$100 Oil!!!!: "Not necessarily very high."

$100 oil is “not necessarily very high,” said OPEC president Chakib Khelil on Sunday.

The new leader of the world’s largest oil cartel believes inflation-adjusted highs in the 1980s were “between $102-110.” Thus, $100 in 2008 is no big deal.

"The surge in price will probably go on until the end of the first quarter of 2008,” Khelil predicted, “before stabilizing during the second quarter.” How he comes by this view… he didn’t say.

“It would take a lot of economic slowing to arrest the squeeze between growing demand trends and depleting supplies,” notes our own oil adviser, Byron King. “Oil supplies are so tight… between sabotage in Nigeria, bad management in Venezuela, raw depletion in Mexico, Peak Oil in the Middle East.... the slightest amount of bad news -- a hurricane in Gulf of Mexico, a pipeline leak in Alaska, a bomb blast in Iraq… would send prices up even further.”

The new President of OPEC (Oil Producing Exporting Countries), Chakib Khelil said this in a recent speech. He predicted that the "surge in price will probably go on until the end of the first quarter of 2008, before stabilizing."

So, OPEC has now gotten used to the idea of $100 oil and are thinking..."hmmm....how can we squeeze a little bit more..."

Well, expect $100 oil to be a fact of life and remember that inflation-adjusted highs in the 1980s were as high as $110/barrel, so if this is going to be a true record-setting surge, $110+ is not out of the question.

In fact, it may only take one slight bit of bad news like a hurricane in the Gulf of Mexica, a burst pipe in Alaska, increased bombings in the Middle East to send prices to...oh let's say...$125/barrel. Hey, if OPEC can pull numbers out of their keister, why can't I?

Is the high price of oil all about the Middle East and the weak dollar? No. It is also about trouble in Nigeria, increased demand from India and China, depleting supplies in Mexico, bad management in Venezuela, environmental laws, etc. Oil is complicated. A lot of factors are in play, but it only takes one random act to make all of the factors important and in play.

But remember, while some pundits are crying that the sky is falling with Peak Oil, new discoveries are being made, technology is allowing more oil to be had from existing and once thought dead oil fields.

Notes From The Underground:
Dow - 12,818.14 -9.35
Gold - 875.10 +15.10
Silver - 15.57 +0.36
Oil - 96.77 +1.68
Wheat - 9.25 +0.22

To Your Investment Success,

Patrick

Heroes

Thanksgiving is the time of year where we give thanks for what we have...

Christmas is the time of year where we give to those less fortunate than ourselves.

As many of you know, I am good friends with Jim Canale and a Platinum member of his CashFlow Now! Mentoring Group. Well, Jim is hosting a wonderful, stand up event on January 4 to raise money for the Hero Scholarship Fund of Philadelphia. At this event we will be playing Robert Kiyosaki's Cashflow Game and raising $14,000 for the Hero Scholarship Fund.

The Hero Scholarship Fund is a charity that pays the college tuition for kids of cops who have been killed in the line of duty.

In the past 14 years, 14 police officers in the City of Philadelphia have been killed in the line of duty. The life insurance that the city provides the family is paltry. And the pension benefits to widows, especially if the officer has not been in the force for very long, is pitiful. Long story short, the death of a police officer is a body slam to the family left behind and every little bit that we can do to help officers and their families helps.

Remember, police officers put their lives on the line every single day defending where many of us live and invest.

Go to www.cashflowforcops.com to read more and to register for the event on January 4 where we will play Robert Kiyosaki's Cashflow Game for this wonderful cause and also to further our financial educations, as well as network.

Notes From The Underground:
Dow - 13,361.56 +1.54
Gold - 839.50 +11.00
Silver - 14.81 +0.10
Oil - 97.31 +0.69
Wheat - 8.88 -0.27

To Your Investing Success,

Patrick

PS I will be closing the year out on Monday on Jim Canale's Real Estate Lifestyle Radio Show where I will give my outlook for the stock market in 2008. The show can be heard live at 10:00 am on AM860 in Philadelphia.

PPS If you want a copy of my 2008 Stock Market Outlook Report, titled "The 5 Investment Choices You Need To Make In 2008 For Fun And Profit", send me an email to me at patrickclark@undergroundinvestingforfunandprofits.com. The report will be released on January 2, 2008.

PPPS I will be back on regular schedule after the New Year providing insights on a daily basis. I hope that everyone had a very Merry Christmas and have a Happy New Year!

Absolut Proof of Inflation!

First, I apologize for the near week off from delivering you with your daily dose of financial education. Between the flu kickin' my ass, holiday parties (including mine last Saturday), and putting together some of the exciting announcements that will kick off the New Year, I was exhausted.

However, I do have something for you today!

Last week, as I was purchasing libations for the annual KlineClark Xmas Extravaganza Party, I noticed that the price of Absolut vodka had soared some 20% from the prior year (I noticed because the price was still on last year's bottle). Now, since Absolut is an import (from Scandanavia), so I figured that all of the imported spirits were up by approximately the same 20%. I also deduced that domestic spirits had probably risen as well, though I had no basis to figure out by how much. But here is the thing, I went home to see how sales were going for the PA Liquor Control Board, they were up by some 13% for the year. So, prices up, sales up. Makes sense since alcohol is one of those products like food and cigarettes that tend to be unaffected by economic conditions. People need to eat, and if they are not celebrating, they are drowning out sorrows.

Now, some of you may be saying that I am off of my rocker and that the meds are talking.

Well, there were 2, count 'em 2 significant economic events that you should take note from last week.

The first is the fact that WHEAT, yes WHEAT went over the $10 per bushel market FOR THE FIRST TIME EVER on Thursday at $10.09! Wheat and corn is in virtually every foodstuff in our food supply. The obvious are cereals and breads. However, remember that cattle, chickens, pigs, all form of livestock that provide us with meat, cheese, eggs, and milk products are fed with variants of corn and wheat. Unless you can survive solely on fish, veggies, and fruit, you are affected by the price of wheat which has quadrupled in the last 5 years. And food manufacturers and distributors are only now starting to raise prices in any significant amounts to notice. They are still operating on the smaller profit margins brought about by the rise in wheat and corn. Don't you think that they are going to want there big payday soon?

The second event to occur last week was the release of the CPI and PPI. The Consumer Price Index for November clocked in at 4.3% since November of 2006! That is a huge increase considering that previous months year over year inflation numbers were released at 2.8% and 3.2%. In fact, the government (we're here to help) was declaring that inflation was being kept in check! Hah! If you add in the 7% hidden inflation that the government never seems to add in, we are looking at 11.3%!

The Producer Price Index (the price that manufacturers pay) was up 7.2%! This is the largest increase in the PPI in 26 years! If you are old enough remember 26 years ago (if you are not go to the history books), it was 1981! In 1981, the country was going through the middle of a recession, real inflation rates were in double digits still as a result of the oil embargo of the early to mid-70s. The Reagan Administration was still trying to repair the economic policies enacted by the Carter Administration. The 30 Year Treasury Bond was yielding 13%, the Fed under then Chairman Paul Volcker had as its mandate to get inflation under control any way, any how, even if it meant allowing economic cycles to occur and the country to go into recession (which it did). Inflation was eventually put in check and the 1980s became one of the most prosperous decades in history!

Fast forward to today, the 30 Year Treasury Bond is yielding 4.6%, the country is in recession (even if not recognized by the Fed) and the Fed has as its mandate preventing recession at any cost. Even if that means allowing inflation to become rampant. Well, since the Fed no longer acknowledges food and energy in its primary measure of inflation (wheat quadrupled in 5 years, gas up 34.8% in a year), the Fed also cannot acknowledge the fact that we are already experiencing rampant inflation, so they can justify pumping more and more dollars into the money supply, exasperating the inflation scenario...all in the name of preventing recession. Well, if you cannot acknowledge rampant inflation, you cannot fight recession. And since you cannot fight recession, you allow it to occur. Therefore, the Fed under chairman Ben Bernanke and Alan Greenspan before him has FAILED this country and this economy!

It is time for reform at the Fed. Count everything that is pertinent to this society when measuring inflation. This includes food and energy. Place business leaders, former CEOs, in Fed seats, people who know the real impact of their decisions. Eliminate the monopoly of the Fed seats by bankers and academics.

Notes From The Underground:
Dow - 13,177.44 +10.24
Gold - 799.20 +3.90
Silver - 13.92 +0.06
Oil - 91.52 +0.89

To Your Investing Success,

Patrick

Manage Expectations

Well, the Fed did it!

And the markets went in the exact opposite direction of the Fed's intention.

Why?

One huge part of the movement of the stock market is the management of expectations. When analysts (word means something, not the word "anal") expect a certain action, number, etc. often, investments and trades are made by Wall Street with the expectation of that result. If the result falls short of expectations...anarchy! If the result exceeds the expectations...off to the races!

That is why the markets fell off sharply after the Fed announcement of "only" a .25% cut in rates. Anal-ysts were expecting .50% cuts.

That is also why a company gets taken behind the wood shed a shot by traders if it falls short of earnings by a couple of pennies...even if it is better than last year. In anal-yst/Wall Street world, a better this year than last year is not good enough. It must be a better number than expectations.

Which is why a stock can also actually go up if it loses less than what was expected...it still lost money, just not as much as expected.

Now the smart investor comes in after a stock or the market misses some expectation or other and evaluates if it is a trend that is likely to continue or not. Then acts accordingly. Many values and great returns can be found in buying a stock that misses expectations, but the fundamentals and technicals of the company are still sound. Particularly if it pays a nice dividend while waiting.

Notes From The Underground:

Dow - 13,413.66 -60.24
Gold - 801.50 -12.50
Silver - 14.33 -0.36
Oil - 93.30 -1.09

To Your Investing Success,

Patrick

The Economy Has The Flu...And So Do I!

The poor, poor economy. It has gotten sick and Papa Fed keeps trying to give it the same old medicine.

While the Fed seems to only have one prescription in it's medical kit, it seems that it has ceased to have the same effectiveness that it once had.

B-squard, Ben Bernanke and his fellow Fed bankers lowered both the Fed Funds and the Discount rate today by 1/4% to 4.25% and 4.75% respectively. The market proceeded to tank, losing 294 points on the day.

What happened? Rate cuts are supposed to prop up the stock market, not drive it down. While I was calling for a 1/4% cut in the rate, most of Wall Street was anticipating...in fact they were already banking on...a 1/2% decrease in rates.

Mind you, I may be a bit harsh on the Fed and rushing to judgement too quickly here since you have to give these rate cuts time to filter through, but who has time to wait nowadays.

Besides, commercial banks like the rate cut as they immediately trimmed their prime lending rates to 7.25%, the lowest rate in 2 years. This is a boon for real estate investors who are looking to either refinance properties, or get financing for new deals.

However, the thing with Wall Street is that they want what they want...AND THEY WANT IT NOW!

Sometimes even Wall Street does not get what it wants.

Unfortunately, this effects the individual investor, unless...the investor gets creative.

While, all of this is effecting many paper assets negatively, it is opening the window further on others.

One of the initial fuels to the real estate boom was the low interest rates in Japan. In the early part of the decade, interest rates on loans in Japan were hovering around 1%...yeah, that is right....1%!!!! Real estate developers from around the world, and the US in particular were going to Japanese banks and borrowing Japanese Yen, converting it to US Dollars and getting involved in the real estate boom. This was called the carry trade. Many of these loans are either ARMs or short-term development loans. Well, many of these loans are now coming due and the US Dollars are going to be sold to purchase Japanese Yen to pay back the loans.

What does this mean to you as an investor?

Well, there are 2 ways that this can be played. Either calls can be bought in the ForEx markets on the Japanese Yen, OR an investor can buy shares in the Japanese Yen Trust ETF (Symbol: FXY) that closed the day at 90.22. The Japanese Yen Trust ETF holds Japanese Yen and trades on the New York Stock Exchange. It is designed to track the performance of the Japanese Yen.

But wait, there is yet another way that you can play the Japanese Yen. The ETF also trades options. Now the options and the futures supply leverage to the trade and are much more volatile than the ETF.

So, there you have it...3 ways to play the selling of US Dollars for Japanese Yen for FUN and PROFITS!

Notes From The Underground:
Dow - 13,432.77 -294.26
Gold - 812.30 +4.00
Silver - 14.72 +0.03
Oil - 89.15 +1.29

SLV - 143.50 -2.12
FXY - 90.22 +0.71

To Your Investing Success,

Patrick

Is the Ground Full of Money?

Yes!

And it is getting more valuable!

China and India are growing far beyond what analysts ever thought...with no end in sight.

Imagine whole nations with newly minted middle class citizens larger than the United States.

Over half a billion citizens demanding all of the goods that we currently enjoy. All of these goods use minerals from the ground for at least part of their production.

Indian citizens are clamoring for gold. New roads are be paved throughout the country.

China is building infrastructure all over the country...million population cities are being built from small villages in a matter of 6-12 months, in addition to millions of new automobile drivers.

Many of the natural resources are being mined quicker than new reserves can be found, proven, and defined.

South Africa, the world's largest gold producer, is having its lowest production year since 1926.

Silver mining also cannot keep up with demand both on a consumer and an industrial level.

Copper and Lead mines are being shut down by the dozens throughtout South America because there just is no more left in the mines.

This decrease in supply along with increased demand alone can cause prices to skyrocket. Couple this with a declining dollar and prices have the ability to increase even further than they already have!

Notes From The Underground:
Dow - 13,445.20 +196.47
Gold - 797.90 -3.90
Silver - 14.35 +0.03
Oil - 87.16 -0.33

To Your Investing Success,

Patrick

Waiting on OPEC...

Waiting on OPEC (Organization of Pertroleum Exporting Countries) to make a decision on increasing/decreasing the supply of oil is a lot like waiting on the Fed to make an interest rate decision.

You generally know what the decision is going to be BEFORE the decision is actually announced. Except that OPEC is more unpredictable. All of the delegates make speeches at various conferences and meetings that they attend. These meetings almost always have reporters and news cameras. The delegates take advantage of this to "spill" a little of their thoughts on the upcoming decision to be made. Voila! The market has the opening to start trading over a decision that may not actually be made for another month or so...opportunity to make money calling!

Oil ministers from the various OPEC nations have been indicating that they would vote for increased production for some time now. The next OPEC meeting is tomorrow! The law of supply states that as supply goes up, price goes down. Well, oil has come of off it's highs of 99 and change to 87.74 over the course of a few weeks because of these indications. Traders have used this news as an excuse to take some profits off the table.

Some analysts are looking at the charts and saying that this "correction" could continue down to $70/barrel. While this would be nice and I would like to see it happen, I am not banking on it.

Remember, China and India are still growing near double digits, our own demand for the black stuff keeps going up and up much to the chagrin of environmentalists. And while the former chairman of Exxon says that oil should be price at $40/barrel, he is not the one in charge of making that decision.

A bunch of shiekhs, princes, and despots are.

So, back to the law of supply...when supply increases, price decreases. Combine this with the law of demand...when demand increases, price increases, especially when supply is not increased, or it is not increased enough to meet increased demand. Now combine this with people in control of that decision who either A) don't like us are looking to make as much money as possible or C) Both.

What will happen is that supply will be increased to a level that satisfies consumers for a time...but inevitably demand will increase again and will outstrip the new supply level, leading to...higher oil prices.

Notes From The Underground:
Dow - 13,248.73 -6.84
Oil - 87.74 -1.57
Gold - 803.80 +5.70
Silver - 14.30 +0.03

To Your Investing Success,

Patrick