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Investing in Cuba

Written By Brian Hicks

Posted February 26, 2008

Editor’s Note:

On Monday, February 18 at
5:00 p.m., Pure Energy Trader released the promised energy trade. Not even a week into the trade, here’s where readers stand:

Company A and call options: 17% and 37%
Company B and call options: 5% and 38%

The best part – we believe the run to a possible 300% to 400% gain has just begun. Billionaires don’t invest in just any company.

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For more information on Pure Energy Trader and to take advantage of the beginnings of the run, click here.

Energy and Capital’s Sam Hopkins spoke of 4.6 billion barrels of Cuban oil, saying that even the United States Department of Energy can’t play dumb when it comes to Cuba’s oil reserves.

"None other than the United States Geological Survey estimates that Cuba holds reserves of 4.6 billion barrels of oil, and 9.8 billion bbl of natural gas in its Gulf of Mexico waters," says Hopkins. "That’s nearly two-thirds the amount in the Arctic National Wildlife Refuge, which American companies are drooling over!"

Though, it’s not just oil that has investors drooling. The Herzfeld Caribbean Basin Fund (CUBA) is, too, on news that Fidel is stepping down.

But don’t get too excited… yet. Speculation of change may have run the fund up recently, as has rumor of Fidel’s death, but sell-offs are historically imminent.

In 2006, the fund skyrocketed twice.

In late July 2006, it popped when Castro underwent intestinal surgery, and transferred power to Raul. And it popped again when Fidel’s absence from the 50th anniversary of the Granma landing fueled reports of terminal pancreatic cancer and his refusal of treatment.


CUBA chart


It rocketed again in 2007 on rumor of Fidel’s death days after his 81st birthday came and went with no pictures, letters or recordings from him. But as you can see from the fund’s performance…


CUBA reaction chart


…the party ended when a September 2007 photo of a smiling, heavier Castro with Angola’s president made the rounds.


Castro and Angola president


So it was no shock when the fund jetted 17% higher on record 1.44 million share volume when the dictator announced he was resigning.

But it’s no longer a buy. That is, until recent and massive coverage from the Wall Street Journal, Investors Business Daily, CNBC, the Associated Press, and U.S. News & World Report, die down along with recent volume and price surges. Once that happens, we expect to see further interest, especially if trade relations resume between the United States and Cuba.

The Cuban Wait-and-See Crisis

Still, we’re in a wait and see game with Cuba. Just because there’ll be a changing of the guards, it doesn’t mean that change will come quickly. Raul is still Fidel’s brother. And while Fidel won’t be running the show any more, he’s not going away.

It’s to be seen if his concepts of championing closer U.S. ties will happen, something already ruled out by the Bush Administration and its view of Raul as "Fidel lite."

Frustratingly that means a 50-year-old U.S. embargo of Cuba will remain in place.

You also have to remember that during Raul’s one and a half year rule as acting president, Raul had hinted at reformation, but made few changes.

However, Raul is 76, which means that his rule may not last long, and is likely to be passed to a successor that may or may not fulfill Cuban dreams of growth.

Reports have already surfaced that one of these men could succeed Raul. According to the Associated Press, they include:

· Carlos Lage Davila, 56, current Cabinet secretary and credited with "helping save Cuba’s economy by designing modest economic reforms after the Soviet Union collapsed."

· Felipe Perez Roque, 52, foreign minister for about nine years and previous secretary of Fidel.

· Ricardo Alarcon Quesada, 70, is considered a long-shot given age. He was a "foreign minister for one year and served twice as ambassador to the United Nations."

When Fidel does kick the bucket, cash out, and bites the big one, and Raul loses any power, we could see the potential for renewed Cuban / U.S. relations.

Not now, though. Not as big brother is watching Raul.

Again, once the media attention dies along with the latest volume and price spikes, pick up the fund and hold long-term.

Ian L. Cooper