Analysts continue to be stunned by the rate at which cash is rolling into Apple (AAPL). At current cash flows, the company?s hoard is expected to grow from $96.7 billion to $130 billion by next June, an increase of nearly $220 million a day!

So far, the company has resisted every entreaty to part with some of this dosh, either through a share buyback or a dividend. Now some are speculating that the passing of founder, Steve Jobs, and the succession of new CEO, Tim Cook, could lead to a loosening of the purse strings.

Let?s face it. Apple has had a great, decade long run. Hundreds of my readers, many of them Apple employees, are faced with the enviable problem that, having ridden the stock up from $4 to $457, they have too much of their wealth concentrated in a single asset. That is never a good idea from a risk control point of view. But every time I look for reasons to sell Apple, I find three more reasons to buy it. It?s a case of the grass being greener on my side of the fence.

Let me list just a few avenues for continued meteoric performance:
*As the Apple generation reaches the ranks of senior management, more Fortune 500 companies will begin to support their products. Thousands would love to quit carrying around a Blackberry for business and an incompatible IPhone for personal use, with the associated chargers. (note to self: short (RIMM) on the next rally).

*Despite this torrid growth, the stock trades at 11.5 times earnings a discount to the S&P 500 at 13 times earnings.

*The Apple of today is essentially a spanking brand new, high growth company. The company?s only decrepit product is the IMac. The IPhone is only 5-6 years old, while the Ipad and Ap Store are only 1-2 years old and still in their infancy. The potential near term growth of these products is huge.

*IPhones only have a 5% penetration of the world market. Past market leaders like Nokia (NOK) and Motorola (MOT) have reached market shares well into double digits.

*Apple has just scratched the surface in China, where it only has six official stores (but lots of fake imitators), and is already the premium product. The growth opportunities there are massive. Everyone there wants an IPhone, and they are traveling to Hong Kong to get them. When the Beijing store was unable to open due to the crush of customers waiting to buy the new IPhone 4s, it was pelted with eggs.

*There was always a fear of what would happen to Apple stock after Steve Jobs was gone. That is now behind us. In the wine bars around the company?s futuristic Cupertino, California headquarters at One Infinite Loop, I am hearing that Steve left behind enough new product ideas, improvements, upgrades, and direction to keep Apple forging ahead for another five years. The vast, interlocking, synergistic ecosystem he envisioned is still maturing.

 

It has been a long wait for 'peak oilers,' whose passionate belief is that the world will run out of oil in coming years, sending prices through the roof.

This splinter religion came into being in 1956 when M. King Hubbert produced some simple supply/demand charts showing that US reserves of Texas tea would dry up by 1965-70, forcing a heavy reliance on imports with which we have become all too familiar. This was later expanded globally, implying that Western civilization would come to a grinding halt.

 

 

It all seemed very prescient, when in 1973 OPEC raised prices from $3/barrel to $12 in the wake of the Yom Kippur war, and the resulting boycott caused enormous lines at American gas stations. It happened again in 1979 with the fall of the Shah of Iran, taking crude from $12 to $40. Then Saudi overproduction kicked in big time, bring 20 years of falling prices, all the way down to $8. At the 1998 low, oil was selling for less than the barrel that contained it.

Then came China and the commodities boom, which suddenly sent the value of all things 'hard' skyward. Virtually overnight, the Middle Kingdom became the world's largest marginal consumer of not only oil, but all energy sources. By 2008, peak oilers had the second coming in sight, with prices soaring to $150/barrel.

 

 

Enter the Great Recession. The real damage this caused was not the temporary collapse of prices down to $28/barrel and the wiping out of many industry participants. It was the two year freeze on the financing of new exploration and development, a byproduct of the Wall Street crash. BP's Gulf oil spill didn't help matters either. These events have combined to create a bubble in the energy pipeline, the implications of which we may only just now be seeing.

Now the Middle East is blowing up. With populations exploding, per capita incomes plunging, and a religion that mires them in the 14th century, this sort of viral, grass roots revolution could have, and should have happened any time over the last 40 years. It took cell phones, social media, and the Internet to provide the spark. At first, the world didn't care, as Egypt and Tunisia produce little oil, and are non-factors in the global economy.

Then came Libya, an entirely different kettle of fish. Having dealt with the Libyan government myself since 1968 when Muammar Khadafi overthrew the government and kicked me out of the country, I can only say this couldn't happen to a nicer guy. I missed the Pan Am flight he blew up over Lockerbie, Scotland by a week and lost a few friends. Justice finally came when he was dragged out of a storm drain and shot at close range.

 

 

The revolution there raised broader, far more concerning questions. If it can happen in Libya, why not in Saudi Arabia, where the government is still essentially tribal in nature and will not be winning any prizes for their human rights record anytime soon. Women are still not allowed to drive. Take their 12 million barrels/day off the market, even for a few days, and the geopolitical implications are large.

 

 

Which brings me back to peak oil. After a quiet, long term downsizing, the US now only imports 2 million barrels a day from the Middle East. Canada is now our largest foreign supplier, followed by Mexico and Venezuela. But oil is a globally traded commodity, and if you prick the supply line in one place we all have to pay. Remove Saudi Arabia from the picture, and the results could be catastrophic, for China first, but for ourselves as well.

Even without these Armageddon scenarios, we are still facing a huge
problem. World oil production today is 83-84 million barrels/day. There is probably another 5 million barrels/day in reserve. By 2015, an additional 3 million barrels/ day in will come on stream that was financed prior to the Wall Street melt down. After that, new supplies become very problematic.

 

 

Even if the US can keep its own demand relatively flat through modest economic growth, conservation, new efficiencies, alternatives, and switching to natural gas, China promises to eat up all of this increase. That's when the sushi hits the fan. I think oil could hit $300/barrel by 2020, or $225 in today's prices. If you are wondering why I have become so cautious about investing lately, this is a major reason why.

Which leads us all to the bigger question of how do we make a buck out of all of this? Brent crude, which trades in Europe, is already at $110/barrel, an $11/barrel premium to our own West Texas intermediate. Prices here have stayed low because of a shortage of storage facilities. My buddies in the field also tell me there is some elaborate conspiracy to keep West Texas artificially low, because the prices for Middle Eastern imports are priced off of that highly manipulated benchmark. It is far more likely that West Texas trades up to Brent than the other way around.

I missed the window to get in last week at $85/barrel. But if you believe it's going substantially higher, it is not too late to get involved with long term portfolios. For a start, do not buy the oil ETF (USO). The tracking error caused by the contango will kill you, assuring that you will take all of the risk but get few of the benefits.

Individual oil major stocks that I have been recommending, like ExxonMobil (XOM), BP (BP), and ConocoPhillips (COP) are great vehicles. A simple alternative is to pick up the double long oil majors ETF (DIG). These guys have massive supplies in the pipeline that are about to be revalued by higher prices. So are independents like Occidental Petroleum (OXY). You can throw oil service companies into the mix as well through the ETF (OIH).

As (OXY) founder, Dr. Armand Hammer, told me when I was a kid, 'Keep your eye on oil, because everything stems from that.' Some 40 years later, and I think the old man is still right.

 

 

 

 

Often while searching for a piece of data through Google, I stumble across something else which is far more interesting. That is how I found the table below of international savings rates.

Why should you care? Because countries with high savings rates tend to have strong economies and great stock markets, since there is plenty of excess cash available to pour into investments. Those with low savings rates suffer from weak economies and poor stock markets, because of a shortage of available capital. When the American savings rate dropped below zero in the latter part of the last decade, it set off emergency alarms for me that a collapse of the financial markets was on the horizon.

During the last four decades, I have watched Japan's savings rates plunge from 16% to 2.8%, and you know the result for markets there. When it approaches zero, that will be the time to short the JGB's, the yen, and the Nikkei stock index. The only country that doesn't fit this analysis is Australia, with a mere 2.5% savings rate, but boasts a positively virile stock market and currency. The resource boom there is skewing things towards under saving and over consumption.

By the way, the outlook for the US, with its still miserable 3.9% savings rate, does not look great when considering this benchmark. Don't expect a runaway bull market anywhere savings rates are low and falling. What are savings rates telling us are the best countries in which to invest? China, 38%, India, 34.7%, and Turkey, 19.5%.

Australia? 2.5%
Japan? 2.8%
USA? 3.9%
Brazil? 6.8%
Britain? 7.0%
Germany? 11.7%
Ireland? 12.3%
Switzerland? 14.3%
Turkey? 19.5%
India? 34.7%
China? 38%

 

 

The conspiracy theorists will love this one. Buried deep in the bowels of the 2,000 page health care bill was a new requirement for gold dealers to file Form 1099's for all retail sales by individuals over $600. Specifically, the measure can be found in section 9006 of the Patient Protection and Affordability Act of 2010.

For foreign readers unencumbered by such concerns, Internal Revenue Service Form 1099's are required to report miscellaneous income associated with services rendered by independent contractors and self-employed individuals. The IRS has long despised the barbaric relic (GLD) as an ideal medium to make invisible large transactions. Did you ever wonder what happened to $500, $1,000, $5,000, and $10,000 bills?

Although the Federal Reserve claims on their website that they were withdrawn because of lack of use, the word at the time was that they disappeared to clamp down on money laundering operations by the mafia. In fact, the goal was to flush out income from the rest of us. Dan Lundgren, a republican from California's 3rd congressional district, a rural gerrymander east of Sacramento that includes the gold bearing Sierras, has introduced legislation to repeal the requirement, claiming that it places an unaffordable burden on small business.

Even the IRS is doubtful that it can initially deal with the tidal wave of paper that the measure would create. Currency trivia question of the day: whose picture was engraved on the $10,000 bill? You guessed it, Salmon P. Chase, Abraham Lincoln's Secretary of the Treasury.

 

 

Ever Wonder Where The $10,000 Bill Went?