Protect Your Portfolio From Global Emergencies in Energy, Water, Food, Climate and Debt
Stock-Markets / Investing 2010 Jan 23, 2010 - 04:55 PM GMTBy: Sean_Brodrick
The global economy is an amazing study in contradictions. China and India both seem to be booming again, while our economy and nation has some serious problems.
America’s problems include a huge and growing national debt, stubbornly high unemployment, a Congress that is for sale to the highest bidder and more. These problems should continue to weigh on America’s economic recovery, and should steepen any real market correction.
Meanwhile, commodity prices are climbing — again! While they continue to zig and zag, prices of oil, gasoline, and industrial metals are trending higher, and some customers are being priced out of the market.
And scientists tell us that in the longer term, crises in food and water could come to a head.
It seems to me like America is in the crosshairs of five deadly emergencies — energy, water, food, climate and debt. The good news is you can protect your portfolio and even profit from these powerful forces.
Here’s the down-low …
Emergency #1: Energy
Oil prices are on the devil’s own roller coaster, but the big picture is that we are still in a head-on collision with peak oil. What’s more, the cheap, easy-to-pump oil is fast being used up.
To be sure, there were plenty of oil discoveries in 2009, especially in Brazil and the Gulf of Mexico. A whopping 10 billion barrels of oil was added to reserves, the highest rate since 2000. However, the world is consuming around 83 million barrels a day, which equates to 31 billion barrels a year. So, even in a good year, we barely replaced one third of the oil we consumed.
The world is producing 83 million barrels per day, but production at existing wells is declining at up to 8% a year. That means we have to add more than 6 million barrels per day every year to keep production flat. Five years down the road, we’ll have to replace 30 million barrels of production. That’s more than three times the amount of oil (8.1 million barrels per day) that Saudi Arabia produced in 2009.
That means we have to drill a lot more wells. And the oil we find is very deep and therefore very expensive. Oil companies are now putting drills down 4,000 feet in the Gulf of Mexico to then drill through 35,000 feet of rock. These wells are deeper than Mount Everest is tall! Assuming that significant finds are made, it will still be 7 to 10 years before the wells go into production.
Demand Is Rising
Meanwhile, demand is rising in emerging markets including China and India. Demand is being driven by car sales — in March, car sales in China overtook those in the U.S. for the first time, and sales are averaging 1.1 million new units a month. This is roughly twice the level of China’s 2005 car sales.
In the auto-loving United States there is a little less than one car per person in the country, but China’s ratio is a little over one in 10. If China starts to approach our level of car ownership, the increase in fuel consumption will be huge.
Emergency #2: Water
For most Americans, water is less expensive each month than cable television or having a cell phone. And yet the World Bank reports that 80 countries now have water shortages that threaten health and economies while 40 percent of the world — more than 2 billion people — have no access to clean water or sanitation.
Here are some other water facts …
- More than 1 billion people lack access to clean, drinkable water, according to The World Health Organization. About 5 million people die each year from poor drinking water and poor sanitation.
- A prime cause of the global water concern is the ever-increasing world population. As populations grow, industrial, agricultural and individual water demands escalate. According to the World Bank, worldwide demand for water is doubling every 21 years.
More than a billion people lack access to clean, drinkable water. - Only 3% of all the water in the world is fresh water. However, of that 3%, two-thirds is locked up in icecaps and glaciers. In the end, we can only consume 1% of the world’s water supply.
- It takes 14 gallons of water to grow a pound of grain, 435 gallons to grow a pound of beef, 2,000 gallons of water to make one gallon of milk, nearly 20,000 gallons of water is needed to make one ton of steel.
- In dry Northern China, the water table is dropping at over 3 feet per year. Some Chinese rivers are so polluted that they catch on fire. In India, water tables in some dry regions are also dropping very quickly.
And while you can substitute various alternate fuels for fossil fuels like crude oil, there is no substitute for water. This is a crisis that is spinning out of control around the world.
Emergency #3: Food
Right now, America has a surplus of food. The U.S. government predicted that record global production will boost inventories of corn and soybeans to a nine-year high in 2010. Global output in the year that ends May 31 will total 676.1 million metric tons, behind only last year’s record 682.7 million, the U.S. Department of Agriculture said in a Jan. 12 report. Meanwhile, stockpiles of wheat are forecast to jump 19 percent to 195.6 million tons.
However, all we need are a few bad harvests to turn this around. That’s what happened in the 1970s, when the world went from an abundance of food to large numbers of people starving.
The World Bank is already warning that some rice producing countries are facing shortages, and cereal prices could rise very quickly. Also, food prices tend to rise with fuel prices.
Looking down the road, experts say that global food production will have to double to stave off a repeat of the food riots seen in 38 countries worldwide in 2008.
Climate change will cause shorter crop growing seasons and the world’s under-developed farming sector is ill-prepared to make up for the shortfall.
Emergency #4: Climate
Many people believe climate change is a crock, dreamed up by a cabal of scientists who somehow make money off of scaring people. In fact, there is a lot more money to be made criticizing global warming studies — for example, a think tank funded by ExxonMobil has sent letters to scientists offering them up to $10,000 cash on the barrel to call global warming a lie.
According to NASA data, 2009 was the second hottest year on record. This is despite bitter cold felt in parts of North America and Great Britain. How is this possible? As NASA climate scientist James Hansen explains in his paper, “If It’s That Warm, How Come It’s So Damned Cold,” regional short‐term temperature fluctuations are an order of magnitude larger than global average annual anomalies. In other words, the gradual warming trend is interspersed with brief, regional cold snaps.
In any case, for whatever reasons, the Arctic ice cap is thinning drastically, and is now near record lows.
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This warming of the Arctic is releasing vast quantities of methane, a greenhouse gas that can hold 20 times more heat than carbon dioxide. Scientists say methane emissions from the Arctic have risen by almost one-third in just five years. This, in turn, reinforces the warming climate cycle.
Whether you believe in global warming or not, one thing is for sure — governments around the world are going to be throwing money at global warming for years to come. You can ignore that flood of cash, or you harvest some of those potential gains yourself with investments in select stocks and funds.
Emergency #5: Indebtedness
Whether you’re conservative or liberal or in-between, you’ll probably agree that our country has a lot of problems that need fixing. Too bad we’re flat broke, and don’t have money to tackle half the problems bearing down on us.
A lot of the figures I’m about to throw at you can be found at the U.S. debt clock here: http://www.usdebtclock.org/.
Some of America’s debt numbers are quite stunning. The U.S. National Debt recently topped $12.2 trillion. That’s debt per citizen of $39,854 and debt per taxpayer of $112,648.
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| The U.S. National Debt recently topped $12.2 TRILLION — 84% of the nation’s GDP. |
And then there’s consumer debt. From 2000 to 2008, U.S. household debt grew by $6.8 trillion. Recently, it has been falling. Total consumer credit card debt fell to $2.46 trillion in November, and non-revolving credit — auto loans, personal loans and student loans — fell to $1.59 trillion.
The problem with debt is that it makes it more difficult to deal with other crises. If the debt is big enough — and America’s is now 84% of GDP — then it can make dealing with other crises impossible.
There are different ways of dealing with enormous government debt. The way that I think is most likely — one that has been the preference of governments in the past — is by devaluing the currency.
One way to help protect yourself against that is by owning physical gold and silver. But there are other options as well.
My Solution: Crisis Profit Hunter
As one crisis after another bears down on the U.S. and the world, you can hide under your bed or confront them head-on. You can help protect yourself from the worst of the emergencies. And there are profits to be made for the brave and the bold.
That’s why I’m launching a new monthly newsletter, Crisis Profit Hunter. It is a newsletter that recognizes …
- A big commodity bull market is in place, and there are truly huge profits to be made there.
- The U.S. dollar is in big trouble, as is our banking system. While there may be short-term rallies, you should use those to prepare for the next down-turn.
- The torch of leadership in the global economy may be passing from America to the emerging markets — and there are profits to be made on that mega-trend as well.
- America is at the intersection of multiple crises that we haven’t seen in our lifetimes, if ever. And there are ways to invest to help protect and profit from those crises.
- There are actions you can take as an individual to protect yourself, along the lines of my new book, The Ultimate Suburban Survivalist Guide.
You’ll find all this and more, every month, in Crisis Profit Hunter.
And now, for a very short time, I’m offering a special subscription price — just $99 for one year.
I believe 2010 has the potential to be a very exciting year. The bad news is it might be scary exciting. The good news is there are profit opportunities all over the place if you know where to look, can stomach some market ups and downs, and have an eye on the longer term.
Please join me in my greatest adventure yet — hunting the world over for profits, in all kinds of economic weather. Sign up for Crisis Profit Hunter today — CLICK HERE.
Yours for trading profits,
Sean
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