My friend Blair Morse really knows how to keep a secret. We just spent four days holed up in France for our editorial meeting, and he never said a word to me about this secret investigation he’s been on.
When I read his open letter, I was flabbergasted.
Now, I don’t use that word lightly. I’m not trying to make this investigation out to be more than it is. I’ve been on the researching and investigating side of a couple of stories in the commodities sector.
I spent a week in Denmark learning about an island that uses wind power as a currency. I flew 14 hours to South Africa to find out how the country’s mining industry was doing after all the power problems.
This was something I hadn’t heard.
So while we normally feature a guest article on Wednesdays, I had to share with you this letter in which Blair explains the investigation he’s secretly been conducting.
Let me set the scene for you…
Crude oil prices are climbing again. They were back above $100 a barrel even before yesterday’s $2 jump. And even at $100 a barrel, crude oil prices are still $30 higher than this time last year.
That’s a significant run higher. But the jump in prices is not entirely because of the U.S. dollar.
(Sign up for Smart Investing Daily and let me and fellow editor Jared Levy simplify the market for you with our easy-to-understand articles.)
As the U.S. dollar loses value, things priced in dollars get more expensive. This is inflation. But with things like gold and crude oil, traders push up prices even higher. There are two reasons why this happens. First, gold and oil are natural hedges against a falling U.S. dollar. What that means is that gold and oil are assets that help preserve your wealth and retain their value against inflation.
Second, if traders feel like these commodities are going to be more expensive in the future, they’re willing to pay a little bit more now to acquire more gold or crude oil.
We’ve seen both of these factors pushing crude oil prices higher. But they are only part of the reason prices have jumped 43% over the last year.
The other reason is China.
Let me give you a snippet of Blair’s letter to better explain.
According to reports out of China, there is limited oil supply left — and that number is falling fast.
Last November, Paul Ting, a Chinese energy consultant, told The Wall Street Journal:
The real story in China is that there’s massive shortages right now. China has experienced seven consecutive months of [fuel] inventory drawdowns. We’re talking about massive, massive drawdowns.
If the oil in China dries up, it could lead to economic meltdown…
Factories would close their doors. China’s now-infamous growth would come to a screeching halt. Millions of newly unemployed workers would fill the streets.
Chinese citizens would face severe fuel shortages and price shocks.
It’s a safe bet mass protests would follow…
Everything China’s worked for over the past 20 years could be lost.
The Chinese government is acutely aware of the dangerous game they are playing. Those massive fuel drawdowns can only last so much longer.
But Blair’s investigation found out what China’s planning to do about this supply shortage… how the country has been secretly building an oil colony that will dwarf all its other crude oil operations in places like Sudan and Libya.
He didn’t tell me personally what the Chinese have been planning. In fact, he’s only told one person about his findings. That’s how sensitive the situation is.
He told New Growth Investor editor Zach Scheidt.
China is already importing more than half of its oil, and consumption is expected to double from 4.3 million barrels a day in 2009 to 9.6 million barrels a day in 2011. It’s crucial that China finds more crude oil. This growing crisis is creating an opportunity for investors.
Read this letter from Blair for just how crazy this scene could get, and then learn how Zach can turn this crisis into a great chance at profits.
I think you’ll find that this secret was worth keeping…
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