TedBits

By: Ty Andros | Fri, May 11, 2007
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This week Tedbits is focused on the long term pictures in Energy and food prices, both are problematic at best, but solid investment themes. We also take a look at a news item concerning Zimbabwe, an absurd appointment has been bestowed on this economic dynamo. LOL. It highlights the descent into absurdity that the global NGO's (NON governmental organizations) have sunk, drifting far towards their original mandates to pursue political correctness and abusive power. I have also prepared an overview of Tedbits for potential subscribers to review. It details our mission in serving you and a broad description of what's unfolding globally and what you can expect from Tedbits as a regular reader.

In This Issue
The coming explosion in Energy prices!
"Corn Based" ethanol, the dominoes begin to fall!
The most ridiculous item of the week, NGO's.

The coming explosion in Energy prices!

NIMBY is defined as "not in my back yard" and is set to strike at your pocketbook "RIGHT NOW". For decades the Democrats controlled Congress and in return for campaign contributions and support they worked with environmentalist, and trial lawyer constituents, passing laws and regulations which allowed them to manipulate the court system to basically block energy production in the United States, a refinery hasn't been built in over 30 years. Energy discovery and development has been severely restricted in the United States. Internationally, Oil and Natural gas production have been nationalized, and the results are predictable, the more government becomes involved the less we get of whatever they get involved in. As they for the most part suck the life and money out of whatever they touch.

But populations and the world economy has continued to boom and grow and at this point there is no production or refining capacity to feed the energy consumption needs of the United States and the world. US refineries are dilapidated and so overworked that they are now at the point of no return: I predict massive gasoline shortages beginning in the near future. $4 to 5 dollar gas is on the near horizon. I can still remember the democrat's campaign promises in the 2006 elections decrying how the Bush administration was the culprit in soaring energy prices and making promises that they will FIX IT. Well, this summer look for them to propose price controls, a guaranteed way to create even more shortages.

The problem with US energy is self inflicted and political in nature but the blame can be spread to both sides of the aisle. It has been a 30+ year slide into less and less independence from the vagaries of the global oil industry. During this time the only place energy companies have been allowed to explore is next to a dry hole (which conveniently allows environmentalist to claim there is nothing there to drill for, so why allow additional exploration), and the only place they have been allowed to build a refinery is NOWHERE. Very little energy investment or development has been allowed in the United States, whether it is ANWAR (in Alaska), off shore drilling, Nuclear Energy, New Refineries, Clean coal technologies, these things have become verboten.

As Energy development has become captives of the courts, trial lawyers and environmentalists, and politicians once again have betrayed their oath of fiduciary and sound oversight of the US energy policies. Politicians talk about energy independence, but really pay only lip service to the idea of reduced dependence on foreign oil. In fact, their actions say just the opposite, putting the lie to their words. Their talk is all illusion, turn it over in your mind and see through it. Vast US domestic areas of prime oil and natural gas territories remain off limits to environmentally safe energy development. To judge present day oil and natural gas production techniques to those of yesteryears is baloney. When Katrina struck did you hear of huge environmental catastrophes? OIL spills? NO. The only catastrophes were caused by the government's corps of engineers. The techniques used today keep environmental considerations well in mind. Double hulled oil tankers and self capping wells are common today. The current technologies can provide practical solutions to these concerns. Technology works, its time we use it to create practical solutions.

Nobody wants environmentally irresponsible energy development, but the US rules and regulations now in place define that to an impossible standard, so there is no development. Add to that Federal lands are virtually Off limits to energy development. Prime areas for oil drilling off the Florida coast are being developed by China, with the cooperation of the Cuban government. While US companies are sidelined by federal regulation from exploring these same areas. The Chinese and Cubans are pursuing the practical goals of energy development while the United States remains captive to political ones. Once they strike oil who do those field belong to? Possession is 9/10's of the law.

The United States has vast stores of potential energy supplies. Recently a field of natural gas and oil was found in the Gulf of Mexico, holding up to 15 billion barrels of oil and hupe reserves of natural gas, Anwar (Arctic natural wildlife reserve) may hold up to 15 billion barrels of oil as well, its potential is great as it lies near Prudhoe Bay and energy behemoth Canada, which are huge energy production areas. The Rockies hold huge energy production potential as do all the costal areas far off shore (as defined by 15 miles off shore to the 200 mile limit).

But they can't be touched as they are the property of the US government, held hostage to special interest environmentalists and trial lawyers. The US is the Saudi Arabia of Coal, which is continually been developed into cleaner and cleaner forms of energy use. But coal fired plants are politically incorrect. TXU, a Texas electrical utility recently scrapped plans for over 10 coal fired plants under pressure from these powerful special interest politicos. Coal fired, and nuclear plants and their technologies have made unbelievable strides in safer fundamental environmental designs, safety operations and procedures.

This is courtesy of foreign governments who have pursued these goals when developing their own nuclear power industries. Regular readers know I have little good to say about the French, but their nuclear industry in the envy of the world. A shining beacon of environmentally clean and very safe processes from beginning to end. They reprocess the waste, it is phenomenal. I believe all fixed plant electricity should be generated with nuclear or coal fired plants. Properly engineered and with practical regulation for environmentally friendly use.

Oil and natural gas are finite in their supply, and should be husbanded for portable energy production, cars, planes, boats, etc. Peak oil theories are justified, China is now training 40 thousand geologists a year to confront these challenges, the US trains 500 geologists and 40,000 lawyers. What's wrong with this picture?

If these supplies are used for fixed plant energy production they are irresponsibly deployed today to the detriment of future generations. Just like the deficit spending on entitlements destroys the future prospects of their children and grandchildren by sending them the bills for today's extravagant welfare programs, these same selfish people and politicians send the future cost of oil and natural gas production to future generations as well. Global warming advocates push the increased use of natural gas, rejecting nuclear power in an ideological manner. Wasting this beautiful clean portable energy source on fixed plant electrical generation. We need practical solutions to problems, not political or ideologically devised ones. They need to be balanced to consider the broad energy requirements of a modern society (who wants to go back to the Stone Age?) and preservation of the environment. Both needs can be met if the issues are thoughtfully addressed and modern technology is brought to the table.

The noose that these groups have fashioned is now becoming very tight. Europe is in the same boat. Now the train wreck is set to begin. Oh, and what a train wreck it is going to be, the solutions are years to a decade process. The refinery industry was badly damaged during Hurricane Katrina, and they really have NEVER recovered. There are not enough gasoline supplies in storage or production for the summer driving season, and the gasoline won't arrive in time, it won't arrive from the refineries or from importers. Get ready for 4 to 5 dollar gasoline. Are there any plans for increased refinery capacity? NO. And the requirements for doing so are unattainable.

Anyone who can read a chart can see that oil prices have done what the rest of the commodity markets have done over the last year, corrected in time and price, and it is now set to explode higher in the coming weeks and months.

Perfect Fibonacci retracements from the 40 dollar breakout level, on weekly charts can be plainly seen, a head and shoulders bottom is perfectly in place which projects crude to 14 dollars higher from here. The head and shoulder bottom has been activated, and the breakout point is being tested. Fan line break outs. Etc. It's potentially up up and away from here. Bush has now announced that the Strategic oil reserve is returning to the market place with the goal of 500 million more barrels in the Kitty. China has now announced the goal of a 30 day supply to be built in reserves. India is doing the same. Take a look at this chart detailing where new demand has emerged from in the world since 2000. Asia is quickly overtaking the US and Western Europe as the worlds greatest consumer.

Just as the wealth of the world has rotated to Asia (See Sea Change, the wealth of the world is rotating in the Tedbits archives; www.traderview.com), so has the new demand for energy supplies. Building out infrastructure, new highways and feeding all those new cars requires, electricity, OIL and Natural gas. It all adds up to BIDDERS, purchasers looking to build supplies during a time of falling production. And why is production falling?

Maybe it's because populous politicians have seized the oil industry worldwide. And we all know how good politicians are at running oil companies don't we? After the great demonstration they have done in running their respective governments and economies into the ground they now wish to show us their prodigious skills at running the oil industry. OUCH. They are masters at spending today and leaving investment and responsibilities in the future to tomorrows politicians. Let's take a look:

Britain's North Sea, and Norway, Huge oil deposits but very old fields, definitely beyond their peaks and its down hill from here. Well maintained fields, modern technology and careful stewardship will insure the most that can be tapped from this bounty will be. This is high technology at its best as these are brutal conditions in which they operate. The expertise developed in this region is in high demand to tap Russia rugged environs. Positive situation, with declining expectations.

Canada; Americas close neighbor to the north, an emerging energy behemoth, vast resources of oil and natural gas, a primary source of Americas energy needs and soon the worlds natural gas as Liquefied natural gas shipping terminals are under development. This is a prime example responsible energy development, common sense regulation and environmental rules allow for all to thrive with practical solutions to the worlds and this nation's energy needs. The government gets their slice of the pie, but not in a destructive manner. They know where the butter is and responsibly steward energy production. It is only set to continue, refineries, oil sands (oil reserves rivaling anything in the world) are all under development in environmentally responsible and practical manner. Although they waste natural gas in developing and processing the oil sands, nuclear energy is the solution to this thorny problem. It will have to be embraced to allow the oil sands to reach their full potential. Regular Oil and natural gas production are major industries, healthy and responsibly administered. The emerging problems in the United States would be much worse if not for this wonderful neighbor to the north. Positive situation.

Mexico: Pemex, the state run and owned oil monopoly, it supplies the Mexican government with over 40% of its revenues. Its disastrous stewardship of the Canterel oil field is now clearly seen as oil production from that field has plummeted in the past year and a half, down over 500,000 barrels a day a 20% plus drop. This was once one of the finest oilfields in the world, but poor production techniques and maintenance have destroyed its future production potential. Mexico has no oil expertise, and refuses to partner with modern oil companies with the expertise to manage the fields and the production for maximum longevity. Now since this new drain on the government treasury caused by the recent production drop, you can expect the production to be flogged even more: less maintenance and investment in future production can be expected to be the victims of the socialist politicians. So an ever dwindling supply can be be anticipated, and the bounty that is their existing fields will never be realized. Once destroyed it is very hard to fix an oil field that has been abused as the techniques used to abuse it destroy future production potential. Negative situation.

Venezuela: Pdvsa, This oil company was nationalized by Hugo Chavez, most of its senior management and field expertise employees voted with their feet, leaving Venezuela and joining multinational oil firms who are constantly on the prowl for the specialized knowledge and expertise that is modern energy development and production. Chavez in early May completed the nationalization of the Oil industry, seizing the Orinco heavy oil fields from such multi nationals such as Exxon Mobil, Total, Shell, etc. This state run oil company is now manned by the mob, a group of hand picked idiots of the Generalissimo.

Future development, investment and maintenance of Venezuela's oil and energy production assets were thrown overboard years ago. Chavez has squeezed PDVSA like a lemon, getting every drop of cashflow, to the detriment of the future. This piggy bank is now used to buy influence with Chavez cronies in the region: Evo Morales of Bolivia, Raffeal Correa of Ecuador, and Nestor Kirshner in Argentina. And to pay the grocery bills of the poorest people in Venezuela. As equipment and oil and natural gas fields fall farther into disrepair and neglect you can expect constantly declining production. It is amazing to see how quickly Chavez has squandered this great resource. He is now running out of money so you can expect the flogging of these great assets to accelerate, further diminishing their potential future bounty. The major oil companies having now lost tens of billions of dollars of investments through confiscation will not be quick to return. And by the time they do after the Generals demise these assets may not be able to be rehabilitated to reach their potential! Very negative situation.

Nigeria, A tumultuous political climate, always on the verge of political upheaval. A primary supplier of US energy needs, its light sweet crude some of the finest available anywhere. It does allow professional partners (Shell, Exxon/Mobil, Total, etc.) to develop and maintain the oil and natural gas resources. So modern techniques, future investment and maintenance are taking place in a modern and effective manner. Oil workers are regularly kidnapped by various separatist groups: Mend (movement for the emancipation on the niger river delta) being the primary one. Just today they attacked pipelines disrupting over 200,000 barrels a day. The wealth of this region NEVER reaches its residents. Politicians skim the wealth after the oil has been sold, never sharing the wealth with the regions it comes from. So there is a constant conflict brewing as these locals demand better lives, schools, and investment from these proceeds to flow back to them. Until some of this wealth is reinvested in the various regions to reduce poverty, political turmoil will constantly threaten the future of these great energy resources. If a revolution occurs the new government may be far less friendly to the west. China is a major new investor in this region, further diminishing future production from migrating to the developed world. Positive situation that could easily turn negative in a heart beat.

Russia, Under Vladimir Putin, oil resources have been clawed back across the board, Multi national oil company's investments have been nationalized in a back handed manner of environment regulation, renegotiation at the point of a gun, and tax hikes. The major oil companies have not withdrawn, YET. Their expertise is essential to properly developing these massive resources and Putin KNOWS it. The domestic oil industry is controlled by Kremlin insiders, the Chairman of Russia's Largest Oil Company also happens to be Putin's right hand man and most trusted deputy. Under his thumb so to speak.

Russia has some of the greatest reserves of oil and Natural gas in the world, but most of them are undeveloped or remotely situated, still sitting in the ground or under the sea. Production is problematic and the techniques necessary to develop them are the most modern in the world. Previously they could not be developed as the techniques required had never been devised.

Now that these techniques have been developed, why would any Oil company venture into Russia when they know that as soon as the technology has been transferred and the facilities are in production that they will be confiscated under the government facades that have been used previously? It is guaranteed that these projects will be stolen as soon as they are finished. Look at how Putin and company have seized Sahkalin, Yukos, oil pipelines, refineries and all sorts of oil related business. So there is no upside in investing in Oil in Russia. It will not happen. Putin is trying very hard to purchase the power distribution systems and pipelines in Europe, threatening central European governments if they try to protect their domestic distributors, a huge potential flashpoint.

Production may be maintained or rise incrementally. But he tipped his hand too early, and the investors and Oil companies he needs KNOW that the paper any agreement they sign is written in DISAPEARING INK. LOL. Russia is angling for the door of energy priced in dollars, they have made the ruble convertible and their major customers are the Europeans who wish to pay in Euros. Russia has thousands of nukes to face down the US hegemon when they decide to convert to other currencies. This is a dollar story as well, but that is another day. Positive situation that could turn negative.

Bolivia: Hugo Chavez puppet and fool Evo Morales. Has seized the natural gas, and oil fields, stiffing Petrobras (Brazils semi-state owned Oil company) and many multinationals in the process, Billions of dollars of investments by multinational oil companies was lost. The fields are now all manned by poorly trained field workers and military personnel. Once again, this is a recipe for always decreasing production and destruction of future potential. He has seized the natural resource industry as well, so you can say ditto for the production of base metals. Put a fork in it, it is done, it is on the Mexican and Venezuelan path. Very negative situation, see Venezuela.

Brazil, Petrobras, a Semi state owned Oil Company. A serious effort in Oil and gas, but also sugar based ethanol and bio fuel from soybeans. All viable and serious responses to future energy challenges. This isn't an example of poor development. It is an enterprise grounded in developing modern techniques to challenges and constantly improving on them. Positive situation.

Ecuador: Raffeal Correa, read the section on Evo Morales and Bolivia, it is a carbon copy to what's being written in Bolivia and Venezuela, this is a Chavez puppet regime. Enough said. Very negative situation see Venezuela.

Saudi Arabia, Qutar, Kuwait, UAE, etc: all are modern Islamic dictatorships, their resources are probably dwindling as per peak oil, but their reserves remain some of the largest in the world, modern production techniques are being used in current production and future development of resources. These people know when the oil is gone so are they, so they are working hard to protect and develop what they have. Asia, the Chinese and Indians in particular are at their doorstep and don't do negotiations at the point of a gun, or with political demands so they are being warmly received. Of course we disapprove of dictatorships, but their stewardship of the oil resources is fairly responsible. Positive situation, which can change in a heartbeat as they are always subject to attacks from radical terrorists.

Libya, Recently removed for the US governments blacklists. It is moving with haste to develop partnerships with multi national oil companies without ties to the US. The money is being invested in developing this area. This is a positive story for energy production but years away from realization. Ghaddafi's son is quietly trying very hard to drag this backwater into the modern world in a number of areas. Improving situation.

Iraq, Bush's Pandora's Box, you never know what evil or terrible thing is going to emerge. Home to the world second largest oil reserves. It still produces nearly 2 million barrels of oil a day, and holds some of the biggest undeveloped fields in the world. Saddam was only the poster boy for the invasion, the real reason the US went in was because he wanted to price his oil in EUROS rather than dollars. Denying the Mandarins of Washington the ability to print dollars and buy something with funny money. Civil war is easily seen. The conflicts brewing over control of the reserves will be fierce and bloody. The worst is yet to come, oil production is under constant threat to pipeline destruction and infrastructure attack. Don't count on this country to increase production anytime soon. The industry is in antiquated and in shambles, recent US patches have stopped some of the bleeding. But new investment will only come through stabilizing the country and when that can be expected is anybody's guess. Negative situation, nowhere to go but down.

Iran, The mullahs are madmen, the fields are poorly maintained and future development is slated to be done jointly with the Chinese and some European involvement. Most current revenues are diverted to other areas of the economy: maintenance and investment in oil fields is a dream. Vast new undeveloped fields await future development, but US foreign policy prohibits other countries from making investments there. Unless they don't care about US hubris, count the Chinese, French, Germans, Indians and Russians in this group. They want practical sources of business and don't try to project their politics to business partners.

Here is a prime example of US overreach, putting political ideology ahead of practical solutions. Why doesn't anyone in Washington understand that nuclear deterrents are essential to regimes that cannot stand up to the might of the US Armed forces? They saw what we did to Saddam and the future flashed before their eyes, so it's been nuclear ever since. If we quit threatening them the nuclear option becomes an option not a necessity. So the nuclear race is on in the Middle East. Most nations have announced nuclear intentions after witnessing the preemptive nature of US foreign policy. Iran has the added danger engendered by their stated intention of pricing their oil in Euros, a declaration of war as far as Washington is concerned. US oil companies have no future with this group. NONE. Negative situation, nowhere to go but down.

Sudan, Angola, Algeria and Africa, Great new discoveries are taking place regularly, but the US is not considered as partners, the Chinese, Indians and Russians are all there, doing business not politics. Unfortunately every African regime is basically corrupt and brutal, so problems are front and center in dealing with this area of the world. Negative situation, nowhere to go but down.

(Authors note; looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining? In fingers of instability? If so contact me through www.TraderView.com. Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)

United States, Vast resources are available if only the government would get out of the way and pass laws which would put a stop to the courtroom foolishness. Crude prices are weak here as oil in storage is fairly abundant and well supplied at this point. Conversely refined products are on their highs as there is NO capacity to refine them and they no longer have the capacity to meet day to day domestic requirements, get long gas and heating oil and short crude, crack spreads are the order of the day. Environmentalist and attorneys have a stranglehold on the industry. Those that are allowed to work around the edges are politically determined. As democrats set their sights of oil company profits future development can be expected to suffer.

The big oil companies margins and ROI's are less than Macdonald restaurants, hardly price gouging and profiteering. Politicians hawk the headline numbers for this vital and enormous industry fooling the population into attacking the honey-pot of money. I promise you if they get their way we will have much less gas and oil, and the money they collect will never be used to create new alternatives that are economically viable. Don't tell me corn based ethanol, it is nothing but a drain on EVERYBODY, it has no basis for benefit. Negative situation, on verge of crisis which will deepen the problems when political solutions are sold to a stupid public. Politics are destroying the US energy industry, pure and simple. Disaster is right around the corner, and an oncoming light in a tunnel, that tunnel is a freight train headed this way to crush us.

That concludes the brief overviews of the primary oil and natural gas producing regions. It is not a pretty picture. Far more negatives than positives. It is a picture of dwindling production, poor maintenance and field expertise, inadequate investment in future production coupled with exploding demand. And the demand is coming from around the world as the developing world enters the Global marketplace. These emerging nations have trillions dollars to spend, and are doing so, scouring the globe for joint energy partnerships without the "POLITICAL" strings that come attached with doing business with Washington DC. Adding to the problem of oil prices is the current US budget and trade deficits, 50 trillion dollars of future unfunded obligations and the money printing that implies, constantly putting upward pressure on oil prices as producers wish to protect their income from the printing presses. Another good question you might ask yourself is just how long will Oil producers price their products in dollars? The gunboat diplomacy practiced in previous generations of the US hegemon are quickly becoming ineffective in a global marketplace. These techniques in persuasion are growing very very old. Remember, currencies don't float they just sink at different rates.

To compound the problem refineries have been an afterthought as NIMBY has rotated around the world. In the US refineries are now approaching 30 years in age, metal fatigue and normal aging has limited their ability to get to full capacity. If pushed to capacity they will break down just as an old car will. Refineries in the US are like very old cars, almost antiques. Development of new refineries takes years if not a decade. These are very complex processes, with the road blocks available to adversaries of them it makes them impossible to construct. With the exception of Russia, every major economy in the world is an importer of refined products, including China. There is no place to look to fill these shortages emerging globally, modern transportation cannot substitute if there are no production facilities elsewhere, and there aren't. Hugo Chavez may have confiscated the heavy oil fields from the big multi nationals but now he has to figure out how to convert it to something someone can use. Getting there from here is going to be quite a challenge. His destruction of this vital resource is guaranteed.

So its demand constantly increasing, the dollars purchasing power constantly declining, and less and less new supplies available or being developed for future use. In general, governments have seized the industry and are milking them for all they are worth, sacrificing critical maintenance, technological improvements and future investment requirements. Very few refineries are under development or construction, and very little excess refinery capacity is available anywhere, so modern transportation methods offer no prospect for relief. These problems cannot be addressed overnight, solutions take years and decades. Oil may back and fill lower for a few months or quarters, but longer term there is no where to go but higher, barring a economic depression. Of which the probability is very low. This is inflation in your fuel and electricity bills. This is a recipe for explosively higher energy costs far into the future.

"CORN BASED" Ethanol, part II the dominoes begin to fall!

Eight to 12 weeks ago I penned a piece on CORN BASED ethanol in the "Fingers of Instability" series, it is a careful overview of the industry and its potential benefits (NONE) and pitfalls (you can access it at TedBits March 14, 2007 I strongly recommend you read it before beginning this commentary, it is time well spent), now in part two we take a look at the burgeoning problems we outlined in that piece. It is a disaster, written larger and larger like a boulder hitting water the waves emanating outward are killer waves to so much more. It is like a game of dominoes where once set in motion it is difficult to race ahead of the chain reactions to avoid further downfalls.

El Ninja, has emerged off the coast of South America. What does this mean? It means a wet spring and hot summer if history is correct. The wet spring has become a reality, we will see about the hot summer part of the forcast. Having grown up in the corn belt of Lincoln, Nebraska I understand corn fairly well. I still remember some of my earliest summer employment De tasseling corn. It was grueling work in the hottest part of the summer, but as a young boy I was very strong and it was always wonderful to finish the work and emerge with a POCKETFUL of cash. It was great money for me at the time.

But farmers will tell you that if the crop is not substantially in the ground by the end of the first week in May 8-12th, it is probably time to switch your planting intentions to Soy beans or other more hardy crops that can meet the expected weather. The odds of avoiding a freeze, or having good weather during the pollination process when the crop gets MADE start working against you. Make no mistake Farmers are gamblers in that all crops are a gamble till they are taken out of the field during harvest. Drought, hail, windstorms, floods: all are challenges farmers face every year. This winter's wheat crop was set to be record large till early April when a late freeze hit the crop, decimating the expected harvest by 30 to 40%. Mother Nature threw the dice and the American wheat farmer was hit hard!

With the rapid expansion of ethanol production rapidly depleting inventories corn prices have soared to over $4.00 a bushel, old crop and NEW CROP ( new crop prices are always been much much lower than old crop as long as I can remember. It stands to reason that once the crop arrives, supplies become plentiful once again so prices drop). I have watched corn prices almost every year drop to approximately $2.00 or slightly lower. These prices have created intentions to increase corn production by over 15% to over 90 million acres, to meet the requirements of the food industry and energy producers. Soo far so good.

Too many fund investors where on board the anticipated move higher in corn and a washout occurred, taking them off the train, probably only temporarily.

But Murphy's Law is raising its ugly head "What can go wrong will go wrong" and the laws of unintended consequences (unintended don't mean unanticipated these are easily recognized opportunities) is about to explode in our faces. Corn planting has been delayed by cold and very wet weather. They haven't been able to get into the fields as they have been full of mud. Ever tried to get a Tractor or planting machine out of the mud? It is HELLL! So, planting of the intended corn crop is not in the ground is over 50% behind schedule at this late date.

Because of crop insurance that set at high prices many farmers will plant the corn regardless of when it gets into the ground, they are guaranteed their price by the government. But other farmers didn't put their acres into the program. So their planting intentions are already rotating to other grains, they will continue to do so for the next three weeks. From here on in any corn planted has diminished expectations. In three weeks don't even consider it. It is a disaster even today, set to grow to gargantuan proportions over the coming weeks and months. There is no way they can reach the intended acreage from here! Corn this week has been plummeting in price in anticipation of planting getting back on schedule, well as we go to press, huge rain storms have hit Iowa, Missouri and Kansas, 4 to 8 inches of rain and flash floods are being reported. Whoop's El ninja strikes again. Subsoil moisture is outstanding so the crop should start well unless flooding takes place.

Even if they get it in the ground, the anticipated heat will kill the yield, if el ninja produces its usual summer intense heat. Corn is a crop that needs regular rain, weather patterns provide regular anxiety year in and year out as farmers scour the weather map for this vital ingredient. Intense heat over 80 degrees for extended period is also very counter productive, the corn crop need regular temperature drops onto the high 50 to low 60's at night for optimal development. During El ninja you can expect neither, brutal heat day and night combined with far less rain.

But there is now a new problem to add to the equation. Ethanol production is mandated to increase, it is written into the law. The plants are open and new ones are being completed on a weekly basis. Current ethanol demand has completely depleted current inventories and reserves. The USDA barely talks of this ethanol demand, it is potentially explosive news, panic could easily enter the marketplace. It is the one problem that the liars at the USDA can't manage with their usual rhetoric. I have read Bill Gary's excellent work since the mid 1990's, he always publishes his estimates and the official USDA numbers. The USDA regularly rigs the game by releasing numbers that send the grain markets to the lowest price possible, just as the commerce department shades the GDP numbers, the labor department shades the unemployment data, and the treasury manipulates the inflation numbers. It is a predictable pattern used to manipulate the public and manage expectations, they are masters of this game. Some of their lies are unknowable, and we will never discover them, they are buried in the numbers they massage.

(Authors note; looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining? In fingers of instability? If so contact me through www.TraderView.com. Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)

Well the numbers are really becoming quite clear as it relates to corn. THEY ARE VERY UGLY. There is no room for a poor crop, but we are already at a poor crop because of the late planting. People and livestock require food. The crop is not going to be the size that was intended or required to meet all these demands of the competing groups of consumers: people, livestock and ethanol. Corn stocks in China, Mexico, the former Soviet Union, the EU and India are low as well. Food protests are emerging in many of these places. World corn consumption has exceeded production for 7 out of the last 8 years.

Well, domestic and international wheat stocks are also very low. Droughts throughout the world last year severely reduced wheat stocks and prompting export restrictions in many exporting countries, Australia, a major exporting nation suffered an almost complete wheat crop failure, production plunged from 25 million bushels to about 10 million. So major consuming regions went to higher priced producers to supplement their food and feed requirements. Reducing inventories around the world even more. Six out of the last seven years the world has consumed more wheat than it produced. Ending world stocks of wheat this year will be the lowest in 26 years.

As mentioned above the US wheat crop has been severely reduced by the late freeze. Can you guess who is having problems for the 2nd straight year? Yep, you got it Australia is again in trouble. So switching to wheat as feed grain is problematic at best, additionally wheat doesn't really fatten livestock like corn does. So you need to feed more of it to get the same weight. Chickens can eat a lot of soy meal, but cows and pigs can't. It causes the runs, especially in the piggy's.

As incomes rise around the world demand for grains and meats will drive usage incrementally higher as they use rising incomes to feed themselves better. Incomes are rising around the world as 3 billion people enter the global economy after years in poverty. They wish to feed themselves in a better manner, and are doing so daily.

We are in the beginning stages of a massive bull market in grains. Historic, shortages in beans and wheat which should emerge with next years crop, and are close on the heels of the present and emerging corn shortage. The full impact of bio-fuels has still not been felt, as worldwide new plants come on line over the next year, they will be. See how soy and palm oil are beginning to move? Add to this situation the tremendous liquidity now searching for alpha in the hedge and commodity investment funds "fire hoses of hot money" and this really is shaping up to be quite a fireworks show. At one point earlier this year the corn crops open interest at the Chicago board of trade was double what could be harvested. WOW. The dominoes of disaster roll forward as CORN BASED ethanol's unintended consequences (unintended does not mean unanticipated, these are big investment opportunities). This is an asset class that has "Finger of Instability" (see Tedbits archives for the series at www.TraderView.com), written all over it. It can and will get way ahead of itself before the bubble pops.

The definition of inflation is when you purchase something today because you know it will be higher in price tomorrow. We are going to see this written in real life as the consumers and industrial users of this essential commodity we call corn duke it out, with the speculators in there to make their lives even more miserable through higher prices. The stupid, politically inspired American experiment in "CORN BASED" ethanol is about to roll over you like a steamroller!!! What a wonderful addition to add to our lives! NOT. Do you know what to do? Do you know who to thank for this wonderful opportunity?

The most ridiculous item of the week.

Most NGO's (non governmental organizations, funded by groups of nations for common goals) such as the United Nations, OECD, World bank, the International Monetary fund were valuable contributors to world stability after world wars I and II. But for lack a mission now all have sunk into the depths of corrupt bureaucracies. They are comic book characters now slinking around the world serving up self aggrandizing and self serving goals. Just as Government programs everywhere never are ended decades after their usefulness has ended, but never die, these dinosaurs still roam the earth fighting extinction. They are politically correct as their original intentions/missions were so virtuous, so nobody calls a spade a spade in the politically correct press. Now they are big money machines with heavy strings attached, power and control strings.

Anybody that is involved with them are in it for the money and the money they graft off them is enormous. Any nation taking advice from the IMF is doomed to poverty and economic destruction, its prescriptions are recipes for disaster. Ask Russia, Argentina, Thailand and Brazil to name a few.

Asia has formed its own consortium of central banks with a insurance pool to provide liquidity in times of trouble, with 1997-98 still fresh in their minds. To avoid IMF and World Bank involvement in future crisis management. The OECD is the taxman for the welfare states as they sink into bankruptcy from their impossible spending schemes, currency controls and higher taxes are their only goals, economic development is lip service. Ending Harmful tax competition is its principle mission, putting the stranglehold of hold of the welfare states high taxes onto more competitive economies. The examples of the World Bank, IMF and United nations are ripe with horror story after horror story of incompetence, unbelievable poor advice, and criminality.

Make no mistake the railroading of Paul Wolfowitz at the World bank is a bag job. This issue was vetted BEFORE he ascended as President of the bank. The Wall street journal has carefully detailed every move by his adversarys. Talk about the pot calling the kettle black. Corrupt insiders are putting the Kibosh on reform, pronto. Paul Volker was being invited to the party and they new it was going to be a debacle. Food for Oil was going to to be a walk in the park compared to the wholesale thefts that is the World Bank. Any informed careful observers that do not form opinions on headlines know this.

I still remember Secretary General of the UN, Kofi Annan rushing to Baghdad just before the invasion of Iraq stating that he had met with Saddam and that this was a man he could do business with. A Freudian slip of epic proportions as we learned when the food for oil scandal broke. He was heavily ALREADY involved in business with Saddam as he spoke those words of B*** poop. He, his son, France, and Russia were on a gravy train extraordinaire, as they skimmed money and made kickback to Saddam and his boys

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Now here comes the United Nations with another real laugher. There used to be a country named Rhodesia. Rhodesia was the flower of Africa, prosperous, self sufficient, responsible and honest government and an agricultural power house. A bread-basket to Africa. Poverty and corrupt government was everywhere in Africa but Rhodesia. But as we all know, all good things come to an end and this did too. As good Samaritans these government NGO's pushed for the end of apartheid in South Africa. i.e. white government. In South Africa there was a big divide between whites and blacks and it needed to be addressed. Nelson Mandela was the poster child of this movement as he lead the revolution till it succeeded.

Rhodesia was another story though, most of the blacks and whites were rising in income together, famine and unemployment was not an issue in this garden place. It was well managed and as far as the repression in South Africa it was like black is to white. When everybody is making money tough feelings are reduced. But the NGO's went after Rhodesia anyway, and they blinked.

It changed its name to Zimbabwe, threw out the white government and the rest is history. A man named Robert Mugabe seized power and never has relinquished it. Driving this prosperous and peaceful powerhouse into abject poverty. Its economy has gone from FIRST to the WORST. Its currency now suffers inflation measured in wheelbarrows. Thousands of percent a year as there is no wealth creation now taking place in Zimbabwe, there are no tax revenues because there are no revenues. Productive enterprise is a distant memory. Everything is paid for with a printing press and the result predictable, Hyper inflation and Weimar republic type conditions now exist.

HORNS BLARING: Guess who is poised to be elected to the chair of the United Nations Commission on Sustainable Development? You guessed it. ZIMBABWE. Who is the main funder of the group? The World Bank and the IMF. I could laugh but I am crying. Just as Sudan was named to the chair of the human rights commission. This new appointment is right along the lines of previous demonstrations of exemplary leadership and shining moral examples to the world. Comic book contradictions, George Orwells1984 in the real world. How can they put forward these obscenities and get away with it. Why isn't the press having a field day? Left leaning journalists and political correctness. Why does no one ever criticize the obscene behemoths, and unmask them for what they are and have become?

This is the same United Nations whose Environmental commission Al Gore cites as the conclusive authority on "GLOBAL WARMING". After this above mentioned endorsement for this moral authority Gore Cites that the debate is over!! 2500 scientists in 150 countries opinions as established fact. Think about that number and slice it apart, 2500 scientists divided by 150 countries. That's 16 scientists per country: you could fit that group in a small bus or seat them at two big dinner tables. Hardly a broad chorus of hard conclusions. Do you think there might be 16 scientists in each country working on one government sponsored climate projects? Who do you think pay their current salaries? Do you think they may have been promised future work when the fleecing of the planet begins based on their canards? Global warming is probably taking place, as it has since the last ice age, but the cause of it is highly debatable, human versus nature. It is a power and money grab from the most ignorant among us.

Do you really want to put your futures into these people's hands? These groups are institutionalized corruption, the fiat money and credit creation are part of their theft of your future prosperity, as it is what funds them. It is this money and credit creation that destroys the value of your savings no matter which country it resides in. Endless redistribution of income with the global politicians at the wheel. Fiat money and credit creation are the holy grails of governments everywhere as it is the recipe for endless government growth And increasing slavery for us all!!! These NGO"s are a dream come true for power mad politicians worldwide.

In Conclusion, Everything I have covered has inflation written all over it. Exploding prices up and down as these things play out in "FINGERS OF INSTABILITY" (see www.TraderView.com for the whole series). Government inspired and implemented foolishness and absurdity. They are opportunities or pitfalls: you get to decide. To overcome their current poor policies and future boondoggles will require cubic money and credit creation, so it's set to continue. The economies of the world are booming for the most part, the United States is the emerging sick man at this point as the money and credit creation sickness are far more advanced than the rest of the world.

The United States started massive doses of it when Greenspan came to office, the rest of the world has done so much more recently, so it still has much farther to go. They also can support more credit creation for development as they have massive savings built up. This is the financial and economic NO SPIN zone. See it, unfurl your sails and benefit from it as it unfolds. It is not doom and gloom: it is a roadmap to salvation for smart investors everywhere. Thank you for reading Tedbits, if you enjoyed it send it to a friend, subscribe yourself it's free at www.TraderView.com . Thank you for spending your valuable time with us. Don't miss the next issue!!

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Ty Andros

Author: Ty Andros

Theodore "Ty" Andros
info@TraderView.com
www.TraderView.com

7800 Southland Blvd. #110 Orlando, FL 32809
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Tedbits is authored by Theodore "Ty" Andros, and is registered with TraderView, a registered CTA (Commodity Trading Advisor) and TraderVest Clearing LLC a GIB (Guaranteed Introducing Broker). He currently is the principle of TraderView, a managed futures and alternative investment boutique. Mr. Andros began his commodity career in the early 1980's and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio selection and monitoring, customer relations and all aspects required in building a successful managed futures and alternative investment brokerage service. Mr. Andros attended the University of San Diego, and the University of Miami, majoring in Marketing, Economics and Business Administration. He began his career as a broker in 1983, and has worked his way to the creation of TraderView of which he is the sole owner. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis. Ty prides himself on his personal preparation for the markets as they unfold. Developing a loyal clientele.

For greater insight into the philosophy behind Tedbits, have a look at the Tedbits Overview - To help understand our mission in serving you, the TedBits Overview gives a broad description of what's unfolding globally and what you can expect from Tedbits as a regular reader.

DISCLAIMER AND TERMS OF USE: While TedBits strives to present accurate and useful information, we make no guarantee of accuracy or completeness. All information and opinion expressed herein is subject to change without notice. Opinions and recommendations contained herein should not be construed as investment advice. Under no circumstances does the information in this column represent a recommendation to buy or sell any securities or commodities. Do not assume that any recommendations, insights, charts, theories or philosophies will ensure profitable investment. The information contained herein is for personal use only.

Gold and silver backed means that various commodity options strategies in gold and/or silver may be used. When buying options, you may lose all of the money paid for the option. When selling options, you may lose more than the funds received for selling the option. Strategies using combinations of positions, such as spreads or straddles, may be as risky as taking a simple long or short position. A high degree of leverage is used to buy or sell a sufficient quantity of options and/or underlying futures contracts equal to the value of the entire portfolio. The high degree of leverage can work against you as well as for you and lead to large losses as well as large gains. Absolute-return is not meant to imply that a positive return can or will be achieved. Absolute-return describes investment strategies which are designed to have the potential to succeed in rising, market-neutral and falling market conditions. Gold and silver backed and absolute return investments do not mean the investor will take actual physical possessions of any precious metal. Nor should any promise or guarantee be implied that such investments will perform better than any other investment in any possible future scenario described herein nor that such investments can or will preserve or protect in such possible future scenarios.

TedBits may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness. Many of the statements and views made are the opinions of the author. Opinions expressed are subject to change without notice. This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures. There is a substantial risk of loss associated with trading futures, foreign exchange and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance in never a guarantee of future results.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/