Martin Weiss here with the entire Money and Markets team and a very timely message:
In the random cacophony of global events, rarely does fate hand you a known future date when a landmark change is likely to take place. But it’s doing precisely that right now.
Two weeks from today, On April 28, the 15 permanent and elected members of the UN Security Council will meet at the UN headquarters in New York.
They will impose punitive sanctions on Iran, the world’s most threatening rogue state.
And they will set off a chain reaction of events that could drive financial markets berserk.
Hope Fading Fast
Until now, there were lingering hopes that the showdown could be avoided.
Secretary of State Condoleezza Rice tried to drown out the drumbeat of war with the staccato chords of diplomatic pronouncements.
Defense Secretary Donald Rumsfeld sought to silence last week’s war stories in the Washington Post and New Yorker by relegating them to “fantasy land.â€
And the head of the UN’s nuclear watchdog agency, Mohamed el-Baradei, flew off to Tehran for last-ditch talks to convince Iran to take “confidence-building measures,†including the suspension of all uranium enrichment activities.
But this week, the hopes were dashed and the fires were stoked.
In Tehran, rather than sound a conciliatory note to welcome the arrival of UN’s top nuclear energy official, Iran’s President Mahmoud Ahmadinejad spat in his face with words that virtually doom the last-ditch diplomatic mission to failure:
“Our answer to those who are angry about Iran: Be angry and die of this anger. â€
Worse, a senior Iranian official slapped the tombak with the declaration that Iran now intends to manufacture 54,000 centrifuges capable of high-grade, industrial-scale uranium enrichment. That means that the timeline for Iran to build a nuclear bomb could be telescoped from years to months.
In New York, the five permanent members of the UN Security Council — Britain, China, France, Russia and the U.S. — met midweek to decide on their next step: They will wait until el-Baradei returns from Iran. They will hear his official report on April 28. Then they will act in harmony.
In reaction — or in anticipation — your investments could jump uncontrollably:
- The nearest contract of crude oil, which closed yesterday’s day session at $69.32, is now a meager 49 cents away from the all-time closing high of $69.81 reached in the wake of Hurricane Katrina on August 30 of last year. Next, it could catapult to the $80 – $85 level and more.
- The average price of regular unleaded gas at the pump, already surging, could quickly reach $3 per gallon and then make a beeline for $4.
- Gold, now holding firmly near the $600-per-ounce level, could soon surge toward Larry’s next target at $740.
- Silver could blast off to $14 and just keep going. Platinum, copper, and other key metals would fly.
Might there be a sharp intermediate correction in between? Yes. Can you or I pinpoint when that correction will begin and end? Not easily.
Instead, we need to look beyond the day-to-day fluctuations, stick with our investment strategies, and stay focused on the big picture …
Why the Entire Region
Is Coming Unglued NOW
On January 19, in his article “Iran Erupting,†Larry wrote:
“A new Iran crisis is bursting onto the scene … [Iran’s President] Ahmadinejad seems to be working overtime to pick a fight, not just with the U.S. but with the entire Western world.
“The bad news is that I believe he’s going to get his wish. After months of political jockeying, phony diplomacy, and useless economic sanctions — mark my words, we will be at war with Iran.â€
Few people believed him. Even I was skeptical. But just days later, the crisis burst onto the headlines as talks with Iran broke down and the countdown for a major showdown began.
And ten days earlier, on January 9, in “Break Points,†I wrote:
“The critical break point in the future of Iraq and the region will come when the majority Shiites fight back.
“The dominant Shiite political party, the one that won the single largest block of votes in the coalition-sponsored elections, was none other than the same group that’s most directly supported by Iran. When this group decides to fight back, the outright civil war in Iraq will begin.â€
Just six weeks later, that’s what happened: Sunni insurgents bombed the Shiite’s sacred Golden Mosque in Samarra, unleashing wave after wave of revenge killings that have continued to escalate till this very day. Our own ambassador to Iraq admits that:
Iraq is on the brink of an all-out sectarian war.
Such a war could engulf the entire Middle East.
And if it does, it would have the most serious
consequences for both the region and the world.
Over 66% of All the World’s
Proven Oil Reserves Are in the
Persian Gulf and Middle East
Mid-East countries currently have an estimated 743 billion barrels of oil reserves.
That’s seven times more than the reserves of the next largest sources — Africa and Latin America, each with only 103 billion barrels.
And, excluding the tar sands of Canada, which are largely out of reach, North American reserves are only 40 billion, with just half of those in the U.S.
Even adding up all the other sources on Earth … even with all the recent discoveries in other regions … the reserves now potentially jeopardized by wars in the Mid-East still represent a whopping two-thirds of the crude oil on the planet.
This is the most unfortunate convergence I’ve ever witnessed between the press for war and the pressures of growth.
It’s a key reason why crude oil prices failed to come down very much in this year’s first quarter …
Why they held so firmly to their long-term uptrend …
Why they’ve just made new highs for the year this week, and …
Why they’re now on the verge of challenging their all-time highs.
War, Oil and Gold
Joined at the Hip
You’ve seen how war and oil prices are closely linked. Now consider the link to gold:
Many of the world’s most powerful central banks and wealthiest investors are in the Middle East. More so than any other players in the international markets, they can see the handwriting on the wall … smell the fear in the air … and virtually touch the dark clouds above them.
They’d be unforgivably imprudent if they did not take the precaution to move increasingly larger allocations of their petrodollars into gold.
Result: The price of gold hasn’t just been going up! It’s been exploding.
Larry specifically pinpointed the critical break-out in gold back on December 15 of last year — in his Money and Markets email “A Sneak Preview of 2006 and Beyond.â€
That’s when we published his chart, showing his forecast for gold at the time: “Well over $600 in 2006.â€
That’s also when he pinpointed the critical break point for which he said signaled the “next phase in the gold bull market.â€
Sure enough, after that break-out, gold’s rise entered a new, accelerated phase. And we remain right on target with the precise coordinates Larry gave us last year for the next moves:
Target #1. $618, which could be reached within days.
Target #2. $740, which, despite any near-term pullback, could also come very soon.
And, looking beyond the immediate horizon, $1,000 — or even $2,000 — for gold doesn’t sound nearly as far-fetched as it did just a few months ago.
Larry doesn’t like silver as much as gold because its market is less liquid and because it doesn’t share with gold the critical property of being a monetary metal.
Nevertheless, with all commodities booming, silver is certainly not one to be left behind. Quite to the contrary, silver is now displaying one of the rarest of patterns in the history of markets: It’s going practically straight up.
One of the Best Ways to
Play the Bull Market in
Precious Metals: Junior
Mining Companies
by Larry Edelson
Five years ago, Glamis Gold (GLG), one of my favorite junior gold miners, was trading at a mere $2.22 a share.
If you talked to someone on Wall Street about the company — or about any other gold stock for that matter — you’d get laughed off the face of the planet.
The sentiment against gold and gold shares was so bad, I felt like a pariah. But it didn’t phase me.
I shouted as loud as I could that Glamis should be bought with both fists, along with Agnico Eagle (AEG) at $5.30 in early 2001 and Newmont Mining (NEM) at $15 a share.
Fast forward to 2006, and now Glamis is trading at over $35 a share, a 1,476% gain … Agnico is near $31 a share (up 484%) … and even senior miner Newmont Mining is about $53 a share (up 253%).
If you had invested $2,000 in each of those gold shares in 2001 (total $6,000) — today you’d have over $50,000 in your brokerage account. If you had invested a modest $10,000 in each — you’d have more than a quarter million.
Now We See Similar
Opportunities on the
Immediate Horizon
For instance, some undiscovered mining shares that my colleague Sean Brodrick and I are looking at right now include:
- An Australian gold miner involved in the exploration, development and production of gold exclusively in China, sitting on at least 4.48 million ounces. At $600 an ounce, those gold resources are worth $2.7 billion. But the company’s market cap is a mere $423 million.
- A soon-to-be-famous gold miner with gold resources of up to 8.7 million ounces, worth $5.22 BILLION at today’s gold price. Market cap: Just $287 million!
- Another Australian miner set to start producing gold just a few months from now; a project estimated to produce over 500,000 ounces of gold a year for more than 20 years! Total potential gold resources: 12 million ounces of gold worth $7.2 billion. Market cap: A tiny $711 million.
These companies remind me of Glamis Gold. And a few days before the April 28 UN Security deadline, Sean will be recommending at least two of them in his Red-Hot Asian Tigers. (Note: There are only 127 of the original 500 slots remaining. So if you’re interested, I suggest you jump on board before they’re all gone. For more info, call 800-898-0819.)
A Very Costly Mistake
Being Made by U.S.
Investors in Tech Stocks
by Tony Sagami
Quick! Tell me where the Nikkei closed at yesterday. How about the Kong Hang Seng Index? The South Korean Kopsi? Or the Taiwan TSEC Index?
Don’t feel bad if you don’t have the answer on your fingertips. You’re hardly alone.
But last week, the Morgan Stanley Asia-Pacific Index soared to its highest level since January 1990, over sixteen years and three months ago … wiping out any declines in the 1990s … erasing all the troubles of the early 2000s … and crossing into brand new territory.
So failing to pay attention to what’s happening across the Pacific can be a very costly mistake.
Look at these eye-popping year-to-date results for Asian funds through April 5:
The Oberweiss China Opportunity Fund (OBCHX) is up 42.2%.
The Dreyfus Premier Greater China fund (DPCAX) is up 38.4%. And a slew of others have gains in excess of 20%. All just this year!
The reason Asia funds are soaring is simple: China is growing like a weed on Miracle-Gro and pulling the rest of Asia along for the ride.
The Asian Development Bank expects Asia to grow by 7.2% in 2006 and 7.0% in 2007.
In contrast, back here at home, the most recent GDP report showed that our economy grew at a very paltry 1.7% pace in the first quarter of 2006.
This is obviously not a minor pinhead difference that economists like to debate over. It’s a miles-wide gap that’s likely to make the difference between investment failure and investment success.
And make no mistake: It is NOT too late to begin.
Let me give you one example: The Chinese Ministry of Railway reports that more than 316 million passengers traveled by rail in the first quarter of 2006. That’s 23 million or 12.7% more than the same period in 2005.
In response, China has set out an ambitious plan to build an additional 62,000 miles by 2020. But even that massive build-out won’t be nearly enough. So just last week, the Rail Ministry announced plans to build two new railroads on top of the (US) $250 billion already previously committed. That includes:
- A new (US) $1.7 billion high-speed line between Beijing and Shanghai. This new line will travel at over 200 miles an hour and cut the current rail travel time between China’s two most important cities from 13 hours to 5 hours. Plus …
The construction of a new (US) $4.3 billion Maglev — a high-speed magnetic levitation — line between Shanghai and Hangzhou.
Meanwhile, there’s a lot more than just railroads being built in China. Did you know that …
- 80% of the world’s cranes are now in China.
- Shanghai has double the number of skyscrapers as Manhattan: 40,000.
- China is building the equivalent of a city the size of Houston every month.
And guess what: Somebody is going to make a bundle of money from that build-out by investing in the right companies. For example …
Shanghai Prime Machinery, a unit of Chinese government-owned Shanghai Electric Corp., which manufactures turbine blades, cutting tools, electric motors, and bearings.
Shanghai Prime will be going public soon and plans to float a $167 million IPO on the Hong Kong Stock Exchange. The IPO is scheduled for April 27 and will be under the stock code 2345.HK.
I figure the company is sitting pretty because China’s industrial sector grew at 12.3% over the last five years; and that is sweet music to companies that manufacture industrial components.
How sweet? Shanghai Prime saw its sales jump by 68% to $1.42 billion yuan from 2004 to 2005 and saw its profits more than double, from $65 million yuan to $145 million yuan in 2005.
Bottom line: Ask not if Asia is booming. Instead, ask what you can do to participate prudently, while aiming for the most profit potential.
The answer:
* Avoid most U.S. tech stocks like the plague;
* Buy the companies that are in the forefront of the boom; and
* When the Larry Edelson-Sean Brodrick team tell you about countries like Canada or Australia that are feeding the Asian boom, be sure to listen carefully.
And mark your calendar. Like Martin told you at the outset, April 28 — and the days leading up to it — could bring changes that shake the world.
Best wishes,
Tony Sagami
For more information and archived issues, visit http://legacy.weissinc.com.
About MONEY AND MARKETS
MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Jennifer Moran, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.
© 2006 by Weiss Research, Inc. All rights reserved.
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