Unbelievably, Iran Is Out Of Gasoline
By Dr. Steve Sjuggerud
April 24, 2007
"Few have talked about it thus far, but mark May 21st down on your calendars, for that is going to be one of the more important dates of the year this year," Dennis Gartman told us today.
"Why? Because on that date Iran shall begin both rationing gasoline domestically, and shall raise the price of gasoline to the public [by 25%]"
Now this will be one heck of a boondoggle...
As a rule, we like government boondoggles... dumb government moves can create extraordinary profit opportunities. For example, readers of True Wealth made about 60% in less than three years on a trade with zero credit risk, thanks to a U.S. government boondoggle. We're back in that trade again.
Getting back to Iran... The country is sitting on 10% of the world's proven oil reserves... yet once the country's gas rationing takes effect, Iranians will be allowed to only buy less than one gallon of gasoline per day. Can you imagine the irritation of having to buy gas every single day, and only being allowed to buy less than a gallon at a time?
You see, gasoline actually costs the Iranian government about two dollars a gallon. Yet prices are about to be raised from 30 cents a gallon to 40 cents a gallon, etc.
While we can't profit from this, some Iranians are getting rich... smuggling it across the border and selling it at market price. Official statistics say that Iranians are heavy users of gasoline. But are they heavy users, or are they just smuggling gasoline out of the country in mass quantities?
Mohammad Reza Naqdi, head of the Iranian government's Anti-Smuggling Headquarters, said that, for the nine-months ended at year-end 2006, it had managed to stop $1 billion worth of gasoline being smuggled out of the country. My goodness, that's a big number... And it brings up the question, how much gasoline actually managed to make it out of the country?
This program is almost on par with the Icelandic government's banana tree boondoggle some time ago. Yep, that's right, on my first trip to Iceland, I saw banana trees...
What? You don't think of banana trees when you think of Iceland?
Neither did Icelanders... until the government imposed trade restrictions so severe that it was more economical to build "hothouses" and grow bananas indoors than it was to buy them at the supermarket. (Eventually, the government lifted the trade restrictions, and Icelanders are now able to buy bananas like the rest of us do. But readers joining me on my Iceland trip in June will see a banana tree...)
You can't ignore supply and demand. It's Economics 101...
When the government artificially keeps the price of a product low, it has an incentive to sell less – hence the rationing. And when the people can buy for 40 cents and sell over the border for two bucks, they will.
Whenever we see governments messing with free markets, we look for opportunity. We don't have any plans to move to Iran to start smuggling gasoline. But we do keep on the lookout for government boondoggles... quite often they provide the biggest opportunities.
Our favorite one right now in the U.S. is our recommendation of virtual banks once again. Thumb through the DailyWealth archives to learn more about 'em.
Or better yet, consider subscribing to True Wealth. My top "boondoggle" recommendation in the letter just hit a new yearly high... and there's plenty more gains to come as the rest of the market catches on and drives up the price.
In sum, government programs often inadvertently create the easiest trading opportunities. You can't often beat 'em, but you can make extraordinary returns with 'em.
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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