Thursday, March 31, 2011

Three raging meltdowns under way at Fukushima............... JUST OFF THE WIRES... WATCH THE VIDEO CLIP!

 
 
Dr. Michio Kaku says three raging meltdowns under way at Fukushima, threat level raised to 6. 
 
In a stunning new video, the famous Dr. Michio Kaku (physicist) lays it all out on a news interview without mincing words. He said, to the great shock of many:
"If it goes to a full-scale evacuation of all personnel, it means that firefighters are no longer putting water onto the cores. That's the only thing preventing a full-scale meltdown at three reactor sites. Once they evacuate, then we past the point of no return. Meltdowns are inevitable at three reactor sites, leading to a tragedy far beyond that of Chernobyl, creating permanent dead zones in Japan."

Watch this absolutely shocking interview yourself at:
 

The World's 5 Fastest-Growing Financial Centers............... THERE ALL IN ASIA!


The World's 5 Fastest-Growing Financial Centers

The world's most important financial center is London, followed by New York, according to the newest Global Financial Centres Index. But that won't last long. Respondents in the survey by Z/Yen overwhelmingly named East Asian capitals as the cities most likely to become more significant and where they are most likely to open new offices.

#5 Beijing

#5 Beijing

The 10 Economic Risks Stoking Fear Around The World Right Now.................. A MUST READ

The 10 Economic Risks Stoking Fear Around The World Right Now

The global economy is fraught with risk at the moment. With riots in the Middle East, revolutions in North Africa, and nuclear disaster in Japan, investors are being confronted with macro challenges on nearly all fronts. The Economist Intelligence Unit has picked out 10 things it is most frightened of. This is an important list to keep an eye on. If tensions rise around any of these events, the risk-on view of global investors is likely to abate. So keep this on your radar.

FUKUSHIMA NUCLEAR REACTOR GRAPHIC

 

DO YOU SEE A VERY UGLY TREND?............... A GREAT DOLLAR GRAPHIC

 
 
The falling share of the US Dollar in global foreign exchange transactions (first section) and global foreign exchange reserves (second section) Sources: BRI / FMI / Wall Street Journal, 03/2011

10 Emerging Stories You Need To Start Watching Right Now............... QUESTIONS WE SHOULD ALL BE ASKING

 
10 Emerging Stories You Need To Start Watching Right Now
 

Will Belgium turn out to be the surprise sovereign debt default?

Could the commodity bubble's end spell doom for the Australian economy?

Could we be witnessing a new revolution in China?

Could China's tightening programme slam the global economy?

Could the Middle East revolutions escalate to war between Saudi Arabia and Iran?

Could the deflation problem return in the US?

Could the U.S. debt limit fight send yields on Treasuries soaring?

Could an ECB rate hike tank the global recovery?

Will Ireland force the corporate tax issue, and flee the euro?

Will Europe's last line of debt defense fail in Portugal?

Nouriel Roubini's 10 Big Risks To The US Economy.................

Nouriel Roubini's 10 Big Risks To The US Economy

In a note to clients of RGE Monitor, Nouriel Roubini listed 10 downside risks to the global economy.

They are:

  1. Household deleveraging.
  2. Ongoing labor market weakness.
  3. The housing double dip.
  4. The effect of the housing double dip on the balance sheet of financial companies.
  5. Rising oil prices.
  6. European sovereign debt issues.
  7. The Federal debt.
  8. Fiscal drags (especially state and local austerity).
  9. The end of QE2 (Rroubini does not predict QE3).
  10. General investor unease thanks to the Mideast and Japan.

Natural Gas – Are We There Yet?................ AN ABSOLUTE MUST READ.

Natural Gas – Are We There Yet?
Matthew Millar
The current downtrend in natural gas has become epic, with the discount to petroleum huge and growing. With crude oil breaking $100 and the nuclear disaster in Japan likely to increase demand for fossil fuel energy, it is tempting to think that natural gas in the US has found a floor. Unfortunately, the story is a bit more complicated.

A VERY INTERESTING THOUGHT......................

 
While many believe that QE3 is dead in the US, from a global perspective, the Bank of Japan's massive liquidity stimulus and intervention into the bond market is the equivalent of a US QE3.

Relative to the size of their economy, the BoJ spewed the equivalent of their own QE2 — in just 3 days.

Wednesday, March 30, 2011

Consumer Confidence Plummets, But the Market Rallies............. A MUST READ

Consumer Confidence Plummets, But the Market Rallies Anyway! Makes Sense to Me.......
Further leakage at Fukushima, ugly housing numbers, and a decline in consumer confidence, and because everyone knows all of this is already priced into the market, up we go! 
LIKE THE NASDAQ BACK IN 1999 / 2000 THE ENTIRE MARKET PLACE IS NOW BUOYED BY ARTIFICE AND HYPE AND A MANIC CERAINTY THAT NOTHING CAN GO WRONG. WE ALL KNOW WHAT HAPPENED THE LAST TIME. 

IMPORTANT ECONOMIC AND FINANCIAL THOUGHTS, QUESTIONS AND QUOTES...............


aut viam inveniam aut faciam : I shall either find or make a way.

************************************************************************************************************************

Y
ou only get out of life what you put into it. Nothing great is achieved easily or effortlessly. Knowing what you want in life and then having the right mix of patience and preparation will make the difference between success and failure. Once you understand that, anything and everything you desire is within your reach.

ECONOMIC BITS AND PIECES..............


GOVERNMENT SHUTDOWN LOOMING................
Almost five full months after the start of FY2011, legislators continue to battle over the FY2011 budget. In the interim, the government has been kept running through a series of short-term continuing resolutions. The current resolution expires on April 8, which has federal agencies preparing for a possible government shutdown if legislators of both parties can't bridge the huge gulf between their proposals for federal spending cuts. The possibility of a government shutdown that disrupts everything from Social Security checks to pay for soldiers overseas is growing more and more likely, Republicans in Congress say.

Tuesday, March 29, 2011

GREAT EARTHQUAKE INFO......... REALLY COOL STUFF!

 LINK TO EARTHQUAKE 3D;    
 
 
HERE IS THE YOUTUBE VIDEO WITH THE GUY USING THE PRODUCT WHILE HE EXPLAINS THE WORLD EARTHQUAKE SITUATION.
 

HYPERINFLATION............... AN ABSOLUTE MUST READ.

"How can an entire country go under?" You must realize that it is the currency that breaks, not the country. If you can grasp the enormity of that one simple sentence, you have all the information you need to protect your wealth.

The Truth About Hyperinflation: It's More Than Just A Monetary Phenomenon

Cullen Roche
Hyperinflation is poorly understood.  As it's name might imply, most people believe hyperinflation is merely inflation on steroids.  But that's not accurate. 

The Complete And Definitive Guide To The Sovereign Debt Crisis............... A MUST READ

The Complete And Definitive Guide To The Sovereign Debt Crisis

The European sovereign debt crisis is well and truly back and on the minds of investors attempting to asses whether or not it will expand beyond Portugal's borders. Harvard and Oxford historian Niall Ferguson released a presentation on how such crises develop, and it's vital reading for anyone trying to understand the times we live in.

This isn't just about the "PIIGS" states, it is about the United States and United Kingdom, and their very real crisis in public finances. It is about what these states are going to have to sacrifice to maintain stability, in both a fiscal and political sense.

18 reasons why you can stick a fork in the new home construction industry.... A MUST READ

18 reasons why you can stick a fork in the new home construction industry....
 
If you make your living by building or selling new homes in the United States, you might want to consider taking up a different career. New homes sales in the United States hit yet another new all-time record low in the month of February, and there are a whole lot of reasons why new home sales are going to stay extremely low for an extended period of time. 
 
The massive wave of foreclosures that we have seen has produced a giant glut of unsold homes in the marketplace, mortgage lenders are making it really hard to get approved for home loans, unemployment is still rampant and the global economy looks like it may soon plunge into another major recession.  None of those things is good news for the new home construction industry. 
 
If you look at the historical numbers, new home sales in the U.S. always increased significantly after the end of every recession since World War 2.  But that did not happen this time.  Instead, new home sales have just continued to decline.  This is absolutely unprecedented.  So what is going to happen if the U.S. economy suffers another major downturn?
 
The reality is that you can stick a fork in the new home construction industry in the United States. It is toast. There is going to be no recovery for the foreseeable future.
 
 
#1 New home sales in the United States set a brand new all-time record low in the month of February.

#2 Only 19,000 new homes were sold in the United States during the month of February. The previous record low for new home sales during the month of February was 27,000, which was set last year.

#3 The "months of supply" of new homes in the U.S. rose from 7.4 months in January to 8.9 months in February.

#4 The median price of a new home in the United States declined almost 14 percent to $202,100 in the month of February.

#5 The median price of a new home in the U.S. is now the lowest it has been since December 2003.

#6 As of the end of 2010, new home sales in the United States had declined for five straight years, and they are expected to be lower once again in 2011.

#7 Now home sales in the United States are now down 80% from the peak in July 2005.

#8 New home construction starts in the United States fell 22.5 percent during the month of February.  This was the largest decline in 27 years.

#9 In February, the number of new building permits (a measure of future home building activity) declined to the lowest level in more than 50 years.  In fact, new building permits were 20 percent lower during February 2011 than they were in February 2010.

#10 There is a major glut of foreclosed homes that still need to be sold off.  David Crowe, the chief economist for the National Association of Home Builders, recently told CNN that the constant flow of new foreclosures being put on the market is a huge hindrance to a recovery for new home sales....

"One of the biggest detriments to building new homes is the flow of existing foreclosed homes."

#11 The number of foreclosures just continues to increase.  This means that those trying to sell new homes are going to continue to be competing against a giant mountain of foreclosed homes for the foreseeable future.  An all-time record of 2.87 million U.S. households received a foreclosure filing in 2010, and that number is expected to be even higher in 2011.

#12 In fact, there are a whole lot of signs that there will be very high levels of foreclosures for years to come.  For example, according to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments at this point.

#13 A stunningly high number of Americans are "underwater" on their mortgages right now.  This could lead to an increase in the number of "strategic defaults".  31 percent of the homeowners that responded to a recent Rasmussen Reports survey indicated that they are "underwater" on their mortgages, and Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

#14 The truth is that the U.S. doesn't need a whole lot of new housing at the moment.  Right now, 11 percent of all homes in the United States are currently standing empty.

#15 Mortgage lending standards have become extremely tight.  Back during the housing bubble, almost anyone that was breathing could get a zero-down mortgage.  Today, mortgage lenders have made it extremely difficult to acquire a home loan, and it is quite typical these days for lenders to demand down payments of 20 percent or more.  This is dramatically reducing the number of home buyers in the marketplace.

#16 American families cannot buy homes if they do not have good jobs.  Unfortunately, it has become extremely difficult to find a job in the United States today.  This is especially true if you are looking for a good job.  It now takes the average unemployed worker in America about 33 weeks to find a job.

#17 There is not going to be a jobs recovery until the overall economy improves.  Unfortunately, the price of oil continues to rise dramatically and economic disasters all over the planet threaten to plunge the global economy into another major recession.

#18 On top of everything else, perceptions regarding home ownership are shifting in the United States.  In 1996, 89 percent of Americans believed that it was better to own a home than to rent one.  Today that number has fallen to 63 percent.

Houston?…….We HAVE a problem..............

 

The "Pink Elephant" Of US Government Spending No One Wants To Deal With............. HEALTH CARE SPENDING

The "Pink Elephant" Of US Government Spending No One Wants To Deal With

The current debate over the budget deficit has primarily focused issues such as tax reform, but there's an underlying, fast-growing problem no one wants to address. While we may be talking about cutting non-interest expenses and Social Security, it's health care we should be watching.

While we debate about short-term spending cuts and tax reform, the pink elephant in the room remains healthcare spending. The only action we see on this issue is the chatter on how members of Congress are seeking spending cuts targeted at defunding Obama's healthcare law. Healthcare spending will break the back of the government's finances in the long term. As shown in the chart below, over the next 25 years healthcare will become the largest part of spending, at over 10% of GDP.

Note that, with revenues projected to flat line, this health care problem becomes more and more worrying each year.

chart of the day, government expenses growing, march 2011

OUR SOCIETY IS RIDDLED WITH PROBLEMS THAT NO ONE WANTS TO ADDRESS.  UNSUSTAINABLE!

TRANSFER PAYMENTS...............

This chart show transfer payments as a percentage of total income going back 10 years.

chart

But make no mistake. The trend is way up over time.

Here's a long term look. As a share of personal income, transfer payments are up nearly 3-fold since 1959.

chart

And that trend isn't going to reverse itself for long. The bottom line is that as our society ages, more people will be reliant on some sort of transfer to live on, almost certainly.

DEMOGRAPHICS, WAGES, AND GOVERNMENT INCOME STREAMS AND DEBT WILL NOT ALLOW THIS TO CONTINUE FOR MUCH LONGER.

WALMARTS WORLDWIDE REVENUE...................

WALMARTS WORLDWIDE REVENUE 
 
Here you go. China, which gets a lot of hype, remains just a sliver of the company's business.
 
THE ONLY CONSUMER THAT MATTERS IS THE U.S. CONSUMER. WHEN THE U.S. CONSUMER AND DOLLAR DIES, THE GLOBAL ECONOMY DIES. 

Wal-Mart


Monday, March 28, 2011

Steps to Black-Swan-proof your portfolio................

Steps to Black-Swan-proof your portfolio

Given that abrupt market-changing events will always be a reality, here are five tools that belong in every investor's "Black Swan survival kit:"

1. A diversification plan

Some investment advisers would say the survival kit starts and ends here.

Diversification is not so much about buying different asset classes as it is combining different types of risk, from principal risk (stocks) to interest-rate risk (bonds) to purchasing-power risk (certificates of deposit) and more. Diversify across industries, borders, types of investments -- so you have a fighting chance to avoid problems when trouble flares.

"You build strong, diversified portfolios for your clients, you don't put too much into any one type of investment, and you ride out the inevitable black swans,"

2. Cash

Cash is king, so be a loyal subject and keep it where you can easily get it.

That doesn't mean to stuff the mattress, but do keep a stash at home. If you were building an earthquake survival kit, you would have cash on hand because bank machines could be out of order for many days following a disaster.

Preparing for Black Swan events also requires more liquidity than you might realize. A Black Swan could disrupt your job or source of income; three-to-six months' worth of expenses may not be enough.

Plus, having ready cash gives you flexibility to take advantage of lower stock valuations.

"You have to keep powder dry," said David Brady of Brady Investment Counsel in Chicago. "A source of funds is needed to take advantage of corrections. We like to put money to work in undervalued markets

3. Gold

For peace of mind, gold may be the ultimate tonic. Few other portfolio holdings can match the power of gold to protect against a world in turmoil. 

"The most important component of a portfolio in the face and wake of a Black Swan event would be cash, followed by gold," said Karl Mills of JMK Advisors in Oakland, Calif.

As part of a predetermined strategy, and as a way to expect the unexpected, Mills typically commits between 5% to 10% of a client's portfolio to gold.

"There are not a lot of hiding places," he added. "Cash, short-term Treasurys and gold all have utility. Gold is the most volatile, but it is also a good asset to have and hold when things go dark." Read more: Gold as an insurance policy.

4. Hedging products

To stay in the market but mitigate risk, consider variable annuities, structured notes, and hedging strategies — or even traditional mutual funds that hedge the market.

Many financial advisers hate these products — for good reason. An annuity or options strategy is a form of investment insurance, and over time this portfolio preserver can be costly.

But if market volatility threatens to shake you out of the tree, then an alternative strategy or investment that secures income stream or allows you to stay invested even when the market seems crazy is probably a good idea.

"Clients really understood and appreciated the variable annuities with guaranteed income or withdrawal benefits during the depths of the financial crisis," said Daniel Dorval of Dorval & Chorne Financial Advisors in Otsego, Minn. "The guarantees created the confidence to remain invested knowing the income stream from that portion of their portfolio was secure. The income guarantees also allowed us … to take advantage of pricing anomalies created by the extreme Black Swan volatility.

"Clients may not have bought into the recommendation of buying low without the underlying income or withdrawal guarantees," he added. "This means the guarantees not only provided a tangible sense of security for clients, but also allowed us to provide value as advisors doing what we believed was right for long term investing — taking advantage of low prices to buy rather than sell low as so many investors tend to do."

5. A rebalancing plan

Sell winners and buy losers. Sounds like a direct route to the poorhouse, but in fact this portfolio strategy, known as "rebalancing," can keep your riches from becoming rags.

Rebalancing on a disciplined schedule forces an investor to sell high and buy low, which after all is the goal. The tactic restores asset-allocation targets that market movements have knocked askew. Put simply, rebalancing reaffirms your diversification decision and puts your plan back on track. Read more: Analysts bullish on Japanese stocks.

Yet rather than rebalance every six months or year, it's more advantageous to act when allocations move 3% to 5% from target levels.

"Rebalancing your portfolio would have had you selling stocks in 2007 and buying them in 2009," said Charles Rotblut, editor of the AAII Journal, published by the American Association of Individual Investors.

"It would not have avoided all of the market pain, but it would have given you comfort while the market was facing a traumatic event," he added. "That's what you want, because the alternative is to try and predict a Black Swan event, and that's just not going to happen."

SOME RECOVERY.............. A MUST READ

 
According to the U.S. Labor Department, unemployment actually increased in 351 of the 372 largest U.S. cities during the month of January.
 
According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.
 
According to a new study by America's Research Group, approximately 75 percent of all Americans are doing less shopping because of rising gasoline prices.
 
During this most recent economic downturn, employee compensation in the United States has been the lowest that it has been relative to gross domestic product in over 50 years.
 
When 2007 began, 26 million Americans were on food stamps.  Today, an all-time record 44 million Americans are on food stamps.
 
In 2010, for the first time ever more than a million U.S. families lost their homes to foreclosure, and that number is expected to go even higher in 2011.
 
According to Gallup, the U.S. unemployment rate in mid-March was 10.2%, which was virtually unchanged from the 10.3% figure that it was sitting at exactly one year ago.
 
There are now over 6.4 million Americans that have given up looking for work completely. That number has increased by about 30 percent since the economic downturn began.
 
Approximately half of all American workers make $25,000 a year or less. Median home price is $200k.  
 
The Ivex Packaging Paper plant in Joliet, Illinois is shutting down for good after 97 years in business.  79 good jobs will be lost.  Meanwhile, China has become the number one producer of paper products in the entire world.
 
Average household debt in the United States has now reached a level of 136% of average household income.

The U.S. economy now has 10 percent fewer "middle class jobs" than it did just ten years ago.

The average CEO now makes approximately 185 times more money than the average American worker.

According to one recent study, 21 percent of all children in the United States were living below the poverty line during 2010.

Very large concentrations of money and power are almost always bad for the prosperity of average citizens.  Our founding fathers never intended for our central government or giant corporations to have so much power.  We have abandoned the principles of our founding fathers. When large concentrations of power (whether governmental or corporate) are allowed to flourish, it almost becomes inevitable that the gap between the rich and the poor will grow.  We are seeing this happen all over the world today.

Unfortunately, it does not appear that any of this is going to change any time soon.  In the United States, both the federal government and multinational corporations are constantly attempting to grab even more power.  It has gotten to the point where individual Americans really don't have much power left at all.

While most Americans suffer take a look at these statistics about how many of the greedy thieves amongst us are living;

According to the American Society of Plastic Surgeons, facelifts for men jumped 14 percent last year.

The average bonus for a worker on Wall Street in 2010 was only $128,530.  It appears that more Wall Street bailouts may be needed.

According to DataQuick Information Systems, the sale of million dollars homes rose an average of 18.6 percent in the top 20 major metro areas in the U.S. in 2010. 

According to Moody's Analytics, the wealthiest 5% of households in the United States now account for approximately 37% of all consumer spending. 

According to the Wall Street Journal, sales of private jumbo jets to the ultra-wealthy are absolutely soaring....

Sales of private jumbo jets are so strong that Airbus and Boeing now have special sales forces devoted to potentates and the hyper-rich.

Porsche recently reported that sales increased by 29 percent during 2010. 

Cadillac recently reported that sales increased by 36 percent during 2010.

Rolls-Royce recently reported that sales increased by 171 percent during 2010.

According to the New York Post, Barack Obama enjoyed a total of 10 separate vacations that stretched over a total of 90 vacation days during the years of 2009 and 2010.  Apparently Barack Obama was not talking about himself when he told the American people the following....

"If you're a family trying to cut back, you might skip going out to dinner, or you might put off a vacation."

Barack Obama recently played only his 61st round of golf since moving into the White House.  Many are now concerned that Obama is simply not getting enough free time.

Ralph Lauren reported a 24 percent increase in revenue in the fourth quarter of 2010.  It is good to know that preppies are thriving in this economy.

Luxury jewelry retailer Tiffany & Co. recently announced that their profits increased by 29 percent in the 4th quarter of 2010. 

In 2009, only 18,288 vehicles with a price tag of $100,000 or more were sold in the United States.  In 2010, 32,144 such vehicles were sold. 

Porsche has announced that they will soon be taking orders for their first hybrid sports car, the 918 Spyder.  The price tag on one of these puppies will only be $845,000.

WHAT WE ARE WITNESSING IS THE DESTRUCTION OF AMERICA!

Market Cap as a % of Nominal GDP............

Market Cap as a % of Nominal GDP............
 
SOME THINGS HAVE OBVIOUSLY CHANGED SINCE THIS METRIC FIRST TOOK OFF IN THE LATE 80s / EARLY 90s. THEY HAVE NOT CHANGED SO MUCH THAT THIS METRIC ISN'T EVIDENCE THAT VALUATIONS, FOR MANY IF NOT MOST ASSETS, ARE STILL WAY TO HIGH AND ANOTHER UNEXPECTED FINANCIAL ADJUSTMENT LIES AHEAD.
 

COMMODITY CHOKE POINTS..............

8 Chokepoints Threatening The World's Supply Of Key Commodities

 
The civil unrest spreading across the Middle East and North Africa has threatened oil supplies and increased oil volatility.  But unusual weather conditions and conflicts around the world have had a major affect on commodities cutting production and putting in place export bans. Russia's drought and wild fires have caused a ban on grain exports, India's Maoist rebels have hurt the coal mining industry and political instability in the Ivory Coast has seen prices of cocoa soar. Keeping an eye on the situation in these countries would be a good idea.

IVORY COAST: Cocoa

IVORY COAST: Cocoa
 
Ivory Coast's President-elect Alassane Ouattara has extended the country's ban on cocoa exports, which has been in place since its disputed November 28 presidential elections. The country is the world's largest cocoa exporter and exported about 1.2 tons of the crop in 2009-2010, according to the AFP. It's exports account for 34% of the global supply.

THE DEMOCRATIC REPUBLIC OF CONGO: Tin, gold, coltan

THE DEMOCRATIC REPUBLIC OF CONGO: Tin, gold, coltan
 
The Democratic Republic of Congo (DRC) lifted a six-month ban on the mining of minerals earlier this month that was enforced to end illegal trade which affects 80% of the minerals. North Kivu, South Kivu and Maniema which make-up the eastern part of the DRC account for 85% of the nation's tin, gold and coltan production, according to Metal Miner. DRC also accounts for 15 - 20% of the world's tantalum (a rare earth metal) production.

NIGERIA: Oil

NIGERIA: Oil
 
The Movement for the Emancipation of the Niger Delta (MEND), Nigeria's main militant group, has threatened to resume attacks on the country's oil sites and political rallies ahead of elections in April, according to Reuters. The oil-rich nation currently produces about 2.5 million barrels a day but plans to increase production to 4 million barrels a day. Nigeria is the sixth-largest OPEC producer and oil investors should watch the region given that civil unrest in the Middle East and North Africa has already been disrupting oil supply.

INDIA: Coal

INDIA: Coal
 
$80 billion worth of projects in India have been stalled because of attacks by Maoist rebels in Jarkhand, is the heart of India's mining industry. In fact the rebels are expected to earn $500 million off these mines, according to Foreign Policy. India coal production dropped to 531 million tons in 2009/10, which was 70 million tons short of total demand, according to Reuters.

INDONESIA: Thermal coal

INDONESIA: Thermal coal
 
Indonesia's coal output this year is expected to reach about 320 - 330 million tons, 10 million tons below the government target due to weather disruptions, according to Bloomberg. The country is aiming to ban thermal coal exports by 2014. It accounts for 30% of global thermal coal supply and this is most likely to effect countries like India that rely on Indonesian coal for their power supply. Unlike other countries dealing with civilian conflicts this disruption in supply stems from poor infrastructure and weather conditions.

CHINA: Rare earth metals

CHINA: Rare earth metals
 
China has 37% of world's rare earth metals but accounts for 97% of the global supply. Last summer it cut exports, then choked all supplies to Japan over a border dispute, re-allowed shipments and then slashed exports by 35% again. Such arbitrary moves have caused prices to surge for these metals that are used in everything from iPads to missiles.

RUSSIA: Wheat

RUSSIA: Wheat
 
Wildfire and a severe drought hurt Russia's wheat production and has caused an extension of an export ban on the crop through the end of 2011, according to Bloomberg. Russia was the world's second-largest wheat exporter in 2009-10 shipping 18.8 million tons according to International Grains Council estimates. This most recent harvest was 1 million tons lower than expected.

THE MIDDLE EAST AND NORTH AFRICA: Oil

THE MIDDLE EAST AND NORTH AFRICA: Oil
 
As civil unrest spreads in the Middle East and protests continue in Libya, Bahrain and Yemen, the price of crude oil has been rising. With world oil demand expected to grow by 1.4 million barrels/day in 2011 according to OPEC estimates the political unrest in the region is being closely monitored by the world.
 
 
The 7 Oil Chokepoints That Are Crucial To The World Economy

The global economy runs on oil, and much of that oil gets shipped through seven narrow straits. When there's even a rumor of a chokepoint getting blocked, people freak out.

And there have been many rumors in Egypt. A major gas pipeline from Egypt to Israel has just been attacked.

#1 The Strait of Hormuz
#1 The Strait of Hormuz
 
"The most important oil chokepoint due to its daily oil flow of 15.5 million barrels..."

EIA: Located between Oman and Iran, the Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. Hormuz is the world's most important oil chokepoint due to its daily oil flow of 15.5 million barrels in 2009, down from a peak of 17 million bbl/d in 2008. Flows through the Strait in 2009 are roughly 33 percent of all seaborne traded oil (40 percent in 2008), or 17 percent of oil traded worldwide.

On average, 13 crude oil tankers per day passed eastbound through the Strait in 2009 (compared with an average of 18 in 2007-2008), with a corresponding amount of empty tankers entering westbound to pick up new cargos. More than 75 percent of these crude oil exports went to Asian markets, with Japan, India, South Korea, and China representing the largest destinations.

At its narrowest point, the Strait is 21 miles wide, but the width of the shipping lane in either direction is only two miles, separated by a two-mile buffer zone. The Strait is deep and wide enough to handle the world's largest crude oil tankers, with about two-thirds of oil shipments carried by tankers in excess of 150,000 deadweight tons.

Closure of the Strait of Hormuz would require the use of longer alternate routes at increased transportation costs. Alternate routes include the 745 mile long Petroline, also known as the East-West Pipeline, across Saudi Arabia from Abqaiq to the Red Sea. The East-West Pipeline has a nameplate capacity of 4.8 million bbl/d. The Abqaiq-Yanbu natural gas liquids pipeline, which runs parallel to the Petroline to the Red Sea, has a 290,000-bbl/d capacity.

A new bypass is currently being constructed across the United Arab Emirates that is expected to be completed in 2011. The 1.5 million bbl/d Habshan-Fujairah pipeline will cross the emirate of Abu Dhabi and end at the port of Fujairah just south of the Strait. Other alternate routes could include the deactivated 1.65-million bbl/d Iraqi Pipeline across Saudi Arabia (IPSA), and the deactivated 0.5 million-bbl/d Tapline to Lebanon. Additional oil could also be pumped north via the Iraq-Turkey pipeline to the port of Ceyhan on the Mediterranean Sea, but volumes have been limited by the closure of the Strategic pipeline linking north and south Iraq.

#2 Malacca

#2 Malacca
 
"The key chokepoint in Asia with an estimated 13.6 million bbl/d flow..."

EIA: The Strait of Malacca, located between Indonesia, Malaysia, and Singapore, links the Indian Ocean to the South China Sea and Pacific Ocean. Malacca is the shortest sea route between Persian Gulf suppliers and the Asian markets –notably China, Japan, South Korea, and the Pacific Rim. Oil shipments through the Strait of Malacca supply China and Indonesia, two of the world's fastest growing economies. It is the key chokepoint in Asia with an estimated 13.6 million bbl/d flow in 2009, down slightly from its peak of 14 million bbl/d in 2007.

At its narrowest point in the Phillips Channel of the Singapore Strait, Malacca is only 1.7 miles wide creating a natural bottleneck, as well as potential for collisions, grounding, or oil spills. According to the International Maritime Bureau's Piracy Reporting Centre, piracy, including attempted theft and hijackings, is a constant threat to tankers in the Strait of Malacca, although the number of attacks has dropped due to the increased patrols by the littoral states authorities since July 2005.

Over 60,000 vessels transit the Strait of Malacca per year. If the strait were blocked, nearly half of the world's fleet would be required to reroute around the Indonesian archipelago through Lombok Strait, located between the islands of Bali and Lombok, or the Sunda Strait, located between Java and Sumatra.

There have been several proposals to build bypasses to reduce tanker traffic through the Strait of Malacca. Construction began in 2009 to build a 240,000 bbl/d crude oil pipeline from Burma to China that could eventually be expanded.

#3 The Suez Canal

#3 The Suez Canal
 
"An estimated 1 million bbl/d of crude oil and refined petroleum products flowed northbound... continuing enhancement and enlargement..."

EIA: The Suez Canal is located in Egypt, and connects the Red Sea and Gulf of Suez with the Mediterranean Sea, covering 120 miles. Petroleum (both crude oil and refined products) accounted for 16 percent of Suez cargos, measured by cargo tonnage, in 2009. An estimated 1.0 million bbl/d of crude oil and refined petroleum products flowed northbound through the Suez Canal to the Mediterranean Sea in 2009, while 0.8 million bbl/d travelled southbound into the Red Sea. This represents a decline from 2008, when 1.6 million bbl/d of oil transited northbound to Europe and other developed economies.

Almost 35,000 ships transited the Suez Canal in 2009, of which about 10 percent were petroleum tankers. With only 1,000 feet at its narrowest point, the Canal is unable to handle the VLCC (Very Large Crude Carriers) and ULCC (Ultra Large Crude Carriers) class crude oil tankers. The Suez Canal Authority is continuing enhancement and enlargement projects on the canal, and extended the depth to 66 ft in 2010 to allow over 60 percent of all tankers to use the Canal.

#4 Bab el-Mandab

#4 Bab el-Mandab
 
"Most exports from the Persian Gulf... pass through the Bab el-Mandab... an estimated 3.2 million bbl/d..."

EIA: The Strait of Bab el-Mandab is a chokepoint between the horn of Africa and the Middle East, and a strategic link between the Mediterranean Sea and Indian Ocean. It is located between Yemen, Djibouti, and Eritrea, and connects the Red Sea with the Gulf of Aden and the Arabian Sea. Most exports from the Persian Gulf that transit the Suez Canal and SUMED pipeline also pass through the Bab el-Mandab.

An estimated 3.2 million bbl/d flowed through this waterway in 2009 (vs. 4 million bbl/d in 2008) toward Europe, the United States, and Asia. The majority of traffic, about 1.8 million bbl/d, moved northbound through the Bab el-Mandab en route to the Suez/SUMED complex.

The Bab el-Mandab is 18 miles wide at its narrowest point, making tanker traffic difficult and limited to two 2-mile-wide channels for inbound and outbound shipments. Closure of the Strait could keep tankers from the Persian Gulf from reaching the Suez Canal or Sumed Pipeline, diverting them around the southern tip of Africa. This would effectively engage spare tanker capacity, and add to transit time and cost.

The Strait of Bab el-Mandab could be bypassed via the East-West oil pipeline, which crosses Saudi ArabiaSuez Canal, except for limited trade within the Red Sea region.

with a nameplate capacity of 4.8 million bbl/d. However, southbound oil traffic would still be blocked. In addition, closure of the Bab el-Mandab would block non-oil shipping from using the

Security became a concern of foreign firms doing business in the region, after a French tanker was attacked off the coast of Yemen by terrorists in October 2002. In recent years, this region has also seen rising piracy, and Somali pirates continue to attack vessels off the northern Somali coast in the Gulf of Aden and southern Red Sea including the Bab el-Mandab.

#5 Bosporus

#5 Bosporus
 
"An estimated 2.9 million bbl/d... only half a mile wide at its narrowest point..."

EIA: The Bosporus and Dardanelles comprise the Turkish Straits and divide Asia from Europe. The Bosporus connects the Black Sea with the Sea of Marmara, and the Dardanelles links the Sea of Marmara with the Aegean and Mediterranean Seas. The 17-mile long waterway located in Turkey supplies Western and Southern Europe with oil from the Caspian Sea Region.

An estimated 2.9 million bbl/d flowed through this passageway in 2009, of which over 2.5 million bbl/d was crude oil. The ports of the Black Sea are one of the primary oil export routes for Russia and other former Soviet Union republics. Oil shipments through the Turkish Straits decreased from over 3.4 million bbl/d at its peak in 2004 to 2.6 million bbl/d in 2006 as Russia shifted crude oil exports toward the Baltic ports. Traffic through the Straits has increased again as Azerbaijan and Kazakhstan crude production and exports rose.

Only half a mile wide at its narrowest point, the Turkish Straits are one of the world's most difficult waterways to navigate due to its sinuous geography. With 50,000 vessels, including 5,500 oil tankers, passing through the straits annually it is also one of the world's busiest chokepoints.

Turkey has raised concerns over the navigational safety and environmental threats to the Straits. Commercial shipping has the right of free passage through the Bosporus Straits in peacetime, although Turkey claims the right to impose regulations for safety and environmental purposes. Bottlenecks and heavy traffic also create problems for oil tankers in the Bosporus Straits. While there are no current alternate routes for westward shipments from the Black and Caspian Sea region, there are several pipeline projects in various phases of development underway.

Another look at Bosporus

Another look at Bosporus

#6 Panama Canal

#6 Panama Canal
 
"An important route connecting the Pacific Ocean with the Caribbean Sea and Atlantic Ocean... 0.8 million bbl/d... many modern tankers are too large..."

EIA: The Panama Canal is an important route connecting the Pacific Ocean with the Caribbean Sea and Atlantic Ocean. The Canal is 50 miles long, and only 110 feet wide at its narrowest point called Culebra Cut on the Continental Divide. About 14,000 vessels transit the Canal annually, of which more than 60 percent (by tonnage) are for traffic to and from the United States.

Closure of the Panama Canal would greatly increase transit times and costs adding over 8,000 miles of travel. Vessels would have to reroute around the Straits of Magellan, Cape Horn and Drake Passage over the tip of South America.

However, the Panama Canal is not a significant route for petroleum transit or for U. S. petroleum imports. Roughly one-fifth of the traffic through the canal (measured by both transits and tonnage) was by tankers. According to the Panama Canal Authority, 0.8 million bbl/d of crude and petroleum products were transported through the canal in 2009, of which 620,000 bbl/d was refined products, and the rest crude oil. Most petroleum traffic passed from north (Atlantic) to South (Pacific).

However, the relevance of the Panama Canal to the global oil trade has diminished, as many modern tankers are too large to travel through the canal. Some oil tankers, such as the ULCC (Ultra Large Crude Carriers) class tankers, can be nearly five times larger than the maximum capacity of the canal. The largest vessel that can transit the Panama Canal is known as a PANAMAX-size vessel (ships ranging from 50,000 – 80,000 dead weight tons in size and no wider than 108 ft.) 

In order to make the canal more accessible, the Panama Canal Authority began an expansion program to be completed by end-2014. However, while many larger tankers will be able to transit the canal after 2014, some ULCC's will still be unable to make the transit.

#7 The Danish Straits

#7 The Danish Straits
 
"An estimated 3.3 million bbl/d... Russia has increasingly ben shifting its crude oil exports to its Baltic ports..."

EIA: An estimated 3.3 million bbl/d flowed westward through this waterway in 2009 to European markets, up from 2.4 million bbl/d in 2005. Russia has increasingly been shifting its crude oil exports to its Baltic ports, especially the relatively new port of Primorsk, which accounted for half of the exports through the Straits. An additional 0.3 million bbl/d of crude oil, primarily from Norway, flows eastward to Scandinavian markets.

About one-third of the westward exports through the Straits are for refined products, coming from Baltic Sea ports such as Tallinn (Muuga), Venstpils, and St. Petersburg.