That’s why, in my investment letter, Outstanding Investments, I’ve constructed a kind of end-to-end offshore energy mutual fund – from prospect to pipeline. Each company has a broad skill set. None is just a one-trick pony. Some of the companies overlap in skill sets, and even compete with each other.

A few of my favorite names include Norway’s offshore powerhouse StatoilHydro (STO: NYSE), as well as subsea equipment provider FMC Technologies (FTI: NYSE). Then there’s platform and pipeline builder McDermott Intl. (MDR: NYSE), as well as offshore services provider Superior Energy Services (SPN: NYSE).

Going forward, I’m be looking to recommend other deepwater plays…at the right price, of course. I’m looking for companies that can grab hold of key parts of the growing offshore business, and produce great profits in the coming years. I think you’re going to be astonished at what unfolds.

I recently attended the annual convention of the American Association of Petroleum Geologists (AAPG). (Some guys go to classic car shows; I go to geologist conventions). I’ve been a member of AAPG for 30 years, and it’s always fascinating to spend some time there. The meeting rooms and poster sessions feature reports from the front lines of the search for petroleum, natural gas and other energy resources.

One theme emerged loud and clear from this year’s conference: Deepwater. Most of the major oil discoveries that remain to be found in the world will be offshore, in deep water.

The always-ebullient Brazilian geochemist, Marcio Mello — CEO of Brazil’s HRT Petroleum Co. — wowed the crowd with a discussion of the oil potential of the South Atlantic. “Six of the last ten giant oil discoveries in the world were offshore Brazil,” he pointed out. And then Marcio moved the discussion to the other side of the South Atlantic and gave an eye-popping description of the oil potential of the offshore regions of Namibia.

“The Namibian offshore is analogous to that of Brazil,” Marcio stated, with slides and hard data to back it up. Then he showed his proprietary research into natural offshore oil seeps off Namibia, and the geochemistry that demonstrates immense hydrocarbon potential. “But Namibia,” said Marcio, “is way underexplored. So you can put down a little money for the concessions and get very rich.”

The point for investors is how much of future world energy development will involve subsea systems.

For additional perspective, let’s examine the current structure of the American energy supply. Right now, most of the U.S. energy mix comes from burning coal, natural gas and oil. In fact, according to the U.S. Department of Energy, the U.S. gets 87% of its total energy mix from burning fossil fuels. Another 7% of U.S. energy supply comes from nuclear power. The total is 94%.

That leaves about 6% of the U.S. energy mix to come from so-called “renewable” and alternative sources. And 3% of that 6% is renewable hydropower from unique sources like the Hoover, Grand Coulee and other dams. And we’re not building any more big dams.

Thus, only about 3% of U.S. total energy comes from things that grow, blow or shine. Of that 3%, about half (1.5%) is from “biofuels,” and that’s if you count a company like Weyerhaeuser (WY: NYSE) burning sawdust to run the sawmills.

Finally, there’s a very minor part of the total U.S. energy mix — about 1.5% — that comes from windmills, solar and geothermal. For as much visibility as these things get in the media and pop culture, their energy output is tiny — slightly above statistical noise in the overall national mix.

So just follow the numbers. The “alternative” energy sources are a miniscule component of the current energy mix. That’s after a few good years of significant investment, with lots of political support and plenty of tax breaks.

It will take many years (many decades!) for these energy sources to expand and meet the energy needs of the U.S. And that’s despite whatever the politicians and policymakers wish for in their dreams.

That’s why the U.S. must continue exploring for oil and gas. I cringe when I look at the falling rig counts in the U.S. and around the world. Every well that’s NOT drilled is one less source of hydrocarbon in the years to come, as depletion causes output from current wells to decline…which brings us back to the South Atlantic, one of the world’s greatest petroleum provinces.

Some experts think that the hydrocarbon resources in the pre-salt formations off the Brazilian coast may rival those of Saudi Arabia in magnitude. We’ll see about that. But it’s beyond dispute that Brazil and its energy resources are a complete game-changer for that nation, and the rest of the energy-consuming world. It goes back to basic geology and the history of plate tectonics.

When South America started to pull away from Africa about 140 million years ago, an isolated seaway formed — a proto-Atlantic Ocean — that filled again and again with sequences of limestone, thin shales and, finally, massive salt beds. The processes of petroleum geology worked as advertised in the region. And these processes left utterly eye-popping volumes of petroleum locked in high-quality reservoirs covering vast areas.

The big downside (and it’s big and down, to be sure!) is that all that oil is under a mile or two of South Atlantic seawater, covered by three or four miles of rock and salt beds — it depends where you’re located on the continental shelf and slope.

But that’s why it takes companies with phenomenal technical and managerial skills, plus deep pockets, to play in this great game. The bottom line is that with the right companies working at it, there’s enough oil down there to produce a very big payday, not just for Brazil, but for many of the companies that contribute to the effort.

I’ll discuss at length the new developments offshore Brazil during my talk in Vancouver at the upcoming Investor Symposium, July 21-24. The title of my talk will be Is God Brazilian? So that ought to give you a clue about what I think lies under all that water column and rock down there.

Source: Deep, Wet and Brazilian

This from Taipan Daily:

If you drive on U.S. roads, you probably don’t need to be told – the country’s infrastructure is in pretty bad shape.

As a nation, Americans like to look forward. We prefer to spend our money building new things (rather than fixing up old things). Issues like repair and maintenance are back-burnered for other priorities in state and federal budgets. Over time, the cost of neglect rises.

In 2007 we were hit with a long overdue wake-up call: a Minneapolis bridge collapsed. Thirteen drivers were killed.

A Serious Problem

I don’t know about you, but I routinely drive over bridges and interpasses without worry (just as 200 million other U.S. drivers do). The bridge collapse was seen as a freak occurrence, a one-off… but imagine if that changed. The climate of fear could cripple our roadways, and that would be disastrous.

Dale Reiss, vice chairman of the Urban Land Institute in Washington, believes that “at some point, the system could grind to a halt” if we don’t do something about the crumbling state of our highways, roads and bridges.

In Atlanta, Ga., for example – the city where your humble editor went to high school – rush-hour trips are projected to take 75% longer by the year 2030. (If you’ve ever braved Atlanta traffic, you know that’s no joke.)

The estimated repair bill is staggering. A report titled “Infrastructure 2007: A Global Perspective” argues that the U.S. faces a $1.6 trillion deficit for repair and maintenance through the year 2010.

It may not seem like it these days, but $1.6 trillion is still a serious chunk of change. (Unless your name is Hank Paulson or Ben Bernanke, that is.)

Keep in mind, too, that the $1.6 trillion repair bill estimate is only through 2010. When you look at the long-term estimates for needed infrastructure and repair costs – stretching out into decades – you get a repair bill in the tens of trillions.

Keynes to the Rescue!

So, given the above news, the logical John Q. Taxpayer reaction would be something like, “Holy smokes, that’s a lot of dough to spend on repairs.”

But in Washington, D.C. – where everybody and their brother is a John Maynard Keynes fan – the reaction is “Hooray! Something huge to throw money at!”

Deflation fears are all the rage now as you know… the Fed just cut rates to zero… Chrysler is hurting so bad it’s shutting down operations for a month… and President-elect Obama is getting ready to swoop in with the mother of all stimulus plans. Money needs to be spent… and by gum, we’re gonna spend it on infrastructure.

The total amount of “Obama stimulus” seems to yo-yo up and down, like a mood ring attuned to the general anxieties of U.S. taxpayers. The initial amount being bandied about was $600 billion. In recent days the whispers have expanded it to a cool trillion – the big T word – or maybe even more.

On Dec. 6, President-elect Obama put some flesh on the bones of his stimulus plan, pledging “the largest new investment in roads and bridges since President Dwight D. Eisenhower built the interstate system in the 1950s” (according to the Wall Street Journal).

President-elect Obama also promised, in his own words, to “launch the most sweeping effort to modernize and upgrade school buildings that this country has ever seen.”

(Side note: why do most public schools look like prisons? Have you ever noticed that? I don’t get it.)

“Use It or Lose It”

When Obama unveiled his five-point plan earlier this month – encompassing energy, roads and bridges, schools, broadband and electronic medical records – the thing that really made my ears perk up was the “use it or lose it” provision.

Here is the President-elect, again in his own words:

We’ll invest your precious tax dollars in new and smarter ways, and we’ll set a simple rule – use it or lose it. If a state doesn’t act quickly to invest in roads and bridges in their communities, they’ll lose the money.

Have you ever seen the movie Brewster’s Millions? It’s a classic 80s comedy in which Richard Pryor, a minor league baseball player, has to blow 30 million dollars in thirty days – without telling anyone why – in order to inherit $300 million more from an eccentric relative.

The use-it-or-lose-it provision made me think of Brewster’s Millions… perhaps updated here as Obama’s Trillions. In order to meet the stimulus-driven desires of Washington, the states are going to have to shovel this road-and-bridge cash out the door, pronto.

You can almost hear the CEOs of the big construction companies doing a Homer Simpson: Woo-Hoo!

How to Play It?

So we know that the state of America’s infrastructure is a real and serious problem – one that will take years, if not decades, to fully put right.

We also know that Washington is bound and determined to drop a money bomb on that problem, in order to stimulate our sagging economy and create millions of new jobs.

So the obvious question is, how to play it?

Here’s a quick look at some of the major players that could benefit (all traded on the New York Stock Exchange).

Name	Symbol (all NYSE)	P/E Ratio	Market Cap
Fluor Corporation	FLR	11.52	8.98B
Jacobs Engineering Corp.	JEC	14.35	5.98B
Caterpillar Inc.	CAT	7.16	26.16B
The Shaw Group Inc.	SGR	12.47	1.74B
Chicago Bridge & Iron	CBI	n/a	1.13B
URS Corporation	URS	16.03	3.34B
McDermott International	MDR	4.20	2.27B
Perini Corporation	PCR	6.10	1.16B

If you pull up charts for the above names, you’ll see that every single one is in some form of uptrend – as is wholly to be expected, given the Obama news and the longer-term prospects for fattened construction company coffers.

Which of them to buy, though? Another option is just to go with an ETF, like the PowerShares Dynamic Building & Construction ETF (NYSE:PKB).

As you can see, PKB is headed in the right direction. The ETF saw a surge in volume on the “Obama breakout” when the stimulus plans were announced, and the price action is strong.

But PKB has a few problems that make it a less than ideal choice.

For one, PKB’s average volume isn’t so hot at less than 100K shares per day. The volume is doable from a trading standpoint, but getting down to where lack of liquidity starts to be a concern.

Even more of a concern, from our perspective, is the fact that PKB’s top 10 holdings include Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW). We’re not interested in DIY (do-it-yourself) retail or anything aimed at the consumer here, so that’s a real drawback.

Here’s where I turned to the man with the micro plan, Zach Scheidt (a.k.a Cash McDash), to get his take on how to play the Obama infrastructure boom.

Smaller Is Better

The first thing Zach pointed out to me is that, in terms of getting the most bang for one’s trading and investing buck, smaller is better as a rule of thumb.

Here’s what he means…

The major go-to names (the ones in the list noted above) should do well as a result of Obama’s big plans. In fact, they could very well offer double-digit returns in the coming years – nothing to sneeze at.

But, in Zach’s view, most of those multi-billion-dollar market cap names are too big to see the needle really move as a result of this road-and-bridge cash flood… the way it could with some of the smaller, less well-known infrastructure names.

“Think of an 18-wheeler semi-tractor trailer versus a sports car,” Zach told me.

“You can certainly cover ground in a big rig… but you just can’t get up to speed all that fast. So just as a fully loaded 18-wheeler can’t accelerate all that quickly (even on a brand new Obama highway), the big, well-known infrastructure names aren’t set to deliver the velocity of returns that some of the smaller names can.”

This program – which I call the “13F Disbursement Plan” – allows you to legally skim money from the cutthroat Wall Street firms who’ve gotten obscenely rich at the expense of ordinary folks like you and me.

By following the detailed instructions outlined in this letter, you’ll learn how to add $4,570 to $11,450 to your bank account every month, courtesy of the U.S. Government.

Read on for more information…

“Think of a Porsche,” Zach continued, “or maybe a Corvette, out of respect for the ailing Big Three. An infrastructure play with a market cap of just a few hundred million – as opposed to billions – is like the Corvette. The Obama plan’s impact on revenues will be that much greater for these smaller players… and in terms of shareholder return, the Corvette should leave the 18-wheeler in the dust.”

I asked Zach if he had any names in mind. He responded as if I had just insulted his honor. Of course he had some names on his roster – what self-respecting trader wouldn’t want a piece of this trend?

“In particular, I’m looking at one company that has a market cap of less than $300 million,” Zach said. “I haven’t pulled the trigger on it for Taipan subscribers yet, but my preliminary research suggests it could be a double or a triple within the next 12 to 18 months.”

Lawyers and Bulldozers

I then asked Zach what readers should look for as they scout for these infrastructure “Corvettes” themselves.

His response: “One thing that’s really important is to look at the lines of business. In particular, I like names that have the ability to make money on the construction side and the consulting side.”

“You can think of the two lines – construction and consulting – as the ‘bulldozer team’ and the ‘lawyer team.’ Before a structure can be upgraded or a new bridge can be built, a number of assessments have to be made. Sometimes there’s a lot of red tape – especially when NIMBY interests (the ‘Not In My Back Yard’ people) get involved.”

“So the smaller infrastructure names with dual lines of business – like the one I’m zeroing in on for Taipan subscribers – can make money on both sides of the coin. During the assessment period, while the project is being held up by red tape, they send in the lawyers and the guys with the clipboards. This allows them to make fat profit margins on their consulting fees.”

“Then, when the project actually gets underway, the ‘lawyer team’ packs up and the ‘bulldozer team’ rolls in… allowing the company to make another big chunk of profits on the construction side. Nobody likes red tape, but it’s a beautiful racket – a way to make money coming and going.”

Source: How to Play the Obama Infrastructure Boom

This from Investment U:

Look at every investment disaster individual investors have endured throughout history and the cause is virtually always the same. They neglected to ask a simple question: What if I’m wrong?

• Take the guy whose retirement account is loaded up with shares of one company, the same one he works for. He exposes himself to a career downturn and an investment disaster at the same time. He forgets to ask, “What if I’m wrong?”

• Or the woman who buys an investment property in a hot market, taking out a mortgage she can barely afford. What if she’s wrong?

• Take the trader who loads up on call options, trades heavily on margin or bets the farm on the bull market in oil continuing. What if he’s wrong?

Of course, every investor can be wrong. We all are occasionally. Successful investing is about taking – and intelligently managing – risk.

We Know The Future Is Unknowable At Investment U

We at Investment U are well aware that to a large extent the future is unknowable. So despite our well laid plans, we always hedge our bets.

That means buying quality, diversifying broadly and running trailing stops behind each of our individual stock positions. Anyone who has done that over the past 12 months is miles ahead of the average investor.

As the old saying goes, “The winner in a bull market is he who makes the most. The winner in a bear market is he who loses the least.”

Although we’re in a bear market now, the time has already come to start looking ahead.  Investment legends like Warren Buffett and Mark Mobius know this. (They have the benefit of a well-informed investment perspective.) Your average talking head, apparently, does not.

For instance, there have been six major bear markets over the past 80 years. The average decline in the Dow Jones Industrial Average of the previous five disasters – from peak to trough – was 43%.

That’s just about the low point of the current bear market. Unless we’re about to enter a “Greater Depression,” we’re a lot closer to the bottom than the top.

Scared Investors Are Missing the Easy Investment Opportunities

And there are investment opportunities galore, although most investors are too scared to move on much of anything.

• Many of them are tucked safely away in T-bills, where they can sleep soundly at night. But is the purpose of your investment portfolio to provide for you and your family in retirement or is it to play Brahms’ Lullaby?

• Many of these investors have deluded themselves that they will wait until the coast is clear of any investment disasters and then safely re-enter the market down the road.

In other words, having failed to see the top of the market – like 99.9% of all investors – they are now confident they can pick the bottom.

What if they’re wrong? What if the market is already discounting a severe recession? They run the risk of sitting in cash, collecting a pittance, when the market starts to rally again in earnest.

13 Companies At Bargain Basement Levels – For Starters

Meanwhile, there are plenty of companies out there trading at bargain basement levels. If you don’t have much faith in near-term earnings, try a different tack. Buy a few companies that are loaded with cash.

Which ones? Well, for starters, there is:

• AutoDesk (NASDAQ:ADSK)

• Amdocs (NYSE:DOX)

• Dell (NASDAQ:DELL)

• Expedia (NASDAQ:EXPE)

• Foster Wheeler (NASDAQ:FWLT)

• NCR (NYSE:NCR)

• Cisco Systems (NASDAQ:CSCO)

• BMC Software (NYSE:BMC)

• McDermott International (NYSE:MDR)

• Hewlett-Packard (NYSE:HPQ)

• Intel (NASDAQ:INTC)

• Nike (NYSE:NKE)

What if I’m wrong? What if these cash-rich companies go down in the near future, too?

That’s always a possibility.

Limit Your Downside Risk With Trailing Stops

But if you use our recommended 25% trailing stop, you’re not just buying cheap… you’re strictly limiting your downside risk.

The investor holed up in cash, on the other hand, is earning a meager 2% or so on his money.   He may not reach his investment goals. But he sleeps well… and he feels safe.

What if he’s wrong?

Source: What If You’re Wrong?