Agora Financial’s Rude Awakening

Jump to Comments

Wall Street, New York

• The energizing opportunity bailout funds will NOT be investing in,
• Helpful hints for Wall bankers looking to repair battered public images,
• And, not a single joke about recently deceased pop stars…

Eric Fry, reporting from the scene of the crime, New York City…

Your California editor returned to New York City yesterday, his old stomping grounds. The place didn’t look much different than the last time he passed through, about three months ago. The sidewalks weren’t very crowded and the restaurants weren’t very full. Maybe the “green shoots” of recovery aren’t as green as advertised.

So let’s turn to the news…

A quick perusal of yesterday’s headlines revealed little news of great importance. Hmmm…let’s see…a Southern governor publicly confessed his sins and sought forgiveness. Wall Street firms publicly denied their sins and launched a massive P.R. campaign.

“Wall Street’s largest trade group has started a campaign to counter the ‘populist’ backlash against bankers,” Bloomberg News reports. “In memos of confidential meetings with top financial executives, the Securities Industry and Financial Markets Association said it began this month the ‘execution phase’ of the operation, which pledges to ‘embrace change’ and accountability.”

To conduct this campaign of “change” and “accountability” Wall Street will toss tens of thousands of dollars at pollsters, P.R. firms and other public-image managers.

A cynical observer might be tempted to deduce, “Oh, that’s nice, first these firms blow up the American banking industry, solely for the sake of enriching themselves, then they funnel a portion of their bailout monies toward P.R. firms, for the sake of repairing their reputations.”

But let’s not yield to cynicism. Instead, let’s step inside Wall Street’s Gucci loafers for a moment.

If you were one of the individuals who’s unbridled greed had helped bring the economy to its knees, wouldn’t you want the public to focus on something else? And if you were one of the folks who’s raw self-interest helped investors lose trillions of dollars and helped workers lose millions of jobs, wouldn’t you want to launch a campaign “against populist overreaction?”

Living a charmed life – financed by taxpayers – isn’t as easy as it seems…especially not when so many folks are struggling. Do you think it’s easy to continue receiving multi-million-dollar paychecks while the economy struggles to digest the poison you fed it?

But this situation brings us to the heart of the problem. Where is the gratitude? Where is the compassion for the tens of thousands of low-level Wall Street employees who have lost their jobs, just so that the executives who remain can resume paying themselves salaries and bonuses they do not deserve?

Wall Street’s new P.R. effort might work, but your editors here at the Rude Awakening would suggest an alternative approach. We would offer a two-part image-recovery plan, free of charge:

1) Fire the P.R. firms.

2) Stop acting like complete jerks.

“The best P.R. comes from doing good,” one professional investor observes, “not from having to manage your image.”

In fairness to SIFMA, the trade organization represents 600 securities firms, brokerages and asset-management companies. The overwhelming majority of these operations conduct themselves with honesty and integrity. The employees they represent usually show up for work sober, work hard for their clients, and rarely kick the dog when they return home from a tough day.

Unfortunately, SIFMA also includes pariahs like Goldman Sachs, Citigroup Inc. and JP Morgan Chase. None of their bailout activities would be such a problem if they did not consume so much of our precious national capital, reputation and most importantly, investment opportunity cost.

When we hand $170 billion to AIG (who, in turn hands billions to Goldman Sachs, UBS and others), we do not invest $170 billion in dynamic capitalistic enterprises that could multiply our return down the road.

When we toss billions of dollars into the Wall Street black hole, the investment expectation is merely to “get our money back” or to “not lose a cent.” What private investor would risk capital with such a grim expectation?

While we here in America pile up massive debts to bail out failing industries, the next generation of leading world economies is busy deploying its wealth in promising endeavors around the globe.

China recently invested $10 billion to help develop offshore oil reserves in Brazil. This seems like a MUCH better investment than buying $10 billion worth of Citigroup preferred stock.

Byron King explains in the column below…

—- Byron King’s “Laughing Gold” Report – FINAL 84 COPIES* —

All those people who laughed at you when you talked up gold…

Wouldn’t you love to throw it back in their face starting this month?

Now’s your chance. You’re looking at the golden opportunity of a generation

One simple move could mean the biggest and best opportunity to get rich this century.

I explain this ten-minute step in a special report available NOW. But you must act soon — only 84 copies remain…Grab Yours Here.

* Number of copies available as of this Rude Awakening’s mailing. Offer limited to first print.

———————————-

Deep, Wet and Brazilian
By Byron King

Offshore areas of the world — especially in deep water — are the key to the world’s energy future. Far out and deep down. That’s where the last great hydrocarbon discoveries remain to be made.

That’s why, in my investment letter, Outstanding Investments, I’ve constructed a kind of end-to-end offshore energy mutual fund – from prospect to pipeline. Each company has a broad skill set. None is just a one-trick pony. Some of the companies overlap in skill sets, and even compete with each other.

A few of my favorite names include Norway’s offshore powerhouse StatoilHydro (STO: NYSE), as well as subsea equipment provider FMC Technologies (FTI: NYSE). Then there’s platform and pipeline builder McDermott Intl. (MDR: NYSE), as well as offshore services provider Superior Energy Services (SPN: NYSE).

Going forward, I’m be looking to recommend other deepwater plays…at the right price, of course. I’m looking for companies that can grab hold of key parts of the growing offshore business, and produce great profits in the coming years. I think you’re going to be astonished at what unfolds.

I recently attended the annual convention of the American Association of Petroleum Geologists (AAPG). (Some guys go to classic car shows; I go to geologist conventions). I’ve been a member of AAPG for 30 years, and it’s always fascinating to spend some time there. The meeting rooms and poster sessions feature reports from the front lines of the search for petroleum, natural gas and other energy resources.

One theme emerged loud and clear from this year’s conference: Deepwater. Most of the major oil discoveries that remain to be found in the world will be offshore, in deep water.

The always-ebullient Brazilian geochemist, Marcio Mello — CEO of Brazil’s HRT Petroleum Co. — wowed the crowd with a discussion of the oil potential of the South Atlantic. “Six of the last ten giant oil discoveries in the world were offshore Brazil,” he pointed out. And then Marcio moved the discussion to the other side of the South Atlantic and gave an eye-popping description of the oil potential of the offshore regions of Namibia.

“The Namibian offshore is analogous to that of Brazil,” Marcio stated, with slides and hard data to back it up. Then he showed his proprietary research into natural offshore oil seeps off Namibia, and the geochemistry that demonstrates immense hydrocarbon potential. “But Namibia,” said Marcio, “is way underexplored. So you can put down a little money for the concessions and get very rich.”

The point for investors is how much of future world energy development will involve subsea systems.

For additional perspective, let’s examine the current structure of the American energy supply. Right now, most of the U.S. energy mix comes from burning coal, natural gas and oil. In fact, according to the U.S. Department of Energy, the U.S. gets 87% of its total energy mix from burning fossil fuels. Another 7% of U.S. energy supply comes from nuclear power. The total is 94%.

That leaves about 6% of the U.S. energy mix to come from so-called “renewable” and alternative sources. And 3% of that 6% is renewable hydropower from unique sources like the Hoover, Grand Coulee and other dams. And we’re not building any more big dams.

Thus, only about 3% of U.S. total energy comes from things that grow, blow or shine. Of that 3%, about half (1.5%) is from “biofuels,” and that’s if you count a company like Weyerhaeuser (WY: NYSE) burning sawdust to run the sawmills.

Finally, there’s a very minor part of the total U.S. energy mix — about 1.5% — that comes from windmills, solar and geothermal. For as much visibility as these things get in the media and pop culture, their energy output is tiny — slightly above statistical noise in the overall national mix.

So just follow the numbers. The “alternative” energy sources are a miniscule component of the current energy mix. That’s after a few good years of significant investment, with lots of political support and plenty of tax breaks.

It will take many years (many decades!) for these energy sources to expand and meet the energy needs of the U.S. And that’s despite whatever the politicians and policymakers wish for in their dreams.

That’s why the U.S. must continue exploring for oil and gas. I cringe when I look at the falling rig counts in the U.S. and around the world. Every well that’s NOT drilled is one less source of hydrocarbon in the years to come, as depletion causes output from current wells to decline…which brings us back to the South Atlantic, one of the world’s greatest petroleum provinces.

Some experts think that the hydrocarbon resources in the pre-salt formations off the Brazilian coast may rival those of Saudi Arabia in magnitude. We’ll see about that. But it’s beyond dispute that Brazil and its energy resources are a complete game-changer for that nation, and the rest of the energy-consuming world. It goes back to basic geology and the history of plate tectonics.

When South America started to pull away from Africa about 140 million years ago, an isolated seaway formed — a proto-Atlantic Ocean — that filled again and again with sequences of limestone, thin shales and, finally, massive salt beds. The processes of petroleum geology worked as advertised in the region. And these processes left utterly eye-popping volumes of petroleum locked in high-quality reservoirs covering vast areas.

The big downside (and it’s big and down, to be sure!) is that all that oil is under a mile or two of South Atlantic seawater, covered by three or four miles of rock and salt beds — it depends where you’re located on the continental shelf and slope.

But that’s why it takes companies with phenomenal technical and managerial skills, plus deep pockets, to play in this great game. The bottom line is that with the right companies working at it, there’s enough oil down there to produce a very big payday, not just for Brazil, but for many of the companies that contribute to the effort.

I’ll discuss at length the new developments offshore Brazil during my talk in Vancouver at the upcoming Investor Symposium, July 21-24. The title of my talk will be Is God Brazilian? So that ought to give you a clue about what I think lies under all that water column and rock down there.

— Breaking Research from The Strategic Short Report —

Introducing The Fear Factor Strategy:

Since the start of the financial crisis, the Fear Factor strategy has crushed every asset class — stocks, bonds, gold, you name it.

For every $1 these stocks tank, you could pocket at least $3… and as much as $7

While the S&P 500 crashed 43.3%… this strategy has bagged average 102.9% returns

It’s proven to turn $1,000 into $2,619… $3,383… even $5,718

To get in on the next Fear Factor play, you have to act now. It could come out in the next 24 hours. Details Here.

—————————————–

[Rude Endnote: Global markets joined in the Wall Street festivities overnight after the Dow stacked on an impressive 178 points to snap its recent string of losses.

Here in Japan, where your editor is enjoying his afternoon tea, the Nikkei 225 rallied 0.8% while Hong Kong’s Hang Seng and China’s CSI 300 rose 1.8 and 0.3% respectively. Down Under, the Aussie All Ordinaries ended the session 1.25% higher.

European stocks are breaking to the upside in early trading today too. France’s CAC 40 was higher by about half of one percent last we checked. London’s FTSE and Germany’s DAX were up around 1% each.

Crude too enjoyed the return of confidence to the market. A barrel of the black stuff goes for a shade over $71 this morning. Not to be outdone, gold leapt another $4 per ounce over the last 24 hours. An ounce of the yellow stuff now fetches $943.

We’ll be back with your usual weekend wrap tomorrow.

Until then…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com