It's a worthy vehicle for appreciation in certain conditions, and versatile as both a hard currency and a hedge against monetary failures. . .
However, my thought has always been that if the system collapses to the point where gold becomes widely traded as money once again, other things will be worth just as much. Things like guns, ammunition, batteries, liquor, gasoline, heating oil, cows, chickens and goats.
Besides this, I think it's naïve to believe that our government would even allow the private ownership of gold during any kind of dire national monetary emergency. . .
If the poop hits the propeller, the government is very likely to take your gold away like it did in 1933, with Executive Order 6102. I might remind people that this happened in response to a currency and banking crisis not unlike today's in some respects.
I can't imagine the G-men would have much success collecting everyone's bullets, batteries, booze and bulls.
Now, before throngs of you write in to tell me I don't know my history, I realize that the United States was on a different monetary standard in 1933—one that arguably allowed FDR to seize gold under an obscure WWI act of Congress. . .
All I'm saying is that our government is a powerful entity—and able to justify almost anything it wants to do through any number of channels and statutes (see also: passage of health care bill). A presidential Executive Order is only one of them.
Believe me, if Big Brother decides that privately held and traded gold undermines the stability of the monetary system, they could find a way to either seize it or declare it as illegal tender if they wanted to.
But I digress. . .
This piece isn't about the yellow metal everyone's buzzing over at the moment; it's about the kind of gold that can actually make you some BIG money: black gold.
With All Eyes on Gold, It's Time To Buy OIL
The freakish dip in oil prices we're seeing right now may be one of your last opportunities to buy into all manner of oil-based investments at bargain prices.
As I'm sure you already know, this dip is not being caused by any increase in crude production—or a forecasted decline in demand for oil. . .
In fact, the IEA predicts that 2010 will sharply reverse two straight years of declining world oil consumption to break 2007's record of 86.5 million BPD.
Rather, the tumbling oil prices of the last few weeks are due to a U.S. dollar that's suddenly—and, many experts believe, temporarily—stronger in comparison to the debt-strained euro, the world's largest currency in circulation.
Just yesterday, Bloomberg's BusinessWeek confirmed this: Crude oil tumbled to a 12-week low in New York as the strengthening dollar curbed the appeal of commodities as an alternative investment.
Oil is priced in dollars. And all other factors being equal, when the buck spikes, oil dips.
Simple as that.
Right now is one of those rare anomalies (read: window of incredible opportunity) when extreme events briefly disrupt the two-part scenario almost all credible analysts foresee:
- World oil demand soars, while conventional crude production falls (See: Peak Oil).
- The dollar declines as the U.S. government prints and spends ever more of them on things that do nothing the restore America's engine of economic greatness: industry.
Morgan Stanley calls for oil to potentially touch $120 in 2011. . .
B of A/Merrill Lynch sees oil bouncing back to $105 this year. . .
Barclays more conservatively predicts $100 oil by the end of 2010. . .
And all of these venerated experts see oil hitting $135–$150 by 2012–2015.
So it's easy to see how today's low-$70s crude price is a freakishly favorable window of opportunity to get in on well-chosen oil investments. . .
And according to one of my colleagues, some of the best among these are right here in North America.
The Renaissance of North American Oil
Longtime readers of mine know that I'm a commentator, not an investing guru.
Sure, I have some decent instincts about what to do with money to make it grow—and I haven't taken a bath on many of the investments I've made in my life. . .
But that doesn't qualify me to tell you what to do with your money.
However, what I can do is show you in comparative terms what both gold and well-chosen North American oil plays have done over the last year. . .
First, gold's roughly 34% increase:
By any account, a 34% gain on your money in a year is nothing to sneeze at.
And to be fair, appreciation in some of the more solid small gold mining companies beat this quite handily in the past year or so—I've actually seen some 200%+ winners in the portfolios of some of my Angel Publishing colleagues. . .
However, I've never seen anything like the kinds of one-year gains posted by some of the North American oil drillers researched and recommended by Keith Kohl, editor of Angel Publishing's $20 Trillion Report. . .
Three of these in particular could've handed you 825%, 832%, and 852% profits over twelve months—on just a 77% move in oil prices (get their charts and tickers here).
Like I said, I'm no analyst. . . but I've never seen the market pay out such a hefty premium on a base commodity's price move to a specific group of dependent companies before. . .
According to Kohl, it's evidence of what he calls "North America's oil comeback."
I don't have nearly enough space to repeat everything he told me about this under-the-radar renaissance of Ameri-Canadian oil here—but the gist of it is that one "game-changing" new oil/gas extraction technology is now making it possible to economically recover the relatively large quantity of unconventional crude trapped in the strata of certain North American rock formations.
The three drillers I just told you about—the ones that averaged 838% 12-month gains in 2009-2010—are ALL expert practitioners of this particular technique in one of North America's best-known unconventional oil reserves: The Bakken formation of North Dakota, Montana, and Saskatchewan. . .
However, according to analyst Kohl, there's another North American oil-bearing region that's even better for drillers proficient in this new technology.
And one company he's pinpointed has secured not only a huge land base in this rugged region—but also a drilling engineer who's perhaps the world's foremost expert on the "game-changing" extraction technology that's taking the North American oil and gas industry by storm.
Apparently, the oil this driller has been finding in this area since November has proven to be some of the highest-quality crude available on earth. . .
He predicts that early investors in this company could lock down more than 12 times their money in just the next two years!
I haven't heard ANY gold investing analyst predicting anywhere near these kinds of return on a yellow-metal play of any kind. . .
And according to Kohl, this play is just the beginning of many more to come from the comeback of North American oil.
Given the performance of the first few of these boomers I've just showed you (straight from Keith's $20 Trillion Report portfolio, by the way), my money's on the black gold over the yellow kind from now ‘til the cows become cash. . .
And if I had to pick what I thought was the optimum moment to buy into any of these plays—it would be right now, while the dollar's strong and oil irrationally cheap.
Maybe we ought to send a "thank you" care-package to Greece for crashing the euro. . .
Until next time,
contributing editor, Energy and Capital