Wednesday, February 2, 2011

A Unique Insurance Policy That Soars During Chaotic Times

A Unique Insurance Policy That Soars During Chaotic Times

By Matt Badiali, editor, S&A Junior Resource Trader
Wednesday, February 2, 2011
In early 2010, I introduced DailyWealth readers to the idea of "oil insurance."

You see, a majority of the world's largest oil deposits are located in the unstable Middle East. Any major disturbance there – like a shooting war in Iran – will cause the price of oil to skyrocket.

Since oil is a major cost for many different kinds of businesses, big price spikes can damage earnings and drag down an investment portfolio. Of course, they also cause the value of safe crude oil assets to skyrocket in value… assets like the Canadian oil sands.

That's how oil insurance works.

As I wrote in March, the Canadian tar sands are one of the world's greatest, safest oil deposits… second only to Saudi Arabia's reserves.

The latest estimates put the recoverable reserves here at 170 billion barrels. This huge store of oil is located in a safe, stable country… just a pipeline ride away from the world's most voracious consumer of oil. And while most Americans believe we are addicted to Middle Eastern oil, we actually import more oil from Canada than we do from Saudi Arabia.

So how has the "buy Canadian" oil insurance idea done? Take a look…

This is a chart of Suncor Energy, a $65 billion world leader in tar-sand oil. When large investors want to make a pure play investment in the oil sands, they usually turn to Suncor. S&A Resource Report readers are up 43% on the stock in less than a year.

And while most of our gains are due to the uptrend in crude oil, our Suncor oil insurance policy jumped 7% in response to the uprising in Egypt. In other words, it behaved just as I expected.

As you can see, with the threat of political upheavals in Africa and the Middle East… and with the constant threat of the U.S. government debt leading to debasement of the U.S. dollar… it's essential to own assets that can actually thrive during periods of instability. That means owning plenty of gold and silver bullion, and stakes in vital oil and gas fields located in safe, stable countries.

Daniel Yergin got the name for his definitive history of the oil industry, The Prize, from a geologist's claim many years ago that Middle Eastern oil is "the single greatest prize in all history."

The Canadian tar sand deposit is the single greatest prize in North America. As you can see with Suncor's Egypt bounce, buying stocks operating in this area at the right price is – and will continue to be – one of the greatest forms of wealth insurance in the world.

Good investing,

Matt Badiali

P.S. Suncor has enjoyed a huge run in the past few months, so it's a little expensive for new buyers. There's a much, much better deal in the oil sands right now… A quirk in the Canadian tax law system has created an incredible way to cheaply buy a stake in a massive tar-sand deposit.

While most Americans have no idea this stock exists, it's by far the safest and best way to own a share of the Canadian oil sands… and to start collecting a solid dividend.


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