This from Rude Awakening:

The IEA estimates that the oil industry will have to invest over $350 billion per year to counter the steep rates of decline in output. And even that will not be sufficient to maintain levels of output for traditional forms of crude oil. Thus, much of the future investment will have to go toward extracting other kinds of hydrocarbon substances. And these “other kinds” tend to be very expensive to develop.

There are many different kinds of hydrocarbon molecules in the world. The total worldwide carbon base actually adds up to a very big number, and that is NOT including the carbon that is part of the current living biology of the planet. For now I’m just discussing the fossilized carbon like oil, natural gas, bitumen in tar sands, oil shale and coal.

The big problem for the non-oil forms of carbon is the cost of converting it into a viable fuel. We see that, for example, in the Canadian tar sands projects. Lots of steel, concrete, labor, machinery, water and energy input — all to extract this thick, gunky crud that has to be upgraded to something that looks like diesel fuel.

The tar sands are full of hydrocarbons, but they are not inexpensive to extract. The same goes for every other non-convention hydrocarbon source.

The nearby chart shows the total hydrocarbon resources in the world and the relative costs to convert them into a barrel of oil or oil equivalent. This is my summary, based on several different government and academic compilations:

These are big numbers, right? And they can supply a lot of energy over a long time…at a price. But that price will almost certainly be more than $60 a barrel…much more.

Source: $60 Oil…And Why it Won’t Last

This from The Rude Awakening:

During times like these, it’s all too easy to become caught up in the moment. Fear is a powerful emotion. As the markets continue to crumble, many investors lose sight of their goals. They sell positions indiscriminately; they become irrational.

The sell-off we’re experiencing right now is global. And no stock or commodity has escaped the devastation. That’s why we’re looking at a scarce and valuable resource for steady long-term gains: oil.

One energy guru recently made a big bet on oil. He repurchased shares of Exxon (NYSE:XOM), ConocoPhillips (NYSE:COP), Pioneer Natural Resources (NYSE:PXD), BP (NYSE:BP) and Statoil (NYSE:STO) — all at rock-bottom prices. We say he RE-purchased these shares because, in a prescient move, this sage sold off every oil stock he owned in May…back when oil was sitting atop $129 per barrel.

Richard Rainwater knew he would be leaving the party a bit early to the party — and probably miss the top — when he sold his oil investments back in spring. But he also knew that the gains from his $300 million invested in oil stocks and futures were in jeopardy.

“I just felt that America was not ready for $4 gas and we would see a pause here,” he told Time magazine in June.

Rainwater cashed in his profits just before oil’s peak in July. Now, he’s ready to do it all over again, spreading his millions across Exxon, ConocoPhillips and other big-name petroleum pushers.

Rainwater’s outlook is simple: Increased worldwide demand will continue to push the oil price up in the long term. Rainwater’s not alone, either. Analysts and industry experts — like oil tycoon T. Boone Pickens and OPEC President Chakib Khelil — have been making it perfectly clear…oil won’t be down too long.
On July 11, 2008, oil made a record ascent to $147.27 — a 123% jump in only 12 months. Since that momentous event, however, it has been all downhill for the energy sector. As the nearby chart illustrates, oil stocks (yellow line) have been closely tracking the downward trajectory of crude oil (blue line).

With oil sitting below $60 right now, oil aficionados like Pickens are bracing for the run-up to come. “The Saudis claim they have more oil; they don’t. The president wasted his time to go to Saudi Arabia, to say, ‘Give us more oil.’ They can’t give any more oil…they’re stacking up the money as fast as they can stack it up,” warned Pickens in an interview with CNBC.

The allure of oil is hard to refute. With finite supplies and unquenchable demand, it’s clear why many investment houses put oil above $200 in the near future. According to Pickens, it’s just a case of an oil-hungry economy overwhelming producers: “Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87 million. It’s just that simple. It doesn’t have anything to do with the value of the dollar.”

Now is the time to buy oil. The second quarter of 2008 saw the largest drop in oil prices in 17 years. Now with OPEC slashing its production outlook for the rest of 2008 and 2009, it’s unclear just how long prices will be able to stay under $100…much less under $57.

Source: Surviving the Selloff

This from Investor’s Daily Edge:

Strange things are going on in the oil patch. They could help make Obama look good. But what’s good for Obama may ultimately give the U.S. its biggest energy headache yet.

As oil continues its dizzying fall, cheap energy and gas will allow Americans to spend more on other things. But oil companies aren’t happy and are reacting in different ways.

Some, like ExxonMobil (NYSE:XOM), are continuing their spending plans. For ExxonMobil, that would be a tidy $25-30 billion a year. Most of the other oil majors are cutting back – especially on spending in higher cost and/or non-conventional oil development initiatives.

Having just enjoyed another quarter of record or near-record breaking profits, these companies certainly have the money to spend. Oil companies may not be as vulnerable to the economic crisis and credit crunch as car manufacturers, but the good ol’ days are rapidly coming to a close.

Oil for the year is still averaging over $100 a barrel. So on the surface, oil companies are doing fine. But dig a little deeper, and some cracks begin to show. Until recently they’ve been fighting rising costs. Costs of raw materials like steel and cement have now fallen back to earth. But labor and drilling remain stubbornly high.

And production in existing fields is declining faster than expected. For example, oil is flowing from the North Sea at a clip of 1.7 million barrels per day. By 2030, it’ll drop to only 500,000 barrels. Production from existing fields in Alaska, Russia and Mexico are also suffering faster-than-expected declines.

A new report from the International Energy Agency says that oil companies will have to spend $360 billion per year just to keep this rate of decline at 6-7 percent over the next two decades. Otherwise, rates will climb over nine percent.

That’s a lot of money to spend on a losing battle. All that spending won’t reverse rates. It will just slow down falling production.

The same agency noted that oil output outside of OPEC countries has plateaued already. And it will begin to drop in a few years.

There will be individual companies in the West that will be increasing production – especially companies working the smaller oil plays. But the future for the bigger oil companies and for western oil companies as a group is grim.

With each passing quarter, their ability as a whole to maintain production levels will come under increasing pressure. Raising production is simply off the table. Ain’t gonna happen.

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It would seem that Obama’s unfriendly stance toward oil companies (like plans to tax windfall profits) is particularly backward-looking. Oil companies are in a heap of trouble. Oil companies haven’t figured out how to counteract declining prices combined with declining production.

What can they do? They could follow Royal Dutch Shell and put more money into developing non-conventional oil resources, like the vast reserves of oil sand in Canada. Shell (NYSE:RDS.A / RDS.B), along with Suncor (NYSE:SU), Petro Canada (NYSE:PCZ), Imperial Oil (AMEX:IMO) and a half-a-dozen other companies are delaying new projects or cutting back on their spending in Canada, though.

The problem? Some of these oil companies swear it’s more a concern over rising costs than the falling price of oil. But c’mon. The Canadian oil sands are a big money-maker when oil was at $145 a barrel. It would be a profitable operation even with oil at $100.

But at $65? Or $55? That’s cutting it far too close for comfort.

Here’s the kicker, though. Any increase of oil production will have to come from OPEC countries. Countries in the West – including the U.S., of course – will be more dependent than ever on OPEC to satisfy their oil thirst.

And there’s not a thing an Obama presidency can do about it.

Even if he pushes hard on energy conservation and using more alternative energy resources, it’s not going to change the fact that availability of our most important fuel will depend on OPEC countries making timely decisions on raising output.

Over the long run, moving away from oil is a good move. But there’s only one thing that will keep the price of oil down in the short run and that’s a deep and prolonged global recession. Once countries like China and India (where most of the growth in oil demand will come from) start to bounce back, the price of oil will begin a long climb up.

And given that oil companies in the meantime will be making much less money and, as a result, spending much less money on developing new production, a new round of oil shortages will develop…

That is, unless OPEC countries raise production enough to keep prices low. And that’s a non-starter if I ever saw one.

So expect oil to climb to new heights after a 2-3 year pause that has just begun. It’ll easily pass the previous high of $147 reached this July. It should hit $200 and could go higher.

The big oil companies in the West will benefit greatly, even if their production is flat-to-falling. And those big bets that companies like Suncor, Nexen (NYSE:NXY), Opti Canada (TSE:OPC), and Petro Canada have made in the Canadian oil sands will be looking a lot better.

You may want to keep in mind that among the super-majors, the company with a big lead in non-conventional oil development is Royal Dutch Shell. It’s not the best-looking super-major now. But by the time Obama is campaigning for a second term, that could well change.

Source: Can Big Oil Find Ways to Grow?

This from Taipan Daily:

Mark my words. It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking.

— Vice–President-Elect Joe Biden

Just a few weeks ago, Vice–President-elect Joe Biden (back when he was plain old Senator Joe Biden) promised the world that Barack Obama will be “tested” by America’s enemies.

“Remember I said it standing here,” Biden told his Seattle audience, “if you don’t remember anything else I said. Watch, we’re going to have an international crisis, a generated crisis, to test the mettle of [Barack Obama]. And he’s going to have to make some really tough — I don’t know what the decision’s gonna be, but I promise you it will occur. As a student of history and having served with seven presidents, I guarantee you it’s going to happen.”

Say it ain’t so, Joe…

Russia: “I’m Your Huckleberry”

With no time to waste, it seems Mr. Biden’s words have already come true. Within 24 hours of Obama’s historic victory, Russia elected to stir the pot. As the Financial Times reports,

Russia’s president Dmitry Medvedev on Wednesday became the first world leader to throw down a gauntlet to U.S. president-elect Barack Obama, declaring that the Kremlin would station missiles in the tiny Russian enclave of Kaliningrad, which borders Poland, in response to U.S. plans for an anti-missile system in Eastern Europe.

Your humble editor is a big fan of old spaghetti westerns – Clint Eastwood westerns in particular. The Good, the Bad & the Ugly… The Outlaw Josey Wales… Unforgiven… and so on.

But one of the best westerns ever, in part for its cheek and cheesiness, has to be Tombstone, with Kurt Russell, Val Kilmer, Bill Paxton, and a few other notables.

One of Tombstone’s best lines is when Doc Holliday (Val Kilmer) tells Johnny Ringo, “I’m your huckleberry.” Meaning, “I’m the man you want to fight.”

October 13th, 2008: Dawn of a NEW COLD WAR

Overnight, the superpowers find themselves locked in a stare-down over a newly-confirmed strategic energy reserve that could last 391 years. Here’s how you could rake in “spoils” of 19,000% no matter who prevails…

In acting so swiftly to station missiles on the Poland border, Russia is in effect saying to the U.S. President-elect: “I’m your huckleberry. Let’s see what you’re going to do.”

What’s more, this plan does not feel like something Medvedev could have cooked up all by himself. To the contrary, it has Vladimir Putin’s fingerprints all over it.

So is it really a further surprise, then, to hear the Russian newspaper Vedomosti predict that Putin could retake his post as Russia’s president (with the current occupant stepping aside) sometime in 2009?

I have no idea how President Obama will respond to a newly-hostile Russia. My guess is that he will prove much less the “dove” than some expect… that the pragmatic Chicago operator in him could find the means to take a very hard line.

Dove or hawk, we’ll get a chance to find out either way…

A few weeks ago we noted in these pages that “falling oil is a geopolitical time bomb.” That notion holds true as ever, I believe. We just can’t be sure when or in what fashion the bomb will go off.

OPEC Still a Factor

Meanwhile, the Saudis aren’t exactly sitting on their duffs. Crude oil prices saw a ten percent jump earlier this week on news of the Kingdom’s production cuts.

There is open question as to just how effective OPEC really is. Some believe there is so much “cheating” going on that changes in the official quotas amount to little more than hot air. And with budgets getting tighter, the Saudis are one of the rare OPEC producers with enough “swing” capacity to really make a difference in day-to-day crude supply.

With that said, though, the long-term trend for oil prices remains up, not down… and that means greater concentration of power for OPEC. The IEA (International Energy Agency) is expected to release its “World Energy Outlook,” an annual report of sorts detailing the state of energy production around the globe, very shortly.

In that report (according to those who have seen advance copies), the IEA will release a forecast of $200 per barrel oil by 2030. The IEA expects a tripling of OPEC’s revenue in the coming years, from $700 billion in 2007 to more than $2 trillion down the road.

The IEA further notes “a real risk that underinvestment… will cause an oil supply crunch,” and that we will see “persistently higher levels of consumer spending on oil.” No surprises there.

Direction, Not Destination

How much stock should we put in a forecast for oil’s price more than 20 years out? Not much, obviously. I have no idea where the price of oil will be in 2030. (If they were honest, the IEA would admit they don’t either.)

But there is still value in this type of forecasting, because rigorous analysis of the data helps uncover the likely direction of the long-term trend.

We may not know how high or how fast oil’s price will rise in future… but we do know that the long-run direction for energy prices is still UP — not down —  in spite of the recent price implosion.

The credit crunch and ensuing panic have put global growth projections on hold for a time —  but it is only a pause, not a halt. Nor has the reality changed that all the “easy” oil is gone… that remaining oil supplies are getting ever harder to find… and that the NOCs (national oil companies) are increasingly hoarding the spoils for themselves, forcing the western oil majors to pursue ever tougher and riskier projects.

(Eventually) Back in Black

As far as the global economy goes, the worst case scenario for 2009 is one in which the powers that be screw things up so badly that we wind up with Great Depression 2.0.

Barring that tragic outcome — and it’s a pretty low-probability scenario I might add — a real problem we will face is lack of preparedness when demand trends come back on line.

As outlined in our explanation of why the commodity supercycle isn’t dead, a lack of capital spending now will likely lead to even bigger production bottlenecks in future.

And so, in short, I believe that while the price of oil got “crunched” along with everything else — the dollar’s sharp rise playing a role too — energy prices will bounce back with even more velocity and vigor when global growth returns.

And when that happens, we’ll have the same problems to deal with that were temporarily back-burnered by the credit crisis… and as a result, natural gas will play an expanding role.

Jumpin’ Jack Flash It’s A…

When we talk about oil and gas, we typically forget about the “gas” part. This is largely due to the varying roles that the major fossil fuels play. Oil is the big dog because we use it for transport. Coal is king because we use it for heat and electricity.

Natural gas has many uses too, but it’s a less critical piece of the energy puzzle in comparison to its bigger, dirtier fossil fuel brethren.

Oil and gas have big troubles though. The trouble with oil is that we are running out of it (or the easy stuff at any rate). The trouble with coal is that we hate it. America and China have more coal than they know what to do with, but coal is viewed as public enemy number one from an environmental standpoint.

The reality of rising demand is that oil and coal won’t go away — but alternatives will become all the more important. We’ll keep burning all the oil we can, and on a global basis, we’ll see new coal plants firing up every week for the next twenty to thirty years.

But natural gas still has room to be a much bigger part of the mix because coal is so undesirable as a primary electricity source, and the available oil just won’t be enough.

Natural gas is hard to transport across oceans now. But it will become much easier to transport as more LNG (liquid natural gas) facilities get built. In the same vein, it’s not very common these days to think of natural gas as a “transport” fuel… that is to say, something you put in your gas tank. But that mindset will change too, as Western countries move towards the mutually supportive goals of cleaner energy sources and less oil dependence at the same time.

We are nearing the stage, for example, when electric cars become truly viable on a mass scale. Technology, political will, public sentiment, and investor capital are all finally converging on this idea simultaneously.

When we see it really take off, chances are many of these next-gen cars could draw their electricity from natural gas-fired power plants. That’s just one quick example of how natural gas, the cleanest and least offensive of the major fossil fuels, can grab a march on oil and coal. There are plenty more.

Rumblings of GOPEC

As one might expect, the world’s major oil exporters tend to be the world’s natural gas powerhouses too. Last time I checked, Russia held an estimated 25% of the world’s known gas reserves.

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As an aside, there has been a lot of excitement around natural gas shale finds in the US, but the “decline rates” on shale are extraordinary — as high as 70% in the first year. Thus if natural gas truly catches on in terms of consumer heating and transport trends, North America will be back in its same old position… running to stand still as new gas production barely keeps up with the old production’s decline.

This creates an opening for the big gas players — Russia leading them — to band together and form a sort of “GOPEC,” or “natural gas OPEC.”

In fact, the GOPEC idea has already moved beyond the “maybe we should ponder this” stage and progressed to serious implementation. As the UK Guardian reported just recently,

Western concerns about global energy markets hit new heights [in late October] when Russia, Iran and Qatar said they were forming an OPEC-style gas cartel.

The move by the three countries, which control 60% of the world’s gas reserves, was met with immediate opposition from the European commission, which fears the group could drive up prices.

Alexey Miller, chairman of Russia’s Gazprom, said they were forming a “big gas troika” and warned that the era of cheap hydrocarbons had come to an end.

“We are united by the world’s largest gas reserves, common strategic interests and, which is of great importance, high cooperation potential in tripartite projects,” he explained. “We have agreed to hold regular — three to four times a year — meetings of the gas G3 to discuss the crucial issues of mutual interest.”

Don’t Get Fooled Again

In conclusion, investors who think cheap oil and gas will stay cheap should take a lesson from Pete Townshend and the Who. They should get on their knees and pray they don’t get fooled again.

“Meet the new boss, same as the old boss” might not apply to President-elect Obama, who is most decidedly not the same as President Bush. But it does apply to the same old realities of supply and demand.

The world’s oil and gas reserves are still a scarce resource, relative to the global demand that will eventually be coming back on line. The fact that Wall Street has temporarily lost sight of this creates short-term opportunity to scoop up well-run, well-capitalized energy players at insanely cheap valuations.

I’ll confess, too, that I like the little guys here a lot more than the big guys.

The big, well-muscled oil majors like Exxon and BP are bursting with cash and profits right about now — a sign of stability and comfort for nervous investors. The trouble is, all that stability may well be priced in to the shares… and at the same time, the hidden troubles that the oil majors will face in finding replacement reserves do not feel adequately priced in.

Exxon is heralded for its cash and ledger-busting profits, for instance, but few talk about the troubles the big behemoth will have replacing depleted reserves down the road… a task that is getting harder by the day.

Many of the little guys, on the other hand — smaller, more nimble energy companies that are often good takeover candidates — are in an opposite position to the oil majors. Their values are being discounted by Wall Street due to an irrational fear that the financing of current operations won’t hold up.

In other words, we’re in an environment where investors are perhaps paying up too much for the perception of safety, while shying away from the opportunity to pick up great assets at a discount because of an overcompensated aversion to risk.

That’s the kind of discrepancy great investors love to exploit all day long.

And, last but not least, there’s a bonus factor in regard to the “big boys” being stuffed with cash right now — their big cash positions and tough replacement challenges make it easier for them to buy new production versus going out and finding it. (This is sometimes known as “drilling for oil on Wall Street.”) In other words, it’s all the more likely for an Exxon or a BP to spend some of its hoard snapping up smaller names at a fat premium to the going share price.

The Best of Times, the Worst of Times

Charles Dickens opened up A Tale of Two Cities with the famous line, “It was the best of times, it was the worst of times.”

That’s a good summation of how I feel about markets right now. We just went through some of the worst carnage in a hundred years… but at the same time, the fact it’s been the “worst of times” is also what makes it the “best of times” in terms of here-and-now opportunities.

Your spoils of the NEW COLD WAR: 19,000% Gains

On October 13th, an unexpected, world-changing resource discovery put the superpowers at odds — and YOU in the catbird seat. Here’s how to play the coming stare-down for gains of up to 190 TIMES YOUR MONEY…

Exploiting the wide disconnect between public perception and the inevitable reality of the looming “oil and gas showdown” headed our way is exactly how sharp-eyed contrarians get rich. It’s a textbook example, right in front of our eyes, of how new fortunes are built in the aftermath of crisis.

Oh, and one last thing. Speaking of “crisis,” I recently received some interesting intel from Christian DeHaemer, the editor of Breakaway Investor and Crisis Trader.

Not only is DeHaemer relaxed about the looming prospect of a natural gas OPEC, he’s actually excited about it. Why? Because Crisis Trader has pierced the veil of secrecy shrouding a new “natural gas superpower…” an unexpected gas find so big and so astonishing that Russia and the other hoarders will be knocked back on their heels by this new player’s entrance into the game.

DeHaemer also believes he’s found the one company poised to make astonishing gains from this find… and he reveals it to Crisis Trader subscribers. You can find out more here.

Source: As Russia Tests the Waters, an Oil & Gas Showdown Looms

This from Money Morning:

With his landslide election victory Tuesday – coupled with Democratic gains in the House of Representatives and in the Senate – U.S. President-elect Barack H. Obama II will have the ability to pursue more or less any policy he wants.

For investors who have been trying to analyze the economic outlook for the New Year, the election of U.S. Sen. Obama (D-Ill.) provides a major piece of the forward-looking jigsaw puzzle that these analysts hope to assemble. That’s because the likely trends of the United States and other economies around the world – and the relative success of different sectors within those economies – depends crucially on who’s in the White House, what policies they have, and how effectively they can pursue those policies.

Only one thing keeps the triumph of the incoming Democratic president from being totally complete: The Republicans appear to have held onto 41 Senate seats, enough to prevent the Democrat majority from overriding a united filibuster. In practice, however, there are few issues on which the Republicans will be completely united. Thus, on only a few “litmus test” issues – such as the “Employee Free Choice Act,” which removes the secret ballot from union elections – is this filibuster threat likely to be effective.

Obamanomics: From the Environment to Health Care

A review of President-elect Obama’s economic policies – characterized by the term, Obamanomics – clearly offer profit opportunities. Let’s take a closer look at some key areas to consider in 2009.

In the economics area, Obama’s two signature policies are a promise to institute a “cap-and-trade” system of carbon emissions permits to combat global warming, and a substantial expansion in state healthcare provision, notably to include universal healthcare provision for minors.

On the energy front, the support of U.S. Sen. John McCain (R-Ariz.), for the “cap-and-trade” system will make it much easier for Obama to pass legislation quickly, probably in the first half of 2009. Under Obama’s proposed legislation, emission permits will be auctioned to utilities and other businesses with substantial carbon emissions. This has the advantage of being more of a free-market approach than McCain’s plan to give away the permits for free, which would have required the creation of a huge government bureaucracy to decide who would get those permits.

Even so, Obama’s approach has the disadvantage of imposing gigantic new costs on utilities and other carbon emitters. Indeed, Obama himself has said that new coal-fired power plants would become hopelessly uneconomic under his plan – chiefly because of the costs of the emissions permits they would need. That suggests that nuclear power plants (which he does not oppose) would account for the majority of new power-station construction during the Obama presidency – although solar, wind and other power-generating technologies that look pretty and can be made to work also will fare well.

The corollary of Obama’s emissions permit program, therefore, is that an investor should sell coal-producing companies and coal-fired electric utilities, and invest in nuclear power stations and uranium-mining companies. In principle, there should also be opportunities in the solar- and wind-power sectors, but the “new energy” fad of the last couple of years has already driven their valuations to uneconomic levels.

On the healthcare side, investment recommendations are more difficult to isolate. Generally, Democrats are skeptical of the patent protections enjoyed by pharmaceutical companies – as well as the high prices those protections create – so the major manufacturers of patented drugs should be avoided.

Conversely, the producers of generic drugs appear poised to benefit from the increased spending on healthcare – especially the manufacturers of pediatric healthcare products, including pharmaceuticals – should benefit from the Obama program’s emphasis on children’s healthcare.

Financial Crisis Redux

Of all the questions investors will have about the New Year – following Obama’s victory – is what the new administration will do about the current financial crisis.

A federal bailout package – consisting chiefly of spending increases – seems almost certain in the short term; that will cause the federal deficit to balloon even more than it has already, will make U.S. Treasury bond financing increasingly difficult, and will further stoke inflation. In those circumstances, avoid Treasury bonds, except the inflation-protected buying Treasury Inflation Protected Securities (TIPS), the principal and interest of which are linked to the Consumer Price Index (CPI). TIPS currently have an attractive yield around 3.0%.

It seems likely that an Obama administration will tend to impose costs on the financial-services sector in return for the bailouts it receives – perhaps, for example, banks will be required to funnel lending into low-income areas, or toward other chosen beneficiaries. Limits on financial-sector remuneration also may make it difficult for the major banks to do business, particularly in the trading area. The Democrats have a more aggressive attitude toward “predatory lending” than the Republicans, and will undoubtedly find innumerable examples of such lending in the mortgage and credit card area over the next few years, which they will wish to punish. Hence, financial sector investments should be generally avoided.

Potential Profit Plays

On the other hand, both Obama and the Democrats seem more likely to propose bailouts for states and municipalities that find themselves in budgetary hot water because of the recession that’s sure to come (if it’s not here, already). Thus, municipal bonds, which carry a considerable credit risk under a tight-fisted Republican administration, may be thought of as less vulnerable to default under an open-handed Democrat administration with sympathy for the issuer’s problems, particularly if that municipality represents a core urban Democratic constituency.

When New York City got in trouble, U.S. President Gerald Ford – the Republican who succeeded the disgraced Richard M. Nixon – took an unsympathetic attitude and The New York Daily News captured his perceived attitude with the headline: “Ford to City: Drop Dead!” No such episode will occur under the urban-oriented, free-spending Obama!

And that makes munis a “Buy.”

Also in the “Buy” category are automobile and auto-parts companies. No matter which candidate ended up winning Tuesday, the victor would almost certainly decide to bail out U.S. carmakers, as well as the suppliers that rely on them. After General Motors Corp. (GM) was rebuffed in its bid for aid by the Bush Administration, the bailout of U.S. carmakers is now being billed as a top priority for the incoming President Obama.

Automakers such as GM and Ford Motor Co. (F) benefit from being the headliners in an iconic U.S. industry – especially because it’s one that employs lots of potential Democrat voters in industrial states and suffer from international competition that increasingly riles the more protectionist Democrats. A bailout is thus inevitable, probably without involving the automobile companies in a Chapter 11 bankruptcy. And that makes their shares worth a “flutter.”

President-elect Obama’s supporters celebrated ecstatically Tuesday night. Investors should be more skeptical. But looked at carefully, an Obama administration – and Obamanomics – would still seem to offer opportunities for profit in the New Year.

Source: Money Morning Outlook 2009: Obamanomics Offers Investors Plenty of Profit Plays in the New Year

Perhaps the biggest green market, however, will not be an Obama-led green mandate, but emerging markets like China and India. In these places, green presents a true economic gain untethered from the price of oil, coal or natural gas.

That’s because the cost of pollution in these economies has a true impact on the GDP. Pollution raises the price of food, energy and health care. In the case of China, the pollution quotient adds enough overhead to make countries such as Vietnam, Pakistan and Thailand lower cost providers.

In India, the battle of a new Tata Motors plant for the company’s sub-micro thrifty car has forced a relocation that cost Tata millions.

Here in the U.S., though, a new era of subsidized green may lose its luster if fossil fuel prices stabilize at current levels – or even drop.

Green alternatives have always been pegged to the cost of doing business in a fossil-fuel economy. That’s why we saw so many solar IPOs soar with the ever-climbing price of oil. As oil prices retreated, so went the fortunes of so many solar investors.

This proves that self-righteousness is not a technical indicator or an incentive for long-term investments in the green sector. Self-righteousness is not the same as greed, which directly affects the climate for trading.

Now that the green movement has appropriated nuclear, we could see some distorted numbers creeping into the market as why alternative energy is more economically viable than two years ago.

But even the uranium industry doesn’t believe that, with the price of yellow cake down about half from a year ago.

For green stocks to truly perform, the American economy has to be resuscitated.

Over the long haul, green stocks will find themselves tied more to consumer spending than to government hand-outs. Once the economy is restored, and people start driving to the mall and vacation homes in the Outer Banks; once Americans stop conserving energy and turn up the heat in their homes to stay warm; and once alternative energy returns to a better economic alternative to fossil fuels — at that time we’ll see green stocks being to take off again.

Near term, green stocks could be a speculators playground as the Obama halo effect sends up prices. In the mean time, I’d still put my money in oil drillers.

With the consumer price index (CPI) safely in the books for another month, economists can now turn their focus to wholesale inflation with the release of the May producer price index (PPI). Economists, mistakenly, often disregard the energy component of this data each month and focus mainly on the so-called “core” releases – which excludes “volatile food and energy prices.”

While food and energy prices often suffer from month-to-month volatility based on seasonal factors, they cannot be overlooked these days as they continue to have significant impact on the global economy.

Also, Lehman Brothers Holdings Inc. (LEH) can’t seem to avoid the limelight, as the eyes and ears of the investment community will be sharply focused on its earnings announcement today (Monday), which also is expected to detail plans for its much needed capital infusion.

U.S. Treasury Secretary Henry Paulson welcomes his friends from China for Strategic Economic Dialogue IV, as both countries are sure to bicker over unfair trade practices, protectionism, and currency valuations. (And, “bickering” has become a very popular sport in Washington as of late… too late for the Beijing Olympics?).

Market Matters

So let the partisan bickering and political pandering begin. With the executive branch up for grabs in November, the Democratic-led U.S. Congress introduced legislation that has virtually no chance of passing, merely to be used as ammunition as the campaign season heats up. So-called “Big Oil” became the latest villain with politicos proposing windfall profit taxes on record company earnings. Our friends within the Organization of the Petroleum Exporting Countries (OPEC) did not escape the wrath of the Dems, who want to file suits over perceived price-fixing.

In typical partisan fashion, Republican Presidential candidate John McCain has touted his opponent, U.S. Sen. Barack Obama, as a traditional “tax-and-spend” liberal, the wrong choice during this period of economic challenges. Sen. Obama pegged his opponent as a continuation of the previous eight years of failed policies that have led the country into recession/inflation/deflation.

Lehman Brothers has remained front and center in the “who will be the next Bear Stearns Cos. (BSC) watch“ as the financial giant attempted to raise $6 billion in new capital to compensate for its disastrous second quarter. The company also bid a (not-so) fond farewell to two high-ranking executives as it goes to great measures to regain some lost public trust. Over a four-day time frame, its stock gave up more than $4 billion in shareholder value.

Always a day late, Moody’s Investors Service jumped in to protect investors by downgrading the firm from “Stable” to “Negative.” In other business news, transactions headlined the week as Staples Inc. (SPLS) will be acquiring the Dutch office supply company, Corporate Express NV (ADR: CXP), for $2.7 billion. Anheuser-Busch Cos. Inc. (BUD) turned to Mexican brewer Grupo Modelo SA de CV (OTC: GPMCF) to help fend off an unsolicited offer by rival InBevNV.

Meanwhile, Yahoo Inc. (YHOO) finally said good riddance (presumably, for the last time) to Microsoft Corp. (MSFT) in any merger, partnership, or other relationship (and jumped into bed with Google Inc. (GOOG) with a search ad agreement). Apparently, McDonald’s Corp. (MCD) remains recession/inflation proof as the fast food chain reported strong domestic and global sales in May.

Crude traded within a $10 range throughout the week to settle around the $135-a-barrel level as traders over-analyzed news of declining demand, OPEC made comments about “unjustifiable rise on oil prices,” and polls blaming industry insiders for “unethical behavior.” In the “misery-loves-company” category, the United States is not the only nation to struggle with energy-related inflation.

China’s Shanghai Composite Index fell to its lowest level of the year as the country attempted to fight off related price pressures. Likewise, India reported that its inflation rate climbed above 8% in May, while Vietnam devalued its currency because of soaring prices. Closer to home, Broadway ticket sales are down more than 10% from last year’s levels – meaning that even the “rich-and-famous” group of consumers are suffering the ill-effect of soaring oil and gas prices.

After an extraordinary day in the markets that saw the Dow plunge close to 400 points and oil surge to almost $140 per barrel on June 6, any recent volatility seemed tame by comparison. While investors searched for bargains in equities, the fixed-income markets struggled mightily last week as prospects for future Fed rate hikes grew more likely. The yield on the benchmark 10-year Treasury surged past 4% (and beyond), reaching its highest level of the year. Anyone inside the Beltway you’d care to blame, senators McCain and Obama?

That’s exactly what’s happening. The global boom in liquefied natural gas (LNG) is just getting started. And the big boys in the energy industry are all cutting eight-figure checks to build the infrastructure. The U.S. Energy Information Administration went so far as to say, “[LNG] growth will require a $250 billion investment over the next 30 years.”

It’s already started. PriceWaterhouseCoopers says, “Given the number and scale of new LNG projects proposed or under construction, global production capacity could more than double by the end of the decade.”

There are bound to be quite a few investment opportunities with that kind of money being thrown around. As you can see in the chart above, Big Oil is on pace to become major LNG producers. But the largest player of all will be the world’s top natural gas company, Gazprom.

Russia’s de facto state-controlled natural gas company has long been eyeing its opportunity to increase its grip on the world through LNG. Now the major energy companies are falling in line to provide the opportunity the company/country (sometimes its tough to tell the difference) has been waiting for. Learn how Gazprom is going to do it, and how you can take advantage of the coming LNG boom.

Good investing,

Andrew Mickey

Editor in chief, BreakAway Investor

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Source: The $250 Billion Energy Bet