There is only one state in the country that has yet to finalize its annual budget. The political situation in Pennsylvania is getting desperate. Without a spending plan in place, dozens of organizations are not getting the funding they need to survive. Across the state, angry citizens are sharpening their proverbial pitchforks.

While the desperation in Harrisburg will slow the state’s economy, the fiasco is creating a profit opportunity for a handful of companies, most notably natural gas drillers and gambling operators.

The power of a strong lobby

Buried beneath Pennsylvania’s rolling hills and ancient mountains is a massive stockpile of hard-to-reach natural gas. The Marcellus Shale formation has been a focus of the nation’s gas industry for the last decade.

Pennsylvania’s budget woes are a boon for drillers as revenue-desperate legislators lease even more of the state’s forests in an attempt to drive closed a billion-dollar shortfall. With natural gas prices near multi-year lows, the companies signing those leases are likely getting a large bargain.

Companies like Atlas Energy Resources (NYSE:ATN), Rex Energy (NASDAQ:REXX) and Anadarko (NYSE:APC) should be near the top of your watch list.

Another company worth watching, especially after this morning’s news, is Penn National Gaming (NYSE:PENN). While the company has nothing to do with pulling natural gas out of the ground, Pennsylvania’s budget desperation is going to add to the company’s top line.

When up against the wall, politicians will do just about anything to get themselves out of a nasty situation. Pennsylvania’s lawmakers allowed slot machines into the state just a few years ago in an effort to reduce property taxes.

Even though the program was a verifiable bust, the latest budget proposal expands gambling even further. Now the state will be open to various table games.

Move over Sin City

That is great news for Penn National, one of the state’s largest gaming operators. High-margin games of poker are never bad for profits – at least if you are the house.

Penn National is in the news today as word spreads of its desire to purchase Las Vegas’ Fontainebleu resort and casino. The $3 billion facility is only 70% complete as work was halted last spring after funding was eliminated.

Negotiations are still in progress, but there is a chance Penn National could get itself a bargain with the deal. If it happens, shareholders could get a double-whammy of new, high-margin revenue streams.

Put this one at the top of your watch list and watch the action closely.

No matter what happens with Pennsylvania’s budget, somebody is about to profit. Isn’t that how the government works?

Source: Put These Four Stocks on Your Watch List

If you can’t farm it, you have to mine it. It is a great message, no matter if you are an investor or an out-of-work cowboy.

Riding through the streets of Alaska’s ever-wet capital, you see all sorts of bumper stickers. There are three main categories – fishing, mining and Sarah Palin.

It is the miners getting all of the attention this week.

There are several reasons the world’s mining industry is opening a big ‘ole bottle of bubbly, but none more poignant than the fact that America is shelling out debt faster than a hot-rod blackjack dealer unloading his deck.

As Uncle Sam goes “all in,” the folks paying for Washington’s lavish lifestyle are getting nervous. For proof, I need just one set of numbers.

In July, foreign purchasers bought just $15.3 billion more debt than they sold. In June, that number was $90.7 billion. If the trend continues (and you know it will), we could be in serious trouble.

Here come the interest rates

With an all-out disdain for American debt, countries like China and Russia are finding other ways to convert their greenbacks into something more useful. The commodities market has been the first vehicle of choice.

The share price of just about every major mining company is all the proof we need.

Every day, I compile a list of the session’s big winners and losers. I study them, look for the cause of the volatility and determine how to profit from the action. Lately, my winners list has been filled with the folks pulling minerals from the ground.

One player getting plenty of attention from the bulls is Hecla Mining (NYSE:HL).

So far this month, the silver, gold, lead and zinc miner has watched its Street value increase by more than 60%. Shares are up by over 6% today as gold prices continue their exploration above the critical $1,000 level.

As the markets worry more and more about the notion of runaway inflation and a weakening greenback, gold miners like Hecla will continue to increase in value.

Shares are approaching the $5 mark today, but a $10 quote by spring is not out of the question.

Another double-digit commodity winner comes from Anadarko Petroleum (NYSE:APC). If you are a Hot Stock Confidential subscriber, you are familiar with this oil and gas producer’s winning ways.

Since I recommended buying shares of the company back in May, share price has jumped by over 30%.

The gains continue today as natural gas prices surge above the $3.50 level and as word spreads about the company’s latest deepwater discovery off of Africa’s western coast. The news makes Anadarko a major player in the region and the markets are rewarding the company in kind.

Progress in action

Finally, after spending a week in Juneau, I could not write a piece about the mining industry and not mention Coeur d’Alene Mines (NYSE:CDE), the owner of the ever-disputed Kensington Mine.

Over the past week, I had the opportunity to see the mine, talk with some of its employees and witness the hustle and bustle taking place as the site finally goes into action.

With metal prices on the rise, the mine could not have better timing. When the first minerals are pulled from the ground early next year, the company will get a hefty price for its product.

It is no wonder shares of the company are up by more than 100% in the last ninety days.

No matter your political slant or your views of the mining industry, there is absolutely no room to deny the fundamental value of tangible assets like commodities.

As the world’s wealth and power transfers from one continent to another, the rocks buried beneath the earth’s surface will be the only reliable asset.

If I were you, I would get my hands on some.

Source: Commodities Market: Dig Your Way to Riches

The gap between the crude and natural gas markets continues to expand. The world is concerned with having too little of the former and too much of the latter.

As I write, front-month natural gas futures are selling at a level we have not seen since August of 2002 (when the equities market was claiming a low of its own), just $2.93 per million BTUs.

The contract price has fallen by more than 6% during today’s session.

It is certainly not good news for domestic companies that worked overtime to expand their drilling range during the bullish run we saw over the past several years.

Pennsylvania, West Virginia, Ohio and New York all saw companies like Chesapeake Energy (NYSE:CHK) and Andarko (NYSE:APC) knocking on the door of property owners, willing to sign big checks to get their hands on mineral rights.

But now that the nation’s economy has ground to a halt and gas prices have fallen off a cliff, producers are wondering what in the world they were thinking. All they can do is shut down the drills and close the valves.

The further natural gas futures fall, the more output will be stricken from the market. It is a race to see which side of the equation can reach equilibrium first.

The tide is turning

If you have been following this site throughout the summer, you know I have remained bullish on natural gas. And if you are a TFN Strategic Trader subscriber, you know I have made several recommendations in kind.

Judging by today’s headlines, I am not alone.

According to the Financial Times, an unnamed hedge fund has spent millions to gobble up extremely bullish natural gas options with expirations later this winter. Specifically, the fund bought contracts with $10 strike prices that expire in January and February.

That means the fund is showing its confidence that natural gas prices will more than triple in the coming months. If it happens, or comes anywhere close to happening, the mysterious hedge fund stands to rake in tens of millions of dollars.

If it doesn’t happen, of course, and the situation gets even worse, the mysterious fund could lose everything.

So why would anybody make such a move?

Several reasons. First, even if natural gas prices do not hit the $10 strike price, the options could surge above last week’s trading price of $0.056 with even a slight short-term spike in prices or bullish speculation.

A four-percent turnaround in gas prices in the near future could lead to a triple-digit gain for the fund. That’s the beauty of options.

Beside an all-out speculative play, the firm could be hedging its book with the move. After already making a slew of cash playing the downside, this could be its plan to help ensure it keeps those gains even if prices make a quick turnaround.

The bullish argument for gas prices is an easy one to make. As natural gas prices and demand have plummeted over the last year, producers have cut their production. They have cancelled plans for new exploration and have slowed their development of new wells.

Eventually, the current market oversupply will turn into a shortage. When it happens, which very well could be this winter, prices will surge until equilibrium is met in the opposite direction.

Whenever the market’s pendulum swings this far, its momentum will carry it to the extremes of both sides.

Now is the time to enter natural gas plays, when nobody else wants to do it. The easiest way to make the move is to check out TFN Strategic Trader’s portfolio. There is more than enough in there to get you drooling.

Source: Taking a Big Bet on Natural Gas

After dropping from $147 last July close to $30 this past winter, crude oil is now trading within a reasonably tight track around $40 and $57.

Now it’s on the move again, breaking through $60 right at the beginning of the summer driving and hurricane seasons.

But oil companies’ proud profit margins of yesteryear have disappeared… along with the easy credit that allowed investment banks and hedge funds leverage crude prices to record highs.

Suddenly, not even the most pink politician is talking punitive taxation against oil companies any more. The euphemisms “surcharge” and “windfall profits” have gone with the wind. Share prices of Exxon (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS.A) are down 30-40%… just like the rest of the market.

Our team of analyst has compiled a concise list of the five oil companies you should have in your portfolio. They represent a strategic selection… ranging from U.S. refiners benefiting from lower crude prices and tight inventories to tiny, undervalued oil producers working in regions that will represent a hotbed for demand from China and Russia.

Oil Stock #1: The Refiner

There are companies that have been benefiting nicely from oil’s reversal of fortune. Especially refiners, whose cost basis has been cut by 70% over last year’s peak, assisted by lower crude prices and a stronger dollar.

Take Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT). This U.S.-based refiner and maker of petro-based specialty products just reported Q1 net income of $75.6 million, compared to a net loss of $3.4 million in the first quarter of 2008.

Its adjusted EBITDA of $50.1 million for Q1′09 reflects an increase of $35.2 million over Q1′08.

Despite the substantial drop in gasoline demand (Calumet’s quarterly sales actually fell 30% from the year-ago period!), the increase in gross profits was primarily due to the drop in crude oil prices.

Adjusted EBITDA of $50.1 million for the first quarter of 2009.

The Indianapolis-based refiner and processor of specialty lubricants just declared a quarterly cash distribution of $0.45 per unit on all outstanding units.

But let’s reminisce: The steepest increase in crude prices last year occurred in the second quarter. While the biggest drop in gasoline consumption appears to be behind us—mostly in Q4′08 and the past, dreary first quarter of 2009. Even if oil prices keep increasing from current levels, the cheaper inventory purchased in the past 6 months, combined with increasing demand, should make for a gangbuster second quarter.

Gasoline inventories were reported to have dropped by a larger-than-expected 4.1 million barrels in the second week of May, bringing current inventories to the middle of the historical average.

The stock today is trading at just under $13. Buy up to US$14 in the coming days, with a 25% profit horizon by July… when gasoline demand will stretch inventories and send U.S. refiners soaring.

Oil Stock #2: The Acquisition Target

The best part of the oil and natural gas business is its predictability. The last several years should be all the proof you need.

Here’s how the story goes: A soaring economy increases demand, which causes prices to surge. Eventually, demand reaches its peak, the market is oversupplied and prices fall. It’s classic economics.

Right now, according to my models, we are just past the peak of the fall, which makes this a fantastic buying opportunity.

Over the past six months, the world’s natural gas and oil producers could not close their valves fast enough. Nearly every week, we heard rumors of OPEC quietly cutting more and more production. Remember, less supply equals higher prices.

Now that many economists believe the worst of the financial fiasco is over, demand will begin to rise. Current reserves, which are significantly above historic averages, will dwindle and producers will be forced to open their valves once again.

But there is only one thing that will persuade them to get the energy flowing once again… prices. Futures traders are going to have to push oil and natural gas prices even higher before financially cautious companies open the tap.

That way, when they do start pumping, they know their pipelines will be filled with profits.

Watching Apache (NYSE:APA) and its burgeoning balance sheet, we tried to find out what company might be the target of a possible acquisition bid.

There are multiple possibilities, ranging from speculative companies with a large access to oil sands to some of the nation’s largest natural gas producers.

With energy prices making it tough to boost the bottom line, Apache and its competitors are surely going to use their cash and stock reserves to go on an acquisition spree. While I have my opinions, telling you what company I believe Apache will target would be a speculative guess at best.

We can make the same sort of profits, without the unnecessary risk: Instead of targeting one company and risk missing the mark if another target suddenly appears, why not take a stake in a company that will benefit no matter who buys what?

That company is Anadarko Petroleum (NYSE:APC). With a Street value of about $23 billion, this company is not going to get acquired by anybody but the industries biggest players. If it were to happen, they would have to pay one hefty premium for a portfolio of global reserves.

It is an unlikely scenario.

What is likely is an up-tick in industry M&A activity that boosts the value of the entire sector, including Anadarko and its steady revenue stream.

By now, you have certainly heard of value-destroying flaws with mark-to-market accounting. As the value of a company’s assets drop, they must change their value on the balance sheet, whether the company intends to liquidate them or not. Anadarko just took a $240 million hit. It hurts now, but as energy prices slowly increase with a once-again expanding economy, the so-called flaws in mark-to-market accounting will look like a blessing.

At current prices, Anadarko is undervalued. If M&A activity kicks into high gear, it will look even more undervalued. And if energy prices continue their bullish surge, oh boy, shareholders will do quite well.

My recommendation is buy shares of Anadarko Petroleum (NYSE:APC) at or below $47. This is a mid-term play that could put 25% gains into your pocket within the next 6 months.

The energy industry just hit its earnings bottom, making this a great time to be a buyer, no matter if you are a shareholder or a major producer looking to acquire some extra growth.

Oil Stock #3: The Power Broker

Total S.A. (NYSE:TOT) acts as the big brother to the entire European energy-producing industry. This is a $130-billion, French-based conglomerate that has all the capital and power it needs to become a global dominator as Europe’s energy supply chain suddenly breaks.

TOT as was a $90 stock in June of 2008. It’s a $57 stock today. And it could be a $150 stock if crude prices continue to move and the EU is afraid of becoming too dependent on Russian energy imports.

Think of it Total as a football team’s back-up quarterback. With Russia in control of Europe’s natural gas supply, it is forced to sit on the sideline and watch the game unfold.

But as soon as Russia is checked, Total will run in and take the crowd by storm. It has everything it needs to be a continental dominator: The company has operations all across the globe, but is strategically positioning itself to take advantage of growth in Western Europe. It has operations in all of the key countries mentioned above.

But even better, it has a huge downstream business that will soar in value as Russia battles with the west. Just like it did this past winter!

Total has enormous amounts of refining capacity: Over 2.5 million barrels per day. In fact, it is the largest refiner in Western Europe. Even more important than Total’s industry-leading refining capacity is its ability to produce unfathomable amounts of natural gas. During the third quarter of this year, the company pumped the equivalent of more than four billion cubic feet of oil each day.

Total has staggering amounts of production capacity. At current levels of demand, the company has more than enough supply. But when Moscow gets aggressive and closes its pipelines, European demand will go through the roof. That means Total’s natural gas will sell for a premium. Its shareholders will get rich.

Sarkozy is hell-bent on making France the predominant player in the European Union.

France is all about advancing the interest of French industry. It’s one of the cornerstones of its policies. And it has always been the main directive of its government.

This means that Sarkozy will leverage the current crisis to the exclusive benefits of French companies. And the main beneficiary is Total.

Action Alert: Buy shares of Total (NYSE:TOT) at or below $58!

Oil Stock #4: Oil’s Great Game

BMB Munai Inc (AMEX:KAZ): The former Soviet republic of Kazakhstan rarely creates headlines in the American media. It is far more popular with Russia and China.

Both countries consider the Kazkhstan an important strategic point in Asia. And both love its oil and natural gas reserves.

The company you need to know about, BMB Munai, a tiny oil producer based in Kazakhstan. The company is young, financially well positioned and, more importantly, working in an ultra-rich, under-utilized part of the planet, the Caspian Sea.

This company has strong ties to the American and Russian government. Its current CEO used to be a big shot at Haliburton. He has “Inside-the-Beltway” written all over him…

How about the company’s chairman? Boris Cherdabayev has been a top employee at Exxon and Chevron. He has even worked for Lukoil, Russia’s largest oil producer. And BMB Munai’s president, Askar Tashtitov? This guy used to be a government consultant.

When it comes to being politically connected, it doesn’t get any better than this. BMB Munai’s wholly-owned oil-pumping subsidiary, Emir-Oil, was even created by the Kazakhstan government. With a market cap of just $66 million, the company’s $1.40 share price could double, even triple with just one turn of a pipeline valve.

(In fact, we just saw an incredible 65% spike in a single day… caused merely by expectations that talks between the Kazakh Chamber of Commerce and a Chinese trade delegation from Sichuan Province would generate good news for Kazah oil.)

By investing in this stock, you are investing in the company the American and Russian governments expect to be (or should I say will make) the region’s next big oil producer.

Action Alert: Buy shares of BMB Munai (AMEX:KAZ) at or below $2.00.

Oil Stock #5: Striking Black Gold

The next company you need to know about is Toreador Resources (NASDAQ:TRGL).

Toreador has stakes in the energy-rich Black Sea, a region expected to have more than enough natural gas and oil reserves to power Turkey and its neighbors for a long, long time to come.

Toreador Resources will be a prime investment target when Russia resumes its hostile activities. It was part of a team that first discovered natural gas in the Black Sea. It has the tools and products to find oil where no other companies were successful. Because of its technological prowess, it is sitting on a huge stockpile of black gold.

When Russia invaded Georgia last summer, Toreador showed its potential to smart investors. Share price soared by as much as 30% in just a few days.

Imagine what could happen to this $70 million company if the stakes are even higher. If Turkey becomes the next big target like so many experts believe, shares of this $3.40 stock could easily be selling for as much as $20, or more.

Invest in Toreador Resources now and profit as the next global crisis unfolds. When these predictions come true, you will look like an investing prophet.

Action Alert: Buy shares of Toreador Resources (NASDAQ:TRGL) below $4.00.

Source:The Top 5 Oil Stocks for 2009

U.S. banks – under government order to raise capital as a result of the recently completed bank stress tests, and desperate to shed the onerous shackles of the U.S. Treasury Department’s Troubled Assets Relief Program (TARP) – have been announcing billions in secondary stock offerings in recent days, and experts say many more such deals can be expected.

Anadarko Petroleum Corp. (NYSE: APC), Bank of America Corp. (NYSE: BAC) and Ford Motor Co. (NYSE: F) yesterday (Tuesday) became the latest U.S. companies to pursue new sources of capital, announcing deals that involved offerings of stock or debt, or outright asset sales.

Those announcements came just one day after four of the largest U.S. banks – BB&T Corp. (NYSE: BBT), Capital One Financial Corp. (NYSE: COF), U.S. Bancorp (NYSE: USB) and KeyCorp (NYSE: KEY) – announced plans to raise a combined $6.5 billion through stock offerings. At least some of the money raised will be used to repay the TARP money the federal government injected into troubled U.S. banks.

“All the deal activity sends a clear signal – investors are willing to take more risk,” says Louis Basenese, a longtime expert on the IPO market and editor of The Takeover Trader and White Cap Report newsletters. “And it’s already trickling down into the IPO space. In the next two weeks, four deals are slated, doubling the total volume for 2009.”

When asked if all these deals could end up soaking up all the capital that’s still sitting on the sidelines – blunting, as a result, the rally that’s had stocks surging over the past two months – Basenese said there’s no reason for that to be a concern.

“With $8 trillion-plus on the sidelines, we’ve still got a ways to go before the capital is gone,” Basenese said.
In fact, we may well be just getting started, he says.

“During slowdowns, the IPO space is as lonely as a geek on prom night. But right now, our geek might be getting lucky. Along with the market rally and strong appetite for secondary offerings, we’re seeing IPOs hit the market again,” Basenese said. “This week we get Digital Globe. Next week, OpenTable and SolarWinds are slated to debut. And there are over 100 more in the pipeline to fuel a sustained recovery.”

The Latest Deals

Yesterday’s announcements involved a carmaker, an energy company and a top U.S. bank.

Anadarko, an independent oil-and-gas exploration and production company based in Woodlands, Tex., said yesterday that it priced a public offering of 30 million shares at $45.50 each. Underwriters have an option to buy up to 4.5 million additional shares of the company’s common stock through the offering, which is expected to close Friday.

The company’s shares were down about 6% and listed at $45.70 in pre-market trading yesterday morning, FoxBusiness.com reported.

Bank of America, ordered to find $33.9 billion in new capital as a result of the recent bank stress tests, has finally sold about $7.3 billion worth of its shares in China Construction Bank Corp., Reuters and Bloomberg News both reported.

BofA sold 13.5 billion shares, or 6% of CCB, to investors including Hopu Investment Management Co. and Singapore sovereign wealth fund Temasek Holdings Pte. The sale cuts Bank of America’s stake in CCB to 10.6%.

Hopu Investment was founded in 2007 by Fang Fenglei, Goldman Sachs Group Inc.’s (NYSE: GS) China partner. Hopu and Temasek have collaborated before; in late April, the two announced plans to invest $300 million in a Mongolian iron-ore mine. It was Hopu’s first deal since being launched as a private equity firm, Bloomberg News reported.

Bank of America’s sale of part of its CCB stake wasn’t news to Money Morning readers. In a story published in mid-January – “The Global Financial Crisis Will Cost Western Banks a Share of Future China Profits” – Money Morning reported that BofA was going to have to sell some of its stake in that key China bank. Indeed, the report detailed how banks in the United States and Europe would have to divest their interests in China’s promising banking market in order to close capital deficits created by the global financial crisis. The story was part of Money Morning’s ongoing investigation of the U.S. banking bailouts.

On Friday, BofA filed with the U.S. Securities and Exchange Commission (SEC) to sell as much as 1.25 billion shares of common stock, a move that would raise as much as $11 billion (given a proposed maximum offering price of $8.79 per share).

BofA said it will use the net proceeds from the offering for general corporate purposes. Bank of America Securities LLC and Merrill Lynch & Co. (NYSE: SQD) were listed as the underwriters for the stock offering.

Bank of America is also looking at still more asset sales to raise the rest of the required capital. Last Thursday the bank said it’s looking to end a loss-sharing agreement with the federal government on $118 billion of troubled assets, calling the agreement unnecessary – and too expensive.

Ford announced plans to sell 300 million common shares, and said it would use the proceeds from the offering for “general corporate purposes,” and to make a contribution to a fund that pays for healthcare for its retirees.

Total shares outstanding will increase to 3.102 billion – or to 3.148 billion if underwriter’s option for an additional 45 million shares is exercised.

Citigroup Inc. (NYSE: C), Goldman Sachs Group Inc. (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) are acting as joint managers for the stock offering.

Ford’s shares closed yesterday at $5.01, down $1.07, or 17.6%, from Monday.

According to an SEC filing, a settlement with various unions calls for the initial three payments to be made on Dec. 31, 2009, June 30, 2010 and June 30, 2011. At each date, as much as $610 million of the amounts payable could be satisfied by the delivery of Ford common stock, valued at fixed prices of $2.00, $2.10 and $2.20 per share, respectively, the filing stated.

Ford intends to use a portion of the proceeds of this offering to fund all or a portion of the payments to the settlement fund – in lieu of delivering shares on those payment dates, according to a media report by 123Jump.com.

Ford Chief Executive Alan R. Mulally took advantage of the stock-offering announcement to say that Ford’s management and employees are making “strong progress on our transformation plan – gaining retail market share with great new products, improving quality, reducing costs and positioning Ford for a return to profitability.”

Ford also said that it’s unlikely the company will pay any dividend in the foreseeable future. Ford last paid dividends in the third quarter of 2006.

As Ford Sells Shares, So Do GM’s Top Execs

Interestingly, Ford is trying to sell shares to investors just as a group of top General Motors Corp. (NYSE: GM) executives – including GM Vice Chairman Robert A. “Bob” Lutz – have sold what was left of their personal stakes, according to several SEC filings on Monday. The stock sales by GM executives were reported by MarketWatch.com.

“Our shareholders are obviously facing some pretty severe dilution if the bond exchange goes through or we end up in bankruptcy,” GM spokesperson Julie Gibson told MarketWatch. “Either way, no matter the outcome, we’ll essentially be issuing new stock.”

She acknowledged to MarketWatch that the executives took advantage of a trading window to sell their shares while there’s still some value “like most reasonable people would do.”

GM’s executives sold their shares just as the company is trying to rid itself of $27 billion in debt by persuading thousands of creditors to exchange their bonds for 10% in GM stock.

According to the MarketWatch report, the SEC filings say that Lutz was joined by fellow Vice Chairman Thomas G. Stephens, Ralph J. Szygenda, Troy A. Clarke, Gary L. Cowger and Carl-Peter Forster. All together, the six sold nearly 205,000 shares between Friday and Monday, fetching between $1.45 and $1.61 a share.

GM’s shares closed yesterday at $1.15 each, or 20.14%.

It is worth noting that Money Morning Contributing Editor Martin Hutchinson wrote this week that there’s a chasm of difference between the prospects of GM and Chrysler LLC – the two foundering members of Detroit’s “Big Three” – and Ford, which Hutchinson says may actually be worth investing in.

If the market shakes out as Hutchinson expects, Ford could emerge as only real winner among the U.S. automakers.

Under such a scenario, “Ford will pick up market share from GM and Chrysler, even if domestic brands overall continue to see their market share ebb,” Hutchinson wrote. “That will reduce Ford’s losses, and when the automobile market does rebound, the company that created the original automobile assembly line will move to a position of substantial profitability. For the first time since Henry Ford kept the Model T in production too long in the 1920s, Ford may become the dominant U.S.-controlled automobile manufacturer.”

As the secondary-offering market heats up, and the recession, Basenese, the stock-offering expert, says investors need to focus on these investment opportunities – and especially on those that emanate from the expected escalation in IPOs.

“History suggests IPOs are the place to invest coming out of a slump,” he said. “For proof, all we need to do is go back to the last ’severe’ recession on record, from 1973 to 1975. As we exited, IPOs turned in impressive numbers, with first day gains jumping to 40% and three-year returns climbing to more than 150%, easily outpacing the Standard & Poor’s 500.”

Source: Big Surge in Secondary Stock Offerings Will Lead to a Major Uptick in IPO Profit Plays

Identifying The Market’s Next Takeover Targets

The task of identifying the market’s next takeover targets can be daunting. Literally thousands of potential targets exist, which is probably why most investors liken it to a crapshoot and in turn, shun such a strategy altogether.

But that’s a monumental mistake!

They’re passing up easy double-digit profits. Historical takeover premiums (the amount paid over the current share price for a target company) average 22%, according to a study in The Journal of Finance.

And that’s just the averages.

It’s common for many deal premiums to reach into the high double digits and even triple digits.

Investing in Takeover Targets – 3 Steps to Improving Your Odds

By following three simple steps when investing in takeover targets, we can dramatically improve our odds of success…

• Go where there is consolidation. Consolidation trends are a powerful predictive tool because they tend to persist. Think about it. When your biggest competitor goes out and doubles in size overnight, there’s only one way to respond – find a suitable acquisition of your own to remain competitive. Thus, by focusing on those industries and sectors undergoing the most rapid consolidation, we can isolate high probability targets.
• Focus on companies with valuable (and undervalued) assets. Whether it’s a new drug, a mammoth oil discovery, key market share, distribution channels, or a few promising patents, the real reason a company is acquired is because it owns a particular asset of value to the acquirer. Only invest in companies with such “must have” assets. And to reduce risk even further, I suggest buying clearly undervalued companies – ones trading at or near cash levels on the balance sheet. (Yes, they do exist.)
• Insist on improving fundamentals. Understand that takeovers take time. In fact, acquiring companies might spend as much as nine months conducting due diligence. Yet, even then, there’s nothing stopping them from walking away from a deal (Microsoft -NASDAQ:MSFT- and Yahoo! -NASDAQ:YHOO- ring a bell?). I recommend buying an “insurance policy” to protect against such unprofitable break-ups. By that I mean, only buy companies with improving fundamentals – whether it’s strong earnings growth, new product launches, increasing market share, etc. That way, you stand to profit even if a takeover never materializes.

You’ll recall in my previous article about the imminent takeover boom, I singled out three sectors that fit the first criteria above – health care (specifically drug makers), energy and technology.

3 Takeover Targets to Add to Your Portfolio Today

For those unwilling to expend the effort to carry out the next two steps… or just eager to get going immediately, here are three takeover targets to consider adding to your portfolio today:

• Crucell NV (Nasdaq: CRXL): Merck (NYSE:MRK) and Schering Plough (NYSE:SGP). Pfizer (NYSE:PFE) and Wyeth( NYSE:WYE). Roche and Genentech (NYSE:DNA). Now Gilead Sciences (NASDAQ:GILD) and CV Therapeutics. Crucell is likely next. It’s the largest independent vaccine maker, with products for treating influenza, childhood diseases and hepatitis B. Crucell’s PER.C6 cell line is its most valuable asset. The company already licenses out the technology to over 60 companies. And there’s no doubt management is accepting offers. In January, it was in friendly talks with Wyeth, before Pfizer swooped in and bought Wyeth and ended the discussions. Best of all, multiple suitors exist (Novartis -NYSE:NVS-, Sanofi-Aventis (NYSE:SNY), Merck and eventually Pfizer) so a bidding war could unfold, which translates into greater profit potential for us.

• Anadarko Petroleum, Corp. (NYSE: APC): As oil tycoon T. Boone Pickens famously observed, it’s often cheaper to drill for oil on the floor of the New York Stock Exchange than in the ground. Andarko proves it, as its reserves currently trade for less than $10 per barrel. Throw in a recent deep-sea discovery off Brazil, minimal political risk (80% of assets are located in North America) and high-quality, relatively untapped and undervalued natural gas assets and the takeover case here is an cinch. A multi-billion dollar stock repurchase program provides downside protection, too.

• Lawson Software (Nasdaq: LWSN): The company is a quickly growing niche vendor of enterprise resource planning (ERP) software for medium-sized businesses. Tech heavyweights like Oracle (NASDAQ:ORCL), Cisco (NASDAQ:CSCO)and Microsoft are in desperate need of new growth initiatives. They have little exposure to the middle-market. And they have the cash to afford to buy it. The $308 million in cash sitting on Lawson’s balance sheet reduces our risk and also represents a 32% instant rebate to any potential suitors.

Full disclosure: I have recommended all three of these companies to subscribers in recent months. And we’re sitting on gains of 8%, 25% and 59%, respectively, proving it pays to follow step 3 above.

So to echo Alex’s sentiments from Monday, if you haven’t added a handful of potential corporate takeover targets to your portfolio, what are you waiting for? The opportunities and potential profits will be historic.

Good investing,

Lou Basenese

Source:  Takeover Targets: 3 Steps to Finding Them & 3 Stocks for Any Portfolio

This from Investment U:

President-elect Obama takes office in less than a week’s time. While many will be watching closely to see how he handles the ongoing financial crisis, I’ll be equally interested to see how he handles a far more ominous one: our ongoing energy and infrastructure crisis.

Regular readers know I believe energy and infrastructure are inextricably combined. We need cheap energy to fuel sustained economic growth. And we need infrastructure in place to move and dispense the energy from its source to its destination. Today I’m going to give you a perfect example of how the two are intertwined, and how one can play off the other to create a positive benefit for all.

In the face of gas prices that are less than half of what they were only a few months ago, it’s easy to think the “oil crisis” has passed. We can all return to “business and life as usual” – revert to our old driving habits – and just pay the lower price at the pump, right?

That would be a huge mistake. The real price we’ll pay will be our continued dependence on foreign oil. Last year, U.S. consumers and businesses spent over $475 billion hard-earned dollars for it.

Higher Gas Prices Are Around The Corner

With today’s lower prices forcing the cancellation or postponement of exploration projects around the world – and OPEC threatening more cuts – higher gas prices are just around the corner.

Just imagine for a minute, if – year after year – we took that nearly half a trillion dollars and reinvested it here. We’d have a stronger dollar, less susceptibility to economic downturns and recessions, and perhaps even a trade surplus as opposed to a trade deficit.

Well there’s one state that’s doing just that, setting an example the rest of the country should follow. As a result of their efforts, a growing percentage of money spent on auto fuel stays here. And car sales there are on fire. You see, these cars don’t burn gasoline. They run on a much cleaner fuel, one that’s found in abundance right here in the United States: natural gas.

We’re behind the natural gas as a fuel for cars curve, however. Worldwide, there are about eight million vehicles operating on natural gas. Here in the United States we only have 116,000. But Utah, with its estimated 6,000 vehicles, is breaking new ground. Even Utah’s Governor Jon Huntsman Jr. converted his state SUV to run on the clean burning fuel.

One word: cost.

Gas Prices In Utah – 85 Cents-A-Gallon

Natural gas prices at the pump in Utah are controlled, and are the cheapest in the nation, at the equivalent of roughly 85 cents-a-gallon. The other big advantage Utah has is the infrastructure to fill the cars. It’s fairly scarce in most other areas of the country.

And while natural gas is widely used in Europe at the consumer level, here its use is relegated to a few fleet vehicles. At the consumer level, it’s the classic Catch-22 situation. Carmakers – with Honda as the only notable exception – aren’t willing to make natural gas powered cars with so few filling stations available.

On the other side, filling stations don’t want to fork over the money to install expensive equipment to compress the gas, something that’s required in order to fill the tank on the car.

As is often the case, government intervention in the form of tax incentives or financing will go a long way towards breaking the logjam. California is leading the way, with legislation that offers a minimum $2,000 rebate to buyers of natural gas fueled cars.

Congress has legislation it will be considering this year that offers tax credits to consumers and producers alike, and mandates to install pumps at service stations across the country. The goal? Have the nation’s consumer fleet 10% powered by natural gas within 10 years.

Energy and Infrastructure Plays With a Natural Gas Bent

U.S. natural gas production remained stagnant for nearly nine years, and then in 2007, abruptly increased 9%. Improved drilling technology accounts for a large portion of the increase. Horizontal drilling and fracturing is fast becoming the preferred method of producing gas from difficult geological formations like shale.

And there’s plenty of it: Big shale deposits include the Marcellus, Bakken, Haynesville, Barnett and Woodford. Navigant Consulting, an industry consultant, estimates natural gas production can be ramped at least 50% to 30 trillion cubic feet per year between now and 2020, if necessary.

A simple way to play the gas game is to bet on one of the big producers, like:

• Chesapeake Energy (NYSE: CHK)
• Anadarko Petroleum (NYSE: APC)
• Or BP, PLC (NYSE: BP)

Once the gas is brought to the surface, it has to be distributed through our nation’s pipeline network. And that’s currently being expanded at a rapid rate to meet growing gas demand, primarily from utility customers. Take a look at three of the largest natural gas pipeline infrastructure companies in the United States:

• Kinder Morgan (NYSE: KMP)
• El Paso (NYSE: EP)
• Williams (NYSE: WMZ)

In summary, natural gas-burning vehicles represent a clean alternative to fossil fuels, and a good bridging solution until improved batteries enable meaningful numbers of plug-in electric hybrids. All the companies mentioned stand to score big if a serious natural gas auto mandate gets underway. And we’ll all be the better off for it.

Source: The Gas Prices Rollercoaster: Why Energy & Infrastructure Are Inextricably Combined

But that’s just me. Why are the cocaine-sniffing, marijuana-toking, sex-trolling and “gift”-taking members of the Bush administration’s MMS important to you? Well, among a number of energy related tasks, one thing the MMS does is report on staffing levels on oilrigs in the Gulf of Mexico… or “gee-oh-em” in oilrig talk.

As you might imagine, these staffing levels are actually an important part of the information that’s used by big oil and natural gas investors. Imagine if this data could be bent by outside sources who buy an MMS staffer with some coke, pot, prostitutes or tickets to an NFL game.

And, because the MMS is so corrupt, what are we now supposed to make of its Sept. 7 report on GOM oil rig and platform staffing levels?

The MMS claims that companies have evacuated workers from 452 production platforms (63.0%) and 81 rigs (66.9%). It also claims that 95.9% of the GOM’s oil production and 73.1% of its natural gas production were shut-in as a precautionary measure as Hurricane Ike approached the central and western gulf.

Can we believe the MMS when it reports that Shell Oil began evacuations from its offshore GOM facility last Sunday? And that on Wednesday, the oil and gas super-major decided on “a full evacuation.”

The MMS also reported that Ike forced Anadarko to evacuate all 600 workers from its facilities. It also said that Anadarko shut-in all of its GOM production on Thursday.

That included Anadarko’s Independence Hub. This is the Gulf’s largest natural gas processing facility. In fact, at 1 billion cubic feet of natural gas per day, the Independence Hub accounts for 10% of all the natural gas produced in the GOM.

So you can see how the MMS reports could influence markets… and why the number of MMS employees who were so easily corrupted for penny-ante payoffs is so disturbing.

After all, where do you think energy prices are headed when the MMS reports that giants such as ExxonMobil (XOM) and ConocoPhillips (COP) are shutting down GOM facilities, such as Conoco’s Magnolia platform?

Wouldn’t it be great to have someone in your pocket who could influence the markets in the direction you wanted by issuing a small press release with a big headline?

You bet it would.

Also, you have to wonder what it is about the energy industry and corruption. Could it be that prices are easier to influence than we regular Joes might imagine?

Because, there’s a delicious irony that the MMS’s venal shenanigans begin to come to light during the very same week that a federal court okays a $7.2 billion payout to Enron investors.

You have to think the current crowd on Pennsylvania Avenue – the one that manages the MMS and invited the Enron boys to help set national energy policy – has got to be more than ready to get out of Dodge. Of course, the current crew still needs to get “the hero” Scooter Libby his pardon. But, you can bet that this administration’s bags are packed. And it’s ready to go because, as the Reaganites and Clintonites would tell you, this ain’t a monarchy.

Eight years is a long time to keep the lid on all the bad stuff you’ve done or allowed to happen on your watch.

So, when I look back at the past eight years… no make that the past 16 years… no, the past 20 years… no, make that the past 28 years… I realize that MMS can only mean one thing.

“Make mine scotch… a double, please.”

GLOBAL HUNT FINALLY INTENSIFIES

Back in 2005, the CIA disbanded the unit dedicated to hunting Osama bin Laden.

Today, seven years after 9/11, the man suspected of being the largest mass murderer in American history remains at large.

Even more interestingly, word out of Washington is that the hunt for al Qaeda’s leader is once again priority.

But, as Peter Bergen, CNN’s national security analyst reports, while it’s a near certainty that bin Laden is living in Pakistan:

“American intelligence agencies have nothing of any substance on bin Laden. Given the hundreds of billions of dollars that the ‘war on terror’ has consumed the failure to capture or kill al Qaeda’s leader has been one of its signal failures.

“That said, it is worth bearing in mind that finding any one individual can be hard. Think of Mohamed Aideed, the anti-American Somali warlord who was known to be in Mogadishu, the capital city of Somalia in 1993, yet some 20,000 US soldiers deployed there were not able to find him. Think also of Radovan Karadzic, the alleged Bosnian Serb war criminal arrested in July in Belgrade who it took more than a decade to track down after the end of the civil war in the former Yugoslavia, and he was hiding in a relatively small country in Europe, not the badlands of the Afghan-Pakistan border.

“And given the fact that bin Laden is not making obvious errors such as talking on phones the signals of which can be intercepted and the fact that no one in his immediate circle will rat him out for the long-advertised cash rewards for his head it is likely that al Qaeda’s leader could evade detection for years or even decades.”

You have to figure President Bush still rates catching bin Laden as a top personal priority.

Bergen suggests that it’s one reason there have been so many recent missile attacks on suspected al Qaeda and Taliban strongholds within Pakistan’s border.

The idea is not to kill bin Laden, who must be well hidden, but to kill so many of his associates… their wives and children… to cause sudden uncertainty and increased communications between terrorists.

That extra communications traffic will make it easier for intelligence agencies to monitor. It could lead to more top al Qaeda leaders, and even bin Laden.

This is a real departure in US policy. It’s the first real push to capture – more likely kill – bin Laden since he, somehow, evaded US troops and spooks at the battle of Tora Bora in eastern Afghanistan in mid- December 2001.

Stay tuned for an October surprise.

Source: Corruption In The Oil Patch

The new agreement, valued at $1.2 billion, is a variation of a deal struck with the state-owned China National Petroleum Corp. in 1997, when Iraq was in the clutches of Saddam Hussein.

“The Chinese contract was signed with the former regime,” Hussein al-Shahristani, Iraq’s oil minister, said in an interview that appeared on Iraqi news Web site al-Noor. “It’s valid. It was unfair because it was a production-sharing contract. We have negotiated with them for a year. It was turned from a sharing contract into a service contract.”

Al-Shahristani, will put the finishing touches on the deal during a visit to China early next week, when he is joined by Latif Hamad, governor of the Wasit province – where the Ahdab field is located.

“The governor will discuss the logistic cooperation with the Chinese company, especially the security side,” provincial spokesman Majid al-Atabi, told The Associated Press.

The deal with China is one of several contracts Iraq is touting in an effort to boost oil production by roughly 500,000 barrels a day, from 2.4 million barrels to 3 million barrels by the end of 2008. Iraq then hopes to increase production to 4.5 million barrels a day by 2013.  As it stands now, the country sits on estimated 115 billion barrels of reserves, but exports a meager 2 billion barrels a day – 10th in the world.

Thirty-five foreign oil majors were invited to bid for contracts to provide technical support and help boost production in eight oil and natural gas fields last month. However, it was recently reported that oil majors are balking at the commitment, as the terms of the contracts have been shortened, and security concerns and political gridlock have undermined any progress.

“It appears that on present form (the Iraqi government) probably won’t proceed with most of these or all of them,” Charles Ries, coordinator for Iraq’s economic transition at the U.S. embassy told reporters earlier this week. “But I think that some of the companies are open to continued discussions even on relationship grounds, and some of the companies… don’t think it’s worth their time.”

Ries said that the contracts lost much of their appeal when Iraq reduced the length of their terms from two years to one, and when it became clear that companies who signed wouldn’t be given any preferential treatment for future long-term deals. Ries added that the deals, worth about $500 million apiece, “were never going to be hugely lucrative.”

Iraq has been negotiating with Royal Dutch Shell PLC (RDS.A, RDS.B), BHP Billiton Ltd. (ADR: BHP), BP (BP), Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Total S.A. (ADR: TOT), and a consortium of smaller firms led by Anadarko Petroleum Corp. (APC),  according to Reuters.

Anadarko has already pulled out, but officials insist negotiations are ongoing. An anonymous Iraqi official responded to reports that talks had disintegrated Wednesday, telling the AP that deals with Shell, BP, Exxon, Chevron, and Total were “still on the table,” and “none of them has pulled back.”

Development of the energy sector will be crucial to Iraq’s reconstruction and development, as oil accounts for 90% of export earnings and 70% of the country’s gross domestic product.

Source: China and Iraq Finalize Oil Contract, as Western Oil Majors Waver

Yesterday (Thursday) futures prices for that benchmark grade of crude oil hit the latest in a succession of record highs, punching through the $135-a-barrel mark on the New York Mercantile Exchange, before sliding back.

In other words, in only a single year, crude-oil prices have more than doubled, soaring 115% – and setting 27 separate new records along the way. And while a short-term correction may be in the offing – especially with fears of a U.S. recession ebbing – the reality is that oil prices are nowhere near the end of their run, meaning the United States is really an economic system that’s at the crossroads.

“The market is less worried about the economy and subprime problems,” Tim Speiss, head of the wealth-management arm of Eisner LLP, told MarketWatch.com. “But that’s near-sighted. If oil stays above $130 a barrel, that’s a very significant event and a lot of the sectors of the economy would have to be re-engineered.”

Commodities of all types are at or near all-time record highs. And the impact – on a global basis – has been as starting as it is far-reaching, affecting consumers at all income levels and in every market across the world.

Even so, here in the U.S. market, it’s the price of oil – and of gasoline – that continues to dominate the headlines. Like a junk-food junkie who’s constantly searching for a sugar fix, the U.S. economy is addicted to foreign oil. And because it’s not a habit we’re going to kick anytime soon, U.S. consumers will be forced to live with the heinous consequences.

Given that harsh reality, shrewd investors will look for ways to offset that largely unavoidable pain with some well-placed profit plays. Before we can do that, however, a look at the basics is necessary.

Oil Prices 101

Since 2005, global oil production has remained stagnant, but demand has increased exponentially. Even if American consumers are unwilling to pay $4 a gallon for gasoline, and U.S. demand plummets, global demand will continue to rise.

Eduardo Lopez, an analyst with the International Energy Agency, told The Independent that America’s role as the global oil-price arbiter – the United States consumes one out of every four barrels of oil used worldwide – is dwindling.

“Demand is coming from emerging markets. As long as the [United States] doesn’t collapse, it doesn’t really matter if the mature economies are slowing,” Lopez said.

While the IEA expects demand in industrialized countries to decline by 0.7% (about 300,000 barrels of oil per day) this year, the Paris-based group says oil consumption in the rest of the world will grow by 3.7% (1.4 million barrels a day).

The net increase is due chiefly to the rapid growth in China and India.

Fueling the Fast-Growing Economies of China and India

According to the China Petroleum and Chemical Industry Association (CPCIA), China’s apparent consumption of petroleum byproducts such as gasoline, diesel and kerosene rose 16.5% year-over-year in the first-quarter. Crude oil consumption jumped 8%.

China’s net imports totaled 44.95 million metric tons in the first quarter, up 15%, and net imports of oil products rose by 32% from a year ago, according to the Asian nation’s General Administration of Customs.

And now that the most powerful earthquake in 58 years has ravaged the country’s infrastructure – smashing roads, leveling refineries, and shutting down hydroelectric plants – China has been forced to supercharge its imports of diesel and jet fuel just to supply power generators and airports to help it accelerate the desperate rebuilding process.

Ultimately, the IEA sees China’s oil demand more than doubling to 16.5 million barrels a day by 2030.

But that’s nothing compared to other emerging hot spots, where demand is expected to rocket sevenfold during that same stretch.

Just look at India, another big country with a pedal-to-the-metal growth rate. That country is expected to overtake the United States, Japan, and China as the world’s leading net importer of oil by 2025.

In 1970-71, India was importing 11.66 metric tons of crude oil. By 2005-06, however, the imports had increased to 99.40 metric tons, the Economic Times reported. Since 1997-98, alone, petroleum imports have almost tripled. Nearly 76% of India’s domestic oil needs are met via imports.

And it’s really no wonder: India’s demand for oil is expected to grow by 8%-10% this year alone.

Together, China and India will account for 45% of the increase in global primary energy demand through 2030. The two countries’ net oil imports are expected to jump from 5.4 million barrels in 2006 to 20 million barrels a day in 2030, which could create a “supply crunch” as early as 2015 according to the IEA.

The Pending ‘Supply Crunch’

There’s no avoiding the fact that the world will one day run out of oil. In fact, the biggest field in the world, Saudi Arabia’s Ghawar field, is only a shadow of its former self. It was originally discovered in 1948. And since the 1970s, the oil field has required large-scale injections of seawater – a technique used to artificially pressurize an oil reserve that’s on the decline.

Ghawar isn’t the only spot where this seawater saga is playing out. As the biggest, most-accessible, and most-cost-efficient wells on the planet dry up, oil producers are struggling to replace them.

To do so, they’ve been forced to experiment with challenging and costly deep-sea drilling expeditions. Such heavy-hitters as Exxon Mobil Corp. (XOM), BP PLC (BP), Total SA (TOT), Chevron Corp. (CVX), ConocoPhilips (COP), and Royal Dutch Shell PLC (RDS.A, RDS.B), will spend a record $98.7 billion this year on exploration and production, according to Lehman Bros. Holdings Inc. (LEH).

Exploration costs have more than quadrupled since 2000, as oil producers have been forced to take on more complex projects and the costs of both labor and materials have skyrocketed. In just the past eight years alone, the cost of finding and developing a barrel of crude oil soared from $4 to $18, Andrew Latham, vice president of exploration services at consulting firm Wood Mackenzie Ltd., told Bloomberg News.