Christian A. DeHaemer - Angel Publishing

Seven Reasons to Invest in China

I've been reading a lot of nonsense lately making the case for a China bubble. The reports saying that the 10.7% GDP growth cannot continue, and that the property market is overvalued and set to pop when the government cracks down on lending...

Former Asian Chief of Morgan Stanley Andy Xie says, "China's property market 'bubble' is set to burst as the government curbs credit growth and clamps down on speculation."

Poppycock, I say. I'd like to point out that Xie is best-known for calling 10 of the last three bubbles... meaning he calls a lot of bubbles, and occasionally one actually happens.

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The truth is that the generals are fighting the last war. Just because the U.S. economic decline was based on a real estate collapse does not mean that China's economy will do the same. There are very real differences.

Seven Reasons to be Bullish on China

1. China's cash-fueled bubble trumps a credit or debt-fueled bubble.

For one, China is being driven by cash — not credit. (You may remember this thing called "cash" from back in the day...)

If you count public and private sources, China has 5% to 6% of global GDP in cash; if you count the broadest measures, China has almost three trillion dollars in foreign reserves. And the economy and tax revenues are growing — not shrinking — as they are in other parts of the world.

2. Jim Rogers likes it.

The first time I met Jim Rogers — the guy who wrote the quintessential Investment Biker — I was at a small speaking engagement in New York that took place at one of those English-sounding hotels along Central Park. I'm sure he has no recollection of me.

Jim had just gotten back from a trip around the world with his very young wife. The two of them had driven a yellow, custom-made, 4WD Mercedes over every continent... while pulling a trailer, no less. He wrote about that trip in the book Adventure Capitalist.

Mr. Rogers said a lot of things at that event, but one thing stuck with me. When asked about the housing bubble (this was back in 2006 or so), he said to short the investment banks. When asked which ones, his reply was, "all of them."

He was absolutely right.

Right now, Rogers is saying that China's economy is not in a bubble. But he says there are certain areas where real estate is overvalued. Bloomberg quoted him as saying, "property prices should decline in Hong Kong and Singapore. But China's economy as a whole isn't in bubble territory."

3. China will soon have the largest transportation network.

When I was a schoolboy in the 1970s, every civic class I took touted the Eisenhower highway system as being one of the greatest growth engines ever produced. The textbooks claimed that because the United States had more highways — of superior condition — than any other country, goods could flow from coast to coast with ease.

I don't know if they still teach this, but I do know that the U.S.'s lead on its road network is about to end.

China just spent $586 billion (plus additional trillions in loans) on a stimulus package. And a lot of this money is going towards highways, railroads, and airports.

According to the Malaysian Insider, "[China's] infrastructure spending had been increasing by an average of 20% annually for the past 30 years — a tried and true engine that has helped power the Chinese economy's explosive growth."

Plans call for China's highway system to stretch 85,000 kilometers by 2020, surpassing the roughly 75,000 kilometers of interstate roads currently in the U.S.

There was a time when Americans could build an airport on a volcanic island in three days. Now we spend 10 years bickering over the rebuilding of the World Trade Center. I've yet to hear a date on the grand opening...

4. China is now the number one auto market.

Naturally, if you build roads... people want to drive on them.

In 2009, a total of 10.3 million passenger cars were sold in China — up 52.9 percent from just a year earlier. Domestically-branded cars accounted for 30 percent of this total.

Nick Hodge of Alternative Energy Speculator says, "The Chinese auto industry is growing in an exponential fashion. And it's not all old fashion gas engines. There are 50,000 taxi cabs in Shanghai that run on natural gas. But the fastest growing company makes a battery-powered car. The stock is up 400% already, and it's going to quadruple again."

5. China boasts public sector savings and low debt.

The average Chinese citizen saves 36% of his income. He can do this because the cost of living is far lower than in the United States. There is almost no credit card debt, and all mortgages require a 30% down payment.

6. Chinese manufacturing is still rockin'.

According to the Wall Street Journal, the HSBC China Manufacturing Purchasing Managers Index rose to a record high of 57.4 in January from 56.1 in December. A PMI above 50 represents growth — and this is the fourth month in which the PMI has grown.

7. Oil production is increasing in the Middle Kingdom.

The Chinese oil major CNOOC jumped 10% on news that it was increasing production by 28% for 2010. Bloomberg reports: "The forecast says a great deal about the likely trajectory of China's manufacturing and transportation industries for the balance of the year. But it is also a reasonable guide to oil demand, which so far analysts have expected will be modest this year."

Oil companies don't increase production unless they believe that it will be met by an increase in demand. CNOOC has 2.8 billion barrels of proven reserves and a market cap of $7.1 billion. They obviously think that the moderate global growth picture — which the future market equates to $75 oil — is wrong.

The only conclusion to be made is that China's growth track for 2010 is much better than most experts think.

China: A Giant Commodity Vacuum

The bears are flat-out wrong on China. GDP for 2010 might drop from above 10% to only, say, 9%... but that's still better than you can get anywhere else.

Manufacturing numbers are hitting records; exports are up; oil demand is increasing; there is a cash surplus and pent-up demand from consumers for high-dollar items, like cars... These things all suggest that China will continue to be a giant vacuum cleaner, sucking up the world's commodities.

The position of power belongs to those countries that will sell to China the raw materials it needs to be the factory of the world.

This free report details how you can be in that position of power. But you better hurry... My lawyers are warning me that I might have to take this insider information offline soon.

All the Best,

Christian DeHaemer

Editor, Wealth Daily
Founder & Editor, Crisis and Opportunity

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The Planet's Largest, Most Undervalued Mineral Wealth

If I had told you five years ago that you could make an easy ten bagger in a small oil company that was drilling off the shore of Ghana, you would have laughed...

And yet the proof is in the return. Take a look:

The truth is you make the most money by going where no one else wants to go, for the simple reason that no one has bought yet — which means everyone is left to buy. The secret is to get there first with the most.

Tullow is an independent oil exploration company with interests in nineteen countries. A few years ago, the company discovered the world-class Jubilee oil deposit off the coast of the west African country of Ghana. The deposit is expected to have 1.8 billion barrels of oil. I immediately recommended the company and its partner, Heritage Oil; as you can see by the chart, the return has been substantial.

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Tullow was once a small player in African oil that no one had heard of... They now have a market cap of 10 billion pounds and just recently raised $1.35 billion to buy out partner Heritage Oil's claims to the Jubilee field.

According to the UK's Financial Times, "Tullow, which has a market capitalization of nearly £10bn, said it also needed the money to fund development of its Jubilee oil field in Ghana, which is on the cusp of production, and to launch a worldwide drilling programme."

Race for African Oil

The Heritage buyout (currently pending approval by the Ugandan government), is important because it preempts Italy's Uni, which was making an offer. Furthermore, Tullow has stated that it promised to sell half of the fields to CNOOC of China or France's Total.

My guess is that CNOOC Ltd (NYSE: CEO, $6.4 billion market cap) will be the big winner.

China just needs it more.

You see, the global economy has been in the dumps for the past two years. Most economists would say that this should translate into a smaller demand for oil. And that's true — for the U.S., where oil consumption fell by about 5% to 19 million barrels a day.

But in China, there was no slowdown.

In fact, oil consumption increased: from 7.83 million barrels per day in 2008 to almost 8 million barrels per day in 2009.

Even more significant is the fact that China now produces less than half of its oil consumption. Crude imports reached a record high of 4.1 million barrels per day. Furthermore, Chinese production actually fell 0.5% in 2009 over 2008.

The deputy director of the National Energy Board, Wu Ning, warned that "now the most acute problem in China is the increased importation of crude oil."

China's Burning Coal Needs

And it's not just oil that China is importing by record numbers...

China's General Administration of customs recently announced "that the country's net imports of coal in 2009 exceeded 100 million metric tons for the first time."

China has hit the continental divide and is now a net importer of coal. Up until last year, they were a net exporter of this energy source. According to Customs, China imported 125.834 million metric tons of coals in 2009. This was up 211.9 percent on over 2008.

China Wants Your Gold

China is after not only oil and coal, but everything in between. Including gold. The Middle Kingdom is now the number one consumer of gold.

According to preliminary statistics from the Bombay Bullion Association — the leading body of gold traders in India — China overtook India as the biggest consumer of gold last year. This is big news. India has held the position as the world's biggest gold consumer for many years.

Gold has now taken its place on China's long list of commodities for which the country is the world's largest buyer. China's rapidly growing economy, investment demand, and $2 trillion in foreign reserves have allowed it to become the buyer for many others, as well.

Feed the Dragon

Like something out of a Pink Floyd video, China is the factory of the world and needs to feed commodities to its vast maw of production.

Lucky for us, the largest untapped, unexplored, and unexploited resource country on earth borders China to the north. It's called Mongolia, a country with just three million people and a GDP of only $5 billion.

This is amazingly small. Heck, the TARP bailout was $700 billion — that's 140 Mongolias. The average net worth of the people on the Forbes 400 is $3.27 trillion.

There is just one recently signed Mongolian gold deal that will double GDP every year for the next 30 years! And Mongolia has oil, gold, copper, molybdenum, uranium, silver, coal, natural gas — all of it left untouched, due to old Soviet bumbling and 20 years of political bickering.

But now things have changed. The government is working together... Deals are being signed... And China is on the commodity warpath...

And incredibly, Mongolia — with its vast mineral wealth right next door — is on sale for a fraction of what these assets command in the international marketplace.

If you think making 1,380% in Uganda in a couple of years was a good return... It has nothing on what you can make in Mongolia.

Read this free report right now.

All the best,

Christian DeHaemer
Editor, Energy and Capital
Editor & Founder, Crisis and Opportunity

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Are About To Be Taken Over by 1 Company

On January 1, 2010 -- for the first time in history -- Greenland's $273 billion rare earth resource will turn over to a single company.

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China's Huge Oil Demand

According to the Energy Information Administration, the world's demand for energy has been increasing for decades and will continue to rise into the foreseeable future. Take a look:

This isn't news.

John Felmy, the Chief Economist at the American Petroleum Institute says, "There's no question demand internationally is increasing, and virtually all the major forecasters for the year have been increasing their forecasts for demand worldwide."

This only makes sense. The global economy is coming out of a recession. China just announced that GDP grew 10.9% last quarter. India is expecting to grow GDP at 7.5% in 2010.

Heck, even the UK announced that its longest recession in history was now over and GDP grew in that country at a sedate 0.1%...

"The # 1 Oil Play in the Country"

With the rest of the nation in recession, one state is enjoying a real live oil boom.

It's all happening in North Dakota, where the Bakken -- a massive oil formation -- has already become a major force in our domestic energy picture.

And now, geologists tell us, we may be looking at a "second Bakken"... one that could easily double the Bakken's 4.3 billion barrels of recoverable oil.

Read on to learn more about what's being called "the #1 oil play in the country"... and the profit-making stocks behind it.

Given those numbers, it should come as no surprise that China and India will have huge energy demand into the future. Note the expansion on the red bar in the graph below:

And despite what you might hear from Al Gore and U2's leading man Bono, oil consumption will increase over the next ten years.

According to the World Institute for the Analysis of Global Security: "From now to 2020, world oil consumption will rise by about 60%. Transportation will be the fastest growing oil-consuming sector. By 2025, the number of cars will increase to well over 1.25 billion from approximately 700 million today. Global consumption of gasoline could double."

It's simple: More cars are sold in China today than in any other country. India is spending billions to build highways, and India's Tata Motors is now selling a $2,000 car to the masses.

China Loves Oil

The most recent data showed that China's oil demand in November rose 18.7 percent year-over-year — the third straight month of double-digit growth. It is no wonder then that over the past two years, China has been securing long-term contracts to its energy needs. It has used its nearly $2 trillion in foreign reserves to gain access to for foreign gas and oil supplies.

China is selling its suspect dollars to lock in hard assets.

Starting back in 2008 when the price of crude dropped to $35 a barrel, China (through its three top oil companies) started an aggressive campaign to scoop the West. They invested in Iraq, Iran, Kazakhstan, Nigeria, Venezuela, and Argentina, among others.

The Chinese have even invaded North America's backyard. They made inroads against the U.S. supply of Canadian oil sands, as Canada is afraid that new low-carbon fuel standards in the U.S. will restrict the purchase of oil sands oil.

China is also looking to buy leases in the Gulf of Mexico from Devon Energy and announced that they were buying a major holding from the Saudis: a transfer station in the Caribbean.

The Chinese are also beating the Europeans and Russia. The Middle Kingdom has recently built an oil pipeline, the first running east from the oil- and gas-rich nations along the Caspian Sea including Kazakhstan and Turkmenistan. There are reports that certain types of crude from Saudi Arabia can't be bought in Europe anymore... they're all going to China.

And just last month, China Development Bank announced that it was investing $50 billion to buy 6 billion barrels of oil reserves in Nigeria.

Obama Does Nothing...

Given China's aggressive tactics, one might expect the U.S. government might try to counter China's oil grab by securing its own oil future. After all, most of us still remember the oil embargo in the 1970s that drove the economy into a decade of stagnant growth and high inflation...

But you would expect wrong.

From a recent report from the Institute for Energy Research:

On February 4, 2009, Interior Secretary Salazar rescinded 77 oil and gas leases in Utah that could cost American taxpayers millions in lost lease bids, production royalties, new jobs, and the energy needed to offset rising imports of oil and gas.
On February 10, Secretary Salazar delayed for 6 months the development of the new 5-year leasing program for offshore drilling that would have set the framework for accessing newly available areas.
On February 25, Secretary Salazar canceled a new round of commercial-scale oil shale research, demonstration, and development leases in Colorado, Wyoming, and Utah.
On February 26, President Obama introduced a budget that contains page after page of taxes on oil and gas totaling more than $31 billion that will reduce our domestic energy production.
On March 30, President Obama signed the Omnibus Public Lands Management Act into law, prohibiting energy production on over 3 million acres of federal land.
After rescinding 77 Utah oil and gas leases in February, Salazar announced on October 8 that he would lease 17 of them.
On October 20, after canceling a new round of commercial-scale oil shale research, demonstration, and development leases last February, Salazar issued a new oil shale leasing program that decreases lease acreage by 87 percent, demands unrealistic timelines for investment into cutting edge research, and leaves royalty rates at the whim of the Secretary or in new regulations.

The truth is this: The Obama Administration is so bent on green energy that they haven't even acknowledged the need for oil.

Despite the highest estimates for windmills and sun-power, the wildly held view is that oil will continue to account for 40% of global energy demand 25 years from now... And this at time when energy demand as a whole is expected to increase 60% or more!

Futhermore, all serious research suggests that hydrocarbon-based fossil fuels (oil plus coal, natgas, etc.) will still account for 85% of world energy demand in 2035.

That's why the top tier Chinese oil companies CNPC, Sinopec, and CNOOC have worked with their government bank and made hundreds of billions of dollars of oil and gas investments.

The Chinese Love Their Oil Companies

The popular mood toward oil companies in the U.S. and China couldn't be more different. In China, they have the full support of the government and people.

In the U.S. the big American oil companies like ExxonMobil, ConocoPhillips, and Chevron are dragged before Congress and scapegoated. You may remember your representatives on their high horse back in 2008.

Sen. Dick Durbin (D-Ill.) said, "You have to sense what you guys are doing to us," and called the oil companies "unconscionable."

Rep. Edward Markey (D-Mass.), chairman of the Select Committee on Energy Independence and Global Warming said, "On April Fool's Day, the biggest joke of all is being played on American families by big oil."

The naive sheeple and politicians in the U.S. routinely vilify the very people who supply the energy they use every day. They curse Big Oil as they fill up their Expeditions. Exxon, they claim, is Beelzebub.

If you think oil is expensive now... just wait until we can't get anymore of it.

Giving Away the Store

The cold, hard reality of it all is this: oil is power.

And right now, America and the West are handing over — uncontested — the largest power in the history of the world to their chief rival.

As an investor, I see the future. If the short-term dollar bounce means that oil falls to $70, or $60 or even $55 — I'm a buyer, not a seller. For the simple reason that the Chinese will provide a hard floor and ensure prices. And with the world coming out of recession, there is plenty of upside.

Make China Pay

The good news is that I know where China is going next... and how you can make them pay in what I confidently proclaim will be the best investment opportunity of the decade.

Don't believe me? Read this free report.

All the Best,

Christian DeHaemer

Editor, Wealth Daily
Founder and Editor, Crisis & Opportunity

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Your Next Car Could Run on Natural Gas

T. Boone Pickens made a bad call.

It seems that building a massive $2 billion dollar wind farm in the middle of nowhere wasn't that good an idea after all...

The famous oilman had a conference call this week, declaring that he is cutting his proposed wind farm on the Texas panhandle in half.

But the problem doesn't have to do with the windmills, or even wind. The problem has to do with right of ways, NIMBYs, and the long-distance power lines necessary in the transport of the energy to where it is needed.

According to the Wall Street Journal, "Mr. Pickens in May 2008 announced plans for the biggest wind farm in the U.S., by amount of installed megawatts, to be located in the Texas panhandle. But Tuesday he said he would cut his order with GE to 333 turbines from 667 machines and use them for wind farms in Canada and Minnesota."

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Another reason Pickens is cutting the wind farm idea is because the situation on the ground has changed. Two years ago, an alternative energy source — natural gas — was in limited supply and heading towards $15 a barrel.

Natural Gas Weekly Chart

Since then, companies like Chesapeake Energy (NYSE: CHK) and XTO Energy pioneered new drilling methods that increased natural gas supply by more than 58% in just four years.

It is now estimated that the U.S. has enough natural gas to last 100 years. And just this week, the U.S. became the world's largest natural gas producer.

These facts, coupled with the recession, drove natural gas prices down to $3 per billion BTUs.

The Good Gas

The benefits of natural gas may seem obvious: it is colorless, odorless, and burns clean. What may not be so obvious, though, is the fact that natural gas is one of the cheapest forms of energy production we have — especially for sectors like transportation.

According to the New York Times, "Natural gas is the cleanest fossil fuel, emitting fewer greenhouse gases than coal or oil. Many experts say they think it's underused as a power and transportation fuel, especially after new technologies recently unlocked huge reserves in shale gas fields across the country."

The problem lies with the traditional and ingrained coal and oil interests this country has. These interests seek to preserve the status quo. They are fighting a rearguard action, however, as no new coal utilities are being built and we are running out of low cost oil.

The green interest, on the other hand, has no desire to see a hydrocarbon based solution — despite the fact that the cost of solar and wind aren't economical, especially for transportation.

(I should mention that the Solar EnerTech (OTC: SOEN) recently claimed it has brought the watt per kWh below $3.09, which would make it competitive with natural gas... at least when it's sunny.)

The green lobby wants battery-powered and hybrid vehicles, despite the fact that batteries are very toxic and require non-renewable minerals that must be mined. Furthermore, you can only drive the electric car a short distance before recharging.

The hybrid has its own problems. I've read that without the weight of the second engine, hybrids would get just about the same gas mileage. Heck, my brother's 1985 Honda CRV got 47 mpg on the highway. The Toyota Prius, by contrast, gets only 36 mpg on the highway.

I've yet to have a patchouli-smelling, Birkenstock-wearing auto engineer explain that mileage per gallon discrepancy to me...

No Infrastructure

The biggest hindrance to having a world of cars that run on compressed natural gas is the lack of infrastructure: You just can't go down to the Exxon and fill up your tank.

And this is what T. Boone is trying to change. He is launching a new ad campaign in which his commercials will focus on the abundance of natural gas in the U.S. and our dependence on OPEC.

According to the New York Times:

He wants the president to convert the entire federal automobile fleet to natural gas. Then he wants Congress to give large tax credits to companies that use natural gas vehicles, and filling stations that install the necessary equipment. By Mr. Pickens's estimate, just fueling a small percentage of the country's trucks and buses with gas could displace as much as 8 percent of oil imports within seven years.

I think Mr. Pickens is on the right path. He wants the government to jump-start the transition to make it viable.

We Don't Need the Government

The switch to natural gas for filling stations will happen anyway — with or without government backing. ExxonMobile (NYSE: XOM), arguably the best-run oil company on the planet, recently bought out XTO energy for $30 billion.

"XTO more than doubled production in the past four years, largely from unconventional drilling, while Exxon's output fell 1.2 percent, company filings showed. European oil majors Statoil ASA, Total SA and BP Plc bought into shale-gas joint ventures with XTO rival Chesapeake Energy Corp. in the past two years," according to Businessweek.

That says it all. The old independent oil majors can't increase production without natural gas. It is now in their best interest to promote natural gas for all our energy needs.

And T. Boone Would Clean Up, As Well

T. Boone has a company called Clean Energy Fuels Corp. (NASDAQ: CLNE) which "offers natural gas as an alternative fuel for vehicle fleets in the United States and Canada. It designs, builds, finances, and operates fueling stations and supplies compressed and liquefied natural gas."

It's been a good year so far...

Another company building NG infrastructure is Chicago Bridge and Iron (NYSE:CBI).

Natural gas is the future. ExxonMobile and other big oil companies have capitulated and joined the cause.

It's only a matter of time before you drive a clean-burning NG car.

Until next time,
Christian DeHaemer
Analyst, Energy & Capital

P.S. The best way to play the coming natural gas boom might be to buy the undervalued producers. A colleague of mine found one such opportunity in a region that is four times bigger than Saudi Arabia's coveted Ghawar Field and Iran's legendary North Pars... eight times larger than the Barnett Shale... and nine times the size of Alaska's Prudhoe Bay... Read more about this profit opportunity before the news gets out.

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Peru Economic Boom Time

On December 17, 1996, a small group of heavily armed thugs calling themselves the Tupac Amaru Revolutionary Movement (MRTA) blew a hole in a garden wall and stormed a diplomatic reception at the Japanese Embassy in Lima, Peru. The group seized over 400 people.

The Peruvian Stock Exchange plummeted and was forced to close three hours early.

They didn't know it at the time... but this episode would signal the end to the Shining Path (Sendero Luminoso) guerrilla war, the authoritarian regime of President Alberto Kenya Fujimori, and mark the birth of the Peruvian struggle to become a modern capitalist democracy.

The Most Profitable Energy Transition The World Has Ever Seen!

On November 12, 2008, the International Energy Agency (IEA) officially confirmed that every fossil fuel resource we rely on today will simply not be able to keep pace with demand.

As a result, the IEA stated in very clear terms that renewable energy will soon become the second largest source of energy.

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Three Prongs of Death

One hundred and twenty-six days after the hostage crisis began, President Fujimori gave the Peruvian Armed Forces the go-ahead to attack the fortified embassy. Commandos attacked in three simultaneous moves: from tunnels, up ladders over walls, and through a hole caused by explosives in a wall.

In a piece of magnificent luck or execution, the commandos managed to save all but one of the hostages and took only two casualties. Furthermore, when the dust settled and the fires were put out, all of the Tupac Amaru Revolutionaries were dead.

At the time, the Peruvians and much of the world though it was a great success. President Fujimori ran rhetorical victory laps for the international media.

Some time later, the news broke that commandos had greeted the surrendering Tupac Amaru members with a spray of bullets to the back of the head.

This, plus other allegations of bribes and corruption, forced the President to flee to Japan.

Just recently, back in Peru, he was sentenced to 25 years for using death squads to murder leaders of the notorious Shining Path revolutionaries.

Fast-Forward 14 Years

Many things have changed in Peru in the last 14 years. In fact, it has been one of the best performing markets of the last decade.

If you had bought the Peru Lima General Market in July of 2000 for 1,322, you could have sold in July of 2007 for 24,222 — a gain of 1,732%.

In contrast, if you bought the S&P500 in 2000 at 1,500, you'd be down about 29%. It is now trading at 1,136.

Peru on the Launch Pad

Riding the wave of commodities and a peaceful representative government, Peru had one of the world's fastest growth rates last year at 9.8%.

The country has vast reserves of minerals. It is the world's largest producer of silver; third largest of copper, zinc and tin. It is the fifth largest producer of gold.

Peru is also blessed in that it sits at a crossroad between two of the world's fastest growing economies: China and Brazil.

There are many people who believe a new highway which is being built across the Andes will add more than 1% to GDP. It will connect the enormous appetite of China with Brazil's overflowing agriculture centers, and replace the Panama Canal as the main passage for trade between those countries.

Couple that fact with new oil and gas projects, and you have a country on the verge of a surge forward.

Out of Recession

Like the rest of the world, Peru wasn't immune from the global recession in 2008. But the country has been one of the first to recover.

Bloomberg suggests that the country came out of recession in the last quarter of 2009: Exports jumped 23.8% in November; imports climbed 21%.

Peru is one of few countries that have managed to reduce unemployment rate. A recent report by the International Labor Organization states that unemployment in Peru fell from 8.6% in 2008 to 8.5% in the third quarter of 2009.

The currency, the sol, is also in an upswing. It advanced 8.5% last year and secured its place as the sixth best performing currency against the dollar among 26 emerging markets, tracked by Bloomberg.

Another leading indicator — bank loans — hit a record high of $19.6 billion in November. Mortgage loans and consumer credit were also hitting new highs.

The Peruvian economy and political structure have come a long way in the past decade... to the point where the country is expanding into green energy resources.

Right now my associate, famed global investor and linguist Sam Hopkins, is in Lima. He is meeting with hotel execs and wind energy association heads this week to bring you from-the-ground information on this emerging market.

He commented in Monday's Wealth Daily:

"The truth is that Peru's location is incredible in terms of both international and internal economics. Peru has a system of microclimates that can jar a person's system with precipitous drops in temperature and altitude, while benefiting businesses that want a variety of natural resources within easy reach."

I don't know what Sam will uncover. But I do know that Peru has the wind at its back and has left the terrors of its past behind it.

There is a big boom that's just getting started, and Sam Hopkins is the guy to ferret out the winners.

Find out how you can profit from this crossroad opportunity.

Sincerely,

Christian DeHaemer

Editor, Wealth Daily

Win Big When the Next Domino Tumbles

First there was housing... then the banks. And after that it was the automakers that came crashing down. Next up is a Commercial Real Estate Crash.

And unfortunately - just like the rest of them - the government's last-ditch efforts to prop up this domino are all doomed to fail.

But a 372-year-old investing technique is the answer to it all. And it might not only save your portfolio during this $1 trillion crisis... but also make you a fortune!

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China Magnesium Stock

In another example of China sucking up the mineral and energy resources of the world. China Direct Industries, Inc. (CDII:NASDAQ) sees a future of growth.

The company produces and sells magnesium to the Middle Kingdom. Two days ago they announced that annual forecasts were back on the menu. The scales have fallen off their eyes and the company can now see the future. Needless to say, the future looks good.

China Direct now expects full-year 2010 revenue of $130 million to $150 million. And surprise, surprise, this is in line with the consensus target of $145.3 million.

China Direct has a market cap. of $58 million and a price to sales of 0.29 (which is low). They have $19 million in cash and $2.8 million in debt.

Over the past three years Magnesium has climbed from $0.60 per pound to $2.00 a pound today. I haven't done any real due diligence on it but it looks like a buy on a pull back. Put it on your radar.

Sincerely,

Christian DeHaemer

Crisis & Opportunity

Twelve Outliers to Watch in 2010

Dear Energy and Capital Reader,

Crisis & Opportunity Editor Christian DeHaemer recently revealed his Black Swans list for the coming year to readers of our sister publication, Wealth Daily. The article was so well-received that I thought you too might like to see what Chris predicts for 2010.

Happy New Year,

John Phillips

Publisher, Energy and Capital

———

Twelve Black Swans for 2010

It's that time of year again. The eggnog is turning... Christmas trees are cheap... and all the world anticipates my annual Black Swan list.

These aren't predictions — any fool can make a prediction. A Black Swan event is, by definition, unpredictable. And to predict the unpredictable is just one step ahead, one step better.

In the last few years, we've been hit with a number of these events that come from the blue and destroy with a vengeance; the biggest of these was the credit crisis of fall 2007.

So I give you some eventualities to ponder for 2010...

"The # 1 Oil Play in the Country"

1. China Blows Up

Andrew Lawrence proposed the Skyscraper Index in the aftermath of the 1998 Asian Contagion. His theory says that the world's tallest buildings have risen on the eve of economic downturns. That is, countries that put up the world's tallest buildings enter an economic downturn shortly thereafter.

There is a lot of evidence to back him up: 1907 panic in the U.S. was marked by the Singer Building; the Great Depression followed the Empire State Building; the Asian currency crisis of 1998 — the Petronas Twin Towers.

The world's tallest building at present is the Burj Dubai, which will officially open on January 4, 2010. As you know, real estate prices in Dubai have been cut in half and their biggest company, Dubai World, just defaulted on $50 billion.

The next tallest building being built is The Shanghai Tower in China — expected to be 2,073 feet tall to be completed in 2014.

2. The UK Defaults

High national debt, high inflation, high unemployment, plummeting housing prices, and a second round of bank failures coupled with political mismanagement sends the UK into insolvency. The Queen goes crown-in-hand to beg for money from the IMF.

3. No More Coal Plants

All new electric plants built in 2010 will be fired by natural gas. New drilling methods have increased the supply by 58%. Natural gas is clean, cheap, and it works. There is much money to be made in companies like Chicago Bridge and Iron (NYSE: CBI) that make transfer and storage facilities.

4. Uranium Surges to $90

The price of uranium launched in 2007 up to $145 a pound. Now, after the crash, it is back to $40 a pound. But the same demand that drove uranium up is still there. China is currently building eight nuclear power plants and has another twenty in the planning stages; Britain is building ten. Egypt, India, Sweden, South Korea, and most of Africa are building or seeking to build nuclear energy facilities.

The World Nuclear Association just had a meeting which concluded uranium demand is increasing and at the same time, previous production projections have dropped off due to the credit crisis. Companies like Cameco (NYSE: CCJ) will benefit.

5. Democrats Hold Their Congressional Majority

Strong economic performance in the second half of 2010 will drive down unemployment. The Democrats will be hailed as heroes who saved the economy. The average voter won't care about the new debt burden. And this — coupled with a schism in the Republican Party between the Old Guard and the Palin/Tea Party — will send the GOP into a leaderless chaos. Spending will continue to increase.

6. Mongolia Stock Exchange Becomes the Best Performing Market

China is the world's largest consumer of oil, coal, meat, grain, copper, and [in the near future] uranium. The one country that can supply its constantly growing needs is under-utilized Mongolia.

Mongolia recently dropped its tax rate from 68% income to 30% ownership in new mines/wells. A major deal with Rio Tinto will double the GDP. Twenty-two other deals, possible in coal, oil, uranium, rare earth metals, copper, gold, etc., are pending... And the Mongolian Stock Market is extremely undervalued, with month stocks trading at a P/E under ten.

7. China Drops the Dollar Peg

After years of maintaining a link to the U.S. dollar to ensure cheap exports (and in the face of an ever-falling dollar), China pursues a strong yuan policy in order to buy up natural resources and create domestic consumption.

8. Iran Gets the Bomb and No One Cares

Much like Pakistan and India, Iran will build its nuclear warhead. Israel will be powerless to stop them due to the hidden, protected, and duplicate nature of the manufacture. The Obama Administration will send a strongly-worded letter in response.

9. The Housing Bust: Part II

Housing prices will take another hit as mortgage rates climb past 10%, the ARM balloon payments reset monthly mortgage payments for millions, banks finally sell their inventory, and a large portion of those who are underwater just stop paying. Expect another 30% drop in prices.

10. Dow Hits 20,000

No one is talking about an extended bull market, and I'll grant you that with the amount of debt the U.S. has taken on (on both personal and national levels), it seems the market's geared for a long up-move.

But consider this, dear reader: when Zimbabwe had run-away inflation in 2007, it also had the best performing stock market in the world. Take a look:

According to Austrian Business Cycle Theory, the extreme volatility you see in the business cycle is not the natural state. Rather, it is one created by excess growth in money supply and credit.

New money is not simply given to everyone equally and at the same time... New money flows to certain entry points and filters out.

In this way, the money that is currently being produced by the Treasury and hoarded by the banks could flow to equities and launch another bubble.

11. Solar Power Goes Mainstream

Renewable energy will account for 15% of electricity by the end of the year — up from 12% this year. Wind energy grew 28% in 2009; it will grow even faster next year. A company that's looking good is J.A. Solar (NASDAQ: JASO).

12. Uncle Sam Officially Loses the War on Drugs

Four states — Massachusetts, California, New Hampshire, and Washington — seek to legalize marijuana. Currently in each state, there are bills being debated which will result in regulation and legalization of marijuana.

This new political will, coupled with a need to cut back in spending, will dramatically reduce the budget of the DEA as well as local police. One company in this growth business is Medical Marijuana, Inc. (MJNA.PK).

Have a great 2010,

Christian DeHaemer

Energy and Capital

(and soon-to-be-launched Crisis & Opportunity)

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11 Black Swans for 2010

It's that time of year again. The eggnog is turning... Christmas trees are cheap... and all the world anticipates my annual Black Swan list.

These aren't predictions — any fool can make a prediction. A Black Swan event is, by definition, unpredictable. And to predict the unpredictable is just one step ahead, one step better.

In the last few years, we've been hit with a number of these events that come from the blue and destroy with a vengeance; the biggest of these was the credit crisis of fall 2007.

So I give you some eventualities to ponder for 2010...

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1. China Blows Up

The next tallest building being built is The Shanghai Tower in China — expected to be 2,073 feet tall to be completed in 2014.

2. The UK Defaults

3. No More Coal Plants

4. Uranium Surges to $90

5. Democrats Hold Their Congressional Majority

6. China Drops the Dollar Peg

7. Iran Gets the Bomb and No One Cares

8. The Housing Bust: Part II

9. Dow Hits 20,000

But consider this, dear reader: when Zimbabwe had run-away inflation in 2007, it also had the best performing stock market in the world. Take a look:

According to Austrian Business Cycle Theory, the extreme volatility you see in the business cycle is not the natural state. Rather, it is one created by excess growth in money supply and credit.

New money is not simply given to everyone equally and at the same time... New money flows to certain entry points and filters out.

In this way, the money that is currently being produced by the Treasury and hoarded by the banks could flow to equities and launch another bubble.

10. Solar Power Goes Mainstream

11. Uncle Sam Officially Loses the War on Drugs

To find out exactly how you can take advantage of every angle 2010 guarantees to throw our way, and how to profit from it like the top insiders on Wall Street, click here for your free report.

Have a great 2010,

Christian DeHaemer

Wealth Daily

(and soon-to-be-launched Crisis & Opportunity)

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Oil Rich Gulf States to Drop the Dollar

With the global warming lobbyists fighting the snow in Copenhagen, a small, unheralded piece of news popped up on my newsfeed.

It seems that while the green lobbyists were drinking scotch and counting the money soon to be made from carbon credits, the Arabs were driving another nail into the U.S. economy. The Gulf states are ditching the dollar.

End of an Era

You see, the Saudis are sick of it. The price of oil has been bouncing around between $12 a barrel in 2000... to $147 in 2008... to $38 in at the start of 2009...

You simply can't make budget projections based on that kind of fluctuation.

After all, the Saudis have some 5,500 princes to keep in Maseratis and Benzes. They need champagne for their harems and steroids for their thoroughbreds. This type of lifestyle doesn't come cheap. The political cost for keeping the Saudis' regime in power has been estimated at more than $60 a barrel!

And besides, why should they let the price per barrel get whipsawed by the value of the dollar? Especially when everyone sees that the value of the dollar is going to fall...

Win Big When the Next Domino Tumbles

First there was housing... then the banks. And after that it was the automakers that came crashing down. Next up is a Commercial Real Estate Crash.

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In answer to these problems, the Gulf states announced this week that they have formed their own monetary council based on the euro model.

According to the UK's Telegraph:

The Gulf monetary union pact has come into effect, the move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world's proven oil reserves, and financial clout equal to that of China.

Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.

How About Them Apples?

This is the biggest news I've heard in at least a month, and I've seen very little reporting on it in the U.S.

Here is the money quote: "The U.S. dollar has failed. We need to de-link," said Nahed Taher, chief executive of Bahrain's Gulf One Investment Bank.

Ouch!

Needless to say, one of the major benefits to the U.S. dollar's reign as global reserve currency is that it is the currency of oil.

The U.S. government continues to expand the money supply which inevitably leads to inflation.

If we get the high, double-digit inflation that many are predicting (due to the increase in money supply, coupled with oil traded in a new pan-Gulf state currency dubbed the Gulfo)... the U.S. currency will suffer.

Interest rates on U.S. debt will go up. Oil, gold, and other hard assets will increase in value. These are the sectors to invest in over the next decade.

Supply and Demand

As it is... the short-term prospects of a rise in oil price seems assured. Check out this chart on global crude oil stocks:

In the face of the global credit crisis and ensuing recession over the past year, oil companies stopped exploring and pumping new oil. Stockpiles have been decreasing.

If we get an uptick in GDP growth in 2010, as many expect, this will push up demand... which will lead to a price surge.

Big oil hasn't exactly embraced this idea. The drill utilization rates have been flat to down.

According to Rigzone:

Americans Will Continue to Need Oil

Americans spend $400,000 every minute for imported oil. And despite the rhetoric in Copenhagen, the Department of Energy projects the demand to increase.

The government projects that, even if we take green fuels into account, the United States will require 2 million barrels more per day in 2030, and 1 trillion cubic feet more natural gas every year.

The only solution seems to be to increase domestic production of hydrocarbons.

If you include areas offshore and those restricted from exploration, the U.S. has an estimated 102 billion barrels of oil and 635 trillion cubic feet of natural gas.

In the western states, oil shale reserves alone are estimated to hold 800 billion barrels of oil — that's a lot of oil.

But there is one company my colleague Keith Kohl has been talking about... what he feels is the best way to play the need for increased domestic production: The Bakken Oil Field.

Keith writes, "The Bakken oil play stretches across Montana, North Dakota and into Southeastern Saskatchewan. We're talking about some potentially massive reserves of oil, too. The amount of oil in place has been estimated between 271 billion and 503 billion barrels of oil. Although that is only referring to total oil-in-place, a U.S. Geological Survey (USGS) field report released on April 10, 2008, estimated there are up to 4.3 billion barrels of undiscovered, technically recoverable oil on the U.S. side of the Bakken."

Ian Cooper of $20 Trillion Report writes, "Thar's black gold in them thar hills... this time in North Dakota. The discovery is huge. Unlike Northern Canada's oil sands, the Bakken's oil can be extracted relatively cheap, without the use of energy intensive processes... That news alone means North Dakota could be headed for a boom oil year. In January 2008 alone, the North Dakota Oil and Gas Division issued 90 permits to drill. At that pace, the number of permits could double those of last year, and be near the record 1,098 issued in 1981, according to reports."

It is obvious that the dollar will continue to fall over the long term. The pricing of oil in Gulfos will mean that imports of oil will surge in dollar terms.

I encourage you to invest in domestic production before it's too late. Click here for the free report.

Happy holidays,

Christian DeHaemer

Editor, Energy and Capital

(and soon-to-be-launched Crisis and Opportunity)

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Crisis Investing

It's one of my favorite investment stories.

It was told to me by the now famous prognosticator, businessman, and future congressman, Peter Schiff — at the Hotel Del in San Diego, back in 1999.

Not only was it instructive on how to make a legitimate fortune, but it forever changed my investing philosophy.

You see, it was 1998 and the dot-com bubble was just ramping up. The NASDAQ had doubled that year and was about to go up 300% by the time it found a pin in the first few months of 2000.

At the time, I was recommending companies like Oracle, Sun, and Qualcom — and those recommendations were up between 600% and 1000%. I had an entire portfolio of these overvalued, over-hyped, new-age stocks. And they were going up 10% a day.

It was a surreal experience. CNBC was on at every bar and restaurant. Fashion models were giving stock recommendations and sales of Ferraris in Silicon Valley were off the hook.

Everyone knew the end was coming but nobody knew when, exactly...

And when you were staring at Amazon going up 10% a day, you didn't want to leave the party too soon. The downside was that many party-goers showed up late and never left.

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Asian Contagion

While the Internet boom was still all the rage, many emerging markets at the time suffered what was called the "Asian Contagion" — a debt and currency crisis.

This crisis was fueled by fast money from the larger economies. Emerging markets took on too much debt denominated in U.S. dollars, British pounds, and German deutschmarks.

As the dollar increased in value against local currencies, the debt payments went up, and the countries could no longer pay. A whole host of nations — South Korea, Indonesia, Thailand, Malaysia, South Africa, Russia, Brazil — could no longer keep up with their payments. They had to default or face the IMF's strict recovery policies.

Default

The poster child for this international event was Indonesia. Indonesia was run by the dictator Suharto, who had been in power for decades. His party came to power in a brutal revolution which killed more than 300,000 people in the early sixties.

In 1998, Indonesia had to pay more than half their export earnings to service their debt, which stood at 140% of GDP. Furthermore, the principle payment on their debt was going to increase from $2 billion in 1999... to $5 billion in 2000... to $9 billion in 2001.

In short, it wasn't going to happen.

For years, Indonesia billed itself as an Asian Tiger and did all the things that countries do at the top of a bubble, like building the tall buildings and starting a car company before hitting the tipping point. (As an aside, 140% of debt to GDP seems to be the trigger point in these scenarios.)

Wall Street and London knew Indonesia would have to restructure or default. The situation was unsustainable. Traders started selling the rupiah, the local currency. The rupiah fell from 300, to 3000... to 10,000... to the dollar... before you couldn't get a bid at all.

Threat of Civil War

The price of everything went through the roof. Students and workers flooded into the streets as they could no longer afford rice, cooking oil, or fuel. Suharto responded with troops and tanks. Violence ensued. Cars were burning in the streets for weeks.

The Bottom Fell Out of the Jakarta Stock Exchange

At this point, a California lawyer gave Peter Schiff a call. He wanted to fly to Indonesia and start buying companies. And that he did.

He packed up his bags and his limited knowledge of life on the ground, and started investing in Indonesia companies, and a lot of small caps at that.

He was among the buyers of last resort. While tanks sat on the tarmac at the airport, these people were talking to CEOs. It was the epitome of buying fear — real "blood in the streets" stuff. And it worked just like they talk about.

By the time I heard the story six months later, the California lawyer had sold and was now fat, happy, and rich. (He was fat to begin with.)

In the fall of 1998, I recommended Indonesian Telecome (NYSE: TLK), an undervalued blue-chip close to the bottom. This recommendation tripled in about a year and I took profits.

But what I should have done was follow the California lawyer. I should have scraped together all the money I could find and bought a plane ticket. Because you never really know when the top of a momentum- or liquity-driven market bubble will pop.

But you can know — or come pretty close to knowing — when fear is at its highest, when blood is running in the streets... and it's time to buy.

And truth be told, I've been buying fear ever since. I would encourage you to do the same. It is the only time-tested way for the retail investor to get rich in stocks. And it is why I created Crisis and Opportunity.

It is also the reason I got on a plane when I heard about the "blood in the streets" deals in Mongolia. Keep and eye out for my research report. It will be in your inbox in the next few weeks.

Happy Holidays to you and yours,

Christian DeHaemer

Editor, Wealth Daily

P.S. If you're currently a member of one of our many advisories, tomorrow I'll show you how you could instantly collect more than $10,753. Meantime, my office mate Luke Burgess has recommended one bargain of a silver stock. And, as Luke explained to me, this company just announced an 86% increase in silver production. But that's nothing compared to what they have planned. Here's the full report.

An Urgent National Priority

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America's Unsustainable Debt

Back in 2004, I refinanced my house to take advantage of lower mortgage rates. It just so happened that there was a mortgage broker in my neighborhood, as well as a real estate appraiser.

My wife at the time wanted to update our kitchen and the basement and add all the gewgaws and widgets that seem to make females happy.

Fine.

We went to the mortgage broker and refinanced and took out some equity. He went to the real estate appraiser and said, "I need XX amount to make this deal happen... and Fred, if you want more work from me — this deal is going to happen."

Fred said, "Sure, I can do that."

Some people might say that it is a conflict of interest for Fred to be appraising housing prices in his own neighborhood, or for our mortgage broker to give him work based on that appraisal. But that's how the world works and it is part of the reason why the housing prices climbed beyond all rationality.

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Rating Agencies

There are also rating agencies that produce judgments on sovereign and corporate debt. The top three are Moody's, S&P, and Fitch. Personally, I think they all suck. Here's why...

I've been in this business for 15 years and lived through five major international meltdowns, and these debt ratings agencies have never given prior warning. They are, in fact, less than worthless because a "AAA" rating absolves fund managers of the responsibility of doing the right thing.

Anyone with even a passing interest in Wall Street knows this.

But what these agencies are good at is closing the barn door after the horse gets out and the roof has fallen in.

This week, in order to save their reputation and fend off some lawsuits, Moody's downgraded Greece's debt rating from AAA to BBB+. Last week, if you remember, I told you that Greece was headed for trouble.

It's one thing to pick on a small country like Greece... but it's quite another to start blowing up your own neighborhood. You may not like to hear it, but the U.S. deficit — and its debt as a percentage of GDP — are similar to that of Greece.

According to Moody's Investors Service:

... In the worst-case scenario the U.S. could lose its triple-A rating in 2013 if the countries growth slows, interest rates climb, and if the government fails to address the national deficit that has substantially grown due to the assistance provided to the financial sector.

The next year or two will show whether growth potential has been structurally eroded or whether a robust yet sustainable recovery is possible," said Pierre Cailleteau, chief international economist at Moody's.

Way to stick your neck out, Pierre. If I was 6' 5" and had a laser-rocket arm, I'd be Peyton Manning.

I'm sure the report will inspire a number of tea-baggers to send strong letters to Obama (who, as I write this, is announcing plans to spend our way out of the debt crisis).

According to Brietbart: "President Barack Obama outlined new multibillion-dollar stimulus and jobs proposals Tuesday, saying the nation must continue to 'spend our way out of this recession' until more Americans are back at work. Without giving a price tag, Obama proposed a package of new spending for highway, bridge and other infrastructure projects, deeper tax breaks for small businesses and tax incentives to encourage people to make their homes more energy efficient."

It's Only Money

The U.S. debt clock has surpassed $12 trillion and the annual deficit has ballooned past $1.5 trillion. I've read some numbers that say if you take into account the total amount of personal debt and unfunded liabilities such as Social Security, the U.S. is leveraged to more than 350% to GDP.

But let's push those skeletons back into a closet for another day and just look at the numbers published by the government in July.

Here is the chart for U.S. debt as a percent of GDP:

That chart can expand. In Japan, debt to GDP is 160%.

But then again, the Japanese stock market is at 10,000 down from 40,000 in 1990.

The U.S. is in the enviable position of being the world's reserve currency. And the currency of choice for safety. Which means that when countries like Greece that blow up all of the money heads for the short-term U.S. debt, this keeps our interest low and our debt payments manageable.

This is nothing more than tradition these days. It works because it has worked. There is no fundamental reason to seek out an asset that has lost 30% of its value in the past year and call it "safe."

There will come a day when the dollar will no longer be seen as a safe haven. To me, that day is today.

But enough on that...

Here's the chart you should see:

As you can tell, the S&P 500 is at a crossroads; a juncture; a tipping point...

The unmovable object of the three-year downtrend has run into the unstoppable force of this year's suckers rally. Technical analysis guys would say that the longer trend is the most dominant.

The secondary indicators — such as the MACD crossover — suggest that we are heading down in the short term.

The dividend yield would tell value investors that we are back below 2%, or where we were at the 2007 peak. That is not a bottom.

And take a look at this third chart:

Gold is riding a six-month uptrend after going sideways for almost two years below $1000 per ounce.

It has recently sold off because the unemployment number in the U.S. came out at a beneficial 10% — down from 10.2%.

If you can get in anywhere around $1,100 an ounce, it looks like a good deal. Remember that the Indian Government bought 200 metric tons at $1,058 from the IMF on November 3rd. That's your floor.

If you haven't bought gold yet, buy some on this dip.

And if you're looking to increase your returns, my colleague Greg McCoach recently uncovered yet another way to come out ahead during this crisis. It's a very unique sort of investment, backed by gold. And get this: it makes twice the returns of owning physical gold.

Sincerely,

Christian DeHaemer

Editor, Wealth Daily
(and soon-to-be-launched Crisis and Opportunity)

One of the Most Profitable Plays of 2010

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A Black Swan Gold Hedge

Gold has been on fire as of late, hitting new highs on fears that the U.S. dollar is doomed.

Gold is up 54% this year. That's a great return, regardless of how you slice it. But it's down today, which sets up a good opportunity to buy.

Only 11,000 Jobs Lost

The jobs report out this morning backs up the idea that the worst is over. The economy only shed 11,000 jobs in November, much lower than an expected 125,000. This pushed gold down below $1,190 an ounce.

Wall Street believes that the stabilization of jobs adds more evidence to the idea that we will see a solid recovery in 2010.

And they may be correct. But an increase in jobs on the back of a massive global debt load doesn't mean we are out of the woods just yet...

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A Flock of Black Swans

Black Swans are high-impact, hard-to-predict events that lay waste to well-honed Wall Street theories.

There are still traders at work who remember September 16, 1992, which is known in Britain as "Black Wednesday." That's the day when George Soros broke the Bank of England by shorting the pound and pocketed a billion dollars in the process.

Just this week, the world was hit by the news that Dubai wouldn't be able to pay $59 billion in loans. Speculation quickly followed that other countries were in danger of defaulting. Most of these were small countries like Greece, Latvia, and the Ukraine.

But Could a G10 Country Default?

What you may not know is that of the $80 billion or so of Dubai debt at risk of default, some $50 billion of that money is with UK banks.

Just yesterday, Morgan Stanley put out a warning on the UK in a report:

... There is a danger Britain's toxic mix of problems will come to a head as soon as next year, triggered by fears that Westminster may prove unable to restore fiscal credibility.

Growing fears over a hung parliament would represent something of a leap into the unknown, and would increase the probability that some of the rating agencies remove the U K's AAA status.

In an extreme situation a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in UK government bonds. The Bank of England may feel forced to hike rates to shore up confidence in monetary policy and stabilize the currency, threatening the fragile economic recovery.

A Country of Bankers

England has been hit harder than most during this global crisis because it is a nation of bankers. Financial services provided 27 percent of revenue during the good years. Which is why England is the only G20 country to remain in a recession...

The Pound Is Pounded

Britain is printing money just like the U.S. And just like the U.S., The Labor Party (Democrats) is in full control, simply lacking the political ability to reign in debt. Projected tax liabilities for the UK tax payer are estimated to hit 350% by 2010. That's a lot of debt.

A falling currency is the same thing as inflation. At some point, the UK must hike rates to defend its currency when prices of all goods start to move up. This will set off an inflationary debt spiral in which higher payments compounded by new government debt, a maximized printing press, increased interest payments, and a lower tax base will conspire to send England back to the days before Thatcher.

Black and Blue Swan

Morgan Stanley believes that such a scenario is likely unless the government acts to rein in debt. And the UK — much like the United States — is saying they will do it next year. Time will tell if "next year" is too late.

All I know is that if a G10 country loses its AAA status, or its currency sustains a sudden 10 to 30 percent drop, gold will surge.

It's a great hedge against the next black swan. You could buy physical gold and you'd do fine.

Heck, I think gold will climb over $2,000 an ounce before all this is over.

But there is a better way to maximize your gains... My colleague Greg McCoach recently uncovered another — and much more profitable — way to come out ahead during this crisis. It's a very unique sort of investment, backed by gold... yet this gem pays you double the gains gold makes!

Have a good weekend,

Christian DeHaemer

Editor, Energy and Capital
(and soon-to-be-launched Crisis and Opportunity)

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Buy Gold As the Dollar Burns

"You cannot keep out of trouble by spending more than you earn."

— President Abraham Lincoln

A few days ago, Dubai World — maker of all things frivolous — announced that it would delay payment on its $59 billion debt. This announcement is what Moody's called "a de facto default" and it drove markets down around the world.

The Heng Sang was off 4.5%... Greece fell 7%.

Two days later, Dubai said it was just joking. Of course it would pay.

Dubai, the spendthrift younger brother that built a party palace out of a fishing village, is lucky that older brother Abu Dhabi has a US$700 billion nest egg and is inclined to help out.

Doubtless, there will be strings attached... but it looks like the legendary Palm Islands won't sink — even if they don't sell at a profit.

Debt Crisis Has Legs

It looks like the debt crisis isn't over, despite what Wall Street and Washington would have you believe.

Immediately after the Dubai default, newspapers speculated who would be next. Their guesses: Greece, Latvia, Ukraine, Ireland, and perhaps even the U.K and Italy...

Greece is the current whipping boy for the fiscal conservatives in Brussels. The country has been overspending since before it hosted the Olympics to lackluster crowds, and is now on the edge of a negative debt spiral.

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The EU is upset because the country's budget deficit will be more than 12% of GDP this year. That is four times the amount stipulated by the EU.

According to the Wall Street Journal, "Greece's finance minister came out today and promised that the country wouldn't default on its loans as the cost of insuring its bonds soared to the highest among the 16 nations that use the euro."

Of course, that's what finance ministers always say right before they default.

It Can Happen Here

The current Prime Minister of Greece campaigned on the typical tax-and-spend social programs. But he recently switched gears. He's announced emergency measures to "save" the economy, and is now talking about "an uphill struggle" to get the economy back on track.

In case you were wondering, the U.S.'s budget deficit is now 13% of GDP. And President Obama is announcing new trillion-dollar programs all the time. Health care... cap-and-trade... expanding wars in Afghanistan... and whatever else is on his happy wish list.

Total public debt in Greece is now 99% of GDP and will rise to 135% of GDP by 2011. Numbers like those mean the country is paying around 50% of income just to pay interest. It's not good. It does not make people want to lend you money, but rather short your currency, which in turn drives up the amount you have to pay in interest.

Total debt for the U.S. is 90.4% of GDP for 2009 (without adding in unfunded liabilities like Medicare and Social Security.) Next year, the number will be closer to 200%.

The main point here is that Greece is a small country that can — and will — be bailed out by Germany and France. On the positive side, Greece doesn't own a printing press for euros and can't inflate their way out of debt. The country must stop digging its hole.

Sadly, the situation is not the same here in the States. The bad news for Americans is that we do own our own printing press, and we have no qualms about using it.

Bye Bye Greenback, I Hardly Knew Ye — U.S. Dollar/ EURO

The current brain trust in charge of the U.S. Economy believes that you can spend your way out of a debt crisis. What the economy needs is a little money to "prime the pump."

Heck, it worked when Regan did it in the 1980s. And again with Clinton in the 1990s.

Dot com depression? Feed it money.
9/11 bailout? Cut interest rates.
Real estate earthquake? More money!

Let's take a look at how well it has worked so far for the current crisis...

Remember a year ago when G.W. Bush sent everyone a $300 check? Cost: $152 billion. Result: Nothing.

Then the TARP gave failing banks $700 billion and, in effect, nationalized them. Result: Biggest-ever bonus for bankers.

And more recently, Obama dreamed up the American Recovery and Reinvestment Act of 2009. We'd build bridges and put America back to work. It would only cost $787 billion. Thus far, the result: No bridges and a 10.2% unemployment — and climbing.

Cash for clunkers? Sold forward inventory at a cost to taxpayers, $8 housing credit? Artificially inflated house prices again at an untold cost to the tax payer.

The upshot of all of this is that the total U.S. Debt now stands at $12,009,454,244,833.79. (Click here for the real-time debt count).

Last year, we spent $253 billion in interest to service this debt. By 2019, that interest payment will be $675 billion — that's the low end of the projection, based on the idea that interest rates will stay low and the economy ramps back up to 5% growth.

A more likely scenario is that interest rates will hit double digits by 2019 and growth will be stifled.

There are only three ways for a country to get out of debt:

Buckle down, cut costs, and increase taxes. This is laughable given the current political climate.
Default. This would mean that we could never borrow again at low rates, and the United States would resemble Argentina. America has never defaulted before; but it's a possibility if there were a run on the dollar.
Print more money, destroy its value, and thus pay off your debt. Winner, winner, chicken dinner!

Obviously, we are going for answer number three. This will lead to high inflation, coupled with stifling interest rates and large tax increases, to cover ever-decreasing government programs. And alas, given the current political situation... it seems inevitable.

How the Dollar's Fall Can Make Your Fortune

I'm not here to scold you. I have no illusions that I can change the course of global events. But I can tell you how to make a profit.

These new dollars that are flooding into the system are not staying in the U.S. The smart money knows that the dollar will continue to fall. Hard assets like gold, silver, and foreign stock markets will continue to go up.

One way to play the dollar's crash is to load up on physical gold. It's safe. And it's breaking record highs on a near-daily basis. It hit $1,218 per ounce as I wrote this article.

On the other hand, my colleague Greg McCoach recently uncovered another — and much more profitable — way to come out ahead during this crisis. It's a very unique sort of investment, backed by gold... yet this gem pays you double the gains gold makes!

Until next time,

Christian DeHaemer
Editor, Wealth Daily
(and-soon-to-be-launched Crisis and Opportunity)

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The Mongolia Coal Mining Boom

When I was a young high school punk, I had the good fortune of attending Jim Peckham's wrestling camp. Coach Peckham was the 1976 USA Olympic wrestling coach. He had cauliflower ears and a face that looked like he chased parked cars. He was a certifiable badass and left a lifelong impression.

Peckham taught me three things:

You have to "earn the right to win," meaning you must work harder than your opponent works or you don't deserve victory. This alludes to the deeper meaning that even inalienable rights must be earned.
Wrestling is the world's oldest martial art; the caveman that put his fellow man on the ground was the one eating the deer or getting the cavewoman.
There are two great wrestling countries in the world: Iran and Mongolia.

In Iran, they fight until the loser "turns his face towards the sun, the moon, or the stars."

And in Mongolia, they've fought a massive tournament every summer for more than 800 years, going back to the armies of the world's greatest warrior, Chinggis Khan.

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National Hero

When I first met Dolgorsürengiin "Slippery" Sumiyabazar at the Mongolian BBQ in downtown Ulaanbaatar, I took notice. He had Peckham's mashed-up ears and a game face that said he could take your head off.

Sumiya is a national hero. He won the traditional wrestling tournament in 2006 after finishing second for a number of years and is also Chairman of the Board for the National Investment Bank of Mongolia (NIBM), in addition to being an elected member of the city council and in charge of the budget committee.

In other words, he has accomplished more than most.

Modern Mongolia

The Mongolian BBQ is a modern restaurant, popular with foreigners as well as locals. When I sat down, I couldn't help but notice that the 2004 wrestling tournament was playing on the flat screen TV over his shoulder. He turned around and said, "2004 was unlucky for me."

We waited about 15 minutes as the sword-wielding chef cooked up our choice of local grass-fed, free-range beef, sheep, goat, and horse, fried with vegetables. The choices included beef tongue and fatty lamb tail.

It was around the time we were digging into our plates when Sumiya showed up on TV. So I was looking at the man at the table, and looking at him again over his shoulder.

My host, the CEO of NIBM who goes by Bayar, pointed and said, "That is him!" Soon the entire restaurant of thirty or forty people was watching.

The Sumiya sitting at our table waved it off... a bit embarrassed perhaps.

Meanwhile, the Sumiya on TV in 2004 spun and executed a hip throw which launched both huge men through the air. They crashed down on the dusty Asian steppe with a lung-collapsing drop. And Sumiya was dancing the arm waving strut of the victor.

The crowd at the restaurant cheered and pointed. I asked Bayar if he had arranged this, and he laughed and said, "Maybe... maybe."

But much to my disappointment, Sumiya didn't want to talk about wrestling. He wanted to talk about the budget, which is increasing from $2 billion togrog to $6 billion togrog. He wanted to talk about the new airport and the US$997 million he was spending to refurbish the old Soviet roads. He wanted to talk about the future.

World's Largest Gold Mine

Sumiya told me the Oyu Tolgoi gold mine (O.T.) is what everyone is talking about, but it is just the beginning. For those who don't know, O.T. is the world's largest gold and copper mine by square miles and the fourth-largest by proven reserves.

Ivanhoe Mines and Rio Tinto just signed a deal with the Mongolian Government worth between US$4 and $6 billion. This deal was possible because the newly elected government just cut taxes from 68% to a 30% ownership stake.

This deal has opened the floodgates for direct foreign investment in resource-rich Mongolia.

But as Sumiya told me, it is just the start. Mongolia is landlocked between China and Russia... and this is a benefit. The government catch phrase is Mongolia is land-linked. China needs resources and Mongolia has them... and Russia has needs, too.

Great Business Climate

Mongolia's business climate is so good right now, a start-up nanotech company named Wisdom Assets moved there from London to take advantage of the low taxes. The regular income and corporate tax is now a staggeringly low 10%. Wisdom Assets is a group of scientists with more than 22 patents, including some that use snake venom to thin blood.

The NIBM is acting as a consultant with a number of companies that are setting up shop in Mongolia.

Caption: Christian DeHaemer, Orgilmaa Silzkhuu - Board Secretary and head Lawyer, and Bayarsaikhan "Bayar" Banzragch - CEO National Investment Bank of Mongolia, having drinks at the Chinggas Khan Irish Pub in UB.

One of the projects is a deal to build a $500 million real estate complex in downtown UB. The project will be built to world-class standards by a South Korean company. It will include a hotel, condos, and a shopping mall. It is being billed as a 'green building,' with solar panels and other environmental attributes.

Dolgorsürengiin "The Blue Wolf" Serjbüdee, Sumiya's brother, is heading up the project. He was a renowned K-1 fighter in Japan; K-1 is similar to mixed martial arts in the U.S.

Caption: Dolgorsürengiin "The Blue Wolf" Serjbüdee - Sumiya's brother and former professional K-1 fighter in Japan, future real estate mogul. Another brother, Dagvadorj, is the 68th Yokozuna of professional Japanese sumo wrestling, and one of only two currently in the world.

45 More Mines Pending

I had spoken earlier with Altanbaatar Chuluunbaatar, Head of Registration and Service Division at the Geological & Mining Cadastre Department. He was among the government people who negotiated the O.T. deal.

Mongolia has vast reserves of high-quality coal and is lucky to share a border with the largest coal consumer in the world. This makes Mongolia a major force in the global coal market. Mongolia will play a growing role in powering China's heavy industries and electric coal-fired generators.

Altanbaatar told me that right behind O.T. is Tavan Tolgio (called T.T.), a huge coal deal between the state-owned Mongolia coal company and a short list of bidders.

T.T. is a coal mine located 40 kilometers from the Chinese boarder and in close proximity to a rail line. With 6.5 billion tons of coal, T.T. is said to be the largest undeveloped coal deposit in the world.

The short list of bidders for the coal project includes BHP Billiton (BHP), Vale S.A. (VALE), Peabody Energy Corp. (BTU), India's Jindal, and China Shenhua Energy Co. Ltd. (1088.HK).

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Tom Albanese, CEO of Rio Tinto, says of the supply in this part of the world: "Coal from Mongolia to China is happening. It is expanding, probably doubling every two years."

And Mongolia also has vast hoards of uranium, copper, and rare earth minerals. Altanbaatar told me that there are 15 known resource deposits that may be equal to O.T. and T.T. There are another 30 that have been explored by the Soviets, but not by modern seismic equipment. These may also be major fields.

As I write this, a government report on these potential mines is being translated for me from Mongolian to English. Soon I will have the only English translation of these vast resources...

It is still early in the game, but word is leaking. I just heard an analyst on Bloomberg talking about the Mongolian mineral boom... though he was recommending the $90 billion Rio Tinto, whose Mongolian assets are maybe 3%.

First on the Ground

I was told by more than one person that I was the first foreign journalist that they had talked with, and therefore they rolled out the red carpet. I was lucky enough to have tremendous access to major players. A year from now... everything will be different.

After talking with government officials, the major players in the investment bank, the owner of the largest brokerage in Mongolia, head of the Mongolian Stock Exchange, and interviewing about seven CEOs... I probably know more about the Mongolian opportunities than all but a handful of other foreigners.

I am analyzing the information for the best way to play the coming investment boom. There are companies that trade in New York, London, Toronto, and Hong Kong that will surge. There are also a few on the Mongolian Stock Exchange with tremendous value — including one that trades with a P/E of one.

The timing couldn't be better. The next two years will see tremendous growth.

Commodities will be where the money is on the horizon. I believe this, and my colleague Ian Cooper has been telling readers this very thing for some time now, too. In fact, his latest rare earth metals play is shaping up to be wildly profitable...

I greatly admire these young, hungry Mongolian businessmen. There are few places with more opportunity. To be young, educated, and a native Mongolian is, at this time, to be on the precipice of greatness.

You should come along for the ride. Look for my free report in your inbox on January 1, 2010.

Until next time,

Christian DeHaemer

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Mongolia's Gold Mining Rush

Editor's Note: This article originally appeared in Wealth Daily with an article about by Steve Christ on Nov. 5, 2009.

———

The price of gold hit an all-time high yesterday with the announcement that India has recently bought 6.7 billion dollars worth of the heavy metal from the International Monetary Fund (IMF). As I write this, gold is a few dollars short of $1,100 an ounce.

Now, $6.7 billion is equal to a month's worth of U.S. military operations in Iraq, and doesn't even come close to any of the bailout packages awarded to U.S. financial institutions... but it was enough to purchase half of the total amount the IMF is selling this year. And $6.7bil is more than pocket change for India...

According to Yahoo Finance:

The sale to India was nearly half the 403.3 tonnes of gold that the IMF has targeted for sale over the coming years... The Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the United States and Germany. India is the world's biggest consumer of gold, importing between 700 and 800 tonnes of the metal every year or 20 percent of global demand.

India's Initiative: A Bellwether for Government Gold Buying?

The amount of money that India's central bank spent on gold is not as significant as the fact that they bought gold at all.

For the past fifteen years, major governments like France, Russia, and Germany have been selling gold on the open market. This has obviously had a bearish effect on the price of gold.

This year, not only are none of the major holders of gold selling the metal, but up-and-coming countries like India and China are buying it. China recently reported that it was doubling its gold reserves to 1,054 tonnes.

Both of these countries are selling U.S. Dollars and buying hard assets. They simply believe that the dollar will continue to fall. The fact that the Fed announced today that they would hold the Fed Rate to 0.25% for the foreseeable future backs their argument.

Last week, I told you about a "double top" in the Russell 2000 and that you should buy puts on the corresponding iShare (NYSE: IWM). Those puts surged 59% the next day.

Today I'd like to take a look at the ten-year gold chart...

Pent-up Energy in Gold

I've circled patterns on the ten-year gold chart above. These patterns are called "coiled springs." The thinking is this: markets tend to go from trading for long periods of time in tight ranges. This is interrupted by massive breakouts. Sideways markets build energy like a weight on a coiled spring; when the weight is removed, the spring leaps forward.

The chart shows that after each sideways period (lasting roughly two years), the price of gold jumped an amount equal to that which it went sideways. This would suggest that this rally is going to push gold to $1,450 to $1500 an ounce.

And that's just for starters... I personally believe that the next liquidity-fueled bubble market will be in gold and other hard assets.

One of the most obvious ways to play this surge in gold prices is to buy junior gold miners — and I've been recommending those all year, to my readers' good fortune.

Go Down Stream

Another way to play the new gold boom is to buy companies that help miners mine the yellow metal.

You may not be aware of it, but there is a new gold mine in Mongolia. In fact, it is the world's largest — a mine bigger than the state of Ohio!

The spending on this mine will double the GDP of Mongolia. That's right — double... which means Mongolia will become to Central Asian minerals what Dubai is to Middle Eastern oil.

This boom all stems from a recent government corporate tax cut from a draconian 68% to a more modest 30% of profits.
And this is just the first deal. Mongolia is rich in mineral wealth. The floodgates have been thrown open.

This coming gold rush in Mongolia will flood the country with cash. Early investors will literally make their fortunes.

That's why I'm getting on a 26-hour flight this coming Monday — and braving the cold (the high on Sunday was 13°F), to find out the best way to play it. I've arranged to meet with the largest broker in Ulaanbaator and some well-connected ministers and politicians.

Believe me... my date book is stuffed with tours and meetings. I will be doing my due diligence with my boots on the ground. Look for my report in your inbox on January 1, 2010.

Stay tuned for more next week,

Christian DeHaemer
Editor, Wealth Daily
(and soon-to-be-launched Crisis and Opportunity)

The Mongolia Mining Boom

I wasn't sure what to expect when my plane landed at the Genghis Khan International Airport.

It was midnight. The pilot informed us of the local temperature: a bitter cold -5 degrees. The airport resembled an old Soviet-style bunker and reminded me of similar buildings in ex-Communist countries like Bulgaria.

I overpaid for the first taxi; the driver pestered me and I settled on a price that was more than I should have paid, but he drove the 15-minute trip from the airport.

The air was heavy with pollution that came from the gur (yurt) village.

People still live in traditional nomadic structures and they burn wood and cow pies and the like. On this night, everyone had a fire going.

The roads were full of potholes. Most lights were off. The buildings I saw as I drove into Ulaanbaatar (or UB, as everyone here calls it), were of the former Soviet-style apartments. More of these ugly grey buildings have been built in the world than any other — that I'm sure of.

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My hotel, in comparison, is a top-notch four-star establishment. For $170 a night, I get a place to lay my head, including daily breakfast with eggs to order and thick black coffee.

I hadn't yet heard from my contact from the National Investment Bank of Mongolia, and so I have to be honest. . . I spent some time biting my nails during my flight to Asia. I was worried that I had annoyed Mr. Bayarsaikhan Banzragch, the CEO of the only investment bank in Mongolia. . .

But it turns out he was in Japan on business and had just returned.

Bayar, as he is known, and his lawyer Mrs. Orgilmaa Siizkhuu took me under their wing and gave me access to the Head of the Stock Exchange, the Vice Governor at the Bank of Mongolia (their central bank), and a regional head at the Mineral, Resources and Petroleum Authority of Mongolia.

I also interviewed the man who is building a world class city called Luminu City with a budget of $500 million. It will be a green city (it is always sunny in Mongolia), with solar panels, a 45-foot office tower, shops, and condos. He told me he is "building a second Dubai in the heart of Asia. . . "

And I almost believed him. I'll tell you more about those meetings later. . .

First, I want to point out an article I wrote recently about the commodities boom in Mongolia — gaining momentum then, as I wrote the article, and today, as I type these words from my hotel room — and the significance of the political takeover by the Moderate Social Democratic Party last year.

The contextual significance of Mongolia's political state and the commodities boom is important in understanding just what is on the horizon in regards to the vast fortunes that can be made by this opportunity, as I explained in my last piece:

Untouched for 19 years, the world's last great energy, metal, and mineral boom is about to launch in Mongolia. In fact it's already happening. A new tax law has recently changed the business climate, and the likes of Goldman Sachs, China Wealth Fund, Rio Tinto, and many other big players are rushing through the gates. . .

For the better part of a century, Mongolia has been known for its wealth of minerals: gold, coal, rare earth metals. Heck, the Russians had the whole place mapped out in the 1960s.

But under Russia, very little extraction ever took place. In the early 1990s, Mongolia finally broke free from its status as a Soviet puppet state and the country reacted like many former Russian states: It whipsawed from corrupt renegade capitalism back to its former communist party rulers and a collective mentality.

But neither of these systems was conducive to the massive capital inflows necessary to fund long-term gold, copper, and coal mines.

And as a result, during the commodity boom era of the 2000s, Mongolia was taken over by the anti-capitalists and strict laws were made placing punitive taxes on foreign companies after Mongolia's mineral wealth.

Then last year, the Moderate Social Democratic Party took power. This new group had a pragmatic approach to economics and political ideology. One of the first things those in power did was to cut the corporate tax from 68% to 30%. I bought one small gold miner in anticipation of this new law. . .

It is now up more than 458%.

To give you some perspective, the square footage of this mining property is bigger than the state of Ohio. And the $6 billion investment — coupled with the expansion of the economy — will easily double Mongolia's $9 billion GDP.

But it wasn't long after the plane touched down that I realized there were some things I didn't know when I wrote my article about mining in Mongolia: Mongolia isn't some warmed-over former Soviet state. These people were hard-working, smart, and aware of the fact that their future is very promising.

If I can generalize a population, they remind me of the people I've met from the Western High Plains states, like Colorado and Wyoming. They are a proud, horse-and-mountain people with a long history. After all, one of their ancestors once ruled the world.

They are Buddhists who care very much about the environment and their place among generations. When I mention the amount of gold and uranium their country has, they gratefully attribute from whence they came with the response, "Thank the ancestors."

The feeling I get on the ground is one of controlled optimism.

Mongolia's people are going to meet the future peacefully, with every intention not to mess with the balance of their present-day lives.

I'll keep you informed on my adventures and on-the-scenes discoveries in the weeks to come.

More later,

Christian DeHaemer

Wealth Daily

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Mongolia Mining

The commodity boom in Mongolia is just getting started. Vast fortunes will be made. Yours could be one of them. . .

Untouched for 19 years, the world's last great energy, metal, and mineral boom is about to launch in Mongolia. In fact it's already happening. A new tax law has recently changed the business climate, and the likes of Goldman Sachs, China Wealth Fund, Rio Tinto, and many other big players are rushing through the gates. . .

Here's the Deal

For the better part of a century, Mongolia has been known for its wealth of minerals: gold, coal, rare earth metals. Heck, the Russians had the whole place mapped out in the 1960s.

But under Russia, very little extraction ever took place. In the early 1990s, Mongolia finally broke free from its status as a Soviet puppet state and the country reacted like many former Russian states: It whipsawed from corrupt renegade capitalism back to its former communist party rulers and a collective mentality.

But neither of these systems was conducive to the massive capital inflows necessary to fund long-term gold, copper, and coal mines.

And as a result, during the commodity boom era of the 2000s, Mongolia was taken over by the anti-capitalists and strict laws were made placing punitive taxes on foreign companies after Mongolia's mineral wealth.

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Then last year, the Moderate Social Democratic Party took power. This new group had a pragmatic approach to economics and political ideology. One of the first things those in power did was to cut the corporate tax from 68% to 30%. I bought one small gold miner in anticipation of this new law. . .

It is now up more than 458%.

See for yourself:

As you can see, the law passed in mid-August.

The first group to take advantage of the new law was Rio Tinto and its partners, who had been sitting on a concession for about 10 years. They reached an agreement with the government and are investing some $6 billion to build the world's largest gold mine within 100 miles of the Chinese border.

To give you some perspective, the square footage of this mining property is bigger than the state of Ohio. And the $6 billion investment — coupled with the expansion of the economy — will easily double Mongolia's $9 billion GDP.

An independent study projects the mine will be "capable of average annual production in excess of one billion pounds of copper and 330,000 ounces of gold for at least 35 years. Peak annual production in excess of 1.6 billion pounds of copper and 900,000 ounces of gold is projected to be reached six years after initial production."

This Is a Very Big Deal

As soon as the law passed, I started touching base with my contacts. I called James Passin, who runs the extremely successful Firebird Global Fund. James and I worked together for many years at the Taipan Publishing Group.

(You may have recently seen James' name in newspapers for hosting a fundraiser for former President Bill Clinton and the current Governor of Maryland, Martin O'Malley, at his New York brownstone.)

Name-dropping aside, knowing people on the ground is key.

In fact, over the past few years, Firebird has been buying up small companies in Mongolia in anticipation of the new gold rush.

The first thing James told me was that he owned a large portion of the largest broker in Ulaanbaatar who would be happy to show me around. He was also going to put me in touch with a national hero and wrestling champion who is very well-connected.

Mr. Passin's theory is that everyone knew about Rio Tinto (Market Cap: $89 billion). And yes, it might go up 50%. . . but the real money was going to be made in the banks, telecoms, and breweries — among others. The massive flood of liquidity taking over Mongolia (with a population of three million), would send fifteen-cent companies to five dollars almost overnight.

My friend's theory is hard to argue. My own research had given me the distinct feeling that Mongolia could be the Kuwait of Central Asia, with its oil, coal, gold, copper, uranium, rare earths. . .

The Rush Is On!

I'm not the only one who believes this. Just this week, China put up $700 million in a coal company.

According to Reuters:

Hong Kong sovereign wealth fund China Investment Corporation is planning a $700m investment in Iron Mining International, a mining company with interests in Mongolia. Iron Mining is backed by private equity firm Hopu and Singapore state investment group Temasek.

The deal tops off a billion dollar spending spree by the group this week into the Mongolian mining sector. CIC also took a $500m stake in Canadian company SouthGobi Energy Resources in the form of a 30-year secured debenture issued by the company. SouthGobi also has coal mining interests and exploration assets in Mongolia.

And an Australian Company just sunk another $195 million into coal. According to its press release:

Leighton Holdings Ltd. (LEI.AU) said Wednesday that it has secured an upgrade worth A$195 million of a mining contract in Mongolia.

Australia's biggest construction company said Energy Resources LLC has asked its subsidiary Leighton Asia to expand the production capacity of the UHG Coal Mine in the South Gobi region of Mongolia. The adjustment increases the contract's value to A$480 million, Leighton said.

My Flight Leaves Monday Morning at 6:48. . .

It's this type of market momentum that has me getting on a plane early Monday morning and flying 26 hours to Mongolia.

I will report my first impressions next week. The opportunities seem enormous, but you just can't run around half-cocked. . . There are reports to be read and people to talk to.

Look for the full report to be in your inbox on January 1, 2010. Truth be told, I'm not even worried about UB's temperature reached a chilly 13ºF at the high today — I haven't been this excited about an investment situation since the Russians were selling Gazprom for coupons.

And while the commodity boom in Mongolia is just taking off, we're already situated in the early stages of the greatest commodities bull market in history... one that my colleague Ian Cooper has been capitalizing on week after week. He's closed 93 winning trades with his resource and energy stock picks this year alone. To learn how his readers are enjoying gains of 3,124% since November. . . and how there's still time for you to get in before his next trade, just follow this link.

Meantime, stay tuned for news from on the ground,

Christian DeHaemer

Editor, Energy and Capital
(and soon-to-be-launched Crisis and Opportunity)

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The usual way to make money in the market is to buy when others are selling, and to sell when others are buying.

Or, as the oft-quoted Barron Von Rothchild said, "Buy when blood is running in the streets, and sell when the horns are blowing victory."

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The truth is I've had a very good crisis.

But I'm not here to gloat. I'm here to tell you how to profit from what's going to happen next. . .

Where has the fear gone?

If you remember, during the spring of 2009, you couldn't get a higher rate of bearish market psychology. The fear was so palatable you could smell it. People were literally jumping out of windows with their trading account records stuffed in their coat pockets.

Obviously, that was the time to buy.

But now, there is no fear. Every stock chart you look at is up 200% or more. Investors who've held through the bad times are thinking, "A few more up months and I'll be able to retire again."

But they aren't going to get it — not this year, anyway.

I'm not just blowing Dixie. This isn't just a hypothesis. I know the bears are dead because the volatility index (VIX), a great measure of market psychology, is back to historic lows.

VIX is Down

Think of the VIX as the opposite of the stock market. A year ago, it took off to record highs as the major indexes fell 50%. When the market started to calm down and the bulls took over, the VIX went back to its historical trend line at 20.

Two Year VIX

This tells me that all of the bears are wrung out of the market. And let's face it: they've been getting creamed for eight months.

The good news is put options are cheap again.

But it's not just the lack of fear that had me bearish. . . it's the Dow Jones Transportation Average, a leading indicator.

Be Bearish

The Dow Jones Transportation Average has a double top, which is a major reversal chart pattern. It means that the bulls have tried to break a certain level. . . fallen back. . . tried again. . . and failed again.

Double Top in Transports

Dow Theory states that if the Transports break their trend line — and this is confirmed by the Dow Industrial Average — then we are in a bear market. This theory has been right 10 out of 11 times. The Industrials haven't confirmed. . . yet.

But the small caps also have a double top.

Russell 2000 — Double Top and Broken Trend

There is also a double top in the Russell 2000 — the index of the small capitalization stocks.

If you go back through market history, the small caps tend to lead the market both up and down. The idea is that they are more nimble and less defensive. Therefore, they are the first to be affected by events.

The Little Guys are Running Scared

You will also notice that the MACD had a crossover and turned negative. And the volatility has flattened out to the point that it has broken its downtrend.

I'm starting to see these bearish chart patterns all over the place. The NASDAQ has broken its uptrend as well, and looks like it is rolling over. . .

The dollar is bouncing higher — a sure sign the smart money is getting out of equities.

I recommend picking up some iShares Russell 2000 Index (IWM) put options.

I suggest the December 53 (symbol: IWMXA), which last traded at $1.40 with 23,650 contracts out. Or you may just consider switching some of your investments into cash.

Happy Investing,

Christian DeHaemer
Angel Publishing

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Natural Gas Storage Stocks

The greatest — and most ironic — thing about Chicago Bridge & Iron is that they aren't in Chicago. . . don't build bridges. . . and have very little to do with iron.

What the company does do, however, is all the rage. The Netherlands-based engineering company makes infrastructure for natural gas storage and transportation. This sector is so hot that they've picked up six contracts since September — including one just yesterday.

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Gas is Expanding

Around the world, the total known reserves for natural gas are expanding rapidly. In the United States, known reserves have increased 48% over the past three years, due to new drilling techniques called fracting. A natural gas consortium is running television ads saying that we have a 100 year supply of this clean plentiful energy.

China has entire city fleets of buses and taxis that run on compressed natural gas. China also has massive amounts of coal-based methane — methane that sits on top of coal fields. Again, new technology is allowing China to utilize their resources.

Russia's Gasprom (OGZD.IL) has more BTU's in natural gas than Saudi Arabia has in oil, and is now exporting natural gas to California from Siberia.

T. Boone Pickens and his Clean Energy Fules Corp. (CLNE) are running port facilities where every vehicle is based on natural gas. He has had meetings with President Obama and Al Gore on the subject.

Honda has a natural gas car available for sale today that you can plug into a gas pipe in your garage.

Peterbuilt is selling natural gas long haul trucks because it makes fiscal sense to run on NG, as it's cheaper and cleaner. . .

The U.S. has too much natural gas. . . so much, in fact, that the price has dropped to ten-year lows — from $14 to $2.80, while oil went from $35 to $80 a barrel. (I should note, there's been a recent suckers' rally that pushed it back above $4).

"That's great," you say. . . "Cheap, clean energy for everyone. . . but how does this make me money?"

You can't buy the explorers; you can't buy the producers or the service guys; rig counts have fallen through the floor. . .

But what you can buy is the one company that builds storage and transfer stations.

Chicago Bridge and Iron (CBI:NYSE) is an engineering company that produces the infrastructure for natural gas storage and transportation. I mentioned earlier that the company has picked up six new contracts since September — these include a $70 million deal they picked up last week to build a facility in Siberia, and another $100 million deal on Friday.

According to Yahoo:

Chicago Bridge & Iron Co. NV, an energy-infrastructure construction company, on Friday said it received a contract worth more than $100 million from UGI LNG Inc. to engineer and construct the expansion of a Temple LNG peak shaving facility near Reading, PA.

Under the contract, CB&I will be responsible for the addition of a new 50,000 cubic meter liquefied natural gas storage tank and related processing facilities designed to provide 150 million cubic feet of natural gas per day during peak demand periods.

As you can see in the chart below, they have sliced through all resistance and appear to have none until they hit $30. They have a decent balance sheet, a P/E of 11, and should continue to grow with the expansion of the natural gas industry:

The company has a conference call today, and I think the sentiment will be bullish.

Sincerely,

Christian DeHaemer
Editor, Energy & Capital

China's Green Investment

China has a big problem.

Anyone who has been to Beijing, or watched the 2008 Olympic Games, knows that China suffers under a large, black cloud of soot and smog.

On August 27, 2008, China officially became the world's largest polluter. On that day, they churned more CO2 out of their coal-fired electric plants than the United States.

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The Middle Kingdom suffers from a dearth of oil, but has abundant coal supply. For this reason, they use coal for just about everything. . . and given the 10% annual growth in GDP, its use is expanding rapidly.

A recent report from Canada says that China's greenhouse gas emissions have increased 120% this decade.

The Climate Bugbear

Now, I'm not writing to you about saving the environment. I believe that "climate change" is to the Democrats what "terrorism" is to the Republicans. To paraphrase H.L. Menkin, it's a bugbear used to frighten the public. It gives the politicians something to save us from.

So, it's no wonder that China has been fighting international environmental agreements for years. The country would not only rant about western imperialism, but argue correctly that while it contains twenty percent of the world's population, its greenhouse gas emissions per capita have remained less than other industrial countries'.

It seems only natural that the world's fastest growing, highest pollution-producing country would continue on its path of anti-environmentalism. . .

This is why I was so shocked to read that China recently:

Held meetings in New York with 200 green scientists,
Is pushing green energy going into a meeting with President Obama next month, and
Has just signed an emission reduction agreement with India.

. . . And all this ahead of the international meeting on the environment at Copenhagen in a month and a half.

According to the Wall Street Journal, "Asia's two biggest polluters from burning carbon-based fuels announced their collaboration on renewable power and energy-efficiency projects in a memo of understanding yesterday in New Delhi."

What the heck is going on?

One would like to think that China has had a bout of conscience, perhaps in response to a recent report that claimed birth defects in China's coal regions rose 40% between 2001 and 2006.

According to China Daily, "The number of newborns with birth defects is constantly increasing in both urban and rural areas. Environmentalists say that the leading culprit is China's dependence on coal and that birth defects are highest in coal-producing regions such as Shanxi province and Inner Mongolia."

Follow the Money. . .

I'd like to think that China is motivated by ethics, but I doubt it. Rule number one of investing is to follow the money. When a country like China suddenly switches its rhetoric to encompass environmentalism, there is a reason. . .

Green energy is where the money is. The richest man in China (worth $5.1 billion), plans to take over the world by selling electric cars to the masses, and the second richest person made her $4.9 billion fortune recycling paper.

In fact, China's green industry is now estimated to be worth $132 billion.

Wan Benti, chief engineer with the Ministry of Environmental Protection in China, claims "the total output value of 1,300 Chinese enterprises in the environmental protection industry will hit 900 billion yuan by the end of this year."

China is already the world's largest producer of solar panels, and is becoming a front runner in the battery and power storage sector. Note the surge in Hong Kong High Power Technologies:

I suspect that China's newfound environmental crusade has less to do with CO2 emissions and more to do with profit.

If the rest of the world wants to hamstring its leading industries by throwing up more barriers — in terms of carbon restrictions, cap-and-trade, etc. — China is more than happy to sell electric cars and solar panels to consumers in the West.

And if GE sells fewer turbines and GM fewer cars, that's alright, too. . . just don't expect China to follow any agreement it signs.

In the end, it's just more of the same Chinese duplicity.

I do know one thing: all of these Chinese green energy companies can be expected to surge going into the Copenhagen meetings. I'll send you my best idea next week — it's a cutting-edge battery maker that could easily go up 1000%.

Sincerely,

Christian DeHaemer

Energy and Capital

P.S. At this stage in the recession, I would dare any trader to match the success that my colleague, Ian Cooper, has been having lately. After all, how many people do you know trading with a 94.2% success rate? While most traders are running away as fast as they can, Ian simply rolls up his sleeves and gets to work. Recently, he's knocked out a 20% gain in two days — and another 58% trade in a little over a week. But hey, don't take my word for it. . . I want you to grab these profits for yourself. Just click here to learn more.