Customer Service 1 (888) 261-2693
Advanced Search

A High-Income Bet on Rising Energy Prices

By Matt Badiali, editor, S&A Resource Report
Wednesday, July 28, 2010

Last week, I attended one of the best collections of junior resource companies and investment experts you can find anywhere... the Agora Financial Investment Symposium, held in Vancouver, British Columbia.
 
One of the highlights of the conference was hearing master resource investor Rick Rule speak five different times. Every talk held nuggets of information that can make you money, including the one I'm passing along today...
 
Right now, Rick's favorite resource sector is energy. In the past, Western countries competed with one another for energy, especially oil. Those days are over. It's now the age of China, whose consumption will dwarf historical volumes.
 
At the same time, the owners of giant "legacy" oil fields are killing them. National oil companies in Nigeria, Mexico, Venezuela, Indonesia, and Iran exported oil and used the revenues to line the pockets of officials and voters. They failed to properly reinvest in the oil fields. Now, their oil production is plummeting.
 
That is a problem for those countries... but it's also a problem for everyone else who's competing for oil resources.
 
Roughly 25% of the world's export oil comes from countries that have mismanaged their oil fields. It's pretty easy to guess what happens next... Rising demand and falling supply will lead to higher prices. As Rick pointed out, that's not an "if" proposition... it's a "when" proposition.
 
Britain's Energy Secretary Chris Huhne told the Financial Times that oil shocks reminiscent of the 1970s are very likely. He's worried that, as North Sea oil fields decline, England will face supply problems.
 
Great Britain is in trouble. But here in the U.S., we have a solution.
 
The safest, smartest alternative to tanking in oil from the Middle East and South America lies about 850 miles north of Helena, Montana. Canada's tar sands are enormous. And the oil is easy to recover.
 
As the world's excess export capacity thins out, and China gobbles up what's left, the U.S. will depend even more on Canada for its oil supply.
 
Rick recommended Canadian Oil Sands Trust (COS.UN on the Toronto Stock Exchange). The trust is a pure play on the Canadian oil sands. It doesn't own gas stations or refineries... It just owns 36% of giant oil sands mine Syncrude.
 
Its partners in the project are a wide range of oil companies like ConocoPhillips, Suncor, Imperial Oil, Nexen, and Murphy Oil. Syncrude produces about 375,000 barrels per day. Its resource is around 5 billion barrels.
 
Rick says he's not expecting capital gains with Canadian Oil Sands Trust. He says it's like insurance against rising oil prices down the road. And it pays a nice 6.9% dividend while we wait.
 
Good investing,
 
Matt Badiali




In The Daily Crux Recent Articles
Market Notes
Fear vanishes… Volatility Index dips below 22, lowest level since May 3.
 
Bellwether gold miner Newmont Mining drops 7% in two days ahead of earnings report.
 
Bullish economic sign… chemical giant DuPont surges to new high after strong earnings report.
 
Earnings today... ConocoPhillips (oil & gas), Visa (credit cards), Comcast (cable TV/Internet), Boeing (aerospace).
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1106.13 -0.7% +12.9%
Oil 34.36 -0.9% -3.9%
Gold 113.78 +0.2% +23.5%
Silver 17.16 -0.8% +26.9%
US-Dollar 82.12 0.0% +4.1%
Euro 1.30 -0.1% -8.4%
Volatility 24.25 +4.6% -0.1%
Gold Stocks 434.11 +0.4% +26.0%
10-Year Yield 3.00 -1.6% -18.7%

World ETFs
Symbol Price
Change
52-Wk
USA 110.83 -0.7% +13.2%
Canada 26.34 -0.4% +11.7%
Russia 18.34 -1.1% -4.1%
India 31.56 -0.2% +4.3%
Israel 14.23 -1.3% +12.5%
Japan 9.65 +1.2% +0.1%
Singapore 12.16 -0.3% +18.3%
Taiwan 12.36 -0.2% +8.1%
S. Korea 49.06 -0.7% +21.9%
S. Africa 60.36 -1.2% +22.9%
China 41.18 +0.0% -3.9%
Lat.America 46.32 +0.4% +23.6%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 104.63 -0.9% +0.3%
Big Pharma 60.01 -1.3% -4.3%
Internet 52.30 -0.1% +11.5%
Semis 13.29 -2.4% +9.1%
Utilities 31.00 -0.5% +6.9%
Defense 17.29 -0.4% +20.2%
Nanotech 8.85 -1.5% -9.1%
Alt. Energy 9.27 -1.3% -12.6%
Water 16.03 -1.4% +3.2%
Insurance 15.08 +0.5% +18.8%
Biotech 18.14 -0.6% +11.1%
Retail 16.56 -1.4% +10.7%
Software 21.66 -2.1% +18.4%
Big Tech 46.05 -0.8% +16.7%
Construction 11.87 -1.7% -0.4%
Media 12.10 -1.6% +30.0%
Consumer Svcs 57.34 -0.5% +21.1%
Financials 52.85 -0.9% +17.3%
Health Care 58.73 -1.4% +2.8%
Industrials 56.14 -0.5% +25.1%
Basic Mat 59.41 -0.6% +23.4%
Real Estate 51.93 -0.2% +47.9%
Transportation 79.90 +0.1% +25.5%
Telecom 20.32 +0.2% +11.5%