunity?
Either way, the chart adds to the commodity boom story above because silver is both an industrial and precious metal. Its undervaluation is a sign of commodities generally being undervalued.
PalladiumPalladium is an extremely important industrial metal. Its uses are split between automotive and industrial, with a small amount of jewellery and investment demand.
Palladium was the best performing commodity of 2017, up 55% as inventory at the New York mercantile exchange hit long-term lows. Environmental standards for cars, the Volkswagen emissions scandal and China’s consumer boom mean major companies have been sucking up vast mountains of the stuff. The price even surpassed its sister platinum for the first time since 2001.
If you like the idea of trading political risk, consider that about 80% of palladium and an even higher share of platinum are mined in just two countries – South Africa and Russia. Neither are making political headlines for good reasons right now.
Another interesting trait of the palladium market is its connection to platinum. According to the news site Fin24, platinum miners have slowed their efforts in recent years due to flat or falling demand for platinum. A lot of palladium is mined in conjunction with platinum, reducing the supply despite growing demand. It’s an odd situation where supply and demand can remain out of whack, leading to higher prices.
PlatinumPalladium’s surge came at platinum’s expense. But as you’ll discover, this could make it an imminent buying opportunity.
While diesel cars tend to use platinum in their catalytic converters, petrol cars usually use rhodium and palladium. The Volkswagen emissions scandal delivered a sudden dramatic change in demand as people abandoned diesel for petrol as fuel. The price divergence in the corresponding commodities was quick. Platinum prices tumbled while palladium surged.
This chart from InfoMine shows the platinum to palladium ratio. When the line falls, palladium is expensive relative to platinum. That means platinum is at its cheapest since 2001.
Source: Infomine
The platinum price has now stabilised at financial crisis lows.
So there’s no question platinum is cheap and undervalued. But will it go up? You have to look at supply and demand.
Platinum is a bit like silver, but far less popular with investors. Its uses are about evenly split between the automotive, industrial and jewellery industries. Platinum jewellery is growing in popularity in Asia especially.
Platinum is rarer than gold and far less of it is mined. While platinum output from the key producer South Africa has fallen 25%, the stockpiles of platinum have fallen for five years in a row too. That means demand has outstripped supply for a long time now. About $10 billion in platinum is bought up every year. At some point, this demand will trigger a price surge while supply remains hampered.
So how do you invest? Investable coins do exist. But the market is far from liquid. You can expect large premiums. The precious metals investment provider BullionVault estimates the total cost of investing at 34-47%, including the spread demanded by dealers and the 20% VAT. That’s prohibitive.
The platinum ETF, ETFS Physical Platinum [LSE:PHPT] is a good way to play any coming surge in platinum. More using ETFs below. Unfortunately, finding stocks that mine platinum as a major part of their operations is difficult. We’ll look into that below too.
RhodiumRhodium is another platinum group metal (PGM) alongside palladium. Its price performance and uses are similar to palladium. The price doubled in 2017 to a six-year high after finishing 2016 with a 12-year low.
Back in 2008, rhodium hit $10,025 an ounce before falling 90%. Volatility is quite high in commodities like this. And it’s easy to see why – 80% of rhodium is mined in South Africa.
Rhodium’s price recovery owes much to the Volkswagen diesel emissions scandal too.
Like palladium, rhodium tends to be mined with platinum. The proportions that platinum group metals miners extract are around 60% platinum, 30% palladium and 10% rhodium.
CopperJust a few years ago, Chinese authorities were dealing with an odd sort of theft. People were stealing manhole covers to meltdown the metals inside and sell them for scrap. In 2004, Beijing officials estimated 240,000 were stolen in the city alone. And the practice quickly spread around the world. It resulted in a lot of funny accidents too.
Currently, the price of copper is around the World Bank and Goldman Sachs estimate of $7,000 a tonne. In November of 2016 it surged to a 3.5-year high when Chinese imports jumped unexpectedly.
Sourcee: Knoema.comThe question is whether this trend can continue. And this is largely dependent on demand out of China. More on that below.
What you need to know about copper is its position in the world economy as a sort of barometer. They call the metal Dr Copper because it has a PhD in economics from the University of Real Life. The copper price indicates economic conditions because it’s so widely used in so many ways, including in sectors of the economy that are leading indicators, like construction. These days, Dr Copper also specialises in electric cars because they use up so much of the metal.
Investing in copper via ETFs is particularly easy. There are even leveraged options. The main ETF is ETFS Copper [LSE:COPA].
VAT and capital gains tax when investing in metalsThe sales tax applied to investing in metals is a potential game-changer. Paying a 20% premium can ruin your investment’s potential.
The good news is that gold is exempt, as long as you keep it as an investment. The other precious metals, on the other hand, carry a 20% VAT. Unless they’re stored in a bonded warehouse outside the EU.
That means it’s possible to own silver VAT free, as long as it remains out of your possession and the EU. Hence the popularity of Switzerland and Singapore as precious metals storage locations.
Generally, capital gains tax (CGT) applies to your investment profits in metals. But when you buy certain precious metals coins, your gains could be CGT exempt. This is because some coins are classed as legal tender, much like the pound coins in your pocket.
However, this exemption only applies to certain coins. These include silver Britannia coins, gold Britannia coins and sovereigns. Each class has dozens of variations in minting year and weight.
I wonder if you’ve spotted the blind spot that gets people into trouble. Silver legal tender coins may be CGT free, but they aren’t VAT free.
Investing in physical commoditiesThere’s nothing like holding a precious metal in your hand. It’s the most direct form of ownership of something very valuable. Even ownership of your home is subject to the land registry.
A friend once told me that in Bulgaria, you can pay a gypsy to climb through a window into the Bulgarian property registry and change the name on certain key documents. Your business competitor will wake up to discover their shop now belongs to you. And the legal process of correcting the documentation takes many years.
Anyway, owning physical precious metals directly is an excellent way to diversify your wealth out of the financial and political system. It also introduces new risks though. Like the risk of theft. But that’s the point of diversification – to reduce total risk by mixing up which risks apply to different sections of your wealth. Unless you’re like me, it’s unlikely everything will go wrong at the same time.
The problem with physical metal investing is the cost. Storage, insurance, transactions and taxes all add up. For platinum coins, for example, BullionVault estimates the costs can come close to 50%. That’s prohibitive.
But there are many solutions. If you trust firms like BullionVault to keep your metal safe in places like Zurich and Singapore, they’re a wonderful option to own physical metal. And outside the UK government’s reach too.
But if you want to own coins in your hand, the options drop fast. The cost of owning all but one metal make the venture too expensive. Only legal tender gold coins are widely available enough and tax exempt enough to be worthwhile. Silver coins come close. Gold bullion can be a good option too, but why give up the CGT exempt nature of the right coins?
The caveat worth considering here is the odd opportunity you might have to buy precious metals from unusual sources. Silver offcuts from industrial uses, for example. Or buying old jewellery. These are perfectly legitimate ways to invest in precious metals.
ETFs, ETPs and owning commodities on the stockmarket Actually owning commodities has always been a pain for individual investors. And our pain is the institutional investor’s gain. Goldman Sachs is famous for its shady warehouse dealings to manipulate markets.
If you want to own the physical metal, premiums above spot prices are enormous. And the price of many metals fall well short when you try to sell.
So what about using the financial markets’ remarkable ability to get you access to any investable trend? What about metals ETFs, which are usually known as exchange-traded products (ETPs)?
This chart shows the palladium ETF PALL from the NYSE. It’s doubled since 2016’s low:
Source: Yahoo Finance The LSE’s palladium ETF [LSE:SPDM], priced in pounds, looks much the same. So it’s certainly possible to profit nicely from the metals themselves without getting near them.
Medium-term trading these ETFs is a great option. But don’t buy and hold for too long. The fees eat into your returns. And they are really just an investment in a lump of metal which doesn’t change.
If you want to dramatically grow your initial stake, there’s a better way to invest in metals.
Why stocks are the best way to invest in metals Most commodity speculators prefer stocks. And yes, if you’re investing in commodities, you’re almost certainly speculating. The cyclical nature of the business rarely makes “buy and hold” the way to go.
Let’s take a look at what palladium’s price surge did for stocks. There aren’t many palladium-focused miners. Most of the stuff is mined by major diversified companies. But picking the right stock can generate extraordinary gains. Ivanhoe Mines’ share price rose seven-fold since 2016, for example.
The risks in the small-cap commodity space match the opportunities. But that doesn’t mean the risk-averse investor need look away from commodity stocks altogether. That’s the mistake of institutional money according to one investment legend. He says larger commodity stocks are very much out of favour.
Jeremy Grantham first explained why you should buy commodity stocks just over a year ago in Barron’s magazine:
The S&P 500’s exposure to energy and metals companies has dropped by more than 50% over the last few years, and the same is true of the MSCI All Country World Index. Those investing with a value bias may be particularly underexposed to resource equities, as value managers tend to be especially averse to the risks posed by commodity investing.
And:
When valuations relative to the market have been in the cheapest quintile of history, the commodity producers have outperformed the broad market by almost 7% per annum over the next five years on average. Given that valuations continue to hover around all-time lows, at this time resource equities are firmly entrenched in the cheapest quintile of history relative to the broad market.
A commodity price boom generating 7% outperformance for commodity stocks sounds rather juicy. It could deliver the mean reversion in the chart we discussed at the top of this article.
Grantham also claims that the volatility of commodities and commodity stocks keeps many institutional investors away. Pension funds can’t stomach a plunging oil price, for example. This only enhances the eventual returns for those who can hold on. Ordinary investors like us. But you still have to stomach the volatility.
The point here is that the commodity scene is ripe and the potential gains very large.
Three metals stock picks for 2018The best commodity investments are stable, undervalued and diversified miners. That way you’re most exposed to commodity prices, and least exposed to issues like political risk, management risk, funding risk and many others.
But don’t expect sudden gains from these behemoths.
Glencore [LSE:GLEN] and BHP Billiton [LSE:BHP] are two of the biggest miners in the world. They’re very diversified in a multitude of ways and stable companies that provide great exposure to commodities.
Gold and silver miners listed on the LSE tend to come with political risk. Gold is found in volatile countries in Africa and Asia. But there is one excellent option.
Fresnillo [LSE:FRES] is the largest gold company on the LSE by market cap and revenue. It’s also the world’s largest silver miner by a long way, and other industrial metals feature as major parts of Fresnillo’s business too. Operations are mostly in Mexico and the company does its own exploration.
As for more speculative stock picks in the commodity world, including the PGM miners, you need to proceed with caution. These picks are volatile and time sensitive.
But the LSE is home to the world’s third largest PGM miner. Lonmin [LSE:LMI] has been operating for more than 100 years now. It produces almost 700,000 ounces of platinum a year. Palladium, rhodium and other PGMs feature too.
Proving the point that you need to proceed with caution, Lonmin’s share price is down 98% from 2012, with a takeover deal in the works.
The big riskThere’s a major risk to investing in commodities which you can’t overlook. It’s called China.
On the one hand, China is the source of vast commodity demand. Its urbanisation, infrastructure boom and consumer boom implies a voracious appetite for all sorts of commodities.
This chart from the Reserve Bank of Australia shows the proportion of trade and consumption which accrues to China across various commodities. China imports over 60% of the world’s iron ore and consumes over 60% of the world’s copper, for example.
Source: Reserve Bank of Australia But this also means a small hiccup in China would leave commodity markets routed. Commentators are worried about a recession or debt crisis at the moment. Other economies went through plenty as they developed. But none were anywhere near the size of China.
If China goes into crisis, commodities will be in trouble.
If China goes into crisis, commodities will be in trouble.
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An asset goes up in value. People chase its value higher. People start using borrowed money to invest in the asset, and as a result, they make a lot more money, faster. They borrow more. The lenders are happy to lend the money, because their customers’ balance sheets look healthy, and besides, they haven’t defaulted in the past – why would they start now? The system works. Lenders lend money, prices go up, they get their money back, everyone gets rich. And because the system works, people push it to extremes. Eventually everyone owes everybody else. It only takes one tiny thing to go wrong before the whole network of transactions unravels. And that’s when things get nasty... You may be interested inHow to pay ZERO Inheritance Tax – 100% legally Buried deep within George Osborne’s recent pension reforms are the secrets to help you shelter at least £2 million of your assets… Completely free of any inheritance tax at all It’s simple, it’s legal, it’s ethical – and anyone can do it. Click here to find out how you can start protecting your family’s legacy within days. MoneyWeek magazine is an unregulated product published by MoneyWeek Ltd. Why you need to think about debt when valuing companies The price/earnings (p/e) ratio is a popular valuation measure. It takes a company’s share price, divides it by earnings per share, and thus gives you an idea of how much the market is willing to pay for any given £1 of earnings. If the p/e is high, then investors are willing to pay a lot for £1 of earnings – perhaps because they expect rapid earnings growth, or because it’s the best option available compared to likely returns elsewhere. If the p/e is low, then the market is not willing to pay much for £1 of earnings – perhaps because it fears they are about to dry up altogether. The p/e is a useful rough-and-ready tool. And the Shiller p/e (or Cape) is a useful upgraded version of the p/e – it uses ten-year average earnings, rather than a single year’s earnings. However, there’s a small problem with the “p” side of the equation. A typical company is not just funded by equity. It’s also funded by debt. And the more debt a company has, the riskier things are for the equity owners – because creditors get paid first. If there’s nothing left over for the equity owners at that point, then tough luck. So some investors prefer to use enterprise value (EV). Enterprise value takes account of a company’s debt, as well as its market capitalisation. You divide EV by another measure of earnings – EBITDA (earnings before interest, tax, depreciation and amortisation) – and it gives you an alternative to the p/e ratio that takes into account debt as well as equity. Why am I bringing this up now? Well, I was just reading an interesting piece from James Montier, the well-known behavioural economics expert who now works for US asset manager GMO. Montier is bearish. He reckons that the US stockmarket is heavily overvalued, and he doesn’t agree with his colleagues at GMO that we can’t really be in a bubble because there’s no real evidence – on the sentiment side – of irrational exuberance. We keep hearing that on the Shiller p/e measure, stocks are at their most expensive apart from in 1929 and 1999. The 1929 record is one that we’re very close to, but the 1999 peak is still well above where we are now. That gives some succour to the bulls who argue that not only is the Cape over-exaggerating how overvalued markets are today, it’s also been much higher in the recent past (if only on one occasion). However, if you take a look at the market’s EV/EBITDA multiple (which Montier does by knocking a few different measure together), then, as he puts it, the market “is fast approaching the obscene levels of expense that we witnessed in the madness of the TMT [technology, media and telecoms] bubble”. The incredible shrinking US stockmarket This strikes me as particularly interesting given another piece of research that I read over the weekend. Credit Suisse’s Michael Mauboussin – another behavioural investment expert – put out a piece noting that the number of companies listed publicly in the US has fallen precipitously in the last 20 years or so. In fact, the number of companies listed in the US has halved since 1996. In 1996, there were 7,322 listed companies in the US. In 2016, there were just 3,671. And to put that into some perspective, in 1976, there were 4,796. There are lots of reasons for the decline in listed companies, reckons Mauboussin. Merger and acquisition activity is a big one (obviously, a company disappears from the market when it’s swallowed up by another one) while the number of IPOs (companies listing on the stockmarket for the first time) has collapsed. This is also primarily a US phenomenon. (It’s something I’ll look at in more detail in this week’s magazine – subscribe now if you haven’t already.) But on top of the fall in the number of companies being listed, companies are increasingly funded with debt rather than equity. Listed company managements have always had good reason to indulge in financial engineering. If you want to make your bonus, you have targets to meet. For managements, these targets are often related to earnings per share. To boost earnings per share, you can do one of two things. The first option is to drive up earnings. You can do that in many ways, some of them genuinely beneficial to shareholders (improving efficiency and thus profitability), and some of them not so beneficial (buying a big expensive bolt-on acquisition that gives the illusion of growth today, at the expense of big write-downs in the future). But there’s something else you can do: don’t worry about earnings at all, just reduce the number of shares in issue. Then simple arithmetic will drive up earnings per share for you. And if you don’t have the free cash flow to spend on share buybacks, then you just borrow the money. When interest rates are low – as they are now – borrowing money is easy and even seems to make sense. So that’s what companies have done: “chosen to issue debt and repurchase equities on a truly massive scale”. That’s a problem, because, as Montier highlights, it makes the whole system more fragile and vulnerable to shocks. “Low rates allow debt issuance, and equity repurchases line the pockets of corporate managements and (participating) shareholders alike, but ultimately the robustness of the system is diminished.” What could knock it over? I don’t know. But I imagine we’ll soon find out. These Windfalls Are Coming Fast – There Are Two More Big Plays Ready to GoIf you haven’t been able to pocket over $100,000 from the stock market since January, then stop everything you’re doing and go here right now.
Since January 1, D.R. Barton, Jr.’s amazing trading strategy has uncovered 20 triple-digit windfalls on his best trades… Seven of them are from this month alone. With just a handful of days left in March, there’s still time to bank a few more potential wins. 20 Triple-Digit Winners Already (And Two New Opportunities Today) Since January 1, D.R. Barton's amazing trading strategy has uncovered 20 triple-digit windfalls on his best recommendations. Had you invested just $2,500 in each trade, you would be sitting on $102,795 right now. And the windfalls have come nonstop and incredibly fast. So why exactly is this strategy picking so many winners – and how can you get into this historic opportunity starting today? D.R. explains it all for you in his new special announcement right here. And today, D.R.'s got two more trades lined up and ready to go… You could play these two stocks – and make a fortune faster than you ever thought possible. But you must act now. Who knows how many more triples he'll hit before April! Don't miss out on the biggest, fastest, and most lucrative profit bonanza I've ever seen. This is truly the opportunity of a lifetime. To find out how his strategy is cranking out winners and how you can make some major cash, click here. How to Profitably Combat Information OverloadMillions rank the Internet right up there with canned beer, sliced bread, and automatic transmissions.
Me? I think it's the single biggest impediment to profitable investing in the history of mankind. Never mind all the false news that's making headlines lately – pun absolutely intended – or even the acerbic nature of it. The Internet is simply overwhelming. There's so much information that many investors are hopelessly confused about what to do next let alone how find profitable investments. If you're one of 'em, you're not alone. And, you've come to the right place. What Really Works on Wall StreetIf you're of a certain age like I am, chances are you recall futurist Alvin Toffler's groundbreaking 1970 book, "Future Shock," in which he addressed the concept of "information overload" and popularized the notion that huge amounts of information can overwhelm our own limited cognitive processing capacity. Back then, the average person was subjected to around 500 video, audio, and print ads a day. Now, the figure may top 20,000 exposures a day, which represents a staggering 3,900% increase. It's a sensory assault in the purest sense of the term. There's simply no way you're going to absorb but a fraction of what you see – and here's the kicker – even if you go looking for it. That makes investing especially problematic these days. Contrary to what legions of diligent multitaskers believe, studies show that your brain cannot register really important data when you're hit from all sides by unrelated information – the search you just ran on high dividend producers, a joke from your buddy, the note from your children about an upcoming school play. One way to deal with this is to limit the use of technology. Experts like London School of Economics Professor Paul Dolan suggest turning off your smart phone a few hours a day. But that doesn't do much for the laptop, your desktop, or the constant "crawlers" you see invading every television screen. Another is to learn how to "drive" the information superhighway. Companies like Cisco Systems Inc. (Nasdaq: CSCO) and Alphabet Inc. (Nasdaq: GOOG) are trying to teach their employees how to navigate the relentless cycle of information, but have done very little to address the fact that some people measure self-importance by sending out emails you just "have" to answer… off time or not. Still a third is to have the filtering done for you. Google, for example, is working ruthlessly to simplify its searches, which is a lesson in irony considering I just got 3.86 million results in .00005 seconds when I googled "information overload." Never mind the privacy invasion that has to happen in order to make this possible. Not to get too literal here, but there's a reason your smartphone is 18X dirtier than a public toilet seat. We're being hit with so much information today that many people find the only moment they have to themselves is when they're doing their business. Thing is… not even the smartest filters can help you sort through quadrillions of bytes of data in search of the best investments. For that, you've got to turn the equation around. What I mean by that is you have to put a rock-solid investment structure in place first, then go looking for what you want. Doing so will help you automatically find the best companies and invest in them profitably… through thick and thin… and through market conditions that terrify most investors. Why? Simply because you will know how each fits with your specific investment goals and objectives before you start looking. Most investors have great intentions and no structure. So they wind up a lot like Christopher Columbus who had no idea where he was going, no idea where he was when he arrived, and no idea where he'd been when he returned. Wall Street would have you believe that diversification is the answer, meaning that you split your money between a slew of investments on the theory that not everything goes down at once. That's a lot like re-arranging the deck chairs on the Titanic, and about as effective. Just ask anybody who's watched their 401(k) get turned into a 201(k) twice in the past 17 years – from 2001 to 2002 and again when the Global Financial Crisis hit from September 2008 to March 2009. The better way is to use something like the 50-40-10 model I advocate in our sister publication, the Money Map Report, which has helped millions of investors who are a part of the Money Map family. Not only does it reduce risk to razor thin levels, but doing so ensures you are using truly non-correlated choices to build wealth and even bigger profits. It doesn't matter whether you have $500 or $500 million to your name. You can make the 50-40-10 work for your money because it provides the structure you need to navigate today's complicated markets. Start by grouping your money into three tiers that loosely correspond to the "Food Pyramid" we all grew up with: The bottom layer – the 50 – is chock-full of stuff your parents told you to eat because it was "good for you" but which probably tasted like wallpaper paste. The middle layer – the 40 – includes investment choices that are like the food you couldn't get enough of because it tasted great and made you grow. The third layer – the 10 – is the beer and chips or, as was the case in my house growing up, the ice cream pie. It's the higher risk stuff that can easily pack on a few pounds if you eat too much but which you want because it can take your portfolio to amazingly profitable heights. I like the pyramid for a few reasons. First, it's easy to understand. Our brains like simple shapes as opposed to abstract concepts and that's especially important at a time when we're getting slammed with more data, not less. Plus, it's really easy to show millions of investors how and where to put their money for maximum gains and minimum risk. Second, the pyramid forces your brain to recognize what needs to happen. Yet another numerical study and reams of paper from New York's Armani Army isn't going to have the same impact. Visually, you understand that the higher you go up the pyramid, the more limited your choices become so there's discipline involved which is great for most investors who lack it. (Try climbing a pyramid some time and you'll see exactly what I mean.) And, third, organizing your money around a pyramid forces you to "eat" what you need when you need it. That means you'll be able to take advantage of the markets best opportunities without fail when they present themselves and forced to sit on your hands when everybody is scared stiff. This last point is particularly important because that's where the vast majority of investors doom themselves to terrible returns. They get caught up in their emotions and distracted by the blizzard of data that sets them off on a wild goose chase in the first place. So they start making counter-productive decisions – usually when they can least afford it. Not surprisingly, this is also when investors who think they're investing find out the hard way that they've been speculating… and poorly at that. Does it work? You bet. I constructed a hypothetical portfolio of just 11 choices and ran it from August 2000 to December 31, 2016, rebalancing it on the first trading day of each year using publicly available data to keep things simple. I chose those dates very deliberately because a) I hear constantly from investors who are worried the sky is falling, and b) I also hear from those who tell me with a straight face that there's nothing to buy right now and that there hasn't been for years. During this time we've experienced several wars, recessions, two face-melting market declines, rip-your-face-off rallies, a resurgence of nationalism, and the global equivalent of a political train wreck. Yet, the 50-40-10 has returned a staggering 412.81% versus a much lower (but still very respectable) 47.46% from the S&P 500 over the same time frame. No disrespect to people who are worried or those who fear more market madness… what I want you to understand is that history shows beyond a shadow of a doubt that there's a way around almost every obstacle put in your place including the Internet… …if you have the right structure in place from the get-go. In closing, I bring this story to your attention because in 14 days, the United States Department of Labor will move forward with a controversial and little-known plan. It'll enable broad and sweeping changes to your retirement – the most dramatic, in fact, since the Retirement Act was written more than 40 years ago, when 401(k)s and IRAs were created. Washington academics and policy wonks are trying to pass this new change off as "consumer protection," which sounds good on the surface. But the way I see this playing out just doesn't look good for the average retiree. Heavy regulation… Higher costs for brokerage firms… Increases in the threshold for minimum investible assets… Restricted availability of certain investments… A change in fiduciary responsibility… Low- to middle-income earners getting lost in the fray… Make no mistake. This regulation was intentionally approved under the radar. You were left out of the decision-making process for a reason. The good news is that unlike the vast amount of retirees in this country, you now have the 50-40-10 approach in your back pocket. That gives you a tremendous advantage when it comes to capturing the best the markets have to offer while also avoiding periodic corrections and meltdowns that will doom other retirees to an abysmal future. As great as that is, I still worry that this drastic step by the Federal Government will be a crushing blow to countless American retirees and their families. So I'm taking action to ensure every one of my readers is prepared. Tomorrow night, Wednesday, March 29 at 8:00 p.m. Eastern Time, I'm going to host a Retirement Crisis Summit. I'll be on a live call with my publisher, all the way from Tokyo, to share my full findings regarding this impending federal action, and detailed instructions on how to fight back and protect your retirement before the April 10 deadline. The Retirement Crisis Summit will be free to attend for all members of the Total Wealth Family. I want every American informed and protected before it's too late. Click here to sign up. Best regards for great investing, Keith The post How to Profitably Combat Information Overload appeared first on Total Wealth. Join the conversation. Click here to jump to comments… |
One Word... UBER
In 2011, Uber was worth $316 million. Today, it's valued at over $68 billion. That's a 215-fold return in just five years - enough to make investors filthy rich. So why aren't you getting a piece of Uber and Airbnb (worth $31 billion)... and SpaceX ($12 billion)? Because normally you can't, unless you're already a millionaire and highly connected. But today that's all about to change. Go here. Member Services 888.384.8339 Write to Us Keith's Picks Keith's High Velocity Profits readers just took down their 10th triple-digit gain of 2017. It's easy to see why his readers are crazy about these recommendations... Today in... With ETFs hot and getting hotter, Shah Gilani says it's only a matter of time before they ignite the next market crash... Get Shah's breakdown of the situation right here, and you'll also get his Insights & Indictments for free. Theresa May Could Send This Stock Soaring Tomorrow By Money Morning Staff Reports Last June, when "Leave" prevailed in the United Kingdom's referendum on European Union membership, markets all over the world swooned massively and sent unprepared investors on a real white-knuckle ride they're not likely to forget. Of course, as our Chief Investment Strategist Keith Fitz-Gerald predicted, the markets recovered. Ultimately, the vote was a terrific opportunity for us because we were able to snap up some of the world's best stocks at unheard-of prices in time for the rebound. Still, the Brexit referendum and the global reaction were just the first "shoe" to drop. You see, the actual Brexit, the formal departure of the UK from the union, hasn't even started yet. But it's about to kick off... Tomorrow, on March 29, Sir Tim Barrow, the UK's Permanent Representative to the Brussels, Belgium-based EU, will hand-deliver a letter to EU President Donald Tusk informing him that the British government intends to "trigger" Article 50 of the Lisbon Treaty. That will start the formal process of negotiating the Brexit itself. This is likely to have a big impact on the markets and, what's more, Keith doesn't believe investors have "priced in" the full consequences of the Brexit. According to Keith, that means we've "got an incredible opportunity" on our hands - one company he'd like everyone to own before the fireworks start. He's going to tell everyone about it right now, because there's not much time left to buy... Full Story Guess What Politicians Are Handing Us Big Profit Opportunities The healthcare tussle in D.C. and the looming Brexit have created some uncertainty among investors in the market. The latest wave started after the healthcare bill vote was delayed last week and has largely intensified. You can see in this chart how the VIX - the market's fear gauge - spiked to its highest level in a month after the news came out last week. This should continue until the markets get "comfortable," which isn't likely to happen before Friday. But, as you'll see in this free report, volatility isn't really anything to fear. In fact, spiking volatility should be seen as another great opportunity. Michael A. RobinsonThis Is the Next Big "Silicon Valley in Detroit" Play Michael's two auto technology plays have been doing extremely well thanks to some big winning deals. He's kept his readers way ahead of the Street in this sector. And now, he's sharing the best pick in the connected and driverless vehicle space... Full Story Must SeeThis Will Devastate American Savers What Chief Investment Strategist Keith Fitz-Gerald just uncovered has him more concerned for the welfare of our readers than ever before... and on March 28, at 8:00 p.m. (ET), he's hosting the first ever Retirement Crisis Summit. He'll be discussing the facts behind the devastating threat from the federal government to American savers and their families, and what you can do before the April 10 deadline to protect yourself. This situation is so urgent that we're making this special event free of charge for all our readers. Click here to register now. Coming UpThis $525 Million Company Could Go Public in April Tech investors have anticipated this company's IPO for two years. And there will be a frenzy for the stock as the IPO date approaches. Here's everything you need to know about the company and whether or not it's a good investment... Full Story In the KnowPainting the Tape It's an illegal form of market manipulation where market participants explicitly try to change or manipulate the price of a security by creating the appearance of substantial trading activity in the stock. The Securities and Exchange Commission prohibits such an activity because it creates an artificial price for the security that doesn't reflect true demand and supply forces. On March 24, shares of a key Chinese company sank by 85%, leading to one of Hong Kong's biggest sell-offs. The stock has more than doubled in the past year, but the company didn't actually make more money; it relied on one support for its stock price - insider buying from its leader. While no charges have been filed, the company is unlikely to ever recover from this... Private Briefing (Premium)The Classic Business Model Behind This Tech Stock's Growth It's not often you can make money while contributing to the public good, but with this company you've got the rare chance to do so. The stock could easily gain 58% over the next year. Now's the time to get in, before Wall Street makes its move... Full Story Learn more about Private Briefing here... Member BenefitsWe Want You to "Get In" Early - and Make More Money When it comes to making big profits in the market, timing matters. Quickly buying Apple shares after the June 2013 sell-off could have helped you double your money. Moving on Valeant the same day we recommended our big "negative bet" against it could've booked you a remarkably fast 700% return. That's why we've started Money Morning's Profit Alerts service. It sends actionable investing analysis right to you as soon as it's published. You get to decide the areas you want to follow. There is never a charge. And you can start today right here. Bet On Pot ?Which stocks do you think helped the world’s best performing hedge fund soar 145% last year?
Steel?... Oil? Maybe biotech? Nope. I’ll tell you… Cannabis. That’s right… The best hedge fund in the world got rich, in part, from betting on pot companies in 2016. Now I can’t guarantee how things will play out in the future. But based on everything I’ve seen and read, I need to ask… What are you waiting for? In the next 12 months or more, legal weed could soar. It’s a sector that could be about to boil over. And it’s something British investors can tap TODAY. To give yourself a shot at seeing your own personal marijuana fortune then you need to be quick… Everything you need to know is right here. An Old Rival Is a Dangerous New Player in the South China Sea Energy CrisisFor years, I have worked with the U.S. Department of State, providing advice to developing countries on oil and natural gas issues. Our work together goes back some 46 years.
It began during the Vietnam War, when I was recruited into a division of State's Bureau of Intelligence and Research (INR), initially involving insertion into the Southeast Asian theater of operations as a field counterintelligence officer. A great deal of the work I did, and the losses I and others suffered, remain classified to this very day, but suffice it to say that deployment earned me the first of my three Presidential Intelligence Awards – and launched more than two decades of active service in the intelligence community. However, much of my more recent work has involved matters related to the geopolitics of energy, certainly one of the most complicated and potentially explosive issues our world faces today. As a result, I have traveled to a number of countries over the years to work with officials on establishing energy policies and practices. It's one of the reasons I had to return to Vietnam after so much time, to close some of the loops of my past – and to help ensure energy's future swings in America's direction… Why America Is Growing Closer to VietnamAbout two years ago – around 20 years after the 1995 "normalization" of relations between the United States and the Socialist Republic of Vietnam – the State Department requested that I return to Vietnam to provide support to their oil and gas policy planning process. It was the first time I'd gone back since the war, and the prospect has brought back memories. There has been a near 180° shift in American attitudes about Vietnam. Vietnam has been undergoing profound shifts of its own since 1986, with a far-reaching program of market reforms they called "Đổi Mới," or, loosely translated, "Renovation." You see, our onetime adversary is blending communist and capitalist structures to effect huge changes to its economy. It has been a very effective hybrid (and certainly one of the stranger manifestations in recent memory). Had anybody 40 years ago suggested we would be in any kind of alliance with the Vietnamese on anything, I would have thought it pure literary fiction. Of course, there are still some lingering ideological differences and issues between the two Cold War-era enemies, but the two countries have some very compelling interests in common. In general, Washington had opted to support Hanoi in its ongoing disagreements with China over offshore drilling rights in the powder keg of the South China Sea. But that assistance initiative has stalled more recently. The view (to say nothing of the plans) of the new Trump administration on the Vietnamese project remains unknown. Yet even before the November 2016 U.S. election, the project has been opposed by Chinese "actions" in the region. These actions have intensified the situation, to put it mildly. Intelligence reports released over the weekend and again on Tuesday indicate China is nearing completion of three manmade islands, like Fiery Cross Reef, which you see on the left. Any one of these structures could soon serve as a potential base for the powerful new weapon the Chinese are calling "sha shou jian." I've seen dramatic video of this weapon in action (as every American should) and it's enough to say that U.S. Pacific Fleet has cause to be concerned. In general, though, these new islands provide "platforms" for achieving three of China's strategic and tactical aims:
It's hard to overemphasize the importance of this region for trade, especially energy – fully one-third of global crude oil, and more than 50% of the world's liquefied natural gas (LNG), pass through the South China Sea each year. And just when affairs seem to be reaching the point of maximum tension, a longtime U.S. rival has entered the already complicated picture to throw a wrench in the plans of diplomats, soldiers, and energy investors alike. Guess Who's Coming to DinnerRussia… Moscow is threatening to become a fully engaged player in the crisis. They are seeking a foothold in tomorrow's oil and gas hotspot – that could become today's battlefield unless we're very careful. I have discussed aspects of this crisis and its impact in my Oil & Energy Investor newsletter, and I've made profit recommendations for capitalizing on these events in my Energy Advantage and Energy Inner Circle services. The latest Russian involvement, however, results in a whole new set of unknowns… It's hardly a mystery that the Kremlin has shown an interest in South China Sea developments. Asia has become a major emphasis in the Russian drive to sell more domestically produced oil and natural gas. With its central budget remaining dependent on export proceeds from hydrocarbon sales, and that budget further requiring that Russia sell increasing amounts into the international market, Asia is the focus. You've seen me say many times that all projections indicate that the bulk of energy needs worldwide will be shifting to Asia at least through 2035. Major pipeline projects to China have clearly signaled Russian intentions to compete in the region. The completion of the East Siberia-Pacific Ocean (ESPO) network has opened up a major port facility from which rising oil exports are flowing to Asia. But when it comes to oil, Moscow is not only relying on trade. In the South China Sea controversy, they have their own local production base… Russia's Relationship with Vietnam Goes Back DecadesIts name is Vietsovpetro. This is a well-established joint venture between Russian state-controlled production company JSC Zarubezhneft and Vietnam's state company, PetroVietnam. And when it comes to American policy in Vietnam, this is fast becoming a real impediment. At the same time, it's a significant source of leverage for Russia in South China Sea operations and gives it the ability to stymie U.S. initiatives there. As the "sov" in its name indicates, Vietsovpetro has been around since Soviet times. It comprised one of the main economic connections between Moscow and Hanoi following the American departure from Vietnam in 1975. In fact, Zarubezhneft was established to pursue those ties. For years, the company operated only on continental shelves offshore other countries, primarily Vietnam. It was only when the Kremlin decided several years ago to prioritize developing its own offshore shelf that Zarubezhneft started working in Russia proper. Then, Russia needed to attract outside investment for such an expensive undertaking. It still does today. Yet the Kremlin didn't want to lose control over the projects emerging. What emerged was the requirement that projects be controlled by Russian state-run companies having at least five years of experience in shelf production. The list was short – Rosneft Oil Co. (OTCMKTS: RNFTF), natural gas giant Gazprom PAO (OTCMKTS ADR: OGZPY), along with its oil wing Gazprom Neft, and of course Zarubezhneft. However, the last also needed experience inside Russia to qualify. So – surprise! – it was quickly awarded domestic field leases. The company brought in PetroVietnam as a partner. And this brings us to some of the ways we can limit, or "contain," to use the old parlance of the Cold War, China's moves in the region. That is, if we want to… America Is Losing a Massive Opportunity Here"Offshore" Vietnam has emerged as a lynchpin in any attempt to thwart Chinese expansion in the South China Sea. Vietsovpetro has clearly demonstrated the size of offshore oil and gas fields. Several have been operating for years and the volume extracted remains significant. And there have been other limits on Chinese expansion in the South China Sea… Both BP Plc. (NYSE: BP) and Exxon Mobil Corp. (NYSE: XOM) had been working in the area. But BP was forced to sell its interests when the company was setting up a legal war chest in the aftermath of the Deep Horizon disaster in the Gulf of Mexico. Thrusting Exxon Mobil into the primary fallback position may seem like a possibility, given the new U.S. Secretary of State, Rex Tillerson, is the former CEO of the company. But in reality, however, that makes the policy more difficult. China's expansion must be offset by local national policy, not by international oil companies or foreign governments. Washington can certainly assist, but, here at least, it cannot lead. Bringing us back to my "holding pattern" on the State Department liaison plan with Hanoi. At the moment, Vietsovpetro is the established bulwark against the Chinese in the western South China Sea. Now, I also have considerable experience working in the Soviet Union before the January 1992 breakup of the USSR, and in Russia after that. But in the current climate, it's difficult to see any cooperation between Washington and Moscow. It seems possible, maybe even likely, that narrower national interests will instead prevail, with Russian policy moving to another détente with China and dividing up of the region. That would represent something of a missed chance and a foreign policy defeat for Washington, in a region where we can least afford it. If the simmering tension boils over and becomes violent, our forces will of course have to contend with that alarming Chinese superweapon I mentioned. In that event, we'll have to fall back on a small, $6 company that insiders are saying is the government's "ace in the hole" in any fight in the South China Sea. Join the conversation. Click here to jump to comments… The Assassin's MaceToday, Kent revealed critical details on a rapidly intensifying geopolitical situation...
The South China Sea Crisis puts much of the world's oil and gas trade at risk - and the situation is only worsening now that Russia has begun meddling. But even more concerning is what all this means for the United States... Disturbing satellite images have confirmed one of the Pentagon's worst fears. In addition to nearing completion of three man-made islands in the South China Sea, China has developed a new superweapon capable of killing thousands of Americans in a sneak attack that would be bigger than 9/11 and Pearl Harbor combined. This Chinese "Doomsday Machine" is the knockout blow in a deadly battle plan Beijing has already set into motion. They call it "sha shou jian." And if that doesn't scare you... it should. "Dozens" of these horrific new superweapons were recently aimed at the U.S.S. Ronald Reagan on patrol in the South China Sea, nearly igniting a war, according to Chinese state-run television. Now events have come to the surface that lead me to believe hostilities may be imminent... And every American needs to know about it before it's too late. Kent's full intelligence briefing can be found Here |