Saturday, April 10, 2010
U.S. GDP rose 5.7% in the fourth quarter (better than an expected 4.6%), the fastest pace in six years. Manufacturing in the U.S., China, Japan, and Europe also improved. U.S. manufacturing grew the most since July 2004.
In the stock market, 90% of the S&P 500 is trading above its 50-day moving average. Check out this chart from Bespoke Investment Group:
Industrials are the most overbought sector, with 100% trading above their 50-day moving average. And 97% of the financial sector and 92% of technology stocks are above the average. Meanwhile, only 75% of energy stocks are above their average.
The Federal Reserve is preaching deflation, still. The Fed maintained its "extended period" language, keeping interest rates near zero. From the Fed minutes:
The duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further.
The Fed said a weak labor market, tight credit, and low income growth will continue to constrain household spending. So-called "core" consumer prices rose a record-low 1.5% in February from a year earlier in the 30 countries comprising the Organization for Economic Cooperation and Development.
You should remember two things when reading central bank pronouncements and looking at government stats. First and most importantly, the Fed needs you to believe that prices will be stable – no matter how much money it prints.
And secondly, the same governments printing all of the money are the same governments who supposedly "measure" inflation.
"I think it could be the largest oil discovery in the history of the United States," Cactus said of his latest big investment in the Texas oilfields. We were fishing, off the coast of Panama.
I was there with my new global wealth club, the Atlas 400. And the members were passing around lots of good business. But I'm pretty confident what I learned from Cactus will be the most valuable information shared on the trip. Or perhaps even the most valuable information I've ever been told.
"Cactus... did you say Texas?" Yep, Texas. Most of the oil business has given up on discovering any more large onshore oilfields in the United States. Natural gas – sure, there are the shale plays and new drilling technologies. But black gold? Crude? It'll never happen, they said. Peak oil is what they promised. Declining production curves forever.
None of the rhetoric bothered Cactus. "Hell," he said, "if you can convince everyone there's no more oil to find in Texas, it makes it a whole lot cheaper for me to buy up all of the best acreage. And it makes it a whole lot cheaper for me to run drilling rigs too, 'cause nobody else wants the rigs or will employ the drillers..."
In South Texas, Cactus and a handful of smaller, independent oil companies have made a major new discovery. Way down, underneath a major shale play, they've identified a limestone oil reserve that stretches across more than 30 different counties.
Really? Yes. This isn't a joke. Of course, I understand your skepticism. And I admit, I'm a little skeptical too. But I've learned over the last 10 years to listen to my friend Cactus when it comes to the oil business.
He says, "Porter, I've seen the seismic data. A few of the majors have done test wells that show the pressure and prove the formation... we're sitting in the middle of a giant field." The following chart is the leading public company involved in this new Texas play:
I'll have the full story in my upcoming newsletter. And don't bother trying to figure out the stock based on this chart alone. The company wasn't even in the oil business previously. It's a great story. And it's going to get a whole lot better over the next few weeks. To be the first to know about this company, click here.
S&A Investment Research
Date Range:4/1/2010 to 4/8/2010
Date Range:4/1/2010 to 4/8/2010