Nobody gave me a crystal ball for Christmas. Then again it doesn’t take one to predict a lousy 2009. “More of the same” isn’t much of a prediction, is it? It’s more like a status report projected into the future.

I don’t believe in “more of the same.” Either things will get better or worse. The one thing they won’t do is stay the same. Here are six things I think will happen in ‘09.

1. The BRICs (Brazil, Russia, India and China) will have a terrible year. China will compete with the U.S. on who has the bigger government-led infrastructure program. They will also compete on whose is more effective. China’s will be building roads and schools. In addition to roads and infrastructure projects, President- Elect Obama’s will be building wind mills and broadband networks for schools. Both will fail in creating permanent jobs.

2. Iran will save oil. OPEC’s spotty execution in cutting oil output will not stop oil prices from falling further. But Iran’s refusal to stop its nuclear development program will beget serious sanctions from the West, threatening Iran’s oil exports. Oil prices will hit $20 per barrel and then start rising again.

3. Solar stocks (and other alternative energy companies) will spike after Obama gives his first state of the union address at the end of January or early February. Then, when investors realize that the actual legislation is still months away, prices will slink back to their previous low levels.

4. One of the big three auto makers will disappear. Here’s a hint: It won’t be Ford. It will, however, mark the beginning of the auto industry’s recovery.

5. The fourth quarter will cough up earnings reports that manage to disappoint rock-bottom expectations. The Dow will plunge and flirt with the 5,000 mark. Obama’s big stimulus plans will pick the market up before investors realize how horrible the economy must be for Obama to be spending another $1 trillion trying to revive it.

6. Americans fall in love with big cars again.

Source: Six Predictions for 2009

The U.S. trade deficit grew to $57.2 billion in October, a 1.1% increase from $56.5 billion in September. Imports fell 1.3% to $208.9 billion, but exports fell even further, dropping 2.2% to $151.7 billion – the lowest level since January.

On reason for the reason for the larger deficit was more lopsided trade with China. The trade gap with China increased to a record $28 billion, up from $27.8 billion in September. China last year supplanted Canada as the largest source U.S. imports. Since joining the World Trade Organization in 2001, China has also emerged as the fastest growing major export market for U.S. products.

A record amount of oil imports also sent the deficit soaring, offsetting a significant decline in crude prices. Petroleum import prices fell 25.8%, with the average price for a barrel of crude tumbling by $15.56 a barrel to $92.02. However, that decline was negated by a record-high 70.9 million-barrel increase in oil imports. The sheer increase in the volume of imports drove the U.S. oil bill up by 3% to $37.7 billion.

Trade was also dampened by a resurgent dollar, which made U.S. products more expensive to foreign markets. The dollar surged 17% from mid-July to the end of November, reaching its highest level in three years on Nov. 21, Bloomberg reported.

“Trade is going to be a significant drag on fourth-quarter growth,” Dean Maki, co-head of U.S. economic research at Barclays Capital Inc., told Bloomberg. “The slowdown in foreign demand is hitting manufacturing.”

Trade added 1.1 percentage points to U.S. economic growth in the third quarter, when gross domestic product (GDP) actually shrank by 0.5%.

Source: Trade Deficit Grows, Despite Record Decline in Oil Prices

“Bullish news today on top of the recent Chinese stimulus package and news of Saudi Arabia’s supply cuts failed to overcome economic concerns,” said Sucden Research analyst Michael Davies.

Among that bullish news was a report that militants are threatening to renew attacks on oil facilities in Nigeria. A few months ago, that would have automatically shoved the oil market higher. No longer.

Oil prices will likely “keep skipping along bottom here at the $60 per barrel range until we see the fully-implemented OPEC cuts and some winter demand data hitting the market,” said Neal Ryan, of Ryan Oil & Gas Partners.

And Mexico has reportedly hedged almost all of next year’s oil exports at prices ranging from $70 to $100. That stood in stark contrast to last year, when the world’s sixth-largest producer hedged only 20-30% of exports.

“This is a clear sign that they fear oil prices will remain below $70 a barrel in 2009,” said Kathy Lien, of GFT Forex. Lien added that “we doubt that they are the only oil producing country to start hedging.”

Source: Crude closes below $60 -  Mexico hedging like crazy

As the impact of the global credit crunch rumbles on, we’re seeing a very interesting divergence in the performance of the Asian economies. The countries that are still bound to the American eagle are heading for the doldrums. But the ones that have chained themselves to the Chinese dragon are roaring ahead.

You see, despite all the babble about a global economic slowdown, China is still booming. Its economy grew by a white-hot 10.6% in the first quarter of this year. And that’s despite all the efforts of the Beijing government to slow things down…

So, the commodity-rich Asian countries that supply China’s industrial machine, like Malaysia, Indonesia and Thailand, are surviving the global economic downturn well enough. In fact, they’re seeing exports boom…

But not every Asian country is benefiting. The Asian countries that rely on electronics shipments for the bulk of their exports, like Singapore and the Philippines, are being hit by the US slowdown.
The numbers say it all

Just look at the figures. This week, Malaysia announced a 21% jump in exports in April from a year earlier. What are they selling to the rest of the world? Let’s see…palm oil exports are up by 71%, crude oil exports by 53% and exports of natural gas by 26%. Electronic-component exports were up by just 12.5%. The electronics industry used to be the crown jewel of Malaysia’s export industry. And most of those components used to go to the U.S. We’re seeing a massive shift in the centre of economic gravity here.

Same thing in Thailand. The country’s exports jumped 28% from a year earlier. And a good part of that comes down to the soaring prices of rice and other agricultural products.

Indonesia’s monthly exports have just hit a new record of $11.9 billion in March, as well. No prizes for guessing what they’ve been selling…crude palm oil (Indonesia is the world’s biggest producer), natural gas, timber, coal…

Indonesia’s coal story is something that I’ve written about recently. Coal is the new gold. And Indonesia has some of the most exciting coal companies on the planet. We’re watching that situation very carefully…looking for a chance to get in…

And then India has reported a 32% rise in exports… The gist of this story is that if you’ve got what China needs right now, you’re in the money.

And The Dragon isn’t just dragging along a bunch of small Third World economies either. Even developed economies like Japan are getting a boost from China’s rise. The Japanese have sold so much industrial machinery and parts to China that their economy grew by 3.3% in the first three months of this year from the year before.

But here is the bit that really excites me: what China is doing for Asia, it’s now doing for Africa as well. It’s locking the Dark Continent into its economic orbit. And Profit Hunter readers have bought into this boom right on the ground floor.

From basket-case to oil exporter…

It has already invested $30 billion in Africa’s oil and gas industry. And most of that has gone to places that most Western investors would never have touched: Sudan, Chad, Equatorial Guinea, Angola, Nigeria….

Now it plans on investing $5 billion in the West African country of Niger. This is one of the poorest countries on earth. It ranks in the bottom five on the United Nations’ human development index. And the country is battling an insurgency by the magnificently blue-cloaked, be-turbaned, camel-riding Tuareg nomads in the north of the country. But the Chinese don’t seem remotely concerned. They plan to pump the country’s first barrel of oil next year. And to get it out of the country, they are going build a 2000-kilometre oil pipeline and a refinery with a capacity of 20,000 barrels a day.

Here’s another country about to become an economic annexe of the Middle Kingdom…

The new king of the African oil patch

While we’re on the African oil industry, here’s a bit of very interesting news. Angola has now dethroned Nigeria as Africa’s biggest oil producer. Nigeria has held the top spot for decades. But militant attacks in the oil rich Niger Delta and worker strikes have undermined the country’s oil industry. In April, Angola produced 1.87 million barrels of oil per day. Nigeria produced 1.81 million barrels.

We aren’t in Nigeria. But our brilliant African play puts us in the thick of Angola’s booming economy. It owns airlines in the region and is setting-up a massive logistics centre in the country’s capital, Luanda.

Source: China Invests Billions In Africa And We’re Set To Book a Massive Profit

I’ve been covering the Pilbara and its huge iron ore deposits since moving to Australia three years ago. I consider the place ground zero in the resource bull market. Like most bull markets today, the Pilbara’s boom is related to Australia’s neighbor to the north, China. China is consuming iron ore, coal, natural gas, copper, zinc, and crude oil at a pace we’ve never seen before in human history.

Most of us know China’s boom is a huge driver in the bull market in infrastructure, energy, metals, and minerals. But there’s another developing region you’ve probably never considered… one that could make you a rich investor over the coming years: the Middle East.

The Economist reports the six nations of the Gulf Cooperation Council (Saudi Arabia, Kuwait, Bahrain, Omar, Qatar, and the UAE) earned $381 billion from oil exports in 2007. The cumulative earnings will reach into the trillions if oil remains over $100 for several years. The region literally has more money than it knows what to do with. A lot of that money is flowing into infrastructure.

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From Dubai to Kuwait, there’s an estimated $2.4 trillion in construction projects either underway or in development in the world’s biggest oil patch.

Surprisingly, $1.4 trillion of that total is for projects in civil construction. This means spending on residential and commercial construction projects in the Middle East outweighs construction on oil, gas, power, petrochemical, industrial, and water projects combined.

The three largest civilian projects are:

1. King Abdullah Economic City, Saudi Arabia: $120 billion. The leading firm is Dubai-based developer Emaar.

2. Silk City Project, Kuwait: $86 billion. The leading firm is Tamdeen Real Estate.

3. Dubailand, UAE: $60 billion. The leading firm is Tatweer.

The Saudi Arabian government wants to diversify the Saudi economy from its current “Three Pillars” strategy of oil, petrochemicals, and industrials. This building strategy is just one of the forces driving up steel prices, which are now over $1,000 a ton.

The Saudis know their 262 billion barrels of oil reserves won’t last forever. They are attempting to plant the seeds for self-sufficient regional growth that’s not related directly to the oil economy. This means building six brand new cities as centers of commerce and enterprise.

That’s right… They’re building giant new cities out of nothing. Four have already been launched. They are:

1. King Abdullah Economic City
2. Jizan Economic City
3. Knowledge Economic City
4. Prince AbdulAziz Bin Mousaed Economic City

Whether the Saudis can build economic prosperity from nothing is an open question. They certainly have the capital to try. High oil prices have guaranteed that.

From an investment perspective, the long-term success of the Saudi’s grand economic strategy doesn’t matter. The money is going to be spent. Any sensible investor, seeing such gaudy capital expenditure figures, would do the only sensible thing: follow the money.

It is not just Saudi money either. And it is not just residential and commercial growth. A lot of it is industrial, petrochemical, and power related.

For example, in the United Arab Emirates, Dubai recently announced plans to build the world’s largest aluminum smelter ever. It’s a $5 billion project with the aim of producing a smelter that can generate 700,000 tons per year. Saudi Arabia has plans for its own $3.8 billion aluminum smelter. Oman has plans for a $2.2 billion smelter.

That’s $11 billion for just three projects.

How can you profit from all this? As I’ve written in my previous columns, the global building boom is going to require awesome amounts of iron ore and base metals… so producers of this “stuff” still have years of gains ahead of them.

You can also buy engineering and construction firms. Someone has to receive the contracts to build all of this stuff. Go through the holdings of the PowerShares Building & Construction ETF for some ideas.

Whichever investments you choose… realize the infrastructure boom isn’t just focused on China. The U.S. is spending to upgrade its “F” infrastructure rating. Russia is spending. Latin America is spending. And now, the Middle East is spending its oil money. It all points to big returns in infrastructure stocks.

Good investing,

Dan Denning

Source: How Arabs Will Drive the Next Great Infrastructure Boom

Maybe if they’d known this before hauling the oil executives up to Capitol Hill last week, they might not have made as many fatuous statements as they did. Then again, who am I kidding?

For all the attention paid to China’s increasing energy thirst, rising energy demand in the Middle East may pose the greater challenge. Last year, the region’s six largest petroleum exporters — Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar — curbed their output by 544,000 barrels a day. At the same time, their domestic demand increased by 318,000 barrels a day, leading to a loss in net exports of 862,000 barrels a day, according to the U.S. Energy Information Administration.

Demand in the Middle East is a major factor right now, said Adam Robinson, an oil analyst at Lehman Brothers in New York. Mr. Robinson predicts the region will constitute more than 40% of increased demand next year.

Now that I think about it, maybe we should conceal the rising usage/falling exports within OPEC nations from members of Congress. It’ll just make them more inclined to follow through on the notion of suing OPEC.

The unstated assumption would go something like this: The nerve of those countries, using more of the product that lies under their soil, when everyone knows we have the right to buy as much as we want at a price of our choosing so we don’t have to drill off our own coasts. (Yes, I know they subsidize, and we all know that’s foolish. What do you want to do about it?)

Oh, and there’s this cheery sentence buried in the article: “Mexican officials announced Monday that output from the country’s once-mighty offshore Cantarell field had plunged by a third in less than a year.”

Someone call a priest to administer last rites to Cantarell. Then call a bookie to place bets on the year when Mexico ceases exporting oil, like Indonesia, which acknowledged its status this week by announcing it will pull out of OPEC at year’s end.

Source: Oil Exports Down

However, those concerns have been assuaged recently, as many exporters throughout the Pacific have found a significant demand for their goods in other markets.

Exports to the European Union from China, Korea, Japan, and Taiwan grew by 22.4% year-over-year in the first-quarter according to Goldman Sachs Group Inc. (GS). Exports from those four Asian nations to emerging markets, excluding China, have grown by 36.5% for two consecutive quarters now.

“The ability of Japanese exports – and those from around the region – to continue to grow despite stagnant demand from the US has been one of the most striking features of the past year,” Macquarie Bank economist Richard Jerram told the Financial Times.

Exports to the United States from the four Asian export juggernauts grew 4.7% in the first-quarter, their slowest rate of growth since 2003, according to Goldman Sachs.

Demand is even strong in smaller countries such as Singapore. After falling 2.6% in March – when shipments to the United States fell at the sharpest rate in more than six years – non-oil exports rose 1.6% in April from March, Reuters News Agency reported.

Non-oil exports in April rose 5.4% from a year earlier to $10.2 billion, according to trade agency International Enterprise Singapore. That compares with a 5.9% fall in March. Singapore’s shipments to the United States fell at an annual rate of 16.9%, but exports to Europe and China climbed 16.9% and 19.2% respectively.

“Exports to the U.S. continue to be in the doldrums but the EU and China are still strong. Singapore has been able to decouple from the U.S. to some degree,” Joseph Tan, a strategist at Fortis NV told Reuters.

In South Korea, which relies on overseas sales for 40% of its gross domestic product, exports rose 27% in April, the fastest annual pace in more than three years. Lehman Bros. Holdings Inc. (LEH) has already raised its 2008 forecast for export growth in South Korea from 8.2% to 9.3%.

Vietnam plans to raise exports to Africa, the Middle East and south Asia to $2.3 billion this year, an increase of 33% from last year, the Vietnam News reported, citing an unnamed official at the Ministry of Industry and Trade.

“We have a lot of evidence to support the decoupling view,” Timothy Bond, Merrill Lynch & Co. Inc.’s (MER) chief Asia economist, told the AFP, referring to a view that Asian economies are moving away from dependence on the U.S. market, to a more diversified base.

According to Bond, the stronger euro, which makes Asian goods cheaper to European customers, is the main reason Asian exports to Europe have been growing 25%-28% annually.

“Europe has been the main driver of Asian exports over the past few years, not the [United States],” Bond said.

Source: Asian Exports Continue to Surge Despite U.S. Slowdown