Condo Market Cracking; Commodities Surging

In Miami, speculators with hundreds of units and staggering debt pyramids are starting to dump their holdings. In Boston, Las Vegas and New York, were beginning to see similar signs.

The clincher is the data on condos just released this week by the National Association of Realtors (NAR). It shows that …

The Supply of Condos in The U.S
Has Surged by a Whopping 51.4%!

Hard to believe, isnt it? But its a fact.

In July of last year, the supply of condos and co-ops on the market nationwide was only enough to cover 3.5 months of sales. Now, NAR estimates that the supplys enough to cover 5.3 months of sales, a 51.4% jump.

Thats a huge glut of unsold condos on the market, with a large percentage of the units in the hands of speculators … most leveraged to the hilt … buried in debt … and under pressure to dump them as soon as financing costs rise or prices slump.

Naturally, tracking the price of housing is not nearly as simple as tracking the price of a stock or commodity. But the Census Bureaus report, also released this week, gives us some clues:

• Despite a rise in sales, the median price of a new home declined in July by almost $16,000 to $203,800 the lowest level since December 2003.
• Compared to last July, the one-year decline was the worst since May 1992. Even in the months after 9/11, home prices didnt fall that hard.
• Home sales up but prices down? Whats going on? I think at least part of the answer is an even steeper fall in condo prices which is dragging down the median price. And sure enough, the sales data confirm: New condo sales were NOT up. They were actually DOWN 5%.

But while condos are a bubble, the global surge in commodities is driven by some of the most powerful, long-lasting forces of nature …

Worldwide Energy Crisis

For a glimpse of these forces, first join me on a brief worldwide tour. You will see whats happening on the ground right now …

Molokai, July 28. Our first stop is the island of Molokai in Hawaii. Suddenly and without warning, most of the islands 7,000-plus residents are rushing to gasoline stations. They mob the pumps. They wait on two-mile lines for an hour or more.

Decatur, Alabama, August 18. We fast forward three weeks and travel 4,500 miles to the East, where residents of Decatur, Alabama have a similar experience. The rumors are different. But the result is the same: Residents mob the gas pumps, again causing local shortages.

Southern China, July-August. Chinas two major oil suppliers, Sinopec and PetroChina, stop supplying petroleum and diesel gas to outside vendors. Soon, hundreds of gas stations in Shanghai have no supply. In Guangzhou (Canton) and Shenzhen, the two largest cities of Guangdong province, about 70% of the stations display No Gas signs.

BPs Texas City refinery, March 23. Dangerous, flammable liquids are building up in a tower, reaching 120 feet, far higher than normal. A transmitter inside the tower fails. An alarm is also silent. Suddenly, at approximately 1:20 pm, a series of explosions rocks the facility.

Niger Delta, Nigeria, August 16. Royal Dutch Shell, one of the largest crude oil producers in the region, is trying to negotiate a settlement with local community leaders regarding a massive oil spill that took place in 2003. But the talks break down. A popular protest erupts on the streets. And Shell is forced to shut down 14,000 barrels per day of oil production, sending new shock waves through the oil markets.

This tour gives you just a small, anecdotal taste of whats happening on three levels:

First, the worlds distribution network for gasoline is tight as a drum, vulnerable to even the smallest of disruptions. If there is any major interruption of supply flows, expect pandemonium at the gas pumps not only in the U.S. but also in Africa, Australia, Asia, Europe and South America.

Second, the worlds oil refineries are being pushed to and beyond their limits. Either production must be voluntarily curtailed for better maintenance or … future failures will inevitably cause more involuntary cutbacks.

Third, the conflicts in Nigeria, Ecuador and elsewhere are not new events that have suddenly emerged. Like the conflicts in the Middle East and the Persian Gulf, they have been festering for decades. Expect many more disruptions in the months ahead.

In short, this energy crisis is more than just a supply-and-demand imbalance that can be measured by economsts or fixed by policymakers.

The energy crisis is a vast array of potential distribution bottlenecks, technological failures, and geopolitical conflicts. Its a highly complex global phenomenon that can only be resolved in one way with a convulsive upward price adjustment.

The New Commodity Superpower

For readers who have been following Larrys forecasts in recent months, Chinas bid this week for Canadas PetroKazakhstan should come as no surprise. This is precisely what hes been telling you would happen all along, and now its what were seeing in aces and spades.

The buyer, China National Petroleum, is the largest of Chinas Big Three energy companies. The amount offered $4.18 billion is about DOUBLE what another Chinese company paid for IBMs PC business, previously Chinas largest foreign acquisition in history. And Kazakhstan, where the China will now control a substantial chunk of the oil reserves, is the ninth largest country in the world, nearly four times the size of Texas.

So this is obviously big. And the lessons to be learned from this event are equally big:

Lesson #1. Chinas bid for a large North American oil company reinforces what Larry has been stressing about undervalued oil reserves.

Lesson #2. Yesterdays announcement also brings home the reality that should now be obvious to even the blindest of observers: We are facing a worldwide scarcity of natural resources that is both chronic and acute, both long-lasting and urgent.

Lesson #3. China is the worlds new superpower. Indeed, while the attention of the United States is riveted on Baghdad, Basra, Kabul and Kandahar, China has been locking up deals and buying up natural resources in Angola, Nigeria and Sudan … Argentina, Brazil, Ecuador and Venezuela … Australia and New Zealand … Central Asia and Southeast Asia … not to mention North America.

China is virtually everywhere. It has mineral and oil sands extraction contracts with Canada, seaport agreements with Panama and mining contracts with South Africa. Its in the Amazon, the Outback and the Asian steppes. Its big companies have opened offices in London, New York, So Paulo, Sydney and virtually every financial center on the planet.

And this is just the beginning. China will continue to drive up not only the price of energy, but also the value of coal and iron ore, beef and soybeans, gold and silver.

Oil Hits New All-Time Highs!
Blasting off toward $80!
by Larry Edelson

The oil market is on fire. Late Wednesday, the spot futures contract for crude oil surged as high as $68, blasting past the previous all-time record by nearly a full dollar.

Some people think its the fear of Tropical Storm Katrina, now hovering over us here in South Florida, thats driving oil higher.

Perhaps. But hurricanes are not the fundamental reason oil and gas prices are exploding higher. Theyre exploding higher because, for over twenty years, the world took energy for granted. The facts:

• 90% of all the oil in the world has already been found.
• For every new barrel of oil thats been found, FOUR barrels are being consumed!
• Even the oil thats already been found is running down: 80% of existing oil fields are in their depletion phase!

Theres simply not enough oil to go around … demand is overwhelming … and Mother Nature can pony up only so much more.

Theres nothing you or I can do about that. We cant change how much oil everyone else consumes. We certainly cant change the supply situation. But we CAN profit from the opportunities this great bull market in energy is offering us.

The oil bull market began with a barrel of crude in the teens. At the very minimum, I believe it will continue until the low $100s perhaps $110 or $120 per barrel. So at most, its only HALF over. That gives you more than ample opportunity to profit. Plus, it gives you the advantage of a clearly established trend.

One of the investments Im looking at right now, for example, has the potential to spin off $4,200 in gains on a modest investment of just $800.

Another could tally up as much as $7,125 in gains on a $1,375 investment.

And a third could add another $4,800 in gains on just a $1,600 investment.

But first, take a closer look at the next major force to hit the oil and gas markets. Like Tropical Storm Katrina, its impact will hit within days. But unlike any wind, its pressure will be consistent and long term.

Just FIVE Days From Now …

China is going to start yanking hundreds of millions of barrels of oil off the world market … crushing an already-tight supply-demand equation … driving crude oil to $75, $80 and beyond.

Reason: China is building its first-ever strategic oil reserves. Indeed, China has already acknowledged it will start pumping the oil into the tanks right away starting September 1.

Just four sites in Zhenhai, Daishan, Xingang and Huangdao have the capacity for a total of 100 million barrels. And oil should start flowing into these tanks in just a few days.

Ive met with traders on some of my visits to Beijing, Shanghai and Hong Kong. They are very savvy. They will be all over the oil market, lunging at nearly every pullback to scoop up as much oil as possible before it heads to yet another new high.

Our Recommendations

First of all, keep a big chunk of your money safe and liquid, using Treasury bills or money-market funds that invest only in short-term Treasuries. No matter what other investments you choose, always be sure their risk level is right for you.

Second, for your core portfolios, hold all energy shares recommended in my Real Wealth Report and those recommended by Martin in his Safe Money Report.

These are excellent long-term holdings that are designed to ride the energy markets higher for the next 12 – 24 months. I feel they offer great appreciation potential.

For example, consider an oil and gas company such as Pioneer Natural Resource (PXD). I recommended this stock to my Real Wealth subscribers when it was trading at the $38.50 level. Now its at $45.77, up 19%. But its just beginning what I anticipate will be a long rise.

Third, other natural resource markets are also heating up. For example, gold is firmly holding support, about to enter a new blast-off phase. Copper is already at record highs. And other commodities are close behind. So you should also hold any natural resource shares and gold shares weve recommended.

Plus, for money you can afford to speculate with, consider the incredible leverage you can get when you buy options. You get virtually unlimited profit potential. But you can never lose a penny more than you invest.

Control $85,000 of Oil
Shares for Just $3,775.
(Almost 23-to-1 Leverage)

I just told you how China is going to start filling its strategic oil reserves five days from now, a major new force in the oil market.

Thats why, right now, I’m looking at three companies that have solid access to China, making them what I consider to be ideal candidates to benefit from this major new force.

You could buy 400 shares or more in each company for a total of about $85,000, and I think you would do well. But you can avoid that capital exposure by spending just $3,775 on a select portfolio of their options. That’s the equivalent of almost 23-to-1 leverage.

Here’s the range of possibilities as I see them:

• If Im right on all three companies, you could make as much as $19,900 (before broker commissions).
• If Im only half right on where these shares are headed, you could still walk away with as much as $9,950.
• And even if I’m totally wrong, the most you could lose is your $3,775 investment plus commissions not a penny more.

Thats the kind of risk-reward ratio I like: Up to $19,900 in potential gains versus a total risk of about $3,775.

Why I Think These Three Companies
Are Ideally Positioned to Ride the New Wave

THE FIRST COMPANY is a major refinery with facilities all over the world, including Asia. Its well known for its engineering services for refining heavy crude oil precisely the kind that China needs to fill its strategic oil reserves.

A key point: Most of Chinas refineries can only refine light crude oil. So theres no question in my mind that top refiners of heavy crude are going to scoop up some major contracts from China. And this company is at the top of my list of candidates.

For the six months ended this June, its revenues jumped 35%. It has very little long-term debt and plenty of cash on hand. Plus, it already has a strategic relationship with a subsidiary of China Petroleum and Chemical Corporation.

Right now, 500 shares would cost you about $28,900 if you were to buy them outright. But you can effectively control the same 500 shares for a modest investment of just $800 one-36th of what it would cost you for the shares.

THE SECOND COMPANY on my radar screen is an engineering company thats also a top candidate to provide logistics and maintenance services to China.

It’s not in China yet. But it’s a major engineering service provider to India, and this experience gives it a leg up to grab multi-million dollar contracts from China as well.

To buy 500 shares would cost you about $28,650. But with call options, you can purchase contracts representing the same 500 shares for just $1,375.

THE THIRD COMPANY is a multinational oil producer with over 170 million barrels of oil in Asia. Thats not going to be enough to fill all of Chinas present and future oil tanks. But it does give this company a first crack at supplying China.

If you bought 400 shares, it would cost you about $27,500. But the equivalent options cost only $1,600.

With just these three companies you can own call options that represent a total of 1,400 shares worth about $85,000 for just 3,775. Thats almost 23-to-1 leverage.

No Margin,
No Unlimited Risk

If this leverage required investing on margin, borrowing money, or exposing you to unlimited risk, I would be dead set against it.

But options require no margin or borrowing. With the purchase of stock options, you CAN lose money. But your risk is always strictly limited to the amount you invest. Meanwhile your upside potential is virtually unlimited.

Thats why Im such a fan of options. And thats why I recently launched my brand new service dedicated to trading options in the oil and energy sectors Energy Options Alert.

It covers everything from oil and gas refiners … to natural gas distributors … to oil shipping companies … to oil and energy engineering firms and more.

As a member, you get the Energy Options Alert Trading Manual, which gives you the A-B-Cs on the various types of energy options and how they work: How they provide you with incredibly powerful leverage on the upside. How they limit your risk. How you can maximize profits.

Naturally, because these markets move so fast, the initial recommendations you receive will depend on when you come on board and what’s happening in the markets at that time.

But no matter what, you get precise instructions, telling you what to buy, when to buy it, how much to buy, and what to pay for it. Then, its up to you to pull the trigger, or not.

Two-for-One
Charter Membership

The price of the service is $5,000 per year. But in light of the unusual circumstances in the oil market right now, I am making an unusual offer:

If you subscribe for one year, I will give you the second year free. Thats two full years for the price of one. And as a Charter Member, you will be entitled to retain this rate in perpetuity, as long as your membership remains current.

There are three limitations:

First, I have extended this offer to only 200 more Charter Memberships.

Second, this is strictly for subscribers to our publications. It is not available to the general public.

Third, no other discounts are available with this offer.

Naturally, if you wish to cancel at any time in the first year, for whatever reason, you will receive a full, pro-rated refund on the balance of your subscription.

To join Energy Options Alert, and get set for your first set of high-profit potential trades, pick up the phone, call Hestor at 877-719-3477 and mention your personal code of p446-56288. Or order online via our secure website.