“The richest investment opportunities can be found in the fast-emerging alternative energy sector,” says Mike Burnick in The Offshore A-Letter.

“That’s where oilman T. Boone Pickens is putting his money – his company Mesa Power just placed an order for US$2 billion in wind turbines. And there’s much more profit potential in other parts of the alternative energy sector too – especially alternative fuel.

“The market for ALL alternative energy sources grew 40% last year alone to US$77.3 billion and will explode into a US$250 billion industry within 10 years.

“Bio-fuel grew to a US$25.4 billion market last with more than 15 billion gallons of ethanol and biodiesel produced globally – more than double the output of just four years ago. The worldwide Bio-fuel industry will continue to enjoy explosive growth for years to come – expanding into a US$81 billion business within the next 10-years!”

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

Exposed: The Truth Behind Putin’s Stealth Attack on America!

He’s got the world’s economy under his thumb, and his incredible power only continues to grow. Now Vladimir Putin is aiming to take down the U.S. economy and put Russia on top of the financial food chain. My exclusive on-location report from Russia is the only way you’ll learn how to protect yourself from his dangerous game — and bank gains of up to 493% this year fighting against it! His plans are already underway. The time to act is now. Read on for complete details…

Source: The $250 Billion Energy Bet

Finding these opportunities is just half the mission. The more important, and often more difficult task, is finding safe ways to play them.

Consider China. Unless you’ve been cooped up in Guantanamo for the last few years, you’re already familiar with the miracle of China, Inc.; 11.4% GDP growth, the world’s “go to” manufacturing center, a 1 billion strong local consumer market, and some of the greatest business opportunities in the history of the world.

So far, so good. But when you drill down another level, the level where you hope to find undervalued investment opportunities, things quickly get more complicated. Thanks to that country’s emerging middle class, flush with exponential growth in purchasing power and investable funds, , the Shanghai stock exchange has become one of the hottest capital markets in the world. And one of the most dangerous.

Over the last 7-years, the Shanghai Composite Index has returned approximately 80% to investors with some serious roller coaster rides along the way, including days of such catastrophic meltdown that even the most seasoned investors make a bee-line for the nearest emergency exit.

The Price/Value Disconnect

The most disturbing thing about the Shanghai market is the often complete disconnect between the price of a given stock and the value of the underlying company. In China, soothsayers in the local newspapers predict what numbers will endow great luck… just like a fortune cookie at your favorite Chinese buffet; and as you are undoubtedly aware, stock symbols in Shanghai are numbers, not letters. So when the great sage says 0, 4, 7, and 9 are today’s lucky numbers, that spells good news for Shanghai Zenhua Port Machinery Co., symbol: 900947, and poof, the stock jumps—irrational exuberance at its most irrational. This and similar actions of an inexperienced, first generation investor class, coupled with a general overconfidence among the Chinese on the outlook for their stock market, periodically drive the Shanghai exchange to bubble territory, that is subsequently corrected in stomach churning down moves.

So, the sort of booming economy and big upside we like, but with an unpredictable and wildly irrational stock market.

What’s an investor to do?

Because we’re looking to buy into the growth, and to do it safely, stepping up to the craps table in Shanghai along with all the other speculators and soothsayers isn’t going to cut it.

Instead, we invest in undervalued Chinese companies listed on more established exchanges. Simple, but effective.

Some examples…

We are currently following a Jersey-domiciled, London-traded cement company based in the western China province of Shaanxi (not to be confused with the neighboring Shanxi province…). Shaanxi is one of the fastest growing provinces in China, and this cement company is ideally positioned to capitalize on this growth. Currently trading on London’s Alternative Investment Market (AIM) at only 6.4 times earnings and 4.6 times current assets, this stock is as undervalued as it gets, especially considering the growth prospects.

While it has already provided us with solid profits, we see it as a relatively near-term double from today’s levels. But we digress from the central point here… which is, because it trades on the London AIM, and not Shanghai, your shares have nowhere near the volatility.

Confirming that point, we looked at twelve worst performing days of the Shanghai Composite Index since January 1 2007, with single day losses ranging from 5% to over 10%. On average, during those steep drops, our Chinese cement play outperformed the index by an average of 6.85%. Viewed from another angle, on the 12 worst performing days of the Shanghai Composite Index since January 2007, our AIM-listed Chinese cement company actually posted a daily gain on eight of those twelve days, and posted a far better return than the index on all twelve.

For us as investor this means we are able to capitalize on one of the fastest growing industries in one of the world’s fastest growing economies with one of the industry’s most seasoned management teams, and doing it all safely, with far less volatility than in Shanghai.

We believe in the Asia growth story, and we believe in companies like our China cement story (the name of which we can’t share here because it wouldn’t be fair to our subscribers). But we are only willing to risk our hard earned capital in a way that makes sense to us. So in China, we look for solid, undervalued companies on established exchanges – and there are a number of these gems if you dig for them – and save the gambling for the casinos in Macau.

Fitzroy McLean is the co-editor of Without Borders from Casey Research, a monthly service dedicated to searching the world for undervalued, lower risk investments. A three month, no-risk subscription offer is available that will bring you current with all of the Without Borders recommendations… learn more now.

Source: How to Safely Play China’s Growth

YANGTZE RIVER, CHINA – The sky is a brilliant blue, the wind clean and crisp and the China where National Guide Ju Hao works resembles the landscape we’re passing – a jumbled mix of the old and new, and a backdrop to a lifestyle that’s suddenly changing much too fast.

“It’s dramatic,” says Hao, sweeping his hand through the air for emphasis. “Yes …that’s definitely the word for it.”

The rolling hills of China’s Yangtze River valley provide the most graphic and concentrated evidence we’ve seen yet of the change that is modern China.

As far as we can see, there are crumbling old houses built hundreds of years ago and communist-era “flats” – apartments – set low against the hills. Behind them, and set higher, are sparkling new ferro-concrete relocation villages.

But there are no cars, and almost no people visible. Most of the “new villages” don’t have electricity or running water. And their residents remain farmers who head out each day to work the dramatically terraced fields that rise precipitously above the gorge.

It’s as if the new is fleeing the old, yet somehow remains tied to it. But it’s the red lines, and the accompanying signs that read “175 meters” that are perhaps the most sobering hint of the change that’s to come, for the lines and signage serve to warn passersby where the water will be next year when the reservoir of the massive Three Gorges Dam is finally full.

The surface of the water already has risen up and over the 150-meter mark. It’s odd to think that …as we move along the water’s surface …there are entire villages – even cities – far below us, down in the blackness, beyond the reach of the sun’s rays.

“It’s hard to imagine what’s happening in China” Hao said, reflecting upon his life.

Born in a centuries-old hutong – the narrow streets or alleys that are part of life in old Beijing. This one wasn’t too far from Tiananmen Square, meaning he grew up among the poorest of the poor.

His family shared their courtyard residence with seven other families – perhaps 35 people in all – in a space designed and built for a single family. There was no running water and only a single community bathroom that was literally just a hole in the ground.

“We were poor” Hao says. “Very poor.”

Even so, he says, “my earliest memories are very happy ones.” Hao recalls playing with other children as in the alleys as they waited for their parents to draw water each morning.

“We didn’t lock our doors – we didn’t have to,” says Hao. “Our dreams were simple. Any family having a bike, TV, radio or simply a sewing machine was envied.”

Changes Begin

The first hints of change came while Hao was in high school. Then, during his high school years Hao recalls the first glimmers of change. The Cultural Revolution – with all its pain and chaos – finally came to an end, and true reform was able to take hold.

For Hao, the most magic of moments came when he learned that the farmers were suddenly allowed to grow what they want. That meant he could put food on his family’s table. Even today, roughly two decades later, the memory of that singular event is both moving and highly personal for Hao.

He recalls the amazement he felt when the country’s domestic “apple” jeans became the Chinese Prada garment of their day. Almost overnight, he says, “the green, black, gray and brown Mao jackets vanished,” only to be replaced by fashions that raised more than a few old-generation eyebrows. “Suddenly we could listen to Taiwanese pop music.”

“At that point,” Hao recalls today, “we knew change was real. In more ways than one.”

Hao’s father, a career customs officer who spoke French, English and Chinese fluently, suddenly died, leaving Hao – as the eldest son – responsible for everything.

“It was …how do you say …a ‘rude awakening’,” Hao says, his eyes misting a bit at the memory.

It was just about that time that Hao’s grandfather offered a bit of advice that Hao recalls even today: He told Hao to “eat foreign rice,” meaning that Hao should find a career that puts him squarely in front of the changes that would be opening China up to international influences. He also told Hao that he absolutely needed a college education to compete.

“He was a very wise man,” Hao says. “Even back then, even though he would not live to see it, he knew my best future would be to get an education and to work with the coming changes rather than [to] run from them.”

So that’s just what he did.

Stepping Into the Future by Stepping Out of The Past

Hao graduated from high school just after the Tiananmen Square protest of 1989, and began selling newspapers, doing odd jobs, accepting manual labor positions, and working at any job that he could find.

Not only did Hao get into college, he earned enough to pay for his tuition and support his family at the same time. And, in doing so, he became “self-sufficient” – a concept that could not even be imagined by prior generations.

Hao notes that “since before I was born, Chinese have been taught to be part of a collective group. You are always part of something else. Now it’s different.”

“Now,” Hao observes, “we Chinese can be individuals. And, we can have individual value.”

That’s something, he says that previous generations couldn’t imagine. Even now, after all the changes that have taken place, Hao says it’s a concept his mother still cannot accept or understand.

During college, Hao finally got his shot at “foreign rice.” He took – and passed – the National Guide License Exam. At the time, “it was harder than college entry boards and still is,” an elite examination, he notes with pride.

Everyone seems to have a relative who took a beating in the commodities market, and this fact (or fiction) is considered sufficient reason that no sane person would ever risk playing around with such dangerous things. That this particular victim was also a professional economist makes the warning seem even more ominous. I, however, couldn’t help laughing.

Billions of dollars are invested in the commodities market every day. Without the commodity futures markets, many of the things that you depend on in life, from that first cup of coffee in the morning to the aluminum in your storm door to the wool in your new suit, would be either scarce or nonexistent, and certainly more expensive.

To be sure, investing in anything has its risks. A lot of Ph.D.s in economics lost money in the dot-com debacle, too. (On New Year’s Day in 2002, the Wall Street Journal published its annual survey of economists for the upcoming year. Although the economy had been sagging for almost a year, not one of the 55 economists thought that it was in for a serious decline. One hundred percent were wrong – and proof that Ph.D. economists are as prone to mob psychology as the rest of us.)

There are several other bromides out there for why “ordinary people” should not invest in commodities, and I want to lay these myths to rest, once and for all, so that we can get on with the more interesting business of how you can begin to make some money investing in the next-generation asset class.

About That Relative of Yours Who Got Wiped Out – He was inexperienced. You can learn. Most likely, he was buying on thin margin – the minimum deposit a broker requires to take a position in a particular commodity – and when the market went against him he lost big-time.

Here’s how it happens: Like stocks, commodities can be bought on margin. Unlike stocks, however, where by law you have to put up at least 50 percent of the price of the shares, the margins on commodities can be even lower than 5 percent: You can buy $100 worth of soybeans for $5. If soybeans go up to $105, you’ve doubled your money. Beautiful. But if soybeans go down $5, you’re wiped out. Not so beautiful.

Experienced, smart speculators can make tons of money buying on margin. They also know that they can lose tons, too. But they can usually afford it. Your relative was in over his head. If he had bought $100 worth of soybeans in the same way that he can buy IBM – for $100 (or maybe even $50) – he would be happy when it goes up $5 and a lot less sad should it go down $5.

Whenever I mention commodities in public, someone always points out that we now live in a high-tech world where natural resources will never be as valuable as they were when we had a smokestack economy. But if you read your history you’ll discover that technological advances are as old as history itself: The introduction of the sleek and beautiful Yankee clipper ship dazzled the world in the mid-nineteenth century, loaded with cargo, sailing down the trade winds at 20 knots and more, averaging more than 400 miles in 24 hours and able to make it from U.S. ports around Cape Horn to Hong Kong in 80 days; within a decade, the clippers had been replaced by the steamship, no faster but not dependent on wind power; and before long the next big thing in transport had taken over, the railroad, which, of course, was the original Internet – and prices in the commodities market still went up.

In the twentieth century came electricity, the telephone, and radio (three more Internets) and then television (a fourth Internet). There was also the automobile, the airplane, the semiconductor – and in the midst of all of these truly revolutionary technological breakthroughs came periodic, multiyear commodity bull markets.

Even a revolutionary technological breakthrough in a particular commodity-related industry will not necessarily lower prices. For decades, drilling below 5,000 feet or offshore was virtually impossible. Then in the 1960s the Hughes diamond drill bit was invented and an explosion of technological advances in oil drilling and exploration followed. Drilling efficiency – and oil deposits – were available that had been unthinkable before this technological breakthrough. Soon there were wells 25,000 feet deep and offshore oilrigs multiplied around the world. Yet oil prices went up more than 1,000 percent in the 15-year period between 1965 and 1980.

When the supply and demand in raw materials is seriously out of whack, the emergence of new technology will not necessarily restore the balance quickly. To be sure, changes in technology, for example, have made the economy less dependent on oil. But we still use plenty of it, and whenever there isn’t enough prices will rise. Computers or robots may do amazing things, but they cannot find oil or copper where there is none or make sugar, cotton, coffee, or livestock grow faster than nature allows. We can put in orders all day long on our computers for lead, but all that Internet technology will be in vain if there are no new lead mines. Technology can neither feed us nor keep us warm, and the demand for commodities will never disappear.

“But Isn’t It Only Speculation and the Lower Dollar That Are Inflating Prices?”

Certainly, speculators who jump in and out of commodities can push up prices. And the dollar has been a pale remnant of itself – down against the euro almost 40 percent from the beginning of 2002 until the start of 2004 and at a three-year low against the Japanese yen. Since commodities are traded in dollars, a weak dollar will make prices appear higher. Crude oil rose 64 percent in dollars over that two-year period, but only 16 percent in euros.

But the dollar strengthened in the spring of 2004, and a funny thing happened: Commodity prices kept going up. The global recovery, particularly in Asia, was for real. We are now watching a fundamental structural shift in commodities markets, and it is called “supply” – and “China,” a nation that will be consuming extraordinary supplies of all kinds of commodities for years to come. I will explain why in more detail in a later chapter. For now, however, here’s the story: dwindling supplies and increasing demand.

And the dollar has nothing to do with either. Let me also re-mind you of the 1970s, when inflation in the U.S. was about 10 percent a year, the dollar wasn’t buying anywhere near what it used to, and the economy was in a major recession – and commodity prices kept rising. We’re talking another long-term bull market in commodities, and neither speculators nor a weak dollar can make that happen. Speculators can have a short-term effect only. For example, if they drive up the price of oil artificially, oil producers with excess supplies will gleefully dump their oil on the market driving the price back down. Both the dollar and speculation can have a marginal effect, but the market itself is bigger than they are.

Seasoned professionals and mainstream financial hacks alike have been baffled by the sheer scale of the market gyrations. They haven’t a clue which way to turn.

But there’s one team of cool-headed profit hunters who are sitting, carefully biding their time, ready to pick up great investments at distressed, knocked-down prices.

All this talk of recession in Western economies doesn’t worry this group. They’re not concerned about US and European stock market weakness – indeed they’ve been predicting it for months.

Right now, they’re leading their small, private circle of investors to position themselves to profit from a global power shift.

Just weeks ago they explained to their members:

“A recession in America will inevitably see a slowdown in the developing economies as well, but the chances of a global recession are low. Instead, we see this as part of the ongoing shift in economic and financial power from West to East as the global financial system adapts to new economic realities…

“…the current sell-off in global markets may well provide one of the greatest profit opportunities of your lifetime – a chance to buy into emerging companies… with enormous long-term growth potential… on the cheap.”

Today you can discover how to get into this team’s latest recommendations “on the cheap” – and how you could make four times your money by the end of 2009. [ Forecasts are not a reliable indicator of future performance.]

Find out how by reading what my colleague has to say right now in his research note: “The moments no investor wants to miss”…

Click here to read it

Not only does this report explain how to spot up-and-coming investment opportunities while mainstream investor focus is elsewhere, it also suggests where the next such opening is emerging right now…

Let me give you a taster before you click through:

This place has the SAME level of foreign direct investment as China… a CHEAPER workforce… and dirt-cheap industrial land…

Merrill Lynch is calling this place a “ten year buy”… Industry Week describes it as being “where China was 10-12 years ago”…

All the things that should excite every bullish investor on the planet… And yet, here we are preoccupied with last year’s stock market disasters!

At a time when everyone’s talking about LOSING money, the chance to make a bit – potentially double your cash inside of 12 months… and even make up to FOUR times your money by 2009 – is, I guess, worth a look.

But what do you think?

Click here to read “The moments no investor wants to miss”

One last thing:

It might be worth mentioning that the team behind this report were amongst the first in the UK to champion the investment potential of China AND Russia.

And though hindsight is a wonderful thing (we all know how both these economies have surged) back then investor feedback was generally NEGATIVE!

But then, so is the reaction to the so-called “crisis” at the moment! Don’t you just love herd mentality?

If it’s not in your nature to be downbeat, or you quite like the idea of using this distraction to capitalise on a little known breaking opportunity, you should have a read of “The moments no investor wants to miss”.

Click here to read more

Kind regards,

Rob Mackrill
Editor
Daily Reckoning