Leeb Oil Presentation

Slide1 : Oil & The Future Dr. Stephen Leeb, MegaTrends Fund (MEGAX)


Dr. Stephen Leeb, Ph.D. : Portfolio manager of the MegaTrends Fund (MEGAX) Author of The Oil Factor: Protect Yourself – AND PROFIT – from the Coming Energy Crisis Dr. Stephen Leeb, Ph.D.


ENERGY AND INVESTING : The urgent message for investors: Oil prices are on the rise the uptrend is long term rising prices will come to dominate the economic and investment outlook. Oil supplies will become inadequate sooner than is generally understood ENERGY AND INVESTING


CAPACITY LIMITS : Back in early 2002, $30-a-barrel oil was widely viewed as an anomaly Most anyone with an opinion on energy – from Wall Street analysts to oil industry executives – believed oil prices were in a long-term trading range centered around $20 a barrel This opinion rested on the assumption that worldwide oil capacity was sufficient to supply the world with all the oil it needed CAPACITY LIMITS


CAPACITY LIMITS : Much of that capacity was in the hands of the Saudis – but Saudi Arabia had always proved a reliable supplier of last resort The emerging Russian oil miracle: from the late 1990s on, Russian oil production and exports had been rising sharply By 2004 - burgeoning demand for oil became obvious CAPACITY LIMITS


AMEX OIL INDEX PRICES : AMEX OIL INDEX PRICES AMEX Oil index, XOI – price weighted index of the leading companies involved in the exploration, production and development of petroleum.


ARE OIL PRICES HEADED HIGHER? : Even if demand were to slow? ARE OIL PRICES HEADED HIGHER?


DEMAND : Lately oil has been in the headlines constantly as prices have reached previously unseen levels demand will continue to rise investors should respond Rapid growth in Asia will be a major reason demand for energy will accelerate DEMAND


ENERGY DEMAND : ENERGY DEMAND


POSSIBILITY INCREASES IN SUPPLY : To the extend that Saudi Arabia and Russia can produce extra oil inevitable that they will need to consume much of it themselves Enormous investment in which ironically growth requires energy POSSIBILITY INCREASES IN SUPPLY


RUSSIA : In the 1990s and early 2000s, Russian GDP dropped by more than 30 percent. Good thing for the rest of the world Russian demand for energy fell by 20 percent If Russian energy consumption had grown by just 2.5 percent a year during the same period Russian consumption by 2004 would have nearly matched production leaving almost no oil to import As energy production within Russia began to climb, so did energy consumption. RUSSIA


SAUDI ARABIA : Internal consumption of oil production has been in a sharp uptrend Energy-intensive economy growth has exceeded 4 percent energy use has grown by 12 percent SAUDI ARABIA


BOTTOM LINE : While oil may be volatile shorter term – Longer term there are simply no scenarios apart from a massive worldwide recession As long as growth in oil supplies isn’t keeping pace with growing demand, oil prices will continue to rise Whether curbing demand or boosting supplies…highly unpleasant scenarios will arise BOTTOM LINE


INVENTORIES : INVENTORIES


ULTIMATE ANSWER : Development of alternative energies Likeliest to have the most immediate impact on helping us meet our energy needs Nuclear energy Wind Energy Tar Sands Liquefied natural gas ULTIMATE ANSWER


INVESTING : Heavily in stocks that are suitable for both inflationary and deflationary portfolios Big players in alternative energies Wonderful hedges All-weather stocks that can go in any portfolio INVESTING


RECOMMENDATIONS : Exelon Entergy Air Products and Chemical (inflationary portfolio) Canadian Oil Sands FPL Group Of course direct energy plays as well RECOMMENDATIONS


EXELON : Nuclear energy will temporarily fill the gap Exelon is the nation’s largest nuclear utility entire fleet is unregulated Potential expansion and building additional facilities Could result in double-digit profit growth EXELON


ENTERGY : Nation’s second-largest nuclear utility Capacity is regulated More downside protection in the event of a recession and upside exposure to nuclear energy ENTERGY


AIR PRODUCTS AND CHEMICALS : Liquefied natural gas (LNG) has the potential to add the equivalent of about 5 or 6 million barrels a day to the world’s energy supply Heat exchangers - vital components in converting natural gas into liquefied form Also produces hydrogen - vital in refining alternative fossil fuels AIR PRODUCTS AND CHEMICALS


CANADIAN TAR SANDS : Nearly 180 million barrels of oil sands reserves - tar sands are the second largest source of fossil fuels in the world The Catch - difficult and expensive to mine these sands Still an important energy niche CANADIAN TAR SANDS


FPL : Wind the most promising alternative energy Best-situated all-weather stock 85% of revenues from being a regulated utility in Florida staid but steady income Nation’s Largest wind generator (General Electric - is the largest integrated wind company) FPL


CONTINUING UPTREND : Turbulent times that lie ahead What to buy and what to avoid in order to protect yourself and profit Upside potential for investors is enormous CONTINUING UPTREND


DISCLOSURES : DISCLOSURES Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com/adviser or by calling 1-800-873-3639, option 2. Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc. Holdings as a percentage of net assets as of 9/30/04: MegaTrends Fund: Entergy (1.09%), FPL Group (2.05%); General Electric (2.51%). Although mentioned, none of the following companies were held in the MegaTrends Fund as of 9/30/04: Exelon, Air Products and Chemicals, Canadian Oil Sands.