HOW TO MAKE A FORTUNE FROM THE BIGGEST
Hi, Jared Kelly here...
Wednesday night is sure to go down in Stansberry Research history.
I know some folks didn't make it, so let me recap it briefly for you here...
I sat down with our founder and CEO Porter Stansberry, and the newest talent Porter has recruited to his team, Flavious Smith Jr.
The event was called Oil $500: How to Make a Fortune From the Biggest Event in the Oil Business in 50 Years.
The purpose of the event was to address (and help subscribers understand) one of the biggest stories in the financial markets of the last two years -- the complete collapse of oil prices and the devastation that's wiped out dozens of companies in the oil patch.
Because if you've been watching the news, the picture you see probably make very little sense...
After all, just two weeks ago OPEC announced that they would extend oil production cuts to help stabilize the price of oil.
But then last week, oil prices slid down 5% in a single day.
That was because the Energy Information Agency published their weekly report that oil in commercial storage in the U.S. actually increased when it was expected to decrease last week.
Yet the EIA also expects storage to decline by more than 12% in the next 12 months.
So the big question we had on Wednesday night was...
Has oil formed a bottom?
Or will things get worse in the oil sector before they get better?
As investors -- what should we do today?
Because as any investor with experience in commodities knows, if you time the cycles right -- you can make an absolute fortune.
In fact, many of the biggest gains in our firm's history have come from this sector. I'm talking about recommendations like:
- Seabridge Gold -- 995%
- Silver Wheaton -- 335%
- Jihshan Gold Mines -- 339%
- Petrobras -- 123%
- Carbo Ceramics -- 143%
- Targa Resources -- 138%
- Exelon -- 129%
- Natural Resource Partners -- 186%
In many cases, those gains were realized in months not years -- which is why for the last 18 years, Stansberry Research has always had a heavy focus on this sector.
And it is why we've been sounding the alarm in recent days...
Because everyone got a first-hand look at an opportunity that is shaping up to deliver gains just like these.
Porter talked about...
- The global event that will push oil to $500 over the coming years.
- The PERFECT moment to position yourself for potential 1,000% gains.
- The two best places to put your money to work right now.
- And a small firm that could become the largest oil company in the world within ten years.
Now these claims may be difficult to believe....
But if you're a longtime Stansberry reader then you are probably aware that Porter has an extensive track record of making predictions which seem "extraordinary" at first, but come true faster than anyone can expect...
For instance...
Porter was widely praised for predicting the bankruptcy of companies like General Motors and America's biggest mall owner -- General Growth Properties.
He warned investors to avoid Fannie Mae and Freddie Mac during the housing bubble -- correctly predicting both would go out of business -- something that was unthinkable at the time.
Porter was also one of the only analysts in the world to warn investors as far back as 2006 that the idea of "Peak Oil" was a myth.
He was one of the first analysts in the world to talk about the vast resources in the Eagle-Ford and the impact that shale oil and horizontal drilling would have on the worldwide oil supply.
He correctly predicted that the U.S. would become the biggest producer of oil in the world and said that would send prices crashing to $40. At the time, oil was trading at what $120 a barrel and no one could even fathom it falling below $100.
And for more than a year, Porter has been sounding the alarm on auto-loans and the impact they would have on companies like GM, Ford and Hertz (a story playing out in financial news today.)
The point is, we don't know anyone who has more accurately predicted the big swings in oil prices over the past 10 years or more.
That's why it generated so much buzz on Wednesday when Porter revealed his newest thesis: OIL $500.
But Porter also shared an interesting twist to this story...
Yes, there are several incredible opportunities in the oil patch today, but according to Porter, there's going to be a big event not too far in the future, that will create dozens more opportunities just like he sees today.
As Porter said Wednesday...
"I'm trying to teach people that what they want to be ready for is the bottom in oil, not be excited by the top. And so we're very interested in watching production come up, watching storage come up, watching prices go down, because we're interested in finding that point where we know that producing oil is no longer economic.
Not everything gets cheap at the same time. So you want to buy good assets when they become cheap.
Right now, there are several opportunities we like -- opportunities we would happily buy today. We'll tell you about those in just a minute.
We want to buy these assets when magazines are saying there's no future for oil on their covers.
Which is the exact situation we have today.
But there are others that we know we'll be able to get a better price if we wait, when they become more hated.
We use many indicators to judge the health of the market.
There is no one surefire way to know if oil prices have bottomed.
That's why it is so critical to get natural resource assets at a good price during a downturn.
You need someone with expertise - someone that has enough experience to know what something is worth.
And that's why I'm investing heavily in building a team of top-notch oil analysts right now, today.
Because we need to be ready when the opportunity comes, and we need to be able to deploy cash decisively.
And that's one of the reasons I asked Flavious to come work with us -- there's few people in the world that know the oil business like he does."
In other words, Porter explained that he's gearing up for the next oil supercycle, and he's putting together the expertise to take advantage of it when the moment is exactly right.
Porter even shared his most important indicators, which will signal the perfect moment to jump into oil investments.
He shared them live for everyone to see... but if you didn't have a chance to attend, don't worry.
I'll give you the full list right here.
But first, let me briefly tell you about the newest talent to join the Stansberry Research team...
Introducing Flavious Smith...
Flavious Smith Jr. is a 40-year Texas oil veteran and successful entrepreneur.
After earning his B.A. and M.S. from Vanderbilt University, Flavious played a short stint as tight-end for the Denver Broncos, before leaving the team to earn his JD from the Oklahoma City School of Law - the foremost oil and gas program in the country at the time.
Before joining Stansberry Research, Flavious most recently served as the Chief Oil and Gas Officer and Executive Vice President at Forestar Group (NYSE: FOR), where he grew the value of their oil and gas division from $30 million to $312 million in seven years.
Flavious has expertise in engineering, geology, geophysics, land, and operations... and has worked on projects in the Anadarko, Appalachian, Denver-Julesburg, East Texas, Gulf Coast, Hugoton, Permian, Powder River, Uinta, Wind River, and Williston Basins.
But today, Flavious has joined Porter's team to write Commodity Supercycles -- our publication dedicated to finding opportunities where "boom" cycles in natural resource markets can deliver gains of 1,000% or more.
Flavious decided to join Porter's team -- in large part -- due to their shared thesis of where oil prices are going next.
In fact, there isn't a single other analyst we know of in the financial community who shares their view.
Consider...
- Business Insider says that oil prices could stay low for another 3 years.
- Fortune says it will take 5 years for prices to recover...
- Goldman Sachs analysts get paid a lot more -- so they're predicting that prices could stay this low for the next 15 years.
But Porter and Flavious completely disagree.
The cause of every bust is the same -- oversupply.
And the cure to low oil prices is always the same too -- lower prices.
Just consider what's happened in the last few years to companies in the oil business.
The following chart from bankruptcy-law firm Haynes and Boone shows how many companies have gone bankrupt in the oil sector since the beginning of 2015...
As you can see here, when prices fell to as low as $27 a barrel last year, revenues dropped, and debt crushed many companies. A wave of bankruptcies swept across the industry.
In total, 114 exploration and production ("E&P") companies declared bankruptcy from January 2015 through last December.
The combined debt for these companies totaled more than $74.2 billion. Over the same period, 110 oil field-services companies went belly up... with total debt of more than $18.8 billion.
That's 224 bankruptcies and $93 billion in debt.
But as Porter and Flavious put it, "we're just getting started..."
Despite the wave of bankruptcies that hit the sector last year, crude in storage is at an all-time high.
Take a look at this chart from the EIA...
It shows the number of days of crude oil in storage in the U.S.
And as you can see, we currently have levels of oil in storage since 1984...
Just before oil prices shot up over 250%....
These two charts -- showing record oil bankruptcies and record oil storage -- are two of the indicators Porter shared on Wednesday night that always precede "boom" cycles in oil.
Yet, as Porter and Flacious predict, you'll see another massive wave of bankruptcies before the oil and gas sector emerges from this ongoing bear market.
The continued drilling and near-record production will keep driving oil prices lower. The companies with higher costs and big debt loads will become the next victims.
Two months ago, Flavious attended the Oil & Gas Investment Symposium in New York.
Two months ago, Flavious attended the Oil & Gas Investment Symposium in New York.
More than 70% of the companies presenting had debt levels that exceeded their market caps.
Things won't end well for these companies.
But therein lies the opportunity today...
Because when the next (and final) wave of bankruptcies hits the oil sector during this cycle, debt-laden companies are going to hand over their valuable assets to savvy investors at pennies on the dollar.
Yet, the market isn't planning for this...
You see, Porter and Flavious talked on Wednesday night all about a new idea that has become popular on Wall Street...
An idea, called "Peak Oil Demand."
In fact this idea recently appeared on the front page of the Wall Street Journal, under the headline, "Get Ready for Peak Oil demand."
This idea probably sounds familiar to you because of another wildly inaccurate and popular myth from ten years ago...
I'm talking, of course, about "Peak Oil."
For a few years in 2005 and 2006, Porter spent hours each week explaining basic economics to subscribers - that higher oil and gas prices would encourage capital investment in new technologies and new resources... and that sooner or later, there would be a new oil glut, just as there has been every 20 or 30 years in the oil business.
Well... what's happened since? I'm sure you know. As it always does, the free market worked its magic.
But the reason "Peak Oil" was a dangerous idea, is because if the idea were true... investors (and banks) could safely allocate almost unlimited amounts of capital to oil exploration and production projects.
No matter how much capital you invested in it, oil production rates would never increase again.
Many large investors believed that oil represented a "one-way" bet.
Today, the Wall Street Journal says we have another "one way bet"...
"A consensus is growing that fuels demand for passenger cars could fall as... electric vehicles gain traction and the internal combustion engine gets re-engineered to be dramatically more efficient."
In other words, the world will never need as much oil as it does today.
Well, Porter and Flavious are taking the other side of this bet.
Just as nobody believed Porter in 2011 that U.S. oil production would triple in 10 years (it did in just 6 years), and just as no one believed Porter in 2012 when he warned that oil prices were going to crash to $40 (they bottomed below $30), I'm sure many won't believe what Porter is saying today either.
But according to Porter, we'll soon see a bottom in the oil market.
Porter calls it his "magazine indicator."
He saw the same thing happen back in March of 1999...
The Economist boldly proclaimed on the cover at that time that the world was "Drowning in Oil."
Just as today, nobody thought prices would ever go higher again...
Yet that was precisely the beginning of oil's next "boom" cycle, which saw oil prices rise 1,000% over the next decade.
A few years later, The Economist got it wrong again, when it too bought into the "Peak Oil" myth.
Well, can you guess what the Economist is predicting now?
Take a look...
The point Porter stressed on Wednesday night is that when it comes to commodities, you can't wait for things to start looking better.
You need to invest when the market believes things are never going to get better.
That's why it is critical to position yourself today for the next oil supercycle.
Before the market sees the opportunity we see today.
In fact, a number of private equity firms -- aka the "smart money" in Wall Street - are doing just that.
In the past 18 months alone...
- Private Equity firm, Blackstone Group scooped up oil and gas assets, including vast acreage in the Permian basin, to the tune of $1.8 billion.
- Chrysoar, an oil company backed by private equity firm EIG, acquired oil and gas assets in the North Sea from Royal Dutch Shell at a cost of $3 billion.
- Warburg Pincus, the New York firm where former Treasury secretary Tim Geithner works, has its eyes set on the northern Delaware Basin, where it has deployed $500 million for oil assets.
- And Private Equity firm, Neptune Oil & Gas bought a majority stake in a French exploration and production business for $3.9 billion.
It's clear that private equity firms, are buying up oil assets as fast as they can...
Possibly because of another indicator Porter shared on Wednesday night, that has been powerfully predicative for identifying past boom cycles...
Let me show you what I mean...
The following shows the commodity-to-stocks ratio over the past 47 years, a gauge of how expensive stocks are relative to commodities.
As you can see this ratio sits at an extreme only seen twice in the last 50 years.
And both times this ratio hit this extreme in the last 50 years, it was followed by a "boom" cycle in oil prices.
In fact, it is now even lower than either of the previous two bottoms...
The last time this pattern appeared -- in 1998 -- the price of oil absolutely skyrocketed... from $12 per barrel to more than $140 per barrel.
Exxon-Mobile stock doubled and dozens of tiny exploration firms exploded 876%... 1,821%... even 10,000%!
It's a move we've only seen twice in the past 50 years -- and, as you can see from this chart, now it's happening again.
Gains of 1,000% or more wouldn't be unusual going forward following an extreme like this.
But according to Porter and Flavious, it's not going to be the companies you think that will benefit most from the coming boom.
Often small producers and exploration companies are the biggest winners.
Flavious ran a screen on Wednesday night to show the biggest winners after this ratio last hit an extreme in 1998.
You probably don't know many of the names on this list.
But had you put $1,000 in each of these oil and gas companies the last time this ratio hit this extreme consider how much you would have made...
A thousand dollars in Earthstone Energy (ESTE) would be worth $100,000 today...
A thousand dollars in Southwestern Energy (SWN) would be worth $60,600...
A thousand dollars in Carrizo Oil and Gas (CRZO) would be worth $51,447...
A thousand dollars in Range Resources (RRC) would be worth $42,045...
A thousand dollars in Petroquest Energy (PQ) would be worth $31,640...
A thousand dollars in Comstock Resources (CRK) would be worth $28,082...
A thousand dollars in Denbury Resources (DNR) would be worth $25,556...
A thousand dollars in Panhandle Oil and Gas (PHX) would be worth $22,596...
A thousand dollars in PDC Energy (PDCE) would be worth $20,870...
A thousand dollars in Hollyfrontier Corporation (HFC) would be worth $18,211...
A thousand dollars in Vaalco (EGY) would be worth $14,800
A thousand dollars in Apache (APA) would be worth $13,925...
A thousand dollars in EOG Resources (EOG) would be worth $13,562...
A thousand dollars in SM Energy (SM) would be worth $13,118...
You get the point...
Of course, historial results should never be misconstrued as a guarantee for future success and it's important to consider the risk before making any investment.
However, there's no better way to make extraordinary gains relatively quickly than investing in small firms at the start of a commodity supercycle.
At least, that's been the case for lots of Stansberry Research readers who have got into commodity "boom" cycles like this one in the past...
Jim T. who sent us this letter...
"I first bought SLW after reading about it in... the Oil Report. I bought it twice in '08 and sold 1/11 for a 392% profit. This is one if not the best investment I've made but these stocks can also be volatile so you must get in when the prices are beaten down."
And here's a good one from Chalene T. who made a bundle in oil and gas...
"I am one of your "small" investors, "senior" senior citizen, late to investing in the stock market. Your advisories have been my "education" and I've done quite well for a novice... I'm at 300% for LNG and 200% for TRGP."
Or David G. who sent us this letter...
"Today it is priced at $5.36 per share giving me a profit of $306,000... I not only want to thank you, I want to take Porter to dinner."
David B. simply wrote...
"Has been like a slot machine, I put my money in and in pays out."
Hopefully by now, you understand that we see an opportunity in the oil sector today that only comes along a handful of times every century. And you can imagine what nailing just one oil "boom" cycle in your lifetime could do for your retirement.
Porter and Flavious shared their exact projections for where they think oil will go during Wednesday night's event, and the numbers were pretty exciting.
There's a lot that went into it, but the most important thing to understand is that Porter and Flavious looked back at the super "boom" cycles in oil of the past.
And based on past cycles, and current conditions, they expect oil to decline again to $40 a barrel before we see a true bottom in oil prices.
And from there, they see oil going to $500 over the next decade -- a 1,150% increase.
Of course, as Porter shared with viewers, the big winners won't be companies you've heard of today.
Super "boom" cycles in oil can supercharge your gains, but only if you know what tiny firms are best positioned to take advantage of the next boom.
That's one of the reasons why we're so excited to have Flavious join the team.
As I mentioned, before joining Stansberry Research, Flavious most recently served as the Chief Oil and Gas Officer and Executive Vice President at Forestar Group (NYSE: FOR), where he grew the value of their oil and gas division from $30 million to $312 million in seven years.
He's done just about everything you can in the oi business from drilling wells to writing and negotiating contracts worth hundreds of millions of dollars.
His family has lived and thrived Texas for nearly 100 years, when they first got into the oil business.
In short -- he know the players and he knows the game.
That's why Flavious is going to be leading this effort with Porter to help readers capitalize on the coming oil "boom" cycle.
