Gold and Energy Advisor: Gold, Oil & Energy Markets Investment Research
James DiGeorgia, Mr. Macro
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Gold and Energy Advisor's Real Wealth

Real Wealth #277  10/06/2010



Jimmy Rodgers Also Warns: Currency Crisis Ahead. Also a HEADS UP on Buying Shares of British Petroleum (BP)

Dear Subscribers,

As to emphasize the danger of a currency and monetary crisis that I have been warning about these past 7 plus years Yahoo finance just posted a street interview with world famous investor Jimmy Rodgers. In the interview he warns...

“Central banks and governments are going to print money until we run out of trees. It's outrageous," he says. "Printing money is not the right thing to do, but they don't know that. Eventually, they'll run out of trees."

The dollar is a "terribly flawed currency" and is "going to have big problems in the next decade," Rodgers says."

The interview takes just a few short minutes to watch. I think its well worth watching. You’ll find a link to take you to the interview at the bottom of this column following the post script (P.S.)

While Rodgers discusses the benefits of owning gold and also recommends agriculture plays he doesn’t mention owning oil stocks. I think that’s an important omission.

Oil is now trading over $83 a barrel largely because the “risk trade” is on thanks to the quantitative and monetary easing taking place here in the United States, Japan and Europe. As I have repeatedly warned a weaker dollar will mean much higher gold and oil prices.

My staff and I have been researching British Petroleum (BP) and have been amazed at the company’s intrinsic value. While its true BP’s total liability for the Gulf oil spill is still fuzzy the fact remains the company is rich with oil reserves.  

BP has proven oil reserves of 17.6 billion barrels of oil but may have as much as 40 billion barrels among its probable or unproven reserves. Even if you figure the value of the company based on the 17.6 billion number with a market cap of $140 billion plus $30 billion in debt buying BP shares allows you to buy into its oil reserves for just $9.65 a barrel at today’s price of $41.56 a share. BUT THERE’S MORE TO CONSIDER.

BP generates only 12% of its revenues on the sale of oil. The bulk of its revenue, some $200 billion a year comes from retail, refining, chemicals and marketing. So in reality you’re getting a stake in those businesses for nothing, not a single cent extra.

I want to make it clear that I am not recommending buying BP shares at this very moment BUT my staff and I are watching the stock closely and will likely recommend writing a $40 put option on the stock on a pull back.

Optimally we would like to write puts that bring in $1.50 to $2.00 at the $40 strike price that would get you into the stock $38 to $38.50 a share. Using this strategy the worst case scenario would be the PUT expires worthless and you collect $150 to $200 on every $40 put option you write.

We’ve used this strategy over and over again in our GEA model portfolios to generate a nice cash stream and to reduce the cost of recommend stocks in the portfolio.

Best Wishes,

James DiGeorgia

Editor

 

P.S. We just purchased a nice group of 24k Gold NGC graded and certified Mint State 70 (MS70) 1 ounce Buffalo gold coins. These are literally flawless coins that trade at a modest premium over the spot price of gold. They’re beautiful magnificent coins that are very much in demand. When you buy two or more of these coins we’ll extend your subscription to the Gold and Energy Advisor for 1 year – a $79 bonus. Purchase 10 coins or more and we’ll give you a 5 year subscription extension. Call 1-866-697-4653 and speak to one of my gold representatives at Finest Known, LLC. With the price of gold climbing so fast it is literally impossible to set a fixed price. However, I have instructed my gold representatives to work as closely as possible so as to insure you get a great price on these amazing gold coins.

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 Jimmy Rodgers Yahoo Finance Interview October 5, 2010

Please see risk disclosure link below.