Unstoppable Uptrend

But this is not just about lines in rectangles. Its about …

Six Fundamental Forces
That Are Largely Unstoppable

Force #1: Oil demand continues to explode. OPEC is nearly maxed out. The world now needs nearly 83 million barrels per day. And as I pointed out last week, just five years from now we would be facing a deficit of as much as 17 million barrels per day, enough to send oil prices to well over $100 a barrel and gas to over $3.50 a gallon.

Force #2: Russian oil production is slowing. The worlds second largest oil exporter is running at less than half of last years growth rate. And due to all the problems with the Russian producer Yukos, its not likely that production in Russia will increase dramatically anytime soon.

Force #3: Norway, the worlds seventh largest oil producer, is also in bad shape. Bad weather. Old equipment. Strikes. And more. End result: Oil production is nearly 9% lower than a year ago.

Force #4: Gulf of Mexico production is STILL in disarray from last years Hurricane Ivan. And now, the U.S. Weather Bureau has just updated its already-dire forecast for the current hurricane season: It will be EVEN worse than previously expected.

Force #5: No change in Iraq. Iraqs pipelines are still being blown up left and right. Oil production in the country is now 40% below capacity and 50% below pre-war production.

Force #6: New war fears. New world tensions are smoldering between the U.S. and North Korea, between North Korea and Japan, between Japan and China, between China and the U.S. not to mention between Iran and most of the Western world. Even if none of these explode in the near term, the mere fear of a blow-up is keeping upward pressure on the price of oil.

Just ONE of these six forces would be enough to propel oil prices sharply higher! The combination of more than one will be explosive.

CNOOC may have lost its battle to buy Unocal but its efforts to buy up U.S. oil companies are NOT over. Not by a long shot.

The Chinese are tough, determined people. If you look at the long history of the country, they almost never back down from a confrontation. And when they do, they come back more determined and more prepared.

China needs oil desperately. The country has $711 billion in cash reserves, a lot of ammo to buy companies or to threaten to pull the plug on the U.S. So they have the clout. And they WILL use it.

Soon, Washington is going to have no choice but to cave in and bless Chinas efforts to get involved in U.S. oil companies. Why? Because …

China could threaten to dump its holdings of U.S. treasury bonds and U.S. dollars … or

China will turn to cutting more oil deals with the likes of Kim Jong-il in North Korea and Chavez in Venezuela. Wed risk losing an important ally … snubbing our second largest financial creditor … and in the end, cutting ourselves off from oil reserves around the world.

Conclusion: Its only a matter of time before Washington cuts a deal with China, and China buys into some major U.S. oil companies.

My recommendation: Pay close attention to whats going on. Dont think for a minute that Chinas emerging industrialists are going home with their tail between their legs. Theyll be back soon to attempt to buy another oil company, and odds are they will succeed.

Meanwhile, the world is running out of arable land to cultivate.

Chinas grain harvest has declined in four of the last five years, plunging nearly 18% from 392 million tons in 1998 to 322 million tons in 2003.

India the worlds second most-populous country is also facing a severe food shortage. The Indian diet is also changing, as the Indian economy grows and people have more money to spend for food.

The demand for meat and eggs in India, for instance, is projected to be 20 million tons by 2020, four times the 1993 consumption rate of 5 million tons.

All told, by 2030, a short 25 years from now, there will be 9.3 BILLION people in the world to feed.

The Big Breadbasket Shift

Thirty years ago, the United States became The Bread Basket of the World. But today, the U.S. is no longer king of grain production.

The United States itself is starting to consume more agricultural products than it can produce. And American producers are already virtually maxed out.

So where is all the needed production going to come from to meet the explosive demand for soybeans, wheat, and corn?

My answer: South America!

By 2020, five South American countries Brazil, Argentina, Bolivia, Uruguay and Paraguay are expected to produce most of the worlds soybean supply.

South America is one of the few remaining places on Earth where large tracts of arable land are available for cultivation. Market-friendly government policies and advances in agronomy have turned formerly unusable tropical soils into useful farmland. This has boosted South American agricultural productivity to levels above those of the U.S. and Europe.

Already, Chinese trade delegations have been actively shopping for groceries in South America. Chinas President Hu Jintao said during a tour of Brazil and Argentina in November 2004 that his government plans to invest $100 billion in Latin America over the next decade.

The areas with the most potential for becoming the new food baskets to the world …

Brazil will soon be the largest soybean exporter, with 57 million acres now under cultivation. Secretary of State Colin Powell called Brazil an agricultural superpower on a visit there in October 2004.

Argentina has doubled its soybean production from 17 million acres in 1997 to more than 34 million acres today. At the same time, Argentinas corn production for 2004/2005 was 30% higher than the previous seasons crop, climbing from 15 million tons to 19.5 million tons.

Bolivia, Uruguay, and Paraguay are also beginning to show some muscle in agricultural export capability.

My long-term outlook on agribusiness is extremely bullish. The charts and technical trading patterns of corn, wheat and soybeans also support a buy now recommendation. Specific recommendations will be posted in the upcoming issue of my Real Wealth Report.