Adam Sharp - Angel Publishing

Apple Hits Peak Profitability

In case you missed the news, Apple (NASDAQ: AAPL) recently surpassed Microsoft (NASDAQ: MSFT) in market cap.

Revenue is also set to surpass MSFT this year.

It's even more impressive when you consider the fact that Apple has done it with only 9% of the PC market they set out to take from Microsoft 25 years ago.

The performance of Apple stock over the past decade is enough to make you wish you'd sold your house and piled in. It's up 3500% from April 2003 levels, when it briefly traded in the mid $6s.

Check out this chart of Microsoft and Apple since 2002:

An impressive run. And there's no doubt that Apple is a great company with great gadgets.

But the firm's profitability is likely nearing a peak for this cycle.

iPhone dominance set to fade

The iPhone is Apple's undisputed cash cow, contributing around 40% of revenue in Q1 2010.

Profit margins are fat — around 60%, according to the New York Times. Those margins are boosted by a deal with desperate partner AT&T, who's willing to do just about anything to preserve market share (except improve their network, of course).

And so far, Apple has smoked every so-called "iPhone killer" to challenge their dominance.

But all that's about to change.

Apple has finally met its match with the new generation of Android-powered devices. An army of phones including Motorola's Droid X and HTC's Evo are starting to hit the market.

According to Bloomberg Businessweek, Android's share of the smartphone market is up from 1.6% last year to 9.6% today.

This new generation of phones will finally give the iPhone a run for its money. Motorola's Droid X, for example, has more computing power and a higher resolution camera. With an app network that can finally compete with Apple's, the stage is set.

But the biggest factor may be service partners. Verizon and Sprint are betting on phones powered by Google's Android operating system. They've managed to avoid a bidding war with AT&T over the iPhone, choosing instead to focus on building better networks. Now that Droid phones can compete, they're in a strong position.

Personally, I can't wait to ditch AT&T. The coverage is miserable, dropped calls are frequent, and mystery charges seem to pop up every month.

For example, a few years ago I looked at my AT&T bill and noticed a $5 late payment fee on the last five statements. Problem is, I use autopay. My credit card info was up to date. Yet they were autocharging my card two days late, every month, and assessing a late fee.

Nice try, scammers.

As soon as my iPhone contract runs out, I'll be switching to a Droid on Verizon or Sprint.

I'm not saying the iPhone is dead... There are millions of Apple fanboys out there who will never abandon their iPhones.

But the days when it was the only fun smartphone on the market are over.

~~SIGNUP_WD~~

Higher manufacturing costs going forward

Apple manufactures most of their products in China, where wages have risen 50% over the past five years. Ongoing labor shortages and unrest mean this trend isn't likely to change anytime soon.

And with the Chinese now allowing their currency to strengthen, it's only going to get worse.

Companies like Apple — who depend on cheap and efficient labor from China — will see their costs rise. Margins will be squeezed and quality may suffer if manufacturing is shifted to cheaper areas.

Priced for perfection

Like I said, Apple is a great company. I definitely wouldn't short it, but upside from here is limited.

The competition is finally catching up to them, and their costs are set to rise.

I'd much rather own Google or Motorola. For more on the bullish case on Google, here's an article I wrote a few weeks back.

Google is up 12% since, and I think it's got a lot more room to run.

Adam Sharp
Analyst, Wealth Daily

Gates, Buffett and Sokol Own this Stock...

What do Bill Gates, Warren Buffett, and David Sokol have in common?

They have all driven this Chinese electric car... Warren liked it so much he bought the company... The Chinese like it so much it's the most popular car in China. And you can buy it in the United States in the summer of 2010.

Click here to make ten times your money.

A Fresh New Look for Wealth Daily

Tonight we rolled out an updated site design.

The changes are mostly cosmetic, so your browsing experience shouldn't change much. If anything, we hope it'll be better.

We updated our logo, added editor pictures, and started using thumbnail images for articles. The homepage has more articles listed on it now, and they're listed in a more chronological fashion.

Don't worry though, the navigation and functionality of the site hasn't changed substantially. All the old articles are still here, and we'll keep posting new ones every day.

Feedback appreciated: If you notice bugs, design issues, or anything you don't like, please leave a comment to let us know.

Now, for the hard part...

Goodbye old logo, it was fun while it lasted. We're moving on now. It's not you, it's us. See you later. Well, probably not... but you know what I mean.

The New Offshore Oil Paradigm

Offshore drilling is about to get a lot more expensive for producers.

And that has spooked some investors out of the entire sector.

I can understand being wary of offshore producers after the Gulf oil disaster... Any company extracting oil from the Gulf will see their costs rise dramatically.

New legislation, higher insurance premiums, and other factors will make oil production offshore less profitable going forward.

But it's a mistake to throw the entire sector out with the bath water; increased costs for some mean more revenue for others.

Samurai Super Alloy

It was the secret ingredient that turned an ordinary sword into the legendary Samurai Katana — the deadliest weapon before the arrival of modern rifles.

Today, it's crucial to the $987billion/year global steel industry... And the world's supply is quickly running out.

Find out how a tiny mining company sitting on one of the last untapped deposits of this metal could hand you 2682% — in the next 12 months!

So while offshore drilling is about to get a lot more expensive for producers, these stocks are poised to profit from the shift.

Two Offshore Stocks with Upside

1) Acergy Inc (NASDAQ:ACGY)

Ever wondered who pilots those submersible ROVs that provide BP's live oil spill feeds?

Acergy does — along with their newly acquired partner, Subsea 7.

When the Macondo well exploded in April, you can bet these guys were among the first calls BP made.

They've been on site since shortly after the disaster, providing remote operated vehicles (ROVs) and other services to assist in containment efforts.

Acergy is set to merge with Subsea 7 early next year. The new company will take Subsea's name and emerge as the largest subsea contractor in the world, boasting a fleet of 43 vessels, more than 120 ROVs, and 12,000 employees.

Subsea 7 invented the use of ROVs for oil & gas development back in the 80s. But they don't just drive high-tech remote-controlled subs around the sea floor...

The combined firm will offer a smorgasbord of services — including pipeline laying, exploration, subsea field development, riser construction, and engineering.

And the company looks really cheap at current levels. Investors have been spooked by the Gulf drilling moratorium, but only 4% of Acergy's business is currently in the Gulf.

If anything, their revenue from the Gulf will probably grow. The BP contracts alone will provide a nice chunk of cash.

Here are some key stats for Acergy*:

Market Cap: $2.5b
Trailing P/E: 12
Div Yield: 1.42%
Current price: $16.18
52 week range: $8.89-$20.55

*Note: these numbers are pre-merger. The merged firm will be twice the size of Acergy, and dramatically increase efficiency with estimated savings of $100 million per year.

2) Helix Energy Solutions (NYSE:HLX)

Helix runs the Q4000, a fireball-machine currently incinerating 15,000 barrels of oil a day at the Deepwater Horizon site. Here's a picture of the Q4000 in action (source).

The fact that Helix was awarded this death-defying contract indicates extreme respect from industry peers. Flaring crude oil is not exactly an everyday operation.

But Helix stepped right up and has been doing a bang-up job so far, eliminating around 15,000 barrels per day that would otherwise be in the Gulf of Mexico.

Another Helix vessel, the Helix Producer, is scheduled to begin collecting up to 25,000 barrels per day from the blowout preventer.

Helix has been handed some of BP's most vital containment efforts. If they're smart, other offshore oil producers will be looking to do business with Helix.

Everybody needs to have a disaster contingency plan going forward, and they'd be smart to hire HLX on retainer.

Helix key stats:

Market Cap: $1b
Trailing P/E: 36x
Forward P/E (est): 7
Debt: $1.36b
Cash: $212m
PEG ratio: 1.3

Both Helix and Acergy look tempting at these levels. Of the two, I prefer Acergy. In fact I own it.

Other drilling contractors that I have my eye on include Schlumberge (NYSE: SLB) and Halliburton (NYSE: HAL), which has emerged as an unlikely hero from this disaster.

Halliburton contractors warned BP about the well design and risks involved, suggesting the use of 21 stabilizers for the pipe. But BP didn't listen, ultimately using only six.

If you're sick of all this offshore drilling talk (and I certainly am after writing this piece), then take a look at this report by my colleague Christian DeHaemer.

On a recent trip to Mongolia, Chris discovered a small company with BIG oil reserves. History buff that he is, Chris titled the report "Stalin's Lost Oil".

It's an interesting story with a tempting profit opportunity.

Until next time,

Adam Sharp
Analyst, Wealth Daily

4 Reasons to Own Google (NASDAQ: GOOG)

Here are four reasons you should own Google (NASDAQ: GOOG).

#1) They're a Cash Machine

In Q1 2010, Google pulled in $1.9b net income (after expenses and taxes).

And they're currently sitting on a war chest of $26 billion ($83/share) with zero debt to worry about.

Having that much cash sitting around might seem like a waste of capital, but GOOG has been using it to quietly gobble up smaller tech firms...

Companies like Admob, the leader in mobile advertising. Google recently acquired them for $700m.

Mobile advertising is still in its infancy, and I think this is one of those acquisitions that might seem expensive today, but will pay off many times over in the long run.

To get an idea of cash flow, if Google wanted to pay a dividend, they could support a 3%-4% yield and still grow revenue at ~20% year over year. It's a cash machine with solid growth.

~~SIGNUP_WD~~

#2) Search: Best of Breed

Google is light-years ahead of the competition when it comes to search technology. And search is what brings in the money (for now).

As an example, let's look at what Yahoo! gives us if we search for 8 million dollars in euros.

Yahoo gives us an ad for converting euros into dollars, then the first real result is Wikipedia's page on millionaires.Not exactly what I was looking for.

Let's see how Google does:

Exactly what I was looking for. That's just one example of how far ahead of the competition Google is. If you're not convinced, do some comparison searches and you'll see what I mean.

#3) Android & Mobile

Google's mobile phone operating system, Android, has seen incredible growth since it launched in 2007. It has already snatched up 9% of the smartphone market, and is growing at the fastest pace among all OSs.

Motorola's (NYSE: MOT) highly anticipated "Droid X" is set for release later this month, and it's powered by Google software. Some people are already calling it an iPhone killer, but that's a bit much to be honest. I'll go with "legit iPhone competitor", which is a big statement in and of itself.

The Droid X will sport a 4.3" screen and an 8 megapixel camera, fully support Flash 10.1, and be usable by left-handed people (unlike the iPhone 4). It has 8gb of internal memory, plus you can add up to 16gb via flash memory cards.

Google gets revenue from multiple aspects of mobile.

First, their partners who manufacture the phones pay for full access to Android software development tools; they also pay for access to Google Maps, Youtube, Gmail, and other tools.

Google also gets the lion's share of search revenue, and like Apple, gets a percentage of sales from their App store.

#4) Docs & Apps

Google's suite of productivity tools plus Gmail is catching up to Microsoft. Google Docs — which allows users to upload, store, and edit documents online — is gaining market share rapidly.

Premium versions are being sold to businesses and large organizations, and the costs are far lower than using traditional Microsoft software. This part of Google's business should see strong growth over the coming years.

Those are four big reasons I like Google here.

The stock has had a nice pullback lately, and I think we're currently at a good entry point.

GOOG is a stock I like to own in my IRA... For me it's a long-term investment, not a quick trade.

Key Stats:

Market Cap: $142b
Trailing P/E: 20
Forward P/E (est): 14
Cash: $26.5b
Revenue growth (YoY): 22%
Earnings growth (YoY): 43%

A pristine balance sheet, impressive growth, great technology, and a reasonable valuation.

Not much more you can ask for in a big tech stock.

Disclosure: Long GOOG

Until next time,

Adam Sharp
Analyst, Wealth Daily
Disclosure: Long GOOG shares

Samurai Super Alloy

It was the secret ingredient that turned an ordinary sword into the legendary Samurai Katana — the deadliest weapon before the arrival of modern rifles.

Today, it's crucial to the $987billion/year global steel industry... And the world's supply is quickly running out.

Find out how a tiny mining company sitting on one of the last untapped deposits of this metal could hand you 2682% — in the next 12 months!

Where BP Went Wrong

"What the hell have we done to deserve this?"

— BP CEO Tony Hayward, in reported remarks to BP executives following the Macando well explosion

We are now 70 days into the Gulf oil spill crisis and the disturbing details keep rolling in. I keep going back to that question posed by Mr. Hayward shortly after the explosion.

So here's my answer...

Dear Mr. Hayward,

Enclosed is my reply to your question, What the hell have we done to deserve this?

If you wish to refute or respond to any part of it, please email me at adam (dot) sharp (at) angelpub (dot) com.

Without further delay, here is precisely what your company has done to deserve this.

You cut costs and placed profits over safety.

This is the big one. The Wall Street Journal recently reported that your firm frequently used a cheaper well design, known as "long-string." The more expensive option — a "liners" design — offers more protection against a gas blowout like the one experienced on the Deepwater Horizon.

In this case, the $7 million or so you "saved" by using the cheaper design may end up costing you $100 billion+.

Also, the New York Times reports that BP's business model is based on acquiring smaller firms, then slashing costs by skimping on safety and experienced personnel:

Mr. Browne had built BP by taking over other oil companies, like Amoco in 1998, and then ruthlessly cutting costs, often firing the acquired company’s most experienced engineers. Taking shortcuts was ingrained in the company’s culture, and everyone in the oil business knew it.

Apparently the Macando well was behind schedule; it appears that the process was rushed to make up for lost time. Consider the WSJ editorial by Terry Barr, President of Samson Oil and Gas.

Mr. Barr wrote an extremely detailed piece that rips BP's operations to pieces. Here's the conclusion — though I do recommend reading the whole article:

This well failed its casing integrity test and nothing was done. The data collected during a critical operation to monitor hydrocarbon inflow was ignored and nothing was done. This spill is about human failure and it is time BP put its hand up and admitted that.

WSJ reader Donald Ferrel summed it up well in the comment section:

By relying on the blow out preventer, BP did the equivalent of jumping out of an airplane knowing that the main chute was faulty and relying on the back up chute. No responsible person one would do that. BP's backup didn't open.

Every step of the way, it seems your managers placed cost savings and expediency over safety and responsibility.

Secondly, you downplayed the size of the spill.

Since the explosion, your organization has done much to make things worse.

First and foremost is underestimating the size of the spill. This undermined response efforts and cost responders desperately needed time.

The Deepwater Horizon exploded on April 20th. As far back as April 29th, government agencies were using flow rate estimates of 64k-110k barrels per day. The image below is from a video released by NOAA on the spill response.

This image is from 04/30/2010 — yes, just 10 days after the Deepwater Horizon sank.

Note: 5k bpd was the official number at that time.*

*red MS paint edits are editor's

Any suggestion that BP did not know about these higher estimates is suspect. They were the only ones with access to HD video from the leak itself, until government pressure forced them to share...

And their own application to the MMS showed a "worst-case scenario" of 125,000 barrels per day escaping from the well.

Note: I am not placing any blame on the scientists at NOAA. These guys are working around the clock and doing a critically important job, for which they deserve our thanks.

Unfortunately, I suspect there is a political nightmare unfolding around them as BP and politicians fling blame and marching orders around haphazardly.

And so concludes my response to Mr. Hayward's ridiculous question.

To be fair, it is unclear how much responsibility Hayward himself bears for the accident. He took over leadership of BP in May 2007, just over three years ago. While that is a significant amount of time, changing a corporate culture can be difficult.

Hopefully we will learn how hard he was truly trying.

Until next time,

Adam Sharp
Analyst, Wealth Daily

P.S. My colleague Keith Kohl has been highlighting onshore drilling opportunities for years. His latest report explains how to profit from the pullback in offshore drilling. It's a good read, and the picks look interesting.

Editor's Note: I should disclaim that I currently short BP stock. Also, sources used in this story include NOAA whiteboard photo, Free Republic, and WSJ: BP relied on "Cheaper Wells."

Real Worst-Case Scenario for BP: 20m barrels, $560b Damages

As recently as June 10, London-based J.P. Morgan analyst Fred Lucas told clients that BP (NYSE: BP) is a screaming buy. But current "back of napkins" estimates employed by JPM and others to determine the scale and cost of the disaster are far too low, in my opinion.

Given what we've learned in the last month, I suspect that even current "high-end" estimates will look optimistic in hindsight. My own estimates are much higher than everything else I've seen. Of course, my numbers are really just guesses, like everyone elses. Naturally, I think my numbers are more accurate. With that out of the way, here is my analysis of the worst-case scenario for BP and the Gulf of Mexico.

J.P. Morgan's BP analyst is one of the few to venture a guess as to how much oil (total) will be leaked into the Gulf. So I applaud Mr. Lucas for putting the opinion out there, even though I disagree with his current conclusion.

The WSJ reports that the Mr. Lucas' "worse-case" estimate is 1.9 million barrels leaked into the Gulf, all told. (So does "worse-case" mean worse than the current estimates, or a worst-possible scenario? Could be a typo, could be legalese.)

With official barrel-per-day (BPD) rising from 0 bpd initially, to 1,000, to 5,000, to 12,000, to 19,000, to 30,000, all the way to the latest official estimate of 35,000 to 60,000 barrels per day, it seems unwise to assume the trend of increasing estimates will end at any given time (it should be noted that quotes from the JPM buy rec are from a June 10 interview in the WSJ).

My current worst-case scenario: 20 million barrels leaked into the Gulf, and $560 billion in damages. Let me explain how I arrived at that number.

Update: As I was writing this piece, the official FRTG estimate jumped from 20,000-40,000 to 35,000-60,000.

The group in charge of official estimates, the Flow Rate Technical Group or FRTG, has been hesitant to give exact numbers and opinions of all scientists involved. (update above). I spoke with NOAA officials yesterday, and they would not comment on whether the previous 20k to 40k range was actually the low end of a broader range, rather than a median or consensus estimate. They did mention a new official estimate was out soon, but referred all questions on flow rates to the USGS and FRTG.

0 to 60,000 BPD, Will It Stop Here?

As far back as May 21st, a NYT editorial by independent experts said 100,000 bpd is certainly not out of the question. So it seems logical to include those numbers in a worst-case analysis.

Let's run a few scenarios using different inputs for barrels/day (BPD) and number of days until the leak stops. Note: 35,000 represents the low range of the latest official estimate. Total barrels leaked will depend on future revisions of how much oil has leaked out over time, as the flow varies.

BPD	Days	Total Barrels Leaked
35,000	56 (today)	1.96 million
35,000	100	3.5 million
60,000	200	12 million
100,000	200	20 million

Worst-Case Cost Estimates for BP, Based on Valdez Costs

Keep in mind that the Exxon Valdez tanker spilled a relatively small 250,000 barrels of oil into Prince William Sound. That disaster cost Exxon around $7 billion, adjusted for inflation.

The Gulf disaster could end up being 10-80x larger than Valdez in terms of barrels spilled, based on the scenarios outlined in the table above. That would mean 2.5-20 millon barrels spilled close to the Mississipi Delta. It's an area which is arguably more important, by an order of magnitude, than Prince William Sound, where the Exxon Valdez ran aground. Thinking about the long-term environmental damage is overwhelming.

To summarize: My total economic damage estimate range, based on the Exxon Valdez model multiplied by how much larger this spill/leak, is $70-$560 billion.

Relief Wells

The original effort to stop the main wellhead gusher appears to have been abandoned. The focus is now on capturing as much of the leak as possible until a "bottom kill" using relief wells can be attemped.

In his analysis, J.P. Morgan's Mr. Lucas also assumes that relief wells will succeed by July 4th. Everyone wants these wells to work, but it seems reckless to use July 4 as the base assumption for analysis, especially when you call it worse-case.

Most analysts do not expect relief wells to succeed until August at earliest, with Business Week reporting that efforts could take until Christmas.

We have no idea how much oil is leaking into the Gulf right now. Even after the recent revisions, those estimates could go higher. One big reason for this uncertainty is that current estimates are all based on flow rate from the main leak(s).

Oil Leaking from the Seafloor?

Some evidence is emerging that oil is now leaking directly from the seafloor, not just from the broken wellhead. Consider this video shot from an ROV on the seafloor, reportedly shot from one of two ROVs from the Viking Poseidon.

Keith Olbermann of MSNBC reported on the possibility of oil leaking from the sea floor on his show, which aired June 8th.

It's not a happy situation. I don't want the Gulf to suffer or BP to go under. I bought BP shares on May 4th, stopping out for an 8% loss a few days later. So I understand the temptation to value-shop. But facts have emerged over the last month that dramatically change the situation, as I explained here on June 1st.

Unless we start preparing for a true worst case scenario, we will not be ready for the economic, environmental, and financial impacts it could bring.

Note: I am currently short BP and own puts, so please assume this analysis is biased. I do not think it is, but welcome refutations and/or corrections. One might consider the possibility that Wall Street firms who count BP as a client may be unintentionally biased, as well. Do your own research, this is not investment advice. It is the solely the opinion of the author.

Adam Sharp
Guest Editor, EnergyandCapital.com

Perfect Storm for Palladium Prices

Sometimes I mention palladium to investor friends.

I usually get puzzled looks and questions like, "Isn't that stuff radioactive?"

Nope, it's not radioactive. Palladium is a rare precious metal with lots of industrial uses, primarily in catalytic converters — the devices in every car that clean up exhaust fumes.

Interest from investors is growing as well. They're buying bullion bars, like the 1oz Credit Suisse bar seen here ->

The popularity of the new physical palladium ETF (NYSE: PALL) is also adding to the demand squeeze.

The combined demand from investors and industry is pushing palladium prices higher... And we think there's plenty of upside left.

Check out this chart showing projected palladium supply and demand:

See that red line? That's projected demand, and it makes a pretty picture for palladium investors. The black part of the bar chart represents Russian stocks of palladium. From 2005 to 2009 they were dumping their stocks on the market, supressing prices. Now that they appear to have exhausted their stocks, prices should continue to move up.

The palladium demand picture

Palladium is closely related to platinum. It's important to note that platinum is the only precious metal that has consistently maintained a higher price per ounce than gold — and that's primarily due to platinum's use in catalytic converters.

But palladium is rapidly becoming the metal of choice for the auto industry. It's easy to see why, as it costs less than one-third as much as platinum does.

Auto demand currently accounts for about 50% of palladium demand. Spiking auto growth and new emissions standards in emerging nations like India and China will ensure strong demand for the foreseeable future.

Its use in electronics, jewelry, and dental work account for about 30%. Investors currently account for around 20% of demand, but I expect that number to rise in the coming years.

An underdog play

As the least well-known of the "big 4" precious metals, palladium doesn't get the respect that gold, silver, and platinum do.

But in my opinion, it has the most upside of the bunch. We've been recommending it since it traded at $320/ounce in November 2009 (current price: $451/ounce).

As palladium demand from all sides continues to rise, the price will too.

It's emerging as a way for investors to store wealth, hedge against inflation, and speculate on industrial demand.

My friend Luke Burgess just released a report on his favorite ways to play the palladium demand surge. His research led him to two companies set to reap huge profits from growing auto industry demand.

Check it out, it's worth a read.

Until next time,

Adam Sharp
Analyst, Wealth Daily

P.S. To keep tabs on the latest Gulf Oil Spill developments, check out this page on our sister site, Energy and Capital. This disaster is a hard one to watch unfold, but the implications for investors are going to be crucial...

Latest Gulf Oil Spill Updates: News, Pictures, Video Feeds

Follow the lastest BP Gulf Oil Spill news here, with updates throughout the day. A mishmash of pictures, news, videos, and resources.

July 18 updates

Oil Seeps Discovered at Well (Bloomberg Businessweek): U.S. tells BP to uncap well to prevent further damage. Expect a volatile day for BP shares tomorrow. From Thad Allen, head of the response team:

"Allen said a “seep” was found “a distance” from the well and anomalies had been observed at the well head, in a letter sent today to BP Chief Managing Director Bob Dudley that was posted on a government website about the spill.

July 15 updates

BP chokes off leak, now begins the wait (Yahoo/AP): "BP finally choked off the flow of oil into the Gulf of Mexico on Thursday — 85 days and up to 184 million gallons after the crisis unfolded — then began a tense 48 hours of watching to see whether the capped well would hold or blow a new leak."

From Gulf Oysters, A Domino Effect of Lives Touched (NYT): Looking at domino effects from the spill, from personal and environmental perspectives. Good read.

July 8 updates

BP says Gulf spill could be stopped this week (Washington Post): Let's hope so. The question for BP and Gulf residents is this: ultimately how much damage will be done by the oil, gas, and dispersants already released into the Gulf? Nobody knows, with guesses ranging from barely-noticeable to apocalyptic.

Florida Outlines Spill Response (Gov Monitor): A nice overview of Gulf currents, oil footprints, and beach soilings.

July 7 updates

No sovereign relief for BP (WSJ): Interesting developments in BP's quest for cash: "The logic is fuzzy. BP says it won't issue new equity to help pay for clean-up costs in the Gulf. If so, any investment by a sovereign fund would not provide new capital to shore up BP's finances."

Abu Dhabi: Once Burned by Citi, Twice Shy with BP? (WSJ): Abu Dhabi invested $7.5b in Citigroup with a disastrous ending. Will they do it again? "Its like deja vu all over again. One of the world’s biggest multinational companies flounders amid dire predictions that it could go bust or be nationalized, and a deep-pocketed white knight from the Middle East stands at the ready."

June 25 updates

BP Plunges to 14-year Low on Spill Costs, Storms (Business Week): Covers hurricane concerns, stock drop.

No Gulf seafood, no po-boys; owner shuts La. cafe (AP): Detailing the closure of a seafood cafe in Louisiana, due to rising seafood costs

BP says Gulf relief well on target for mid-August (AP) The first relief well could attempt a "bottom kill" procedure by mid-August.

June 22 updates

Anadarko Hopes Blame Is Pinned on BP (NYT): "Rival oilmen have every reason to cast BP as a rogue."

Stop The Gusher: A Collaborative Effort (Democrasoft.com): Give your best ideas on how to cleanup/stop the Gulf oil spill, screen the ideas of others, comment, vote. Interesting idea.

Record 26k barrels captured yesterday (WSJ) 16k barrels recovered, 10k flared.

Latest NASA satellite image of the spill:

June 20 updates

Hurricanes and the Spill: NOAA Fact Sheet (PDF) (NOAA.gov) Scientists discuss how hurricanes could effect the BP oil spill, in both positive and negative ways.

Slower growth, no dividend: BP is no buy (Forbes) Interesting take from Forbes reporter Anita Raghavan.

June 19 updates

Gulf oil spill: a hole in the earth (Guardian) Outlines mistakes made and the possible environmental damage, based on what we know from previous spills.

The oil disaster is about human, not system, failure (WSJ editorial by a O&G exec): Terry Barr, an O&G insider: "This well failed its casing integrity test and nothing was done..."

June 18 updates

BP's Quest for Time (EAC): "The Dwarves dug too greedily and too deep. You know what they awoke in the darkness of Khazad-dum..."

Embattled BP Chief Hayward Taking Back-Seat in Gulf Response (ABC News): "Embattled energy giant BP appears to be shuffling CEO Tony Hayward out of the spotlight a day after the British native roiled Congress with what critics called "evasive" testimony..."

June 17 updates

Anderson Cooper Becomes Loud Voice for Gulf Residents (NYT): He recently caught flack for mentioning an estimate of 70,000 BPD, with everyone dismissing his claims. Now that the upper-limit has been raised to 60,000.

Stunning photos of the Horizon rig sinking from National Geographic: Here's one from their gallery. Gives some idea of just how big these rigs are:

BP supervisor fired for raising safety concerns (Huffington Post) The case of Ken Abbott, a project control supervisor on BP's Atlantis rig. He was fired shortly after raising safety concerns.

Sea creatures flee oil spill, gather near shore (AP): Duke marine biologist Larry Crowder, "A parallel would be: Why are the wildlife running to the edge of a forest on fire? There will be a lot of fish, sharks, turtles trying to get out of this water they detect is not suitable."

Oil spill may cost BP far more than $20 billion (LA Times): "One of the problems is that we don't even know if $20 billion will be enough. This is all on an unprecedented scale"

June 16 updates

BP and Obama Tentatively Agree on $20b Oil Spill Fund (NYT): Headlines will say an agreement has been reached. That's not true yet. There will be fierce arguments over the details, and I don't expect them to be settled any time soon. At some point, if people are not getting the compensation they need, things will come to a head.

Obama hammers BP in Oval Office speech (Washington Post): "We will make BP pay for the damage their company has caused".

June 15 updates

Matt Simmons says Nuke is Only Way to Cap Oil Leak (Bloomberg TV): Here's to hoping he's wrong...

This short documentary shows how Russians sealed a massively out-of-control natural gas well using a small atom-bomb in 1966. Pretty obvious propoganda, but interesting nonetheless:

Obama: 'We will make BP pay' (Daily Finance, June 15) Obama talks tough to BP in his national address. Historical note: he also talked tough to banks in his inagural address. He proceeded to follow the Rubinesque school of economics, and shunned Paul Volcker until his poll numbers plummeted. Expect public reaction to be the key driver going forward.

Alternative Worst-Case for BP: 10m barrels and $560b in damages (me, here on June 15): My analysis here uses current high-end barrel-per-day and total costs based on the Exxon Valdez to arrive at rough worst-case scenarios.

Gulf Oil Spill to Spur Clean Energy Transition (Green Chip Stocks, June 15) Nick Hodge says that the BP spill, along with other recent events, "are speeding up this transition in a way not seen before".

U.S. Adds Measures to Check Gulf Seafood (WSJ, June 15) The U.S. government is adding measures to protect consumers from eating any seafood tainted by the oil spilled into the Gulf of Mexico, including moving inspections onto docks, targeting additional sampling of vulnerable products and creating a protocol to reopen fishing areas.

Efforts to Repel Gulf Oil Spill Are Described as Chaotic (NYT, June 14): Campbell Robertson of the NYT discusses problems on the ground, lack of adequate response tools in place prior to the disaster. My take: Expect tomorrow to be another volatile day for BP shares, with the recent flood of news and President Obama scheduled to address the nation at 8:00 pm EST (coincides with close of after-hours trading in U.S.).

Exxon Throws BP Under Bus, Defends Safe Offshore Drilling (Exxon Mobil, June 14) Exxon Mobil has launched new blog, presumably to distance selves from BP and defend the overall offshore drilling industry. Excerpt from a post: "this incident represents a dramatic departure from the industry norm in deepwater drilling".

BP Remote-Operated Vehicle (ROV) shows oil leaking from sea floor (June 13):

The leak starts off as a trickle, but keep watching. It appears that the fissure spreads and there are significant clouds of oil/gas visible.

BP made series of "shortcuts" on oil well, House democrats say (Washington Post, June 14): "The letter lays out five decisions BP took 'to speed finishing the well,' which was running 'significantly behind schedule,' the lawmakers say. 'In effect, it appears that BP repeatedly chose risky procedures in order to reduce costs and save time and made minimal efforts to contain the added risk,' they said."

South Florida: We're on our own if oil comes (Palm Beach Post, June 14): Pressure on BP to hand off compensation operations to an independent party grows.

Chevron Distances Its Ways from BP's (WSJ, June 14): "This was a preventable disaster" says John Watson, Chairman and CEO of Chevron (NYSE: CVX). Chevron has the largest offshore drilling operations in the gulf, and the moratorium could adversely affect their business. Prepare for a nasty battle this week as the blame-game escalates.

Experts: Spill may not be capped till December (Guardian, June 13): "Saleri, who dealt personally with four blowouts during a career with Saudi Aramco and Chevron, said the BP fire and spill was the worst he had seen. He believes it may cause more damage than the Ixtoc I blowout 30 years ago, which is regarded as the most damaging of its kind."

BP May Lose Oil Leases, Contracts as Punishment for Gulf Spill (Bloomberg Businessweek, June 13): "BP Plc may lose control of its U.S. oil and natural gas wells and be barred from doing business with the federal government as punishment for the worst oil spill in U.S. history, industry and regulatory analysts said."

Obama to Call for Escrow Account and Independent Panel for BP Claims (Politico, June 13): It'll be interesting to see how BP shares respond on Monday.

Gulf businesses say compensation from BP too slow (USA Today, June 12): Profiles businesses directly affected by the spill, gives a good overview of the situation. Excerpt: "Instead of tending to customers, the owner of the 68-room Best Western hotel in Navarre, Fla., is tending to BP claims adjusters".

U.S. Gives BP 48 Hours to Boost Containment (Bloomberg, June 12): American politicians continue to step-up the pressure on BP. Excerpt from the article: "BP plans to almost triple its capacity to capture oil from its leaking well to as much as 50,000 barrels a day by mid-July, the Coast Guard said yesterday.

Lessons learned from Exxon Valdez (Miami Herald, June 12): Expert Rick Steiner, "There's really no easy way to rehabilitate oiled wildlife, no easy way to restore an oil-injured ecosystem and there's certainly no easy way to make lives whole that were turned upside down by these things. Those are lessons we learned the hard way in Alaska and they're lessons that are being learned here, very poignantly."

Florida skips offshore oil-binge but still pays (New York Times, June 12): Neighbor Louisiana earns $65 billion per year from the oil and gas industry. Florida, not wanting to risk their tourism industry, played it safe. But they may end up as the biggest loser, despite their conservative strategy. Expect Florida to demand a piece of Lousiana's revenue to assist in cleanup efforts if BP can't or won't cough it up.

Obama meets with Cameron, says BP "must meet economic claims" (Reuters, June 12): On Saturday President Obama had a 30-minute call with UK Prime Minister David Cameron, insisting BP pay all compensation claims, including ones from workers idled by the drilling moratorium.

Feds tell BP to get more aggressive with capture plans (CNN, June 12): "Federal authorities have ordered BP to get more aggressive with its plans to recover thousands of barrels of oil spewing from a broken well into the Gulf of Mexico, according to a letter made public Saturday."

BP's 8 Stupidest Mistakes (The Week, June 11): Self-explanatory.

Oil Spill Trajectory Simulation, 4 Months Out (EAC, June 11): "The video below shows results from a 4-month computer simulation, showing a path that could take the oil spill all the way to Cape Hatteras, North Carolina, and far out into the Atlantic."

Gulf Real Estate May Lose $4.3 Billion in Value Due to Oil Spill (Bloomberg, June 11): Costar... made its forecast for property prices assuming a 10 percent loss based on previous disasters, such as oil spills, hurricanes and the 1979 Three Mile Island nuclear accident in Pennsylvania, Miller said."

Scenes from the Gulf of Mexico (Boston.com, June 11): Some of the best photojournalism we've seen so far, but also among the most troubling. It's focused on wildlife, so don't click this one if you are disturbed by images of oil-soaked animals.

NASA Satellite Images of the Gulf Oil Spill: (Green Chip Stocks, June 11th): Some of the best aerial imagery we have of the spill, and a coast-guard flyover video with some large-scale shots of oil ribbons (looks like it was shot with a camera-phone, or lower quality video of some sort.

Exxon Still Owes $92 Million for Valdez Spill (Seattle PI, June 10): Food for thought when it comes to the upcoming legal battle, which is destined to be larger than Exxon's 1989 tanker spill.

U.S. initially refused Dutch oil skimmers, then changed their minds 7 weeks later (Houston Chronicle, June 9): This story has been around for a while, but more disturbing details are emerging. Three days after the Horizon explosion, the dutch government offered BP and Obama administration officials specialized skimming equipment capable of removing 20,000 tons of oil per day. It's now 7 weeks later, and those in charge of the cleanup are changing their tune.

Will BP Go Bust?: One of my articles posted here on June 1, exploring the possibility of a BP bankruptcy.

More Resources:

Oil Spill Tracker - Interactive tool to track the oil spill
Drilling Mud 101 - NYT article explains how "drilling mud", which has become a new (and possibly poorly understood) household word, works.
Google's Oil Spill Response Page - Download Google Earth files of the spill, view trajectory forecasts, browse user-uploaded videos, and more.
Oil Spill Fixes - Interactive Timeline from the New York Times
NOAA Interactive Coastal Ecosystem Map - Be sure to click the ridiculous "disable disclaimer" button in the bottom-left of the left sidebar. They don't make it easy, do they? But I guess there are all sorts of political hoops to get through. So let's take a second to appreciate whoever took the time to build this and push it through to the web, despite the potential fallout if it makes anyone look bad.

Must-watch video - Marine Biologist Rick Steiner Discussing Long-Term Damage & Dispersant Use (Time Magazine, June 11).

Live BP Oil Spill Feed

Streaming Video by Ustream.TV

Images (updated daily):

NASA Satellite Image. Description: "On June 12, 2010, oil from the still-leaking Deepwater Horizon well was particularly visible across the northern Gulf of Mexico when the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Aqua satellite captured this image at 1:55 p.m. Central Daylight Time. Oil appears to have reached beaches and barrier islands in Alabama and the western Panhandle of Florida. Close to the location of the well, the oil appears gray, but to the northeast, it is bright silver. The increased brightness does not necessarily mean the oil is thicker or more concentrated there; it may simply be that the oil is located in the sunglint region of the image—the spot where the Sun’s reflection would appear if the water surface was as perfectly smooth as a mirror."

A crude oil wave washes up on the Alabama Shores on Saturday, June 12 (credit: AP)

4-Month Trajectory of Gulf Oil Spill Shows Grim Outlook

Predicting the path of the Gulf Oil Spill is no easy task. NOAA is viewed by some as the authority in this field. But they're currently only providing 24, 48, and 72 hour trajectory forecasts to the public.

Recently the National Center for Atmospheric Research (NCAR) weighed in on the issue. The video below shows results from a 4-month computer simulation, showing a path that could take the oil spill all the way to Cape Hatteras, North Carolina, and far out into the Atlantic. As you can imagine, it's stirred up quite a bit of controversy.

Here is more information on the video from NCAR. Note: this was published June 2nd 2010, 8 days ago. Since then, estimates on how much oil is leaking into the Gulf have at least doubled. So I would expect a current version to show higher concentrations of oil.

This animation shows one scenario of how oil released at the location of the Deepwater Horizon disaster on April 20 in the Gulf of Mexico may move in the upper 65 feet of the ocean. This is not a forecast, but rather, it illustrates a likely dispersal pathway of the oil for roughly four months following the spill. It assumes oil spilling continuously from April 20 to June 20. The colors represent a dilution factor ranging from red (most concentrated) to beige (most diluted). The dilution factor does not attempt to estimate the actual barrels of oil at any spot; rather, it depicts how much of the total oil from the source that will be carried elsewhere by ocean currents. For example, areas showing a dilution factor of 0.01 would have one-hundredth the concentration of oil present at the spill site.

The animation is based on a computer model simulation, using a virtual dye, that assumes weather and current conditions similar to those that occur in a typical year. It is one of a set of six scenarios released today that simulate possible pathways the oil might take under a variety of oceanic conditions. Each of the six scenarios shows the same overall movement of oil through the Gulf to the Atlantic and up the East Coast. However, the timing and fine-scale details differ, depending on the details of the ocean currents in the Gulf. The full set of six simulations can be found here. (Visualization by Tim Scheitlin and Mary Haley, NCAR; based on model simulations.)

The video above shows 6 models. Note: the "virtual dye" in these models was injected near the surface. Other models that inject the dye deeper show a less dramatic spread.

See more of these models at NCAR's website. There are tons more videos, graphs, PDFs, and more for those who are interested.

And check back soon for more charts, video, and pictures as we learn more about this ongoing disaster.

Stock-Picking Contest Update: We Have a Winner

Wealth Daily's first stock-picking contest is over. Thanks to all who participated, and congratulations to the winners.

230 readers battled it out over the course of a month, each given $100,000 in virtual funds to invest.

The winning reader was able to book impressive (virtual) gains of 136% during the contest. Not a bad month, to say the least.

For much of the competition, it was a nail-biter. The top-ranked players were all hovering around the 45% gain mark...

Blue Ribbon

But towards the end of the contest, user Gotanger pulled ahead like Seabiscuit in the final stretch (excluding that last race...)

Gotanger ended up crushing the competition and boasting 136% gains by the end of it all. She or he turned $100k in virtual funds into $236k in 30 days. Not bad, especially when you compare it to the S&P 500's -7.6% return over the same period.

Gotanger will receive $1,000 in cash, plus a complimentary subscription to Wealth Trust ($4,495 value) — allowing full access to all of our premium research tools, for life. Nice trading. Watch for interviews with Gotanger on their winning strategy soon (if he or she agrees).

Second and Third Place

Second place went to a reader going by the handle "bighorn", who racked up impressive 45% gains during the contest. User "yeshkar01e" came in a close third, gaining a close 43%. Since the second and third place prizes are identical, I guess that doesn't really matter, though.

As the 2nd and 3rd place winners, Bighorn and Yeshkar01e will receive two-year subscriptions to Steve Christ's Wealth Advisory ($149 normally).

These Wealth Daily readers managed to book (virtual) returns of 136%, 45%, and 43% in just one month. That's some impressive short-term calls.

Impressive trading all-around. Congratulations and thanks to everyone who particpated. Watch for updates on what the winners were trading in the near future.

Note to winners: Please contact me at adam.sharp@angelpub.com to arrange prize delivery, if you haven't already. Include your VSE username and email for verification purposes.

Watch for another stock-picking contest later this year.

Sincerely,

Adam Sharp
Analyst, Wealth Daily

Will BP Go Bust?

Three weeks ago I wrote an article titled, "Hold Your Nose and Buy BP Stock." That made writing this piece a bit... awkward.

But I'm not one to shy away from mistakes. It was a bad call.

That said, I sold my BP shares for an 8% loss a few days later (and posted a comment to notify readers). That was around the time when it became apparent that BP and reality were out of touch.

Officials from BP were still saying the leak was only gushing 5,000 barrels of oil per day. But good ol' fashioned journalism by Richard Harris and others at NPR said otherwise... They went out and interviewed scientists who are experts in the science of flow-rate analysis to get estimates on how much oil is really leaking out. (Curious that BP or the EPA hadn't thought of this... )

When those estimates indicated 5 to 20 times higher levels than BP was estimating, I got worried and sold. It helped me avoid a bigger loss on my BP shares, but the broader implications are what really disturbed me.

Now that we know the top-kill effort appear to have failed, I am seriously starting to think that BP may not survive this event. And I'm not being hyperbolic here; if I had to hazard a guess, I'd say there's at least a 40% chance BP will not find their way through this mess.

When I had the bright idea to buy BP, it really did look like a bargain. It was a $170b company that lost 20% of its market cap (around $30b) due to a disaster that might result in up to a one-time charge of $6b(?!)... $6b is chump-change to a company with an average daily profit of $43 million (in 2009).

The dividend yield on BP was also tempting (another reminder where the term "dividend trap" comes from). But that was before we knew just how bad the disaster would become... and how poorly efforts to plug the leak would go.

Compared to Valdez

The Valdez grounding dumped 11 million gallons of crude into the ocean. Using the most conservative estimates, the Gulf disaster has already released 18 million gallons, and that number may be much higher — 100 million or more.

The Gulf Coast is also a much more important (environmentally and economically) area than Prince William Sound, where the Valdez went aground.

In inflation-adjusted terms, Exxon's Valdez disaster cost around $7b all told. This is going to be much, much bigger than that.

Nobody knows exactly how much the spill will end up costing BP. Early estimates ranged from $500m to $3b. Those estimates have been steadily rising.

I'd be shocked if the total bill came in at less than $50b; $50b is the low end of my range, which goes up to around $200b.

Could BP raise $200b if they needed to? Maybe, but I doubt it... Such a huge capital raise would be unprecedented, as far as I know.

One of the other majors may step in at some point and buy BP, but that would be taking a huge risk (and may not even pass scrutiny over monopoly concerns).

At Least Two More Months of Oil Gushing into the Gulf

With the top kill effort having failed, experts say we're looking at at least two more months of oil gushing into the Gulf of Mexico. That's how long it is estimated that the relief well will take to complete.

And we don't know for sure that the relief well will work. It's a mess.

The more I learn about this debacle and BP's disastrous management of it, the less confidence I have in their survival. Their safety and environmental record is simply atrocious, as shown by this shocking report by the Center for Public Integrity.

I honestly don't see how BP can survive in its current form. Maybe they can, but I'm starting to think they're destined for a date with bankruptcy...

Update: Fixed some barrel/gallon typos.

Shares disclosure: No position.

JP Morgan and Silver Prices

Earlier this month, something strange happened in silver markets.

I was sitting at my desk, eating some Fritos and daydreaming about the upcoming weekend.

Suddenly, silver spiked 5% and I was jolted out of my pleasant daze.

The move happened fast and silver barely budged for the rest of the day. Clearly, something happened. Action like that shown in the chart below doesn't just occur naturally in the market.

The red line shows 1-day silver prices for Friday, May 9th.

(chart courtesy of kitco.com)

I walked over to my colleague Ian Cooper's desk. "What the hell's going on with silver?" I asked.

He didn't know. Nobody did. A news search turned up zilch.

Gold was near flat and ended the day up less than 1%. The dollar was down, but only by 0.5% or so. So the silver move was isolated.

The price jump was a mystery, apparently — the good kind of mystery, if you own silver miners and bullion like I do.

I didn't think anything else of it.

But over the weekend, I came across an article that may shine some light on the spike...

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On May 8th, the NY Post featured a story about JP Morgan's (NYSE: JPM) possible role in silver market manipulation. According to The Post, the CFTC and Justice Department have launched both civil and criminal investigations into the matter.

JP Morgan has long been accused of depressing silver prices, along with several other "bullion banks." Some theories say they are acting as agents of the Treasury Dept., keeping metal prices down makes the dollar more attractive as a reserve currency. Some think they're just doing it to reap huge profits by moving entire markets.

But this is the first we've heard of an official investigation with the possibility of criminal charges being filed.

Gold & Silver Conspiracy Theorists Vindicated?

Organizations like GATA (Gold Anti-Trust Action Committee) have been sounding the alarm about manipulation of precious metal markets for years. They accuse big banks like JP Morgan of holding "naked" shorts on silver and gold — meaning they are promising something they could never actually deliver.

GATA and other gold bugs have been dismissed as tinfoil-hat wearing morons all along (much like those who said Goldman Sachs was engaged in fraudulent sub-prime schemes... and we know how that turned out).

Now it appears that these "kooks" may have been onto something. They're not vindicated quite yet, but their story is starting to look a lot more credible. The non-believers among us may have to don tinfoil hats and do some groveling before this is all over.

Because this doesn't appear to be your typical wrist-slapping exercise, where the SEC fines a bank some percentage of the profits they reaped from the illegal act, and nobody is forced to admit fault.

We're talking about a full-blown criminal investigation by the Justice Department here. This could be huge.

Why Now?

Apparently Obama is taking notice of his abysmally low approval ratings. As a result, he's desperate to kill the widely-perceived notion that he's in bed with the banks.

Just a thought — but perhaps Obama shouldn't have stacked his appointees with banksters in the first place...

I digress.

Regardless, it's clear that the administration is putting pressure on financial regulators. The regulators, in turn, are putting the screws to the biggest (and most reviled) financial firms. We recently heard about the SEC's fraud case against Goldman Sachs.

And just this month, Moody's revealed that the SEC may revoke their status as an officially-recognized ratings firm.

Like all horribly-embarrassing corporate announcements, Moody's was made after the close of trading on a Friday. Evidently Moody's execs hoped everybody would forget about it by Monday. Not so, as shares traded down 8% the following Monday.

But the JP Morgan investigation could turn out to be the biggest case of all.

JPM is the largest financial firm in the United States, boasting $2 trillion in assets. They're also the largest hedge fund manager in the States, with $53 billion under management.

If it turns out they have been illicitly shorting billions worth of silver contracts, as some allege — and they're forced to buy bullion to cover that position — the result would be staggering.

Implications for Silver Prices

We don't know exactly how this investigation will affect silver prices going forward. But if the allegations prove true and banks are forced to cover massive short positions, a relatively thin silver market could see a big squeeze — and far higher prices.

But cutting out market manipulation is only one factor that may work in silver's favor.

Bernanke's printing press is the other big one. With interest rates likely to remain near 0% for years, inflation will inevitably rear its ugly head. Plus, you can forget about the Fed shrinking their balance sheet any time soon...

All that "exit strategy" talk is nothing more than bluster. I think the Fed is far more likely to expand buying programs further before they consider ditching the garbage on their books. As Milton Friedman pointed out, there's nothing so permanent as a "temporary" government program.

In the long run, American reliance on Fed easing will push precious metals prices higher. Ignore scare talk about deflation — it simply isn't allowed to happen in modern times.

In the Great Depression deflation was absolutely an issue — but the dollar was tied to gold back then. Bernanke will dump enough cash to drown Wall Street before deflation is ever allowed to occur. It would simply crush the big banks, and these institutions are too connected to fail.

How High Can Silver Fly?

More and more respected analysts are calling for $50 silver.

David Rosenberg, former head economist at Merrill Lynch, recently predicted gold would go to $3,000 over the next few years. If it does, I expect silver to outperform percentage-wise. The historic ratio of silver/gold is out of whack, and silver is due for a huge bull run.

If this scenario does play out, the best way to capitalize on it is through junior silver miners. These companies are highly-levered to underlying metal prices.

Well-chosen mining picks could easily see rise four times more than the metal itself does. If silver goes up 200%, a good mining pick could go up 800% or more.

My colleague Luke Burgess, editor of Hard Money Millionaire, has a report detailing his top three ways to play the silver bull market.

Luke gives his top silver stock pick, and the best way to buy silver bullion — plus details on how to invest in a unique security with the potential to generate 4-digit returns over the coming years. Learn how to cash in on monster silver bull-market here.

And stay nimble out there... This market has danger written all over it.

Adam Sharp
Analyst, Wealth Daily

Your IRA and 401(k) are in Washington's sights...

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EU Joins Currency Race to the Bottom

Business is booming for gold dealers in Euroland. Most coin sellers are completely out of gold, and they're starting to run low on silver, too.

The reason?

This month, the European Central Bank (ECB) made a historic decision — stupid and short-sighted, but historic nonetheless...

They decided to join Bernanke's money-printing orgy, gobbling up bonds and cutting interest rates to near zero.

The ECB's initial claims are that its version of QE will be "sterilized" — meaning that for every euro printed, one would be removed from the system.

But that wouldn't be a very effective way to print money, would it?

Pure Play on Chinese 11.9% Growth

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This small electric car company just became the bestselling car in China. And Chinese car sales are up 76%!

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We'll see if these so-called "sterilization" measures go into effect.

European finance officials are justifying their actions as a way to both defend the euro from further decline and fend off evil speculators.

If currency markets are any indication, they're failing in that mission so far. Since the plan was announced, the euro has dropped almost 5% against the dollar.

Doubts about the EU's future persist... and may have gotten even worse.

The Motive

The real force behind this QE wasn't a push to defend the euro; that obviously hasn't worked.

It's really just another bank bailout in disguise.

Banks worldwide — especially large European ones, like Deustche Bank — hold lots of debt from dodgier EU nations. As the value of these bonds plunged, the capital ratios of big banks deteriorated.

And as we know, it would be unfair to "punish" anyone for making bad loans. That would be far too laissez-faire for today's bank-welfare system.

Come on in, the Water's Fine

Europeans are right to be concerned about their shared currency. Healthy economies don't need to resort to quantitative easing, sterilized or not.

That's why Germans are flocking to gold and silver.

The ECB has dipped its toe into the QE pond. And once these things get rolling, they are very hard to stop.

Before you know it, the ECB will be splashing around with Bernanke and Geithner in the QE pool — printing up a billion here, a trillion there.

If the ECB doesn't go the true QE route, Southern Europe is destined for some very hard times ahead...

In either case — inflation or economic apocalypse — precious metals will offer protection.

Strengthening the Case for Precious Metals

Thus, the case for gold is getting stronger every day. With the world engaged in a currency race to the bottom, it's one of the few investments that makes sense.

Some are calling for an end to gold's run...

"Gold is a worthless druid metal," they say.

"How much interest does your gold pay?" they ask sarcastically.

Ignore these pundits — they're clueless.

Gold is not close to done yet. If this were a baseball game, I'd say we're in the third inning.

Just look back at the 70s. In 1971, when Nixon closed the gold window, it traded at $35/ounce. By 1974, it had risen to $195/ounce. In 1980, gold hit $850.

This chart best tells the story:

$35 to $850 — that's a 2300% increase in less than 10 years.

Compare that to the current gold bull market, where we're only up around 300%; it gives you some idea of how high gold prices could go.

Yes, the 1970s were a unique time in currency and precious metal markets... but today's events are arguably even more unprecedented.

We've never had interest rates this low for this long. The Fed has never printed so much money before.

Eventually, the time will come to sell gold. But we're not there yet... not even close, in my opinion.

What I'm saying is that if you haven't invested in gold yet — it's not too late. My favorite ways to play it are physical bullion (Canada's .999% Maple Leafs are nice) and junior miners.

If you own physical and junior miners, you get the best of both worlds. Bullion gives you security, and junior gold plays give you that homerun potential.

Our own Greg McCoach is arguably the best in the business when it comes to picking small gold miners. If you're interested, check out his latest report. He's calling it the "greatest gold find of the last 50 years."

When McCoach says something like that, I pay attention.

Until next time,

Adam Sharp
Analyst, Wealth Daily

Canadian Province Says "No" to Coal...

You thought the U.S. Government was intrusive?

Right now, Canada's new "Green ATF" is closing down coal/oil power plants all over British Columbia...

While funneling over $30 billion to companies of their choosing to pick up the slack.

Find out here which company will more than double in size as coal and oil are switched off.

JP Morgan's Alleged Manipulation of the Silver Market

On Friday, something strange happened in silver markets.

I was sitting at my desk, eating some Fritos and daydreaming about the weekend.

Suddenly, silver spiked 5% and I was jolted out of my pleasant daze.

The move happened fast and silver barely budged for the rest of the day. Clearly, something happened. Action like that shown in the chart below doesn't just occur naturally in the market.

The red line shows 1-day silver prices for Friday (chart courtesy of kitco.com).

I walked over to my colleague Ian Cooper's desk. "What the hell's going on with silver?" I asked.

He didn't know. Nobody did. A news search turned up zilch.

Gold was near flat and ended the day up less than 1%. The dollar was down, but only by 0.5% or so. So the silver move was isolated.

The price jump was a mystery, apparently — the good kind of mystery, if you own silver miners and bullion like I do.

I didn't think anything else of it.

But this weekend, I came across an article that may shine some light on the spike.

Saturday's NY Post had a story about JP Morgan's (NYSE: JPM) possible role in silver market manipulation. According to The Post, the CFTC and Justice Department have launched both civil and criminal investigations into the matter.

But this is the first we've heard of an official investigation with the possibility of criminal charges being filed.

Gold & Silver Conspiracy Theorists Vindicated?

GATA and other goldbugs have been dismissed as tinfoil-hat wearing morons all along (much like those who said Goldman Sachs was engaged in fraudulent sub-prime schemes... and we know how that turned out).

We're talking about a full-blown criminal investigation by the Justice Department here. This could be huge.

Why Now?

Apparently Obama is taking notice of his abysmally low approval ratings. As a result, he's desperate to kill the widely-perceived notion that he's in bed with the banks.

Just a thought — but perhaps Obama shouldn't have stacked his appointees with banksters in the first place...

I digress.

Regardless, it's clear that the administration is putting pressure on financial regulators. The regulators, in turn, are putting the screws to the biggest (and most reviled) financial firms. We heard last week about the SEC's fraud case against Goldman Sachs.

And just this weekend, Moody's revealed that the SEC may revoke their status as an officially-recognized ratings firm.

But the JP Morgan investigation could turn out to be the biggest case of all.

JPM is the largest financial firm in the United States, boasting $2 trillion in assets. They're also the largest hedge fund manager in the States, with $53 billion under management.

If it turns out they have been illicitly shorting billions worth of silver contracts, as some allege — and they're forced to buy bullion to cover that position — the result would be staggering.

Implications for Silver Prices

But cutting out market manipulation is only one factor that may work in silver's favor.

In the long run, American reliance on Fed easing will push precious metals prices higher. Ignore scare talk about deflation — it simply isn't allowed to happen in modern times.

How High Can Silver Fly?

More and more respected analysts are calling for $50 silver.

David Rosenberg, respected former head economist at Merrill Lynch, recently predicted gold would go to $3,000 over the next few years. If it does, I expect silver to outperform percentage-wise. The historic ratio of silver/gold is out of whack, and silver is due for a huge bull run.

If these scenarios play out, the best way to play it is with junior silver miners. These companies are highly-levered to underlying metal prices.

Well-chosen mining picks could easily see rise four times more than the metal itself does. If silver goes up 200%, a good mining pick could go up 800% or more.

My colleague Luke Burgess, editor of Hard Money Millionaire, has a report detailing his top three ways to play the silver bull market.

Luke gives his top silver mining pick, plus the best way to buy silver bullion — and details on how to invest in a unique security with the potential to generate 4-digit returns over the coming years. Learn how to cash in on monster silver bull-market here.

And stay nimble out there... This market has danger written all over it.

Adam Sharp
Analyst, Wealth Daily

P.S. Our free $5,000 stock-picking contest starts today. If you haven't signed up yet, go ahead and do so now. It starts today and runs until June 8th. Go here for the full details. Got friends who like picking stocks? Send them here to sign up. Good luck, and have fun!

508% Gains in 12 months: How to Plunder BP's Blunder

The worst environmental disaster in US history is happening right now...

But despite the tragedy in the Gulf, there's still a way for you to turn BP's incompetence to your financial advantage.

Find out the names of 3 small American companies using the backlash against offshore drilling to become the leaders of the new inland oil boom...

This new report has all the information smart investors need to bank 508% gains by this time next year.

Hold Your Nose and Buy BP Stock

Update: The situation has changed since publication of this article, see updated pieces here and here.

British Petroleum (NYSE:BP) shares are off nearly 20% since their Deepwater Horizon drilling rig exploded April 21st. That's around $30b in market cap wiped out in 2 weeks.

From a cold-blooded investing perspective, this looks like a buying opportunity to me. I've seen clean-up cost estimates from $170m to $3.5b. It could go even higher as the class-actions roll in.

But there's still a major disconnect there — $30b in market cap gone over a disaster that will cost BP maybe a tenth that much. To be safe, let's assume the final bill is $6b. BP makes that much in 3 months.

I'm not downplaying the personal and environmental impact of the spill. It's a horrific tragedy.

And the aftermath (this was 3 days ago, the slick is closer to shore now):

The situation is ugly all around, and BP is taking a beating in the media. Jon Stewart even found them worthy of scorn on a recent Daily Show.

BP is being painted as a monster ruining the lives of hard-working fisherman. There's some truth to that. But the fishermen will end up getting billions in restitution (along with thousands of other adversely affected businesses). They deserve it — and I hope BP doesn't drag out the court cases for a decade (ah-hem, Exxon Valdeez).

Despite all the negatives, I think this selloff is overdone. From an investing perspective, I see BP as a global energy powerhouse on sale - 18% off. The drop in stock price has also bumped BP's dividend up to 6.6%.

So I bought some BP today. The stock appears to be finding a bottom and could see a nice bounce. But I didn't buy it for a quick trade. It's more of a long-term investment at a discounted price.

The bottom line is that BP sn't going anywhere. We're talking about one of the biggest and most well-connected companies in the world here.

They booked $24b in operating income in 2009 on $246b of revenue. Their business spans 130 countries. And they've been gobbling up smaller firms and new fields to keep production strong going forward.

Less Drilling = Higher Oil Prices?

Another aspect of fallout from the Gulf disaster is how it'll affect offshore drilling going forward. I think it'll inevitably lead to less new projects, further crimping supply and keeping prices high.

Just days after the Deepwater Horizon disaster, Gov. Schwarzenegger backed off support for more oil exploration off California's coast. Officials say the new plan would have generated over $100 million a year for the state. That's money CA desperately needs.

The Governator explained his rationale at a press conference yesterday:

"I think that first of all, it's clear that we have to make up that $100 million a year that we (would) make from that. But if I have a choice between the $100 million and what I see in the Gulf of Mexico, I'd rather just figure out how to make up for that $100 million."

That should tell you how strong the backlash against offshore drilling is. Given, this is California we're talking about. But it sure is bad timing for Obama's "drill baby drill" push. It'll be one more factor contributing to higher oil prices in the future.

BP's business won't be directly affected by any slowdown in N. American offshore drilling, though. Worldwide, offshore only makes up about 10% of their revenue. If anything, they could benefit from higher prices (though any price change probably wouldn't be material).

Hopefully the spill will lead to better safety practices and preparedness. That'll cost a BP a lot of cash too, but it has to happen. At this point, all these costs are more than priced-in.

Unless this spill gets much worse than anyone currently is predicting, BP looks like a great deal at these levels. And if they surprise everybody, and manage to pull off a better-than-expected resolution, BP shares would get a nice pop.

Wealth Daily's $5,000 Stock Picking Contest

Think you can pick stocks?

Here's a chance to win $5k with absolutely zero skin in the game.

Wealth Daily is launching our first-ever stock picking contest. It's an opportunity to square off against fellow readers with your top picks.

Keep reading for the full details. Good luck — and may the best portfolio win.

The Prizes

1st Place wins $1,000 cash plus a subscription to Wealth Trust, allowing access to all 9 of our premium investment services for life. (The lowest we've ever sold this product for is $4,495.)
2nd and 3rd place winners get a 2-year subscription to Wealth Advisory, a $158 value.

How It Works

The contest runs from May 10 to June 8 (30 days).
Each player starts with $100,000 in virtual funds (there's no real money involved here... unless you win).
One caveat: Stocks you select must have a minimum share price of $5.
Let your friends in on the contest — Send them this link, where they can get info and a password necessary to register.

The Rules

You must be an active Wealth Daily e-letter subscriber to win. If you're not getting our free daily e-letter, go to wealthdaily.com/contest to sign up and get your contest password.
Only one account per person. (Filters are in place to detect duplicate registrations and suspect activity).

Strategies and Sectors

Remember, this contest only runs for 30 days. So swing for the fences and bring your top speculative picks.

One area I'd recommend is small-cap biotechs. They're absolutely on fire lately. Back on April 19, I wrote about Delcath Systems (NASDAQ: DCTH). The firm, which has a promising liver cancer treatment system, is up 56% since.

Short Candidates

Think the market looks toppy? We are seeing some potentially bearish signs popping up...

First, it's worth noting that bullish sentiment is near decade highs. Historically that has proven to be one of the best contra-indicators around.

When everybody's gung ho, it may be time to re-evaluate your long positions. Only problem is, the market can run 20%+ before correcting. Plus, there's still a lot of Fed liquidity sloshing around. But going against the crowd might be a risk worth taking.

Sector-wise, some investors see commercial real estate due for a crash. If you think this shoe is finally going to drop, you can short a commercial REIT ETF like IYR or a big mall REIT like Simon Properties (NYSE: SPG).

The best short of all may be banks. So far, banks have managed to avoid a major lashing for their misbehavior.

But that's changing... Populist anger in an election year is a powerful force. So after years spent surfing porn and ignoring Madoff/Lehman whistleblowers, the SEC might start doing their job again.

And that prospect scares the hell out of banks.

They'd rather the SEC keep going after high-profile (but meaningless) cases like Martha Stewart's $45k insider trading scandal. But now they're going after what some say is the poster-boy for bad behavior on Wall Street: Goldman Sachs.

And much to the horror of big banks — it looks like the financial reform package may actually have some teeth. "You... you mean we can't gamble with free money and government backing anymore?"

I feel bad for them, I really do. The point is that all this political pressure may actually cut into bank profitability. And clients might start to ditch the firms that are under fire.

If you're looking to short financials, there are plenty of good options. You can short individual investment banks like Goldman Sachs (NYSE: GS) or Morgan Stanley (NYSE: MS). Or you can short a broad financial sector ETF like XLF.

"Ultra short" financial ETFs like SKF are another option. But your timing will need to be spot-on; these ETFs are extremely volatile, due to the options and swaps that give them leverage. Over any period longer than a few days, they inevitably fall behind the underlying index.

How to Get Started

1. Sign up for our daily newsletter here, if you haven't already. You'll get a password required to join the game.

2. Register at Marketwatch.com's Virtual Stock Exchange (VSE). They have a solid (and 100% free) platform for virtual trading.

3. Once you're registered, search for the Game ID at the VSE: WealthDaily (It's case-specific, so capitalize the W and D.)

4. Start doing research! The contest starts next Monday, May 10.

Questions? Post them in the comment section below.

Good luck!

Adam Sharp
Analyst, Wealth Daily

The next big play of North America’s Oil Comeback

Breakthrough drilling technology has turned an abandoned Alberta oil field into the hottest energy territory in the Western Hemisphere...

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Delcath Surges on Phase III Clinical Data

Delcath Systems (NASDAQ:DCTH) surged 30% in after-hours trading Wednesday. The company announced positive clinical data for their proprietary liver cancer treatment system, The Delcath Percutaneous Hepatic Perfusion (PHP) device.

The PHP system works by first isolating the patient's liver from the rest of the circulatory system. This is accomplished using catheters and balloons, which are inserted via small incisions in the patient's neck and legs. Highly-concentrated doses of chemotherapy drugs are then delivered directly to the diseased organ. After treatment, the blood is filtered and cleansed of potentially toxic drugs and returned to circulation.

The system — which is unique as far as I know — allows doctors to target the liver with 10x higher doses of chemotherapy than are normally feasible. Since the drugs are targeted directly at the tumors, then filtered out of the bloodstream after treatment, DCTH thinks they can significantly increase dosage without increasing toxicity. It could prove to be an important life-extending development for patients who currently have few treatment options.

The trial data announced this afternoon comes from Delcath's phase III clinical trial, which enrolled patients who have melanoma that has spread to the liver.

Patients who received treatment from the Delcath system had more than a 50% reduction in a primary study goal, "time to tumor reduction or death". The results exceeded primary endpoint expectations and were statistically significant. In FDA-speak, that's a good news for patients and investors.

Here's an excerpt from the company's press release:

Delcath Systems, Inc. (NASDAQ: DCTH), a development stage, oncology-focused, specialty pharmaceutical and medical device company, announced that its Phase III National Cancer Institute (NCI)-led multi-center clinical trial has successfully met the study's primary endpoint of extended hepatic progression-free survival (hPFS) in patients with melanoma metastases to the liver based on an independently corroborated intent-to-treat analysis. Comparing treatment with the Delcath PHP System with melphalan to Best Alternative Care (BAC), based on independent core lab review of patient scans, the statistical analysis revealed that the PHP patients had a statistically significant longer median hPFS of 214 days compared to 70 days in the BAC arm.

Reuters reports that the market for Delcath's system to treat melanoma which has spread to the liver could be $745 million in the U.S. alone. Delcath is also proceeding with phase II clinical trials on primary liver cancers at the National Cancer Institute. The company's current market cap was around $395m as of closing today (but it closed up 30% in after-hours trading).

Full Trial Data To Be Announced June 5th

While I'm bullish on Delcath (disclosure: I own the stock), it's important to note that the full details of this trial won't be available until June 5th, when the lead researcher presents at the American Society of Clinical Oncology's (ASCO) 2010 Annual Meeting.

That's when we'll learn about overall survival of patients, along with other important study details. So even though Delcath's system met the primary endpoint, as they announced tonight, we don't know exactly how long (or if) it increased overall survival among patients. The data looks good so far, but I prefer to stay wary and be ready for a surprise.

Don't get me wrong, the ASCO meeting is a great platform to present data. If the system works, hopefully it will be in the hands of oncologists ASAP, saving and extending lives. It may be that they just need more time to process and analyze the data fully. Perfectly understandable. But the bottom line is that we don't have all the data yet.

By the way, we alerted Wealth Daily readers to Delcath two days ago (4/19/2010). This is the kind of scoop you could be missing out on if you're not reading our free newsletter yet. If you haven't signed up yet, you can do so below.

Three Small-Cap Biotech Stocks with Potential

Once again, biotechnology stocks are all the rage. A huge expansion of the NIH's budget — along with widespread medical advances — has put biotech back in the forefront.

It's easy to get broad exposure to this booming sector through ETFs or large-cap names like Genzyme. But personally, I prefer the homerun potential that only small-cap biotech stocks can offer. Here are three small-cap plays I've been following for a while.

The $54 Billion Cleantech Surprise... No News Outlet Covered

You won't see the full story reported on CNBC, MSNBC, or even FoxNews.

But tucked away in the southwestern corner of Idaho, a $35 million power company prepares to announce the greatest advancement in the history of nuclear power... and with it, instantly receive billions of dollars in federal funding.

By the time their news hits the press, however, early investors could easily pocket as much $32,000.

Click here for the full story.

1) Delcath Systems (NASDAQ: DCTH)

Delcath, like most development-stage drug firms, is volatile. It's currently trading near its all-time high, after shooting up 85% in the last three months alone.

The company has a promising method for treating liver cancer, one of the deadliest and hardest to treat. Essentially, their system seals the liver off from the blood stream.

Highly-concentrated chemotherapy drugs are then delivered directly to the diseased organ. Sealing off the liver from the rest of the body allows the delivery of far higher doses than are normally possible. The rest of the patient's body is spared the toxic chemicals.

Here's a diagram from Delcath's site, depicting the catheters and balloons used to seal off the organ and deliver high doses directly to the affected area:

You can watch a video on how the system works on Delcath's site here.

Delcath's system is currently in Phase III clinical trials for two types of cancer: primary liver cancer and melanoma which has spread to the liver. A lot is riding on those two trials. Data from previous trials is promising, but anything can happen in larger phase III trials. The FDA is often cautious when dealing with new technologies like DCTH's.

After a parabolic move like DCTH has had recently, it's tempting to chase here. But I'd proceed with caution. Remember, nothing goes straight up. If you do jump in, I recommend using a stop-loss order to protect yourself. This stock can easily move 5%-10% a day. Lately those moves have been up, but it could reverse at any time. Stocks like this are not for the faint of heart.

Here are some key stats for Delcath Systems:

Market Cap: $371m
52 week range: $2.09 - $10.35
Current price: $9.84

2) Curis, Inc. (NASDAQ: CRIS)

Curis has three cancer drug candidates in Phase II trials. They're working in partnership with biotech giant Genentech on these small molecule drugs.

The partnership with Genentech is what first caught my eye. They're arguably the greatest biotech story ever; producing some of the best new cancer drugs of the last 20 years while growing revenue from $400m in 1990 to $12bn in 2009 in the process. They were bought by Roche in 2009. Early investors made a killing.

The fact that Genentech is teaming up with a tiny company like CRIS is reassuring. So even though most of the biology is way over my head, it's good to know that the best in the biz sees potential here. But that fact doesn't guarantee success — not by any means. This is high-risk science and it still has major clinical trials to pass.

The Hedgehog Pathway

The drug candidates Curis is developing aim to disrupt the communication of cancer cells. (Yes, cancer cells communicate with each other. It sounds like a blob-style horror film, but think about it... ) In order to spread, cancer cells have to build highways of blood vessels.

To do that, cancer cells coordinate with each other. CRIS believes their drug candidates may be able to block this communication, which occurs via 'hedgehog pathways' — halting the spread of dangerous cancers. If they're right, the resulting drugs could revolutionize treatment for some forms of cancer. Needless to say, it would also be a positive development for investors.

3) DNA Vaccines

I can't take credit for this last one, unfortunately — our research team uncovered it a few months ago.

It's a small biotech stock that is developing some truly remarkable technologies to combat the world's deadliest diseases. The applications are practically unlimited: cervical cancer, Hepatitis C, HPV, HIV, and more. This company has been developing their unique DNA vaccine technology for almost 14 years, and their pipeline is full of promising drug candidates:

1 vaccine is already in the middle of Phase II human trials;
6 vaccines are nearing the end of Phase I human trials;
1 vaccine is awaiting confirmation to move into Phase I human trials;
4 others are finishing up their animal trials and on the verge of applying to continue to humans.

You can read the full write-up on this revolutionary biotech firm here.

These are just a few suggestions for readers interested in adding biotech to their portfolio. It's a lucrative sector with big profit opportunity.

Some companies will fall by the wayside; but when stocks can shoot up 1,000% or more — you only really need a few big winners.

Keep your eye on biotech stocks as this sector continues to gain momentum.

Until next time,

Adam Sharp
Analyst, Wealth Daily

An Investment... Better Than Gold?

Our international gold guru, Greg McCoach, recently uncovered a powerful, moneymaking glitch in the gold market.

... One that makes buying physical gold virtually obsolete.

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Greece Gets $61 Billion Bailout From EU, IMF

Spain and Portugal must be licking their chops...

After endless speculation, the EU is getting closer to bailing out Greece. The deal isn't finalized yet — despite the headlines and leaders trumpeting a deal, which almost reeks of desperation.

But there has been progress... if you can call it that.

Germany is caving from pressure to put a deal together, after making a lot of noise about moral hazard in recent months. They've tentatively agreed to provide roughly one-third of a massive $61 billion package.

The aid will come in the form of low-interest three-year loans. Greece has $9 billion in notes coming due this May, which explains the announcement's timing.

Who's Really Making a Killing from Foreclosures?

It's not the banks... It's not the auctioneers... And it certainly isn't John Q Public...

Instead, one unique company actually figured out a way to thrive from this financial crisis.

As lenders work through their mountains of foreclosures, this outfit prepares to skyrocket...

And you could be handed an absolute fortune, month after month, through 2012.

Read our latest report right now to find out how.

The EU's Bazooka

But Greece will only use the lifeline if a rescue becomes necessary. So they say...

(That should sound familiar to U.S. readers. Remember Hank Paulson and his financial bazooka?)

Back in mid-2008 — when he was selling Congress on unlimited bailouts for Freddie and Fannie — then Treasury Sec. Paulson said, "If you have a bazooka in your pocket and people know it, you probably won't have to use it."

We all know how that turned out. Pretty well — at least for Paulson's buddies. It let them keep dumping questionable loans onto the public's lap.

Meanwhile, Freddie and Fannie continue to hemorrhage billions and require government backing.

It looks like EU financiers are using a similar ploy to sell this bailout to their citizens. It's a lot easier to sell an expensive plan when it "may not be needed at all."

There's no doubt that Greece is going to need the cash. The question should be whether $61 billion will be enough.

All this does is buy Greece a little time. They now have three years to fix decades of systemic mismanagement, excess, and corruption... Three years to slash budget deficits from 12.9% this year — recently revised upward from 12.7% to 3% in 2012.

Probably not gonna happen. But it buys some time, which is typical of today's kick-the-can school of economics.

Morally Hazardous

Carten Brzeski, an ING economist who worked at the European Commission, summed up the situation: "All that fuss and talk about not putting taxpayer money at risk has been made obsolete."

It's true. Once you put a safety net in place, everybody gets more daring.

Now that the net is in place, EU members have an incentive to let their budgets get out of control. And until the EU puts something in place to discourage reckless spending, that's not going to change. Eventually, it could lead to a breakup of the EU... but that would be much further down the road.

I mentioned that Spain and Portugal are licking their chops on this news. That's because they'll probably be next in line behind Greece for a bailout. If the Greek bailout goes through, other countries will expect similar treatment. It's a dangerous precedent... But it seems the world is full of those these days.

A Broken State

The Greek economy needs an overhaul (as do many others). Its public sector is bloated and government employees are overpaid.

What they're getting is short-sighted, extend-and-pretend economics. Three-year loans from the EU and IMF aren't going to save Greece; they'll just postpone any real change from taking place and allow the status quo to go on a bit longer.

The plan will inevitably lead to more bailouts in the future, for Greece and other EU member states.

It doesn't bode well for the European Union.

I'm with Jim Rogers on this one. Rogers' take on the situation is quite blunt: "Let Greece default, it'd be good for the EU."

Rogers has a point, though. It would send a message that European leaders are serious about maintaining budget discipline and countries better get their finances in order.

But that sort of market discipline doesn't happen these days, so we have to invest accordingly.

Are Greek Stocks a Buy?

The Greek bailout plan may be nothing more than economic voodoo. But that doesn't mean we shouldn't take advantage of it in the markets.

My colleague Christian DeHaemer lives for situations like the one unfolding in Greece right now. Chris is betting on the Bank of Greece. After all, we saw what happened to American banks after they got their $700b... Here's a recent note he sent out to Crisis and Opportunity subscribers:

The Eurozone Blasts Greece with Cash... Stocks Launch

Over the past two days, the leading Greek bank, The National Bank of Greece (NYSE: NBG) has jumped 17%.

It moved on Friday as rumors hit the markets about a Euro/IMF bailout of Greece... Today — or rather, last night — the stock moved up another $0.45 cents to $4.07.

The European government offered below market interest rates around five percent to bail out a country that was running debt levels above 12% of GDP. The Eurozone will offer as much as 30 billion euros in three-year loans.

Bloomberg quoted former IMF economist Stephen Jen as saying, "This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets, so we'll get a rally in those."

Two weeks ago, I recommended the largest Greek bank in my trading service Crisis & Opportunity. It seeks to find extreme value in crisis situations and profit as those situations are resolved and the stocks are revalued upward as a result.

The National Bank of Greece is a clear example of this type of investing. And the run is just getting started.

In the United States, bailed-out banks went on a bullish rampage:

Bank of America (NYSE: BAC) went from $3 at the bottom to $17.93 today...

Wells Fargo went from $8 to $31.20 today...

Citigroup (NYSE: C), with the worst management of the lot, climbed from $1 to $4.29!

NBG has a current P/E ratio of 1.89; pays a 0.29 cent dividend; has a 44% profit margin and an EPS of $2.24.

It is still priced for going out of business... But this company will rock and roll before that happens.

Join me for the NBG ramp-up... and in the meantime, click here to read more about the biggest boom market you've never heard of.

Good stuff, Chris — thanks.

Until next time,

Adam Sharp
Analyst, Wealth Daily

P.S. Watch your inbox for news about the upcoming Wealth Daily Stock-Picking Contest — $1,000 cash plus $5,000 in subscriptions to our premium services is up for grabs. We're going to give contestants $10,000 in virtual cash. The top performer wins $1,000 cash plus a lifetime subscription to Wealth Trust, giving them access to every single one of our premium trading services for life. More details to come next week...

Make 171% as New Gov't Agency Seizes Power Grid

Stronger and more feared than the IRS, FBI -- even the U.S. Department of Homeland Security...

This radical jack-booted agency has one single mission: to enforce new energy policies.

With a budget of $30 billion, this powerful shadow-branch is systematically eradicating old energy technologies and awarding lucrative contracts to companies of their choice.

Luckily, we know the companies about to get the dough... making their shareholders a fortune. It's all in this new report.

The iPhone Gets Multitasking (Sort Of)

Steve Jobs unveiled iPhone OS 4.0 today, in trademark dramatic fashion. Apple's CEO laid out seven "tentpoles" (features) of the new OS in a much-hyped and well-attended press conference.

The update will roll out to iPhones this summer, and it's a major overhaul. The big story is multitasking, which users have been begging Apple for since launch. Note: Multitasking will only work on 3GS model iPhones. Tough luck if you have a 3G or older phone.

Steve Jobs explained that battery life was the bottleneck holding the iPhone back from multitasking, but they claim to have found a workaround that minimizes energy used by apps running in the background.

For now it won't work with every app, but they're working with developers to make more apps multitask-friendly. For now, I'll be happy if I can stream Pandora and browse the web at the same time.

The New York Times' Brad Stone is live-blogging the event. Here's how he described the new multi-tasking feature:

In a demo, Mr. Jobs is showing a Web site, and when he double-clicks the home button on the iPhone, a bar at the bottom of the screen shows all the apps that are currently running.

He's in the eBay application for the iPhone now, and switches over to the iPhone game Tap Tap Revenge. He double taps the home button, the bar of apps at the bottom of the screen opens up, and he switches to e-mail; and then back to the game, which picks up where he left off. "Its very easy to use, very efficient."

Sounds good to me, it's a huge improvement. One thing I'm curious about is how it'll affect AT&T's network. That's gonna be a lot of extra demand on a 3G network that's already overburdened.

iAds - Apple's Ad Network

The other big announcement is iAds (doesn't exactly roll off the tongue, does it?) — Apple's own mobile advertising network. Ads will appear within applications, presumably only free ones. Application developers will have control over where and when ads appear, and get the majority of the revenue.

During the event, Steve Jobs showed a Target ad using video. It'll be interesting to see how intrusive or annoying they are. I don't think Apple will overdo it, they're usually good about keeping their rabidly loyal fans happy.

Apple plans to pocket 40% of revenue from ads. That seems fairly high, but not totally unreasonable. Google takes around 20-30% from partner sites on their ad network.

Not much reaction in AAPL so far. As I'm writing at about 2:30 (about an hour after the press conference started) the stock is down .28%.

Other new features:

Camera zoom
Encrypt data with a PIN code
You can "gift" apps to others
Folders for apps
Custom desktops
E-Mail improvements for Exchange users

Also of note:

No support for Flash (ever)
Apple has sold 50 million iPhones worldwide
Sold 300,000 iPads on launch day, 450k total so far

I'll keep this post updated as more details emerge.