Unrestrained Bullishness for Gold and Silver. James West has gone from writing the audacious and controversial newsletter Midas Letter to raising over $1 billion for a series of funds called Midas Letter Funds based in Luxembourg. The Gold Report caught up with James in Colorado Springs at the Denver Gold Forum, where he was searching for quality companies to include in his next newsletter. He agreed to sit down with us to find out how this juggernaut of rapid financial evolution came about, and where it is heading next.

All of us have heard about the La Brea tar pits in Los Angeles. But most Americans aren’t as familiar with the Canadian oil sands. Don’t feel bad if you haven’t, because these oil sands haven’t gotten a lot of attention in the mainstream media.

If you invest in oil or energy stocks, this gooey-sounding part of Canada is something you should learn more about. In fact, I can’t emphasize enough how huge of a gold mine they are and how investing in them could make you a ton of money.

Time magazine called it the “greatest buried energy treasure that could satisfy the world’s demand for petroleum for the next century.”

Northern Alberta Is Sitting on the 
Biggest Petroleum Deposit in the World!

There are 685 million barrels of proven oil reserves in the Middle East. Meanwhile, there are 300 billion barrels of proven reserves up north …and it is estimated that another TRILLION barrels are just waiting for recovery technology to improve to make it economically viable to extract them.

That’s eight times the oil in all of Saudi Arabia!

This isn’t the type of gushing oil that made Jed Clampett rich, mind you. It’s in the form of tar sands, which resemble gooey coffee grounds.

For centuries, Native Americans used the material to seal their canoes. But the technology to extract the valuable oil has now made tar sands not only economically important but wildly profitable.

Oil sands are a combination of clay, sand, water, and bitumen, an extremely heavy form of crude oil. So instead of being pumped from the ground, the bituminous sands are dug out of the ground. Next, they’re run through a separation process that uses steam and solvents to extract the oil. The process currently recovers roughly 75% of the bitumen at an average cost of $10 a barrel.

Better yet, the petroleum industry is spending billions on research to find new technology to make it even cheaper. I expect the $10-a-barrel cost to rapidly fall closer to the $3 average that OPEC spends to pump a barrel of oil.

There’s no doubt that this is already becoming a huge business. More than one million barrels of oil are produced from Canadian tar sands each day, making up 40% of Canada’s total oil production.

And Canada is now the largest single supplier of oil and refined products to the United States.

So you see, these tar sands could free the rest us from our dependence on Middle East oil. And the vast amount of oil within is bound to turn into a mountain of profits.

So …

What Do These Alberta Oil Sands 
Have to Do with Asia?

A lot. Chinese companies are stampeding into Alberta and spending billions to get their paws on oil sands deposits. In just the last 18 months, Chinese companies have spent $15 BILLION.

Sinopec of China spent $4.65 billion to buy ConocoPhillips’ 9% stake in Syncrude Canada Ltd., the world’s biggest oil sands producer. A few months ago, CNOOC spent $2.1 billion to buy the OPTI Canada, whose main asset was a 35% interest in a Long Lake oil sands project in Alberta.

$15 BILLION is a ton of money. But research firm IHS CERA believes that foreign companies, including China, will spend an additional $100 billion on Canadian oil sands projects over the next decade.

China isn’t the only country from across the Pacific snapping up oil sands deposits. Australian and even a Thai company have invested money into Canadian oil sands projects and portfolios.

One of the big reasons oil sands are so attractive to Asians: The oil sands in Canada are not state-controlled. And they’re not government-owned so there are very few regulatory hurdles to prevent outside companies from taking control.

Now meet …

he Warren Buffett of China

He has been called chiu yan (Superman) and the Warren Buffett of China. He earned that title as one of the most successful Chinese businessman in the history of China and according to Forbes magazine, the ninth richest man in the world and the richest man in Asia.

He controls a vast telecommunications empire …a massive construction company …even the Panama Canal …yet very few Americans have heard of him.

His fortune is centered on conglomerates, Cheung Kong and Hutchison Whampoa, and through them is the world’s largest operator of container terminals, a major supplier of electricity to Hong Kong, a giant cell phone provider, a thriving retailing business, and a powerful real estate development company that has built one out of every 12 residences in Hong Kong.

And he also has a $10 billion stake in Husky Energy, which owns vast amounts of proven Canadian oil sands deposits.

The man I’m talking about is Li Ka-shing, whose fortune totals more than $26 billion and is a true rags-to-riches story.

Li Ka-shing was born in the Chinese city of Chui Chow and was the humble son of a teacher. His father died when Li was only 15 years old, and he took on the responsibility of supporting his family.

Li dropped out of school and went to work for a Hong Kong plastics company where he worked 16 hours a day. His hard work paid off because he started his own plastics company, Cheung Kong Industries, in 1950.

He then scrapped together enough financing in 1979 to buy a controlling interest in conglomerate Hutchison Whampoa. Next, he leveraged that to build a business empire that includes: Banking, construction, real estate, plastics, cellular phones, satellite television, cement production, pharmacies, supermarkets, hotels, transportation, airports, electric power, steel production, ports, shipping, and even the Panama Canal!

One of Li’s most savvy purchases was fairly unknown at the time and considered a horrible investment because of the low price of oil in 1991. Oh, how times have changed! Li’s purchase of Calgary-based Husky Energy has turned out to be a brilliant move and one of the jewels in his portfolio.

A lot of investors have made a heap of money by buying the same stocks that Warren Buffett buys for Berkshire Hathaway. That same monkey-see-monkey-do advice can work just as well — if not better — by following the Asian Warren Buffett, Li Ka-shing.

Husky Energy is a fully integrated energy company with three business segments: Upstream, midstream and refined products.

Upstream is the exploration and development division that goes out and finds the oil and natural gas. The majority of Husky’s proven reserves are in western Canada, offshore Eastern Canada, offshore Indonesia, and major offshore wells in the South China Sea. There’s that China connection again.

Midstream is where the heavy crude oil and natural gas products that come out of the ground are transformed into synthetic crude oil and transported to refineries for final treatment.

Refined products include refining of crude oil and marketing of refined petroleum products, including gasoline, diesel, and even ethanol blended fuels and asphalt.

Husky Energy is listed on the Toronto Stock Exchange (HSE.TO) but is also available on the U.S. over-the-counter (HUSKF.PK) market.

Now, please don’t consider that a rush-out-and-invest-tomorrow recommendation list. As always, you need to do your own homework and figure out if any of the companies I discussed today are appropriate for your personal situation.

Plus, timing is everything in the investment business, so I suggest you wait for them to go on sale or wait for my buy signal in Asia Stock Alert before investing any of your hard-earned money.

The opportunity and potential profits, however, are HUGE and very worth your attention.

Best wishes,

Tony

Tony Sagami is the editor of Asia Stock Alert, a monthly newsletter with a mission to help you profit from booming Asian economies with companies the Wall Street crowd ignores. One of the most experienced research analysts in the industry, Tony follows a “boots-on-the-ground” approach for getting his market insights by traveling throughout Asia. Each month, he brings members profit-packed opportunities. Plus, Tony lets you know when to buy, how much to pay, and when to lock in those profits. For more information on Asia Stock Alert, click here.

About Uncommon Wisdom
For more information and archived issues, visit http://www.uncommonwisdomdaily.com

The collapse of socialism in the West will follow a similar course as the collapse of communism in Russia and China. The political system will be forced to adapt. Much of the old politicians have outstayed their welcome and the ravages of time. By 2016, most will be swept away and a new monetary system as we know it will be forced upon us. The national debt will crumble and it will be a time of hardship for those who counted on fixed income sucking the blood out of governments on all levels.

The promises of socialism the politicians have made for so long but lack the funds to have ever made it a reality, will crumble and fall to dust. When they can no longer sell more debt upon debt, the music will stop. The jig will be up and the walls will come crashing down. Society will need to be rebooted and hopefully we will enter a new age of enlightenment that will enable great minds to come together to carve out a future that is hopefully one that draws from the lessons of the past making a step forward in the evolutionary process of mankind (if you indulge my dreams).

As to WHERE TO INVEST…..HERE

The San Francisco Federal Reserve bank came out with a gloomy forecast last month. Its analysts said that stocks were likely to earn paltry returns over the next 10 years. The reason cited was simple enough; stockholders don’t live forever.

‘Demography is destiny,’ said Auguste Comte. ‘It works the other way around too,’ he might have added. If they thought they were going to live longer, America’s most ubiquitous age cohort — the baby boomers — might continue to buy stocks. Instead, the cold hand of the grave is on their shoulders and on the whole economy. The boomers are retiring at the rate of 10,000 per day over the next 18 years. They will sell stocks to finance their remaining years.

Old people have always been a drag on an economy. Migrating tribes left them behind. Eskimos put them out on the ice. Old people generally bowed to their fate with good grace. In times of famine, for example, they stopped eating so the young might live.

Mortality has doomed the stock market, says the S.F. Fed. P/E ratios will likely be cut in half. Investors are unlikely to see their stocks return to 2010 levels, says the report, until 2027. And this assumes that US companies will continue to grow profits as they did since 1954. Not very likely. Because democracy, energy, and financial quackery are destiny too. Jointly and severally, they are responsible for the biggest financial debacle in history.

This week, Deutsche Bank came out with a report of its own. It, too, is confident that the “Golden Age” — 1982-2007 — is over. In its place is a “Grey Age.” Instead of the nominal 12.8% gains of the Golden Age, investors have gotten returns of — 2.8% per annum for the last 4 years. Deutsche Bank expects stock market investors to lose about 10% of their money — in real terms — over the next 10 years, while the economy goes through 3 recessions!

But what would you expect? Everything droops. For the last 3 or 4 centuries the winning formula for developed economies and their governments has been simple: More energy. More output. More people. More credit. More promises. This formula has been so effective for so long people began to think it was destiny itself. It’s not. Instead, it is slave to destiny not its master.

By 2007, the slave was put in his place. The business cycle turned sour. Native populations in Europe and Japan are falling. Energy use per person in the developed world has leveled off. Private sector credit is shrinking. So is real private sector output.

The feds responded to this challenge as they had to every post-WWII slowdown. They added more — more money, more credit. The government itself spent more money and used more energy. But the economy did not react in the old manner.

An obvious reason: people are no longer as young and sans-soucis as they used to be. A young man’s eye may be drawn to fast German cars or slick Italian suits. But an old man can barely see at all. The baby boomers no longer roll their joints; they rub them. And they are no longer the source of an economic boom; now, they are the proximate cause of the bust.

But there’s more to this new Grey Age than demography. People too are subject to the law of declining marginal utility. They wear out. But so do even the most enduring and impressive economic trends. There were only 450 million people on the planet in 1500. It took 99,000 years to reach that level. Then, over the next 5 centuries — the population soared 10 times. Today, it is hard to find a parking place in any major city. How was such a big jump in population possible? Destiny was demography. With ready, cheap energy at hand, man could grow more food. And then he could ship it all around the world. And he could put his talents to work making more and better machines…which would vastly increase his output and his standard of living.

But the Machine Age ages too. The first tractors appeared more than 100 years ago. They may have increased production 10…20…100 times. Since then, improvements have been incremental, not revolutionary. We have bigger, faster, better tractors — that use more energy than ever.

Meanwhile, energy itself came to be more expensive. When the price of energy rose in the ’70s, the “30 glorious years” that followed WWII were soon over. Hourly wage rates stopped increasing and have not gone up since.

Yes, there is plenty of energy around. But it is net output that you get from energy that counts, not the raw output. If a gallon of gasoline costs $5…it must produce more than $5 in additional output or the economy gets poorer. As the price rises fewer and fewer new energy apps pay off.

Likewise, credit is subject to the law of declining marginal utility too. In 1950, an additional dollar of credit added about 70 cents to GDP. By 2007, the US economy was adding more than $5 of debt to produce a single new dollar’s worth of GDP. Now, the feds’ new credit inputs produce negative real returns.

The jig is up. More no longer works.

Regards,

Bill Bonner

for The Daily Reckoning

About Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day andEmpire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning

Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the new book from Bill Bonner, is now available for purchase. It is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010. Whether your new to these Daily Reckonings, or one of Bill’s “long suffering” readers, this is one you surely won’t want to miss.

This is an important juncture for Gold and let me say the analysts. We are starting to see some disagreement on Gold and that is natural after a strong surge.

Click here to read more…