This from Today’s Financial News:

Regardless of this man’s selfishness, I eventually pulled up to the pump and put five gallons of gas at $1.93 each into my tank. A ten-dollar fill-up was more than enough to put a smile back on my face.

It would have taken twice that to fill my tank, but I took a bet that prices would be even lower by the time I needed to refuel. I saved five gallons of tank space for gas at $1.85 in just a couple of days.

So far, my prediction is paying of. After nose-diving from the $60 handle, crude prices dipped below $50 this morning. It is the first time in nearly 24 months that we have seen prices that low.

With crude prices dropping, it is no wonder other components of the energy sector are plunging as well. Most importantly, the price of a gallon of gasoline on the wholesale market dropped by more than 6% this morning to trade at $1.034.

Natural gas dropped almost a dime to a level where $6.644 will get you 1,000 cubic feet. And for all you folks waking up to sub-freezing temperatures and snow flurries in the Northeast this morning, you will be glad to know heating oil declined by 5.33 cents to $1.706 per gallon.

In a time when America is facing a major recession and job losses are reaching monumental levels (542,000 workers applied for first-time unemployment benefits last week), falling energy prices are a greatly needed silver lining for consumers. Just imagine if we were still paying $4 per gallon of gas. It would not be pretty.

Our gain is their loss

For the folks depending on record-high oil prices to fuel their economy, the situation is downright horrid. If Venezuela is in financial trouble, then the situation in Russia is downright catastrophic.

Investors should be drooling on their shirts looking for ways to take advantage of Moscow’s troubles. In the office this morning, we were debating all the opportunities face investors. We came up with at least half a dozen great opportunities. As we gather our thoughts and complete our research, we will share what we know.

For now, take a look at the Market Vectors Russian ETF (NYSE:RSX). It invests directly in about 30 Russian securities. It gives investors an easy way to play a market that is down nearly 80% so far this year.

As energy prices continue to drop, Russia’s economy will slow even further. With about 40% of its revenues dependent on the energy industry, the government is in a desperate situation.

When it compiled its 2009 budget earlier this year, Moscow used $95 oil as its base figure. With prices about half of that figure, the country is sitting on a serious deficit. To make matters worst, the country has already lost nearly $100 billion in its emergency reserves thanks to efforts to shore up the ruble and preserve what is left of its economy.

I may have started the day on a bad note waiting to pump cheap gas in my truck, but Russia is about to start 2009 in absolutely horrendous shape.

If I could only make one investment during this entire crisis, I would take a significant short position in the Russian economy. The ETF mentioned above gives investors a fantastic opportunity to do just that.

Source: Oil and Russia: Check out the Market Vectors Russian ETF (RSX)

This from Today’s Financial News:

If you think the situation is bleak here in the United States, you would wet your pants if you took an in-depth look at Russia’s economy.

Its stock market seems to be closed more than it is open. Its currency is plunging. And its government is running out of options and money to fix the situation. Russia makes America look like we are sitting atop a booming economy.

Putin’s downturn could lead to some easy profit potential. But more on that in a minute.

For nearly all of the last decade, Russia’s economy has been based on the country’s ability to sell its natural resources to Europe and countries all around the world at a steep premium. Its Urals blend crude is not the best oil on the market, but it is all over the place in Russia and buyers once lined up to get their hands on it.

But now that the line has all but vanished and Urals blend is worth less than $53 per barrel, the Russian government has seen its revenues slashed in half. The country’s 2009 budget depended on its oil selling for $95 per barrel. But as of today, the country was forced to revise its estimate to $50 for 2009 and $55 for 2010. That leaves a significant hole in the Putin’s financial plans.

Running out of rubles

To make up for the deficit, Russia is forced to tap its rainy-day fund, consisting of billions of dollars of tax revenues from the oil industry. It is a serious blow to a country that was finally started to regain some of its global superiority.

Even worse than the country’s budget problems is the severe drop in its currency. Even with key central bank interest rates at 12%, the value of the ruble continues to fall. For foreign investors measuring their portfolios in rubles, the losses are stacking up quick.

Investors cannot pull their money out of the Russian markets fast enough and have created a run on the Russia markets. It is creating a whirlpool of problems for the country, forcing it to consistently close trading on its major exchanges.

Unless Russia makes dramatic political moves to drive up the price of its natural resources, it is in serious financial trouble.

This is where your profit potential comes in.

We already know President-elect Obama is widely expected to be tested during the first few weeks of his term. The worse Russia’s economy gets, the more likely it is we will see trouble from Moscow.

Just a day into Obama’s transition Putin and Medvedev promised to move its short-range missile armory into an offensive position if America’s missile defense system in Poland is not dismantled. It is a sure sign of political pressure to come.

And now, Medvedev is calling to extend presidential terms to six years. Do you think that has anything to do with his goals of getting Putin and his offensive goals back in power?

I have been working overtime to find ways to profit from this Russian hostility and desperation. I found some surefire winners. I am putting the finishing touches on my full report, right now. I should have it online within a few days.

Source: Russia’s financial desperation will lead to trouble

This from Today’s Financial News:

What impact will rising taxes, stronger labor unions and increased regulations have on the country’s publicly traded corporations? Well, if today’s trading activity is any indication of what the future holds, we are in for a long road to recovery.

Some investors are taking this as an opportunity to look overseas.

India and the fairly limited impact the global economic crisis has played on the country has been a safe haven for some savvy investors. Even Australia is getting plenty of American investment dollars now that many of its mining stocks are dirt cheap.

While all of these investing notions are solid, international investors can do better. One region you should keep your eye on is Eastern Europe. There is a lot of political activity heating up in the area and smart investors will be able to take advantage of the action.

The fighting never stops

We all know Russia and Georgia are far from good friends right now. They are battling over many issues, but one undeniable fighting point is energy. Russia’s financial stability depends on selling oil and natural gas to its western neighbors at a premium.

But just like you and I do not like paying absurd amounts for our fuel, neither do countries like Georgia. That is why they are hurriedly trying to build out their own supplies. Countries like Turkey, Hungary, Georgia, and Kazakhstan are quickly realizing they are sitting on some very valuable energy reserves.

This does not make Russia happy.

But as investors, we need to look at this situation, not as a political mess, but as a great investing opportunity. Tiny, government-backed companies are about to be sitting on huge windfalls. The kind our new administration would love to tax… but can’t.

America may be getting a new administration that is not too happy with Wall Street, but that does not mean our days of successful investing our over. In fact, I believe there are more profit opportunities today than there were yesterday. You just have to know where to look.

My colleagues and I are currently researching and examining the situation in Eastern Europe. Look for our conclusions very soon.

Source: Obama Presidency: Investors flee overseas

This from Money Morning:

There clearly are countries – such as the United States and much of the European Union – that are going to collapse into recession, even if only unofficially. But this doesn’t necessarily have to evolve into a global recession – a position that most of the traditional Wall Street establishment disagrees with, by the way.

Let’s take a look at several of Wall Street’s current misconceptions – and see why I’m selectively bullish:

• The Red Dragon (China) is ready to hibernate: Wall Street is worried that a U.S.-induced recession will slay the Red Dragon. There’s no way. If a country can fall into a recession when its economy (as measured by gross domestic product, or GDP) is advancing at a 9.6% clip – at a time when its U.S. counterpart will be lucky to eke out a 1.0% growth rate – well, I’ll eat my hat. The Armani Army, in its infinite wisdom, is worried about a recession in China even though its $1.9 trillion in foreign reserves are more than 32.10% of GDP and external debt is a miniscule 7.6% of GDP (external debt is defined as the amount of debt that China owes external creditors, including consumers, central governments and commercial institutions, according to the CIA Fact Book). By contrast, the U.S. reserves are 4.84% of GDP, while external debt is 84%. The United Kingdom and Switzerland are in even worse shape, with external debt of 382.2% and 279.1%, respectively.
• China won’t be able to survive a drop-off in exports to the United States: Then there’s the myth of China’s export economy. The last time China took a header and export business dropped by 35%, its GDP dropped by less than 1%. I’m betting it will be an even smaller bump this time around, especially since China’s middle class now is increasingly responsible for internal growth – independent of what China exports to the rest of the world.
• The Asian economies are an economic train wreck just waiting to happen: This was true a decade ago, when the United States and Western Europe held all the cash. But no longer. Today, nations such as Singapore, Thailand and Malaysia are running trade surpluses. So is Canada. That suggests that the currencies of these countries are significantly undervalued at a time when their economies are increasingly tied to that of China. What does that tell us? Today, China is the growth engine of Asia; tomorrow, it will be the growth engine of the world.
• The U.S. economy remains the financial center of the world: Today, an estimated 78% of global economic activity takes place outside U.S. borders, which means that even in a recession, an increasing amount of capital circulates beyond the U.S. shores. Indeed, the U.S. stock market now represents less than 30% of total world market capitalization, down from roughly 45% as recently as 2004. Don’t be surprised to see the United States continue to decline in economic relevance. One day, the lion’s share of the financial trades will take place beyond U.S.  borders.
• Because it’s a developed market, the United States remains the world’s safest and most promising place to profit: In the 1980s, the United States accounted for one-third of the global economy; by 2030, that ratio will be cut in half. The reality is that U.S. investors who want to be successful in the years to come will have to learn all they can about markets whose names they can’t yet pronounce.

Wall Street may not agree, but the real adage to embrace and remember is this one: It’s easier to become No. 1 than it is to stay there.

There’s no doubt that the “experts” who are projecting that the world markets will decline further and perhaps even collapse will take issue with my analysis. But it’s important to note that I agree with you – at least in the near-term. Barring a governmentally induced Hail Mary, I think there’s no question that the worst remains ahead of us.

But longer term – I’m talking three, five to 10 years – I am intrigued by the fact that so many emerging markets have collapsed in the chaos, even though the underlying economies haven’t really changed. Everything we know about financial markets history and changes in market behavior suggests that countries backed by high cash reserves tend to emerge from periods of market chaos faster – and stronger – than the economies that had been at the top of the heap when the crisis first struck. [For some insight into which countries have the biggest reserves as a percentage of GDP, take a close look at the accompanying chart].

Where does that leave us? Well, in spite of what Wall Street would have us believe about the Red Dragon, this cash-reserves indicator suggests that China – and countries that have close economic ties with that country – may actually be getting more attractively valued (and not less) by the minute. That’s especially true for longer-term investors.

As for the types of investments that seem most promising, given the troubled times we live in, keep focused on the simple ones. As I’ve long suggested, such simple profit plays have always played well during periods of similar market turmoil. So there’s no reason to believe it will be any different this time around.

After all, the financial history books are filled with notable examples of real earnings and real products enjoying success over long periods of time. Particularly when those profits are being generated by companies focusing on such basic societal needs as energy or infrastructure. Barring a complete collapse in the oil business (or any perfect substitute that’s eventually developed), energy, commodities and infrastructure companies will continue to offer solid upsides.

Source: How to be “Selectively Bullish” – Even in the Face of Financial Crisis

More from Money Morning:

Four months ago, it appeared that three economic “bad actors” were triumphant in their disregard of economic laws and contempt for the United States: Russia, Venezuela and Argentina. Today, while the iron laws of economics have taken a bite out of all of us, they have taken an especially big chunk out of the economies of these bad actors. Unlike most of us, they will not be quick to recover.

That is good news – for U.S. foreign policy, and for those of us who hope that the more befuddled emerging markets will figure out how to run their economies before Malthusian population pressures overwhelm them.

The world does not need to see bad behavior – political or economic – rewarded.

Let’s consider a few of the worst players.

Russia’s Tactics Backfire

Russia, first, invaded Georgia in August and appeared ready to use its oil-and-gas wealth to rebuild the Soviet military machine, as well as making Western Europe entirely dependent on the whims of its state controlled energy company OAO Gazprombank.

Gazprom’s attempts to control energy supplies to Europe included blocking the Nabucco gas pipeline and striking a deal with Libya, Europe’s main non-Russian potential supplier. Russian defense spending, too, has quadrupled since 2001 and was continuing to increase rapidly – by 26% in 2009, to more than $50 billion (bear in mind that Russia gets more bang for its ruble because its soldiers are both cheaper and require less maintenance than pampered US and EU forces).

Not any more. The decline in oil prices, halving in three months, has thoroughly destabilized the Russian economy and wrecked its budget picture. Russia has been forced to promise $100 billion to its banking system, without any certainty that this capital injection will solve its problems. Inflation is running at 16%, and will rise further as Russia’s foreign exchange reserves are used to prop up the banks. Oleg Deripaska, Russia’s richest oligarch, has been forced to sell assets to meet market calls.

Most pathetically, Belarus, previously Russia’s most reliable poodle ruled by a wholly unreconstructed autocrat, is making promises of “reform” – if it can get access to International Monetary Fund (IMF) cash.  The RTS stock index is down by around 75% from its peak in June – that makes the roughly 30% decline in the Standard & Poor’s 500 Index seem no more than a gentle correction.

Chavez Feels the Pinch

Russia’s the most dangerous of the bad actors, because of its nuclear weapons and belligerent foreign policy attitudes, but it’s not the only one to face hard times. Venezuela is also facing the pinch – although this Latin American player found the benefits of $147 oil were so fleeting that even President Hugo Chavez had failed to spend up to his income (though a 26% increase in dollar spending in the 2009 budget shows he means to try). Inflation is 36%, around the level at which it becomes an overwhelming problem, while oil output has been falling since Chavez replaced the senior management of the oil company Petróleos de Venezuela S.A. (PDVSA).

The cash crunch has not yet hit home – Chavez is desperately trying to postpone any hardship until after the Nov. 23 local elections. The stock market is down only 40% from its January 2007 high – although the nationalization of electricity, telecoms and cement has removed a number of stocks from active trading.

Nationalization also hasn’t helped electricity service – the country has suffered three nationwide power blackouts this year. You can expect further bad economic news from Venezuela in early December, after the local elections.

Cry For Argentina

Finally, Argentina, which is dependent on a broad range of commodities, has also run into trouble. Argentina defaulted on its international debt in 2002, before forcing bondholders to accept new bonds worth about 30% of face value. It also seized most of its residents’ dollar savings: This country seems to succumb to that particular kind of bad-actor behavior about every 10 years.

However, vice had appeared to be rewarded, with 8% annual growth for Argentina in 2003-2007. Inflation is currently running about 25%, but the government solved that problem by forcing out the head of its statistics bureau and making up new inflation numbers, thereby ripping off holders of its inflation-linked bonds.  With the decline in commodity prices, however, the government of Cristina de Kirchner was running into trouble, since it had $20 billion of debt to repay by the end of 2009, even on its written-down schedule.

The government’s solution was simple – it nationalized the $30 billion private pension scheme, set up in 1994 by the previous government – to much IMF and economic reformist applause. So much for pensions privatization – in Argentina, it simply gives the government an additional pot of money to steal. With an additional $30 billion available, the Argentine government can carry on spending for at least another year – at the cost of condemning its middle classes to a penurious old age, since few of us have the foresight to save in more than one pension scheme.

Russia is probably the most seriously affected by the oil-price decline, because its ambitions were most expensive. In Venezuela, trouble hasn’t really hit yet – or Chavez is keeping it hidden until after the local elections. In Argentina, meanwhile, the bad-acting government has found yet another way to make the middle class pay for the leadership’s misdeeds.

However, if oil prices stay below $70 for the next few months, and commodity prices are likewise subdued, we can be confident that even Russian Prime Minister Vladimir Putin, Hugo Chavez and Cristina Kirchner will suffer a very cold winter indeed.

PS. At the other end of the scale, some foreign markets have great recovery potential. Martin Hutchinson picks four markets most likely to “bounce big” after this financial storm.

Source: Trouble Comes Home to Roost for the “Bad Actors” of the Global Economy

This from Taipan Daily:

The petrocrats were richly rewarded as crude oil climbed to new heights. Now a sharp decline in the price of oil threatens to tear their world apart. A time for drastic action could be at hand…

Today I want to talk about a situation that feels like a ticking time bomb – a time bomb that could go off sooner rather than later. It starts with this chart…

After climbing to nearly $150 a barrel earlier this year, the price of crude oil has fallen. A lot.

Crude’s big drop is good news for consumers, who won’t have to spend as much on gas and groceries. US prices at the pump recently fell ten cents to $2.92 a gallon, according to the AAA auto club. When the cost of fuel falls, the cost of transported goods falls too.

It’s also good news for the Federal Reserve. Thanks to falling oil prices – and falling commodity prices in general – the Fed doesn’t have to worry as much about inflation these days. They can flood the system with paper money to their heart’s content, knowing that the “early warning system” of rising commodity prices has been shut down. (At least for now.)

Big Trouble for the Petrocrats

In sharp contrast, falling oil is very bad news for men like Vladimir Putin and Hugo Chavez. You could even say it’s a flat-out disaster.

One or both of these men may have to take drastic measures in the only way they know how… and they may have to do it soon.

First a little explanation: As you likely know, these “petrocrats” were huge beneficiaries of the oil price run-up. Both had the good fortune of timing their political rise to a period of fast-rising oil wealth.

In Russia, Vladimir Putin amassed vast amounts of power, money and prestige as crude climbed to great heights. In Venezuela, Hugo Chavez used his gusher of funds to bribe the citizenry and spread influence throughout Latin America.

But that was then, and this is now. With the price of crude nearly cut in half from its 2008 highs, the roof is caving in on both men’s heads.

Evaporating Oligarchs

We’ll take a quick look at Russia first.

Though Putin has become extremely popular with average Russians, his real power base is concentrated with the oligarchs and the siloviki.

The oligarchs are Russia’s new class of billionaires — men who amassed great power and wealth in the chaos and turmoil of Yeltsin’s Russia in the 1990s. The siloviki (a Russian term) are the kingmakers and the lever pullers… the men in the shadows who decide Russia’s fate.

The two groups are deeply intertwined. The oligarchs have the money… the siloviki have the power… and Putin holds court over both.

Now, as the price of crude declines, the oligarchs’ fortunes are falling apart. As the New York Times observes, “perhaps no community of the super affluent has fallen as hard, or as fast, as the brash Kremlin-connected insiders whose wealth was tied up in the overlapping bubbles of the Russian stock market, commodity prices and easy credit.”

The numbers are staggering. Bloomberg calculates that the top oligarchs – the 25 richest Russians on the planet – have lost a collective $230 billion over the course of the recent market decline. (This is partly due, too, to a Russian stock market crash. Russia’s benchmark stock index, the RTS index, is down more than 70%.)

Effectively gain 12 times your money the second you buy this stock And likely as much as 190 times your money over the next few years. Don’t scoff — it has happened before under almost the exact same circumstances that one small petroleum company is now in prime position to cash in on. But you’ll have to move fast to ride along for 190-fold gains (or more).

Too Much Leverage, Comrade

To make matters worse, many of the oligarchs ran their affairs as if they were one-man investment banks. Huge quantities of leverage and debt were the norm. During boom times, it was no big deal for an oligarch to borrow many multiples of his net worth. The borrowed capital would then be put to work in even more speculative ventures. Now all that leverage is killing them.

This is a deadly serious problem for Vladimir Putin (a man reputedly worth tens of billions himself) because it leaves his power base badly fractured. If the oligarchs go down the drain, Putin could too.

Russia as a country is in a little better shape, thanks to a huge currency surplus war chest. Russia has upwards of $530 billion in reserves by some estimates. That’s rainy day money that can be spent as needed to keep the people calm and Moscow on its feet.

But none of that will matter to Putin if his hidden power network, a large part of which depends on the oligarchs, is destroyed. If something isn’t done to stop the bleeding, Vlad could wake up to anarchy in the Kremlin… or a new challenger risen up from the ranks… or even a dollop of Polonium 210 in his borscht.

Too Much Credit, Amigo

Hugo Chavez, Venezuela’s fiery leftist President, has arrived in a similar place by a different route.

Chavez didn’t make the mistake of leveraging up or staking his power on a group of rich insiders. Rather, he made the mistake of giving away his most precious resource for free… forgoing hundreds of billions in revenues in an aggressive effort to buy friends.

As it turns out, Venezuela only has one big customer who pays full price for oil: the United States. Most everyone else gets it at a huge discount.

In 2005, Chavez formed something known as the “Petrocaribe” club. He might as well have called it the “Chavez will bribe you to be his friend” club, for reasons you’ll soon see.

The 18 Latin American countries in the Friends of Chavez club – er, excuse me, Petrocaribe club – suck down roughly half the oil Venezuela produces. (That’s 1.2 million barrels out of 2.4 million barrels per day total… a 25% decline since Chavez rose to power.)

The upshot is that Venezuela, a country whose output should be rising but is instead declining, gives away half its oil for next to nothing. Chavez charges Petrocaribe members 30 percent of the market price up front, on 90-day terms, with the balance paid in installments spread out over 25 years.

Thirty percent down, 90 days same as cash and a 25-year repayment plan. What a deal!

If that deal sounds like a steal, that’s because it is. Chavez fancies himself a great liberator… the hope and salvation of Latin America… and he will grease the palm of anyone who agrees with him and stands against The Evil United States. (Never mind that The Evil United States is Venezuela’s only big customer paying cash on the barrelhead.)

Venezuela on the Precipice

Not only does Chavez give away half Venezuela’s oil to outsiders, he gives it away at home too. Thanks to mass subsidies, Venezuela has the cheapest gas prices in the world. You can fill up for your tank for twelve cents a gallon in Caracas… and that’s only the tip of the subsidy iceberg.

Not to put too fine a point on it, Chavez is a self-styled “revolutionary” with no concept of basic economics. He assumed the oil gusher would last forever, and spent money accordingly.

As if all the spending weren’t enough, Chavez has grossly neglected the maintenance and upkeep of PDVSA, the state-owned oil company. Rather than investing in technology and engineers, Chavez has ordered PDVSA to waste its time on hare-brained community schemes. He has installed political cronies in important positions, driven out key employees, and generally let the whole apparatus go to pot.

Now, like Putin, the falling price of crude is delivering the mother of all wake-up calls. Various sources estimate that if oil stays below $80 for long, Venezuela will have trouble paying its bills. Chavez is the type of guy who needs a frying pan to the face to see the error of his ways… and he is about to get it.

An Old Play From the Dictator’s Handbook

So what are Putin and Chavez going to do? Both men are in dire straits, and a ramp-up in oil production is not the answer.

Expanded oil output won’t help the oligarchs at this point. They need a higher price per barrel to shore up market values on their battered and bleeding holdings. And Chavez couldn’t expand production even if he wanted to. (Mazhar al-Sheridah, an oil expert with the University of Venezuela, says his country will need $32 billion and five years’ construction time to raise output.)

One option for both men is to lean hard on OPEC, and hope a round of deep cuts does the job of pushing oil higher. We’ll talk more about that in a minute. But there is another, older, more reliable play too… one that’s proven its effectiveness time and again in recent years.

Putin and Chavez can stir up turmoil on the cheap.

If there were such thing as a “dictator’s handbook” (or maybe a petrocrat’s handbook), you would find this play early on in the list of basic maneuvers. When things are going to hell at home, distract the populace (and the world) by starting a firestorm elsewhere.

It’s hard to solve a pressing problem with long-range tools like diplomacy and fiscal policy… but much easier to light a match and drop it in a drum of kerosene.

Return of the Fear Premium

For the past few years, crude oil traded with a hefty “fear premium” built in. The thought was that, with the supply and demand balance so tight, even the smallest conflict or disruption could have big ripple effects on the price and availability of oil.

Now that the markets are worried more about slowdown than runaway global growth, the fear premium in oil prices has gone away. If anything, it’s been replaced by a new deflationary mindset as “demand destruction” takes hold.

But “fear in the hearts of men” is back in the ascendant… in the hearts of Putin and Chavez anyway. As the walls crumble down around them, both could easily be on the verge of panic. Both know that oil prices must move higher if their regimes are to be saved from oblivion. And both are willing to do whatever it takes to save their own skins.

This is why falling oil is a geopolitical time bomb. Putin and Chavez could already be considered two of the most dangerous men on the planet. Now both men find themselves backed into a corner like wounded animals. And remember, the most dangerous animal of all is not the one hunting for its supper. It’s the one fighting for its life.

Whither OPEC?

We can’t know what’s taking place behind the scenes… what Putin and Chavez are saying to their closest advisers in their most urgent moments and so on. But we can know there’s a real powder keg brewing here. And OPEC is potentially a part of that mix too.

All I know is, if I were a ruthless petrocrat trying to save my regime from a downward spiral in crude oil prices, I would think big. I would try to set off the biggest, most explosive tinderbox possible, just to make sure my message gets through and the new “fear premium” takes full effect.

And if I could time that action with the actions of another powerful group, so much the better. That would just mean more bang for the geopolitical buck.

That’s where OPEC comes in…

In case you weren’t aware, OPEC is meeting later this week to discuss an emergency cutback in crude production. (Russia is not officially a part of OPEC, but Venezuela has long been a member.)

The market has been a tad jittery ahead of the OPEC meeting, but general expectations seem tame. Wall Street analysts are predicting a one million barrel per day production cut. There is also a general consensus that one million barrels won’t be enough to keep the price of oil from falling further.

Remember, too, that it isn’t just Russia and Venezuela who are hurting here. Many of the OPEC countries – not least Iran – have a lot riding on a high oil price. I suspect that OPEC will have to engage in a little “shock and awe” this week if they really want to get their message through. In 1973 they really took the gloves off, and we saw what happened the rest of that decade. Who’s to say they won’t do it again.

So there you have it. Mix geopolitical TNT with a paper currency fuse, and you’ve got a good chance of seeing energy prices spike higher before too long. Possibly much, much higher.

Source: Falling Oil is a Geopolitical Time Bomb

This from The Daily Reckoning:

An article at En.rian.ru, which is a Russian site, asks, “Time for a gold rouble?”, which made me initially laugh in a Disrespectful, Xenophobic Mogambo Way (DXMW), as it looks like the damned Russians are so stupid they can’t even spell “ruble”! Hahaha!

My levity was soon abandoned, however, as the paper reports, “the decision by the US government to inject $700 billion into the financial system means that the already gigantic annual budget deficit of the American state (previously some $450 billion a year) will now rise by a factor of three. The total state debt of the USA will rise to well over $11 trillion. It is obvious that such a colossal debt can never be repaid. Instead, it will be serviced by more debt in the future”, which they attribute to the collapse of the financial system, as “the collapse of those markets is only a symptom of a much deeper problem, the basic insolvency of the American state itself.”

Then, to show you that there is a perspective beyond the American perspective where we are the Center Of The Freaking Universe (COTFU) and everybody has to do what we say, even if they don’t like it, the paper says, “What can Russia do about this?”

Since I never think of Russians except as humorless bad guys who speak English with terrible accents and who are always out to kill James Bond, it is novel to me that the paper concludes that “as a major exporter of hydrocarbons, her role in the world economy is actually very important. As the age of the dollar draws to a close, Russia will have to consider selling her oil and gas not in the devalued American currency, but instead in the euro used by most of her customers.”

I thought is was strange that they thought that “most of her customers” would use the euro as a common currency, which means that they do NOT think that the Chinese would be most of her customers, even though they are right next door, they outnumber Europeans 2-to-1, and they have almost no consumer debt.

So I thought that was a little strange; but it got spooky when they wrote the line, “the age of the dollar draws to a close”, as my heart withered in fear and I suddenly mistrusted everyone around me, but before I could ask them to explain such a remark, it suddenly made sense when they went on, “It is surely unnatural for two geographical neighbours to do such large volumes of business using the currency of a distant and now ailing nation.” Oops! They’re right! We’re freaking doomed!

I was just beginning to dismiss this odd appearance of intelligence in Russians – about whom I know next-to-nothing except that they drink a lot of vodka and instinctively hate James Bond for some reason – when I was forced to again give them at least grudging respect when the paper wrote, “the Russian leaders might also consider making their own currency, the rouble, convertible into gold”, although they lose points when they are forced to admit that “The idea of gold convertible currencies is extremely unpopular among most economists” as these hotshot weenies “dismiss gold as a ‘barbarous relic’ (to use the famous phrase of John Maynard Keynes) and suggest either the present regime of paper currencies or, at best, a link to a basket of commodities.” Hahaha!

Russian economists are as stupid as the rest of the world’s economists; they prefer a paper, fiat currency, and (if not that), then a currency priced in terms of a basket of commodities! Hahaha! These Russian morons want a currency whose value is dependent on the good fortune of blights not destroying any of the world’s cereal crops, a virus not decimating the livestock of the world, and ecological, geological and political accidents don’t upset the economic status quo! Hahahaha!

I think they heard me laughing, and their feelings were probably hurt, which allows that “Both these solutions are highly artificial and based on the same level of state control which has now just so spectacularly failed.” Hahaha! Yes! Exactly!

Somewhat mollified and again ready to give them the benefit of the doubt, they finally win me over when they conclude, “The contempt of the Keynesians notwithstanding, it is an indisputable fact that gold does remain the ultimate store of value, which is precisely why states own so much of it.”

Russians! Who knew they could be so smart?

Source: Do the Russians Have it Right?

Gazprom has said its decided to push its borders a bit and wants to trade chunks of its prized Russian natural gas fields for foreign assets. But it hasn’t actually made much progress, including today’s deal.

E.On was planning to give away a piece of its Hungarian gas trading-and-storage business and power utility, but the two energy companies couldn’t agree on value (or, less diplomatically:  Gazprom kept demanding a higher return for a cut in the gas field as oil prices moved up this summer, and E.On didn’t want to pay. And then that whole war-in-Georgia thing made the Germans a little less comfortable sitting across the table from the state-controlled Gazprom’s execs everyday.).

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It seems European companies (and others, but mostly the Europeans. Gazprom does loom large on their eastern front.) aren’t too sure about selling stakes in their resources to Gazprom. And the company’s strong-arm tactics don’t exactly go over well in foreign boardrooms.

So what did Gazprom get out of the deal with E.On? 2.93% of its own stock. E.On still holds 3.5%. Ouch.

Gazprom is claiming the Hungarian assets were inadequate and that it couldn’t miss the chance to buy back shares at such low prices.

But in reality (Sorry for using a phrase popularized by MTV, but other options are much less, um, tasteful.) Gazprom got served.

Source: E.On (EONGY) Grabs Gazprom’s (OGZPY) Gas Field

These stories have appeared in the Barents Observer and the Georgian Daily.

As reported, Moscow is ready to support domestic companies bidding on “crisis-ridden foreign enterprises.” The thinking is that Moscow could buy up US companies that would increase its competitive position in global markets. The top priority would be technology companies.

The money would come from a source only referred to as “reserves.” If our take on this is correct, the reserves in question would be Russia’s two oil wealth funds, which totaled $189.7 billion as of October 1, according to Reuters.

That latest number is some 8% higher than a month ago, Finance Ministry data showed. So although the Russian stock market takes a beating, its sovereign oil funds continue to grow.

Both the Barents Observer and the Georgian Daily quoted a high-ranking official who maintained that Russia now has the chance to more comprehensively integrate itself into world economy with the help of the expansion of Russian capital.

The official underscores that Russian authorities are ready to support the acquiring companies in their bid to scoop up foreign assets. He said that the issue has been discussed in the presidential administration over the last six months.

He also confirmed that the state could provide both financial and diplomatic aid — the latter probably more important than the financial part of the strategy given that tech companies are in their crosshairs.

The Russian government had been discussing the possibility of using government funds in this way for “about a half a year” – or well before the crisis broke here in the U.S. But now that share prices of shares in have fallen even further Moscow believes it can acquire a lot for its money.

There’s no doubt that Russia would encounter severe resistance in U.S. acquisitions. However, for our purposes, the Russian strategy serves as more of an indicator that this could be a good time for American investors to consider distressed stocks.

On Monday, authorities halted trading on Brazil’s Bovespa for 30 minutes after it tumbled 10%. Trading in Russia was frozen on several occasions in the last two weeks to prevent an all-out collapse of the market. And China’s CSI Index has lost 58% of its value so far this year.

Despite recent setbacks, however, Andrew Gordon reckons Brazil is the most likely of the pack to weather the current financial storm

This from Investor’s Daily Edge:

Are BRICs going to suffer the same as the U.S. and Europe? Or are they going to forge their own path and avoid the worst of the economic meltdown we are going through? Here’s what I believe…

1. Putin Painted into a Corner. The Russian economy has grown for nine straight years on the back of soaring oil and gas prices. But things have gotten so out-of-hand that Russia had to shut down trading a couple of weeks ago and pump $100 billion into its faltering banks.

Now oil prices and gas prices are down. Inflation is running at 15 percent. Its little incursion into Georgia helped spur over $55 billion of capital to flee its equity markets.

The verdict. Russia came back strong when it defaulted on its national debt in 1998. But where’s the growth to come from now? Oil output falling along with prices will prove a tough combination for Russia to overcome.

2. Chinese Leaders Hope Slowdown Is Temporary. Manufacturers in China are increasing profits at about half the pace as last year. And this is the fourth quarter in a row that economic growth has slowed. The government is now pushing growth over fighting inflation. It’s making it easier for banks to lend. And it won’t hesitate to make use of its $1.8 trillion dollar cash reserve to finance infrastructure projects – including a slew of them in western Sichuan Province where the earthquake hit last May. Is it enough to reignite growth?

Metal traders (not the speculators – these are the folks who trade the physical metals) tell me that demand for nickel has slipped but demand for other metals like copper and manganese is still running high.

The verdict. Every time you shop at Wal-Mart, you help pay for the salary of a Chinese factory worker. China has the means and motivation to keep economic growth around its current pace of 10.1 percent. But if you stop shopping, Chinese factories will go on a firing binge. And China’s economic growth spree could come to a screeching halt.

3. The Raj’s Rough Year. The Indian government has been treading a fine line between controlling inflation and keeping growth going. Inflation has slowed. But so has the economy which will be lucky to reach a rate of eight percent when the year is finished. It was expected to grow a half-to-a-percentage point faster.

With commodity prices falling and inflation at its lowest rate in five weeks, the government is once again throwing its weight behind growth. It’s expected to soon lower its prime interest rate. And that should help consumers buy cars and other big items.

The verdict. India’s high-tech low-wage English-speaking work force has a lot going for it. But its economy is closely tied to Western economies. Even though Indian banks aren’t in trouble like they are in the U.S., tight credit is squeezing a lot of growth out of the economy. Don’t be surprised to see India pulling up the rear among the BRICs.

4. Brazil Still Blazing. The government is looking at current-account deficits for the first time in several years. But that’s not the worst news. President Lula da Silva may be going soft on economic reform. It looks like labor, taxes, and social security are no longer on top of his agenda.

The economy is still going strong. Last quarter it grew over six percent. For the past 12 months it has grown 5.8 percent. For Brazil that’s fast. And unlike India and China, Brazil continues to raise interest rates to cool off inflation.

The verdict. Brazil’s vast offshore oil reserves should keep its economy going strong for the next ten years. But only if its state-controlled oil company – Petrobras – has access to global capital. The bailout could help Brazil almost as much as the U.S.

With all the hype on BRICs being the wave of the future, only Brazil could withstand the economic slowdown in the U.S. and Europe. As I said, it’s hard to talk about the BRICs as a whole. But this one thing is true. They’re not immune to the world’s economic problems. And even Brazil will suffer if the U.S. can’t solve the credit crisis.

Source: BRICs or Straw?