Friday, April 21, 2006 - Vol. 8 No. 80

In Today's Letter: Comment: Gas, Wind Mean Cool Energy Buys Offshore: Not Sold on Cyprus Wealth: Bonds Go from Bad to Worse in 2006 Privacy & Rights: Oppose War, You're a Terrorist

Gas, Wind Mean Cool Energy Buys

Today's comment is by Eric Roseman, Investment Director of The Sovereign Society and editor of Sovereign Society's Commodity Trend Alert.

Dear A-Letter Reader:

"Sell in May and go away," and the "trend is your friend" rank among some of the most popular and proven Wall Street investment adages of all-time. But so does buying natural gas and crude oil ahead of summer.

We've had a massive crash in natural gas prices since December. But, as Americans drive off to their favorite summer destinations starting in June, demand for gasoline and natural gas should propel the sector to new highs.

From its high of $15.38 British Thermal Units (BTUs) in mid-December 2005, spot natural gas has crashed 55% to $6.85. Other energy products also corrected but have since recovered this spring as West Texas intermediate crude oil trades just shy of its multi-decade high of $70.85 last August 30.

We're entering "The Shoulder Season."

That's the period between spring and summer. Flat underlying demand for natural gas generally marks this season. During winter, seasonal demand for natural gas is brisk.  That's followed by a drop in consumption during spring. Then another big spike in demand comes during the summer.

However, this past winter was the warmest on record. January hit record highs, which was a huge blow for natural gas prices.  

For long-term investors, odds heavily favor a natural gas recovery this summer as consumers across the Western Hemisphere crank-up the air conditioners. And in the United States, demand for air conditioning units typically hits a seasonal peak in late July and August as temperatures hit annual highs. But air conditioning demand pales as a price factor-compared to the dreaded arrival of the hurricane season in 2006. 

As hurricane season arrives with much trepidation across the Gulf of Mexico in June, investors would be wise to play natural gas and crude oil. Last year, the worst U.S. hurricane season in more than forty years nearly destroyed America's oil and gas infrastructure. This devastating hurricane season resulted in supply shortages and near-record prices. Hurricane Katrina severely damaged installations in late August, forcing the Bush administration to tap into the nation's Strategic Petroleum Reserves to avert a 1970s-style energy crisis.   

Some energy stocks still offer great values, including one large-cap stock supported by insider buying and paying an attractive 4% effective yield. Also, a new exchange traded fund which debuted in April gives investors a new way to play the spot West Texas intermediate crude oil market - with daily liquidity and low fees.    

Combined with rising geopolitical tensions in the Persian Gulf, tight oil supplies since 2004 and hurricane season just several weeks away, this is the season to be long and strong the energy complex!          

ERIC ROSEMAN, Investment Director
on behalf of The Sovereign Society

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 Offshore

Not Sold on Cyprus
According to Forbes Magazine, Cyprus is being billed as the next tax haven for U.S. investors. Odd, because Cyprus deliberately shed its "tax haven" status to ease entrance into the EU.  This small island known as the crossroads of the Mediterranean has a violent internal past that goes back to B.C. times. Recently Cyprus has been a hotbed of arms trading, cigarette smuggling, sex slave trafficking, mafia dealings and even alleged terrorism financing. But now, Forbes says, "Cyprus has come a long way in cleaning up its act," revamping tax laws to attract businesses, strengthening anti-money laundering laws and even sending tax professionals to other nations to attract investors. Some U.S. companies are setting up holding companies there including Microsoft. While Cyprus is being called "the best country in the EU tax-wise" that's for corporations, not individuals. Better to choose a peaceful tax haven like Panama for your IBC. For now, many better tax havens are still available. LINK:  Click here to learn more.

 Wealth/Investments

Bonds Go from Bad to Worse in 2006
Fixed income remains one of the worst investments since 2002. With the exception of high-yield bonds, the bond market (including corporate debt) has barely generated a positive return since mid-2002. In fact, no other major asset class has fared worse than bonds over the last three years. The Lehman Brothers Aggregate Bond Index has gained 2.92% per annum since April 2003 and just 5.11% per year since 2001. After inflation and taxes, benchmark Treasury, mortgage and corporate debt have posted a negative real rate of return over the last three years. The Federal Reserve, which has raised its benchmark Federal Funds rate 15 consecutive times since June 2004, has paralyzed the bond market. And investors have scrambled out of longer dated bonds and into cash and short-term debt. In April, the benchmark 10-year Treasury bond closed above the important 5% level for the first time since mid-2002. As inflation continues to ratchet higher and commodities soar, the Fed's work is not done yet. So in short, avoid bonds.  

 Privacy&Rights

Oppose War, You're a Terrorist
Grandmothers? College students? Vets? Well who knows? - They COULD be terrorists. And according to Rolling Stone Magazine, mere suspicion is enough for just about anyone to flash on the Pentagon's radar screen. The Pentagon has already collected intelligence on anti-war groups including "Raging Grannies," "Students Against War," "United for Peace and Justice," even "Veterans for Peace." (Yes, even if you've already served your country, apparently you might be a terrorist.)

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• White House increases Strategic Petroleum Reserve by 42% even with oil near an all-time high, hinting that prices could go much higher still.
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