Investing secrets of Sea Island

We'd like to see lower oil prices, says Bill Bonner - but we won't get too excited.

Will new energy discoveries and new technology sink oil prices? Will lower oil prices rescue the world from the Great Correction?

Maybe, says Porter Stansberry and a good number of the analysts and experts here.

We're attending an investment conference for professionals only. It's a beautiful place for one. The island is a barrier island, mostly sand surrounded by ocean or marshland. There is a golf course, tennis courts, bocci courts. Maybe even a kangaroo court. Or an appeals court. And a royal court. Not to mention a food court.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The lodge looks like it was built in the 20s. It has that glamorous look that seems to call out for a white sweater and white flannel pants.You feel you should dress like Cary Grant and hope to meet Claudette Colbert on the lawn.

The rooms are luxurious, large and quiet, while the lobby is lush with rich fabrics and comfortable chairs. The staff are poised, gracious and almost genteel. They would be good people to look after you if you were going broke or insane. Not that we're planning on either. But it's always a good idea to be prepared. Whether you lost your mind or your money, the nice people running the place would probably wait a few days before kicking you out.

There seems to be almost no one here. The lobby is empty most of the day. We wonder how it stays in business.

This is also where George W Bush convened a meeting of the G7 heads of state. In the room next to ours, the walls are hung with photos of Tony Blair, Silvio Berlusconi, George W Bush and others.

They're all gone from office now. Except one, Vladimir Putin, a man who looks like he might never leave.

But the news down here is upbeat. Thanks to fracking and horizontal drilling. They say these techniques are making billions of barrels of oil available. Believe it or not, the US is set to be the world's top producer by 2020, according to a Goldman Sachs study.

An oilman from Texas showed us a map. It included a large chunk of Southwest Texas, coloured to show where drillers had bought oil rights and where they were operating.

Heck, there is hardly an empty county in the whole state! The expert took the map apart, analysing who was working where and how much oil they were likely to get.

The results were staggering.

"Oil will fall below $40 a barrel," predicted Porter Stansberry, our host.

Whether that will happen or not, we don't know. But it got the group talking excitedly.

"Cheap oil will set off an industrial renaissance in America," one suggested.

"Sell the oil and gas companies," recommended another.

"It will help put the US economy on the road to real recovery," said another.

But hold on a minute. A report at the Financial Times tells us that "the era of cheap oil is over," because "marginal oil production costs are heading towards $100 a barrel".

Here at the Daily Reckoning we're not getting worked up one way or another. We'd like to pay less for oil. But we'll wait to get excited until we see lower prices.

And more thoughts

While the wildcatters and roughnecks are coaxing more oil from the Texas dirt, the mad hatters and pencil-necks at the Fed are ready to print dollars too.

And not just at the Fed. "This is the first time in history that all central banks have printed money at the same time," observes WashingtonsBlog.

The central banks of Europe, the UK, China, India, Japan and the US are all adding to their holdings (thus increasing the base money supplies of their respective countries). We've never seen anything like it. A coordinated, worldwide effort to inflate the money supply. State-sponsored counterfeiting on an epic scale.

But all this money printing is not bringing a worldwide recovery. Instead it is "failing miserably".

In Europe, the following countries are now in recession: Slovenia, Italy, Czech Republic, Ireland, Greece, Denmark, Portugal, Netherlands, Belgium, UK andSpain.

In America, the last reported GDP results were positive. But take out inventory build-ups and the growth rate was only 1.6%. Not very exciting. Almost every report in the financial press said the results were "disappointing". But why would they be disappointed? Don't they know we're in a Great Correction? They're lucky there was any growth at all. And if you took out all the stimulus spending, ZIRP, LTRO, TARP, QE I, QE II, Operation Twist, and all the increases in disability... and other transfer payments...

... what doyou have?

Most likely, you'd be in the same situation as the UK, Spain and all the other recessed economies.

And here's more downbeat, but fully expected, news from the US:

(Reuters) - U.S. companies hired the fewest people in seven months in April, a worrisome sign for a labor market that has struggled to gain traction and adding to concerns that the economy has lost some momentum.

The ADP National Employment Report on Wednesday showed the private sector added 119,000 jobs last month, below economists' expectations for a gain of 177,000 jobs. The March figure was also revised lower.

The report comes two days before the government's broader and much-watched monthly jobs report.

"This is an upsetting report," said David Carter, chief investment officer at Lenox Advisors in New York.

"The strength of the U.S. economic rebound is clearly still uncertain. Hopefully we don't get a third consecutive summer of weaker growth."

Recent data, including softer labor market figures, have fueled fears that the economy may have lost some strength as the second quarter got under way. Those worries were partly offset by data from an industry group on Tuesday that showed a better-than-expected pick-up in the manufacturing sector last month.

But government data on Wednesday showed new orders for factory goods suffered their biggest decline in three years in March as demand for transportation equipment and a range of other goods dried up.

And what's this? Bloomberg reports that Americans are bolting for freedom:

Rich Americans renouncing U.S. citizenship rose sevenfold since UBS AG (UBSN) whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago.

About 1,780 expatriates gave up their nationality at U.S. embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva's Overseas American Academy, citing figures from the government's Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.

The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.

A conversation on the subject erupted at dinner:

"Yeah... makes sense that so many people would leave. They just want to save money. Can't blame them for that."

"I think there's more to it. It's not clear that you can actually save money. Tax rates in the US aren't that high. And rich people always have ways of sheltering their money."

"You'd think they wouldn't leave if they didn't have to."

"Well, a lot of people just don't like to have to report everything they do... they don't like having Big Brother breathing down their necks."

"Wouldn't they just have some other Big Brother breathing down their necks?"

"No... I've spent much of my life overseas. Many other countries just don't try to poke their noses into your affairs the way the US does. And many have more civilised tax collection systems. For one thing they only tax you if you actually live in their countries. You don't have to file taxes... and disclosure forms... if you live somewhere else.

"The US keeps its citizens on a tight leash. A lot of people want to slip the leash, even if they don't save any money. They want to be real Americans... not bullied and harassed wimps with no backbone... They want to be free people. And they can't do that and remain American citizens."

And here's Elizabeth with the final instalment of her account of our time in Argentina. Here she continues on her horseback trip to Compuel.

Trip to Compuel continued

By Elizabeth Bonner

Domingo de las Ramas, 1 April, 2012

(You can read the first part of Elizabeth's account of her Trip to Compuel in yesterday's DR.)

We followed the quebrada de Compuel, a stream that runs in little waterfalls over rocks, disappears into the bottom of a small ravine, and then levels into a wide stream running over granular sand. As we went, Maria pointed out the names of various rock formations on the peaks: one called El Torre (the tower), another called La Virgen, because its form resembles the triangular shape of the Virgin of the Valley in her spreading robe and cape.

Another looked like Christopher Columbus in his turban and cloak. As she added, history and geography were the subjects that fascinated Maria as a student and teacher. As we came down into Compuel, we passed a herd of cows grazing on well-watered bright green grass. Compuel supports two to three hundred head of cattle in bad years, and this year the cattle are getting fat.

An hour later, as we continued toward the distant mountain rim, Maria informed me that we could see the house. I could see nothing but a huge pink and grey rock wall in the distance, but as we approached, a cluster of low adobe houses appeared, pressed into a cleft at the foot of the mountain. The adobe walls and barro roofs were almost the same colour as the earth; hardly surprising, as the bricks and barro mixture are made on the building site. We were now riding among hillocks of coarse grass and narrow rivulets of running water, and around dank and ominously dark ponds. Above us was the intense blue sky.

We negotiated a final stream and crossed into the home pasture of the arriendo, where a few llamas grazed on the coarse grass. Laundry was drying, spread out on bushes. And a pack of nine dogs, all descended from a short-legged forebear, came out to see what we were up to. Their barking brought two figures, small in the immensity of the plain, the sky, and the mountains, out to greet us. We rode in safety up to a low wall, dismounted, tied our horses to bushes, and went in to the courtyard. Modesta and her son Daniel came forward to greet Maria as an old friend and to meet me.

Modesta is a delicate nutbrown woman in her late thirties who has lived her entire life in Compuel, caring for her livestock, her child and her grandmother. She wore a faded flowered shirt and a long homespun skirt of brown wool, over dark trousers and a pair of thick heavy leather sandals. She was reserved, probably because she did not know me and also probably because her life does not afford much opportunity for conversation. Her son Daniel, about 15, has the same small, slim build and colouring, but his eyes were a light clear brown, fringed with dark thick lashes. He had a sparkling look about him, as if he would laugh and chatter with slight encouragement.

A very ancient lady was sitting in the sun against the wall of the house; Mercedes, the 95-year-old grandmother who could no longer travel to church. "Ah," exclaimed Maria, kissing her. "I remember when she wore her hair in such long braids that she wrapped them twice around her head." The abuelita was blind in one eye, but with the other she scrutinised my face and then my hand, which she turned over gently between her own. "Qu mano cholita!" she murmured. Maria found this comment very amusing. A chola is a white-skinned person. Very feebly, the abuelita rose from her maseta, the low chair that is typical of this area almost a stool, it can be moved easily indoors and out, beside the fire or out in the sun. She wanted to offer me her seat. She crouched down slowly against the wall and waited for me to sit down. I was saved from this delicate attention not wanting to seem impolite by ignoring her courteous gesture, but then I could hardly take her seat! by the reason for our visit. It was time for the celebration.

Modesta and Daniel helped Mercedes to stand, and she took my arm as we climbed over the threshold into a small building next to the house. It was a chapel and also a storeroom. Two shrines on portable frames were set on a trestle table at one end. Grapes drying into raisins hung from a ceiling rafter, as did wheels of cheese and a kettle. Bundles of fragrant ju-ju for tea were stacked in a corner, along with other herbs and sticks for kindling. The shrines were decorated with paper roses and leaves in bright primary colours.

Inside, the shrines were filled with statues and paper images of Jesus, the Virgin, saints, and with sacred objects like Saint Peter's key and the oxen of San Laborador. Over their painted plaster clothing, the saints were draped in mantels made of pieces of cloth, as if they were visitors who had been given comfortable native clothing to keep them warm and shelter them from the sun. In contrast to the multitude of images and statues in varied colours and styles a jumble of holy objects in which aesthetics was secondary to function was a crche that Modesta had made herself. She had sculpted a herd of animals from clay. The little sheep, goats, and llama were finely made, and she had set them on a wide pan filled with earth in which she had planted grass.

The grandmother was seated on her little chair, and Maria began the celebration. We said the "Padre nuestro", the Credo, asked for forgiveness, and gave the responses to the prayers. We invoked the protection of the saints in the shrines, Maria and Modesta looking inside and making sure we had not missed any. Daniel and Maria sang. We took communion from Maria's hands. The abuelita took her wafer, mixed with water, from a spoon.

There was a drum hanging next to the shrines. It was Daniel's. He took it down and hung it around his neck with the skin facing the ground, and played it for us with drumsticks covered with padded leather. He played with upward strokes, a rich muffled beat. Daniel plays for the misachica, processions celebrating patron saints and their feast days. He is planning to go on the four-day peregrino from Compuel down to Salta, where the annual procession of El Seor and La Virgen del Milagro on 15 September draws thousands of Salteos to the city. The procession has its origin when an earthquake threatened the city in the 18th century. The priest led the populace, carrying their sacred images, around the periphery of the city. Salta was spared the earthquake.


Daniel, Mercedes and Modesta Chaile

We left Modesta and her family, mounted up, and rode through a large herd of llamas that had gathered while we were inside.


Modesta's herd of llamas. Some have been shorn.

Llamas are very pretty and apparently have sensitive personalities. They spit with an accurate aim when they are ruffled; I went to a zoo as a child with friends whose rowdy little brother insulted one of the llamas by calling it a "broken down camel". The llama's spit hit him squarely on the cheek! I've also read that llamas won't stand to be struck or treated roughly they will lie down and die.

This is probably a myth, but I have noticed at Gualfin that people are gentle with animals. Dogs scuttle away with ears and tail low in response to a softly hissed "sali!" Unruly horses are soothed with a prolonged hiss or a soft "quieto, quieto". The only animals that have a rough time with man, it seems, are cattle when it is time to trim horns, castrate, and brand.

Maria and I found a sheltered rock on the lee side of a cluster of huge boulders and had our lunch. Then we mounted up again, and she led me to see a series of rectangular foundations in stone. These were the Inca and perhaps pre-Inca storehouses and corrals.

In the centre of the plain of Compuel and running through it from north to south is the cinaga, marshland with pools of water that support delicate little "pichones", like small sharp-beaked doves, and small black and white ducks. Maria took me up close to observe the pichones floating in flocks upon the edges of the shallow pond among scattered clumps of reeds; startled, they soared into shallow, swooping, swallow-like flight. Less graceful, a pair of ducks rose perpendicularly from the water with strident warning quacks.

We stopped again at near the abra de Compuel, this time to gather the sharply fragrant mua-mua. This herb is said to be good for the circulation of the entire body. Men particularly like to drink it, said Maria with a twinkle in her eye. Our oenologist always asks her to brew him a cup of it when he makes his visit to the vineyards at Pucarilla. And he has five children already!


Sunset over Gualfin.

We rode homeward as the sun was setting behind us. The calves we had passed earlier were now scurrying eagerly back to their mothers. A few goats bleated sharply from the rocky heights, calling the cabritas in. The evening air brought out the scent of the blue lupines that grow in clouds in the higher altitudes. As we descended into the valley, the life of the courtyards of the arriendos was visible far below.

Two little boys were playing on a roof and calling to another to climb up. A little girl scampered across a courtyard, while a dog leapt up excitedly beside her. A little child threw rocks at a herd of goats, while an older brother and a dog herded them on bicycle. The goats are kept in corrals made of thorny sticks, which apparently discourage them from climbing out during the night and getting into the fields. As we drew closer, we passed Gustavo's grandfather, Don Domingo, looking for a couple of burros. We had just seen them, we told him. Linked together with a chain around their necks, they were hopping among the rocks looking for tender shoots to eat.

It grew dark in the shadow of the mountains, but as we turned a curve in the road, we saw the campo of Gualfin ahead. There the sun was still shining, lighting up the winding river as it spread across the plain before disappearing into the breach to Angastaco.

At last we arrived, coming through the short cut to the sala in the twilight tired to the bone, and well-pleased with our journey.

Don't miss Bill's next Daily Reckoning. To receive the next article straight into your inbox as soon as he's written it, sign up to the email list here .

Information in The Daily Reckoning is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision. Your capital is at risk when you invest in shares - you can lose some or all of your money, so never risk more than you can afford to lose. Always seek personal advice if you are unsure about the suitability of any investment. The Daily Reckoning is an unregulated product published by Fleet Street Publications Ltd. Customer services: 020 7633 3600. Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. FSA number: 1152 34