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Three Oil Sand Investments No One's Thought Of
By Tom Dyson
August 7, 2007

Last week, Greenpeace opened an office in Edmonton...

Greenpeace is the world's most famous environmental action group. It is famous for its aggressive campaigns against nuclear arms, whaling, logging, rainforest exploitation... and now the Big Oil companies in the Athabasca oil sands.

The Edmonton office is Greenpeace's fourth office in Canada. Its mission is simple: Shut down the Athabasca oil business.

Yesterday, I met with the campaign coordinator.

"Current oil production is 1 million barrels of oil per day," she told me. "But did you know, they use 5 million barrels of water each day?"

The water comes from the Athabasca River. By the time the companies are finished with it, the water so polluted with oil and chemicals, it instantly kills any animal that touches it.

To protect the wildlife – which includes 150 different species of migratory bird – the oil companies line the banks of their tailings ponds with propane cannons. They fire these cannons every few minutes to scare the wildlife away.

Greenpeace says the polluted water is finding its way back into the Athabasca River and poisoning the native Canadians who live downstream. "They've noticed a high incidence of weird diseases and cancers in the villagers up there," the campaign coordinator told me. "Like bile duct cancer. These people have lived on that land for thousands of years. Suddenly these diseases appear. It can't be coincidence."

Oil sand production will quadruple within the next 15 years – to 4 million barrel per day – says a recent report from Morgan Stanley. We looked at a map of the oil sands region on the wall. "The oil companies will have to dig up an area the size of Florida to meet their targets," she told me. "This is all pristine wilderness."

I talked to many locals while visiting Fort McMurray. I always asked them if they minded the environmental damage. Not one person objected. "It's great for the economy," they all said.

So as much as I empathize with Greenpeace's desire to protect the land and those that live off it, I can't see its campaign being successful. However, I still think Greenpeace's Athabasca campaign might mark the top in the fortunes of the oil companies of Athabasca. Here's why:

Short of a spike in the oil price, I can't see how the Athabasca story can get any better. But I can see lots of reasons for it to get worse. Costs are rising, and the companies have to dig deeper and further to maintain earnings growth. And it's getting harder to innovate. In other words, there's lots of downside, but not much upside.

The best money is always made investing where no one else is looking. But Greenpeace's arrival in Edmonton tells me everyone is watching this story. It's so big, it has caught the attention of the world's most powerful environmental action group.

So if you can't invest in the big oil companies here, how do you make money on the powerful uptrend in Athabasca? Here are three ideas:

1. For entrepreneurs, set up an employment agency in Mexico... or even in the southwest U.S. that specializes in hiring for the Athabasca region. The region needs thousands of new workers... and will pay top dollar for their services. Arrange their documents, pay for their flights, and receive a percentage of their wages for your trouble. Pull this off, and you'll get rich.

2. Natural gas. Every barrel of oil produced in the oil sands requires one thousand cubic feet of gas. Natural gas production in Canada is falling, but demand is sure to rise.

3. Picks-and-shovel plays. Here's an example: In the last 30 years, the major oil companies have planted more than 4.5 million trees in their efforts to regenerate the landscape. With all the expansion of the past five years and the proposed expansion of the next 15, demand for young trees will be huge. Supply these trees, and you'll get rich.

If you're a lawyer, you may want to seek work in the defense of the oil boom here. Otherwise, consider these three points as your starting point for investing in Athabasca.

Good investing,

Tom

Editor's note: Tom Dyson 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.

Sign up today to read more investment ideas from Tom Dyson.

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THE MARKET REALLY, REALLY DOESN'T LIKE FLORIDA

The message from JOE is crystal clear: The market doesn't like Florida real estate right now.

As regular DailyWealth readers recall, one of our favorite gauges of the Florida real estate market is the share price of the state's largest private landowner, St. Joe (JOE).

Owning over 800,000 acres of the Florida panhandle (much it lying within 10 miles of the Gulf Coast), St. Joe instantly reflects investor sentiment towards the Sunshine State. The stock has fallen 35% in the past three months.

It's not an individual problem with JOE. It's a fine company with loads of value. But every stock that even smells like Florida has been pummeled in the past few months.

As today's chart of JOE illustrates, it's a good ole fashioned real estate correction right now. Taxes and interest payments will sandpaper speculators to death… those without cash will capitulate to those with cash… and quitting the day job to become a real estate agent doesn't sound like such a great idea anymore.

AFBIX Bear High Yield

-Brian Hunt

The Defense Department cannot account for 190,000 weapons, including more than 110,000 AK-47 rifles, issued to Iraqi security forces, a new report by government investigators says.

The study, issued last Tuesday by the Government Accountability Office, also said that because of missing and incomplete records, the United States military cannot confirm that Iraqi security forces received 135,000 pieces of body armor and 115,000 helmets.

Since 2003, the United States has spent about $19.2 billion to equip and train Iraqi forces, the G.A.O. report said, and recently the Defense Department requested another $2 billion.

-New York Times

Investors burned by the world's biggest mining fraud were dealt a blow yesterday when John Felderhof, former vice-chairman of Bre-X Minerals Ltd., was found not guilty of illegally selling $84-million worth of shares in the company.

Mr. Felderhof, 67, was the only former Bre-X official to stand trial over the firm's collapse. He was charged with four counts each of illegal insider trading and issuing false press releases but was not accused of involvement in the fraud that saw $6.1-billion of shareholder wealth eradicated in 1997 when tests found virtually no gold at Bre-X's much-touted Busang site in Indonesia.

The ruling means that 10 years after the company's collapse, Bre-X shareholders know nothing more about who was responsible for the fraud, and have now been told one of the key people at the centre of the case was not negligent in allowing the fraud to occur under his watch.

-Globe and Mail

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