Friday, November 13, 2009

Good News Flood -- Cracks Are Opening Wide

A flood of good news is coming as sure as water flows after the ice in the mountains starts to melt. During the tight commodity phase of the business cycle, oil sheiks always get way to cocky for their own good. When prices are high, the people who live in tightly controlled societies, such as Iran, mellow out because economically times are good. When oil prices begin to fall, the people in resource rich countries lose their willingness to "go along" with "un-free" political systems.

Recently, a crack has started opening in Afghanistan. ...

Simply put, many groups are no longer willing to associate themselves with the "bad guys".  Oil is still selling for way too much and these cracks are already beginning to spread. Massive amounts of capital are being spent to provide the means to substitute other goods for oil. Three easy examples include: Warren Buffet's purchase of Burlington Northern Railroad, which hauls massive quantities of coal; China's pans to construct 130 nuclear power plants, which will cut the average cost of electricity in China by half; and, the obvious huge number of contracts being signed by the public for internet connected cell phones.

So far, Obama has wasted billions of dollars are "pork intensive" domestic programs. His programs have slowed the natural economic recovery progress, but selected political friends have collected massive subsidies for very wasteful projects. So many people are feasting or lined up to feast off the "pork table" that the opposition to the above statements is loud, but it does not change the obvious.  Never-the-less, the "good news flood", starting as a trickle, has begun.

Obama sits in the catbird seat in regard to foreign policy. The key opportunity and stumbling block is Iran. Iran is relatively powerful Middle Eastern Country sitting at a powerful geographic location. Still, it's people are suffering because the nation is leading a fight against the western world rather than joining the west economically. For more than 25 years, the west has used carrot and stick in hopes of solving the "Iranian" problem. Until recent times, the carrots had not matured and were thus not effective. Today, while China races ahead with plans to build more nuclear power capacity than exist in the entire USA, Iran is stuck with one plant that was started decades ago. This plant has seen more delays than US Airways.

Obama appears to be twiddling his fingers before sending more troupes to Afghanistan.  In reality he is offering the Taliban in Afghanistan another carrot--which is to gain peace by disassociating with terrorists. In the USA, we do not really care which group is in charge of the Afghanistan government, provided that the government does not support or harbor terrorists.

With his domestic policy in shambles (a failed stimulus package and dead cap and trade and health care bills) Obama strongly desires to negotiate a peace agreement with the Taliban in Afghanistan. The UN (the 5+1 group which includes the USA) has signed-on to process all the nuclear fuel Iran needs.

Only 18 months ago, oil wealthy nations held trump cards. It will take time for nuclear plants and electronic communications to overwhelm the price of oil, but the oil rich nations understand the oil over-under production cycle. They understand that nuclear power will replace the use of billions of barrels of oil. It is silly for them to burn $80 per barrel oil domestically when they could build nuclear for $30 BOE and save this precious commodity for the world market.

Cracks All Around!

1) Natural gas drillers are using water pressure to crack shale rocks, releasing massive quantities of natural gas.
2) The Taliban is separating itself from terrorist groups.
3) Amadenijhad  and UN negotiators are bouncing around a nuclear power processing deal.
4) The sum of individual and corporate investment in wireless communications is massive.
5) China and India are leading a huge nuclear power conversion race.
6) Obama has verbally supported nuclear power in the US.

The US public is being pulled slowly back to nuclear power. All the silly schemes, such as corn oil in gas tanks and concrete and steel intensive windmills are falling by the wayside. The new scheme is to subsidize battery powered cars, which will make the use of nuclear power fit the mind-set of those who get the environment cart turned around. (We are spending billions to subsidize windmills while cars sit at slow stoplights all across the country).

Economically, a ten-year trend of relatively good news is starting. Huge fortunes will be made in stocks and real estate over these years.

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