Agora Financial’s Rude Awakening

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Laguna Beach, California

• Precious metals and energy plays to hedge your waning Benjamins,
• Avoiding the daylight robbery of inflation tax,
• Celebrating a great American’s 302nd birthday and plenty more…

Joel Bowman, from Dubai, UAE…

Did you know the phrase “daylight robbery” actually comes from a time in
England when taxes were levied on windows? The tax was such that only the
richest residents could afford to have the sun peer into their city
dwellings. The poor, literally, were “kept in the dark.”

The term “turncoat” is another interesting one. It stems back to post WWII
Europe, where Hungarian officials saved their hides by switching to communist
uniforms after the Russian booted out the Nazis.

In the column below, Byron King takes a look at how observing the old adage,
“a penny saved is a penny earned” could end up saving you a “whole lotta
Benjamins.”

Enjoy…

— Byron King’s Energy & Scarcity Investor —

A California Energy So Secret, You Can’t Even See it Without a Top-Level U.S. Navy Clearance…

But a former Navy ‘insider’ is now ready to disclose the names of five
’secret’ energy companies that could make you $372,340…

The Navy has already collected $194 million from this discovery.

And CNNMoney.com reports that ‘Investments in [this 'secret' energy sector]
jumped nearly four-fold over the last two years, to about $100 million last
year… Because it’s [still] so small, there’s large growth potential
here…’ Here’s the Full Report .

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Protecting Your “Benjamins”
By Byron King

Today is the 302nd birthday of Benjamin Franklin, author of the famous
phrase, “A penny saved is a penny earned.” If Franklin were alive today, he
might have added a few words about protecting ones pennies from the ravages
of inflation and reckless monetary policies. But since he cannot add these
refinements, we will…after first paying our respects to this great American.

Early in his life, Benjamin Franklin spent a bitter period of time as an
indentured servant. He became well acquainted with scarcity and privation in
a colonial economy at the frontier of the British Empire. After gaining his
freedom, Franklin went on to become a printer, editor and merchant. (At one
point, Franklin had a government contract to print the paper currency of
Pennsylvania.) Franklin was also a natural scientist, scholar, writer and
inventor — coming up with an array of things ranging from the lightning rod
to the glass harmonica. It was Ben Franklin who came up with many social
innovations that we take for granted, such as America’s first lending library
and the first volunteer fire department.

And Franklin was a politician, diplomat, philosopher, ambassador and Founding
Father of the United States of America. It was Franklin who famously summed
up the form of U.S. federal government – if not its ultimate fate – as he
walked out of the proceedings of the Constitutional Convention of 1787. When
asked what sort of government had been established, Franklin replied, “A
republic, if you can keep it.” More than two centuries after his death,
Franklin is among the most revered and respected figures in American history.

Indeed, Franklin is among the best-known Americans throughout the world.
Certainly, Franklin’s intellect and accomplishments are the foundation of his
fame. But one aspect of Franklin’s worldwide fame comes from the fact that
his image is printed on the U.S. $100 bill. Thus, Ben Franklin is ubiquitous
in international trade and commerce.

This monetary aspect of Franklin’s fame is worth bearing in mind. Because it
now takes about one of those $100 bills to purchase one of these barrels of
oil.

And it takes nine of those $100 bills to purchase an ounce of gold.

Just a year ago, a “Benjamin” would buy nearly two barrels of oil, not one.
And it took just a bit more than six Benjamins to buy that gold coin
illustrated above. While we are thinking about it, how much food can you buy
this year at the grocery store for the amount indicated on one Ben Franklin
$100 bill? Less than you could last year, right?

Simply put, the value of your U.S. currency is declining, while the costs for
the things you buy are rising. So what’s the cure? In my investment letter,
Outstanding Investments, we recommend heavy doses of selected gold mining
stocks. Most of the stocks we have recommended have been on a tear lately.
But I believe that there is more room for these shares to appreciate in the
rising price environment for gold.

Oil and gas stocks also seem like excellent candidates to preserve the value
of your pennies. One great natural gas-producing firm in the Outstanding
Investments portfolio is Chesapeake Energy Corp. (CHK: NYSE) – a company that
is rapidly increasing its output from the Barnett Shale play. Chesapeake has
produced a return of almost 40% in just over two years since we added it to
the portfolio. Keep in mind that this was during a time of, essentially, flat
natural gas prices. [Eric’s Note: Faithful Rude Awakening readers may recall
that Byron’s predecessor at Outstanding Investments also admired Chesapeake
Energy, and he told us so in the September 28, 2006 edition.

Chesapeake stock is currently selling at about $38.50 per share, with a
price-to-earnings ratio of about 12. During the past couple of years
Chesapeake embarked on a phenomenally successful drilling and production
program within the heart of the U.S. And the future appears even brighter for
this Oklahoma City-based company. Using between 38-40 drilling rigs that it
either owns outright or operates under contract, Chesapeake expects to
complete – on average – a gas well in the Barnett Shale play about every 15
hours through at least 2010!

Aubrey McClendon, Cheasapeake’s CEO, recently stated that the company plans
to continue acquiring leaseholds in Tarrant, Johnson and Dallas counties in
Texas. So Chesapeake will be drilling its additional acreage in due course.
In 2007, Chesapeake’s gross production from the Barnett Shale was 600 million
cubic feet of gas equivalent (400 million cubic feet per day net), compared
with 2006 gross production of 250 million cubic feet per day. According to
CEO McClendon, “We now will focus on achieving our 2008 gross production exit
rate target of 900-1,000 million cubic feet per day.” This is an output
increase of over 60%.

In other words, Chesapeake will be increasing gas output, in all likelihood
in an environment of rising energy and natural gas prices. Hmmm…seems like
the sort of stock that could protect your pennies, or maybe even hand you a
few more…especially if the global supplies of oil and gas begin to decline.
How dire is the global outlook for oil and gas supplies? Houston’s own Matt
Simmons provides a few hints. Mr. Simmons is a leading light of the energy
industry, and one of the smartest oil and gas guys you will ever encounter.
This is what Mr. Simmons had to say in a recent interview about the world’s
energy situation, discussing whether or not the world increase oil output
over the next 10 years:

“If we were lucky enough to open up the entire outer continental shelf, and
then we were lucky enough to invent quickly enough seismic equipment to start
doing some sort of a high-grading of where we should drill, and then we were
lucky enough to have a growing fleet of newer offshore rigs that could drill
wells, and we just discovered two new North Seas, then there’s grounds that
we could basically spend $400 or $500 billion and maybe end up 10 years from
now with 6 million barrels per day of fresh supply. But the problem is that
each one of those things that I said, ‘If we were lucky enough,’ we don’t
have. And 10-15 years from now, our 73 million barrels per day of current
crude production could easily be down to 50 or 45. So you say even if you had
another 6 million barrels per day, you can’t climb back out of the hole.”

Needless to say, none of the politicians who are running for U.S. president
says anything even remotely like this in any of their speeches. Really, where
are the modern Benjamin Franklins? Do you think that the face of any modern-
day politicians will ever appear on any form of American legal tender? If
that happened, we would probably be living in a “banana republic,” and not
the U.S. republic that Ben Franklin helped to found. Then again, in a banana
republic, at least they produce bananas.

So it behooves you to look after your own financial future. If you protect
your wealth by investing in precious metals and energy plays, you will be
acting out the wisdom of Benjamin Franklin. Invest in gold. Invest in energy.
Invest for your own future.

Happy birthday, Benjamin Franklin!

[Joel’s Note: Want to park some of your Benjamins in some hard, appreciating
assets? Check out Byron’s Outstanding Investments newsletter and a concept he
calls “gold-backed wealth insurance” right here.

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Rude Endnote: So, here’s a question. How many “Benjamins” will it take to buy
a barrel of oil, ounce of gold and bushel of wheat by this time next year?

Send comments and predictions to your managing editor at the address below.

Cheers,

Joel Bowman
Rude Awakening

aussiejoel@the-rude-awakening.com

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