May 3, 2007 by Addison Wiggin & Ian Mathias

• Ponzi schemes at e-gold… what the Feds think they know
• After Murdoch’s Bid: The 5’s first-hand account from the WSJ newsroom
• An increase of 438 million barrels a year for 23 years… what’s Exxon smokin’?
• Bubbles, bubbles everywhere… but not a pin in sight
• Think chickens got it bad? Try beach-goers in SoCal

We’re so quick to judge, aren’t we? “The indictment of e-gold principals is not part of any attempt by the U.S. government to dissuade gold's use as currency in legitimate ways,” James Turk told us yesterday. “These indictments relate solely to e-gold's business practices.” James, as you may know, is the managing director of GoldMoney.com, a competitor of e-gold and a friend of The 5.

“In fact, the indictments come as no surprise,” says Turk. Major allegations of e-gold’s practices have been publicized in the past. Turk provided us with a classic Ponzi scheme that the e-gold execs are said to have allowed on their watch. We’ve put it here, on our Web site. >>

“These schemes coupled with e-gold’s anonymous-user policies were the real source of the indictments,” says Turk.


“I was happy to see that the windows don't open… there may have been some key Journal employees jumping out!” said Kevin Kerr yesterday direct from the Wall Street Journal newsroom. In addition to his gig with us here at the helm of Resource Trader Alert, Kevin wields a pen as a columnist for Dow Jones’ MarketWatch.com.

Despite the company’s rejection of Rupert Murdoch’s massive buyout bid this week, tensions in the WSJ newsroom are high. “The in-house union (who were on the verge of strike before this buyout) is freaking out… office doors are shut… all of the writers are busy at their computers… but rather than working on stories, I have a feeling many of them are on Monster.com,” Kevin chortled.

“I don't know how the Bancrofts could possibly reject this offer,” he later opined. “I mean, really! Who in the hell else is going to pay $60 a share… and the share price has dropped so much! It would be criminal to keep those profits away from investors.”

(Kevin, BTW, will be on Fox News this Saturday at 10 a.m. EST. It might be worth catching the show. The last time he was on, Kevin gave the nod to Novelis, which rose 60% in the three ensuing months.)


“Exxon Mobil's position is to disagree… ” our Byron King reports from the Offshore Technology Conference in Houston. “They doesn’t believe the current state of affairs reflects present or imminent ‘peaking’ in world oil output.” Nor does Exxon expect to see a peak for another 25 years.

At the same time, they predicted we would consume 1.2 million more barrels per day per year from now until 2030. That’s 438 million barrels MORE each year for the next 23 years.

Huh?

“That would take a whole lot of new technology and some drill-crazy politicians,” says Byron, “two things that are hard to come by… and count on.” The real question: If cheap oil has “peaked,” who at Exxon is going to admit it? The most profitable publicly traded company in history admitting that their margins are about to get squeezed? We don’t think so…


Bubbles, bubbles everywhere… The Shanghai stock market, U.S. housing market, “deathanol” farming… if you agree with Jeremy Grantham there are even bubbles in Indian antiques, Chinese art, Central American land, forestry, blue chips, the yen carry trade…

And now… hedge funds and green tech.

“Hedge funds… pose the biggest risk of a crisis since 1998,” says the N.Y. Fed. Quants at the Fed have released a report showing a “high correlation” between now and just before the crash in 1998. The difference? The sheer size of the industry… last year alone saw $1.4 trillion flowing into hedge funds.

And money is flowing into alternative energy companies so fast that "the warning signs of a bubble are appearing," reported the IHT yesterday, which is about as alarming as that soft rag ever dares to get.

“Money is ‘sitting on the shelf’ waiting to be invested, and investors are now chasing entrepreneurs, rather than the other way around,” said research firm Lux Research. “When you see venture capital more than double from one year to the next, and IPO values double from one year to the next, that's the sign of a bubble in the making."

Look out below! 

“You ain’t seen nothin’ yet!” Chris Mayer told us in response to yesterday’s headlines of global chicken feed contamination. 2.5 million broiler chickens eating tainted food “doesn’t even scratch the surface,” says Chris.

“It’s actually sad that this story grabbed the headlines. Last year alone, more than 3.5 million people became ill because of sewage spills leaking into our water supply. More than 1.5 million people have gotten sick in Southern California due to contaminated water at the beaches there.”

Chris has been fired up about water ever since he returned from an investment tour of China in 2005. He’d gone expecting to find solid manufacturing companies to invest in… he came back petrified by the world’s dwindling supply of potable water.

You can read Chris’ research into water supplies, pipe fitters and filtration companies here.

An alert on-the-scene reader told us yesterday that our “comments regarding the pending collapse of China's economy are way off the mark.” He’s been living in China for the last 10 years and had this to say about the possible Chinese market correction:

“Anyone thinking, or waiting for, a slowdown in this economy is in for a rude awakening. In the daily life, there are no real signs of overheating. The condition is as it always has been, just a constant pace of quickness. The middle class continues to gather strength, and the Chinese continue to save most of their earnings, unlike the Americans.

“The current boom, as well as the boom since 2000, is being fueled by savings, not the printing of money. This is the difference between America and China. China is becoming more powerful by the day, while America is becoming weaker.”

Perhaps, but what may be true in the economy isn’t necessarily true for the stock market.

In today’s 5, we sign off with an invitation of sorts. Agora Inc., our parent company, sponsors an event each summer called First Thursdays -- Concerts in the Park. The first First Thursday of the summer is tonight. There will be music… and wine.

The event is hosted by WTMD, a fantastic local radio program broadcast from the campus of Towson University.

If by chance you’re in the area, why not come by and raise a glass with us?

Until tomorrow,
Addison Wiggin,
The 5 Min. Forecast

P.S. In the haste to dispatch Dan Amoss' incisive critique of Bankrate in this morning's issue of your Rude Awakening, a flaw in the issue's chart escaped us. 

As usual, Dan's analysis is spot on... and so is the chart in the amended version, which you can read right here.

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