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When Will the Low-Cost Borrowing Bubble Pop?

These are the best of times for the world’s most ravenous borrower, the United States of America.

A combination of unusual and unsustainable forces has pushed the cost of borrowing as low as it has ever been, so low that many investors effectively are paying to lend money to the government.

Investors buying five-year federal debt are accepting such low interest rates that inflation is on pace to reduce the value of their investments by more than 1 percent each year. Yet demand for United States Treasuries remains much greater than the supply.

The glut of cheap money has allowed the government to keep its annual deficits much smaller than it had expected, holding down the growth of the federal debt .

The Treasury Department, seeking to milk the moment, may start issuing debt with negative interest rates, making investors pay for the privilege of lending money to the government.

But a wide range of experts agrees that the bubble will eventually pop. The question, they say, is not if but when. There are signs that the era of low borrowing costs may be approaching its end, as the domestic economy shows signs of strength and Europe pulls back from economic immolation.

“We are in an unusual period right now in which net interest expense is temporarily depressed,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a speech last week. “This will not last.”

People have been predicting that rates will rise ever since the 2008 financial crisis sent investors piling into the safe haven of federal debt, driving down rates.

But what looked like a brief plunge has become a broad trough. The average rates that the government pays to investors in its debt have declined in each of the last five years, from 4.92 percent at the end of 2006 to 2.24 percent at the end of 2011. Rates have edged even lower so far this year. Adjusting for inflation, the government is borrowing at virtually zero cost.

As a result, while the size of the public debt more than doubled over the last five years, from less than $5 trillion to more than $10 trillion, the government’s annual interest payments remained about the same.

In 2006, the bill was $226.6 billion. Last year, the bill was $227.1 billion. The numbers exclude debt held within the government, by the Social Security trust fund, and the cost of interest on those debts.

The danger, Mr. Dudley said last week, is that the current situation may lead some to underestimate the long-term cost of the debt when rates inevitably rise. The administration’s recent budget projects that rates will increase gradually over the next decade, including about 1 percentage point this year. If the increase is just 1 percentage point larger this year, the deficit will grow by $13 billion. If the same higher trajectory holds over 10 years, the additional interest payments would approach $1 trillion.

The basic reason to expect higher rates is that investors usually demand compensation as a borrower’s debts increase. And the government projects that its debt will grow rapidly in coming years.

The ratings agency Standard & Poor’s last year removed some categories of United States debt from its list of the world’s least risky investments, citing its concerns about the ability of the government to contain the growth through cutbacks in planned spending or increases in federal revenue.

So far, however, investors have grown only more clamorous for Treasuries .

The demand reflects the weakness of the domestic economy, and the Federal Reserve’s determined campaign to drive down the cost of borrowing by purchasing more than $1.6 trillion in Treasury securities.

One less obvious benefit is that about 10 percent of federal interest payments are now collected by the central bank, which returns almost all of the money to Treasury because it is required by law to remit its profits.

The United States also has benefited from concerns about the health of European governments. The International Monetary Fund estimates that the benefits of investors fleeing Europe to buy Treasuries have roughly offset any other damage to the American economy from the struggles of the euro zone.

“There’s a good argument that the net impact on the U.S. economy is zero, a little more or less,” the IMF’s chief economist, Olivier Blanchard, said in a recent interview.

Current DateTime: 06:08:20 28 Feb 2012
LinksList Documentid: 22528753All of this has prompted a flight to safety so determined that investors are lining up to accept the near certainty of small losses on Treasuries to avoid the possibility of larger losses on stocks, corporate bonds or the debt of other countries.

This month, when the government auctioned off one-year debt, Treasury agreed to pay 14 cents for every $100 that it borrowed, or 0.14 percent. Last week at the most recent auction of five-year debt, it agreed to pay 88 cents a year for every $100 that it borrowed. At a 2 percent inflation rate, investors would need to be paid $2 for every $100 they lent just to keep pace.

Treasury is now reviewing whether to let prospective lenders offer negative interest rates, meaning that they would pay the government rather than vice versa. It is expected to make a decision by May.

Some economists say they believe rates will remain low for years. David Greenlaw, an economist at Morgan Stanley, forecasts little change through 2013.

“While there have been some bright spots in the data, the economy probably won’t be strong enough to justify rate increases,” Mr. Greenlaw said.

Other economists expect that rates will begin to rise later this year, as the domestic economy improves and fears about Europe abate.

John Ryding, chief economist at RDQ Economics in New York, expects rates on 10-year Treasuries to reach 3.75 percent this year, up from about 2 percent now, as investors awaken from what he described as “extreme risk aversion.”

But he added that he didn’t understand why rates had remained low for this long.

“I have to say that it’s a bit of an enigma,” Mr. Ryding said. “It’s a conundrum.”

This story originally appeared in The New York Times

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Where the Jobs Are, The Training May Not Be

As state funding has dwindled, public colleges have raised tuition and are now resorting to even more desperate measures — cutting training for jobs the economy needs most.

Leland Bobbe | Stone | Getty ImagesTechnical, engineering and health care expertise are among the few skills in huge demand even in today’s lackluster job market. They are also, unfortunately, some of the most expensive subjects to teach. As a result, state colleges in Nebraska, Nevada, South Dakota, Colorado, Michigan, Florida and Texas have eliminated entire engineering and computer science departments.

At one community college in North Carolina — a state with a severe nursing shortage — nursing program applicants so outnumber available slots that there is a waiting list just to get on the waiting list.

This squeeze is one result of the states’ 25-year withdrawal from higher education. During and immediately after the last few recessions , states slashed financing for colleges. Then when the economy recovered, most states never fully restored the money that had been cut. The recent recession has amplified the problem.

“There has been a shift from the belief that we as a nation benefit from higher education, to a belief that it’s the people receiving the education who primarily benefit and so they should foot the bill,” said Ronald Ehrenberg, the director of the Cornell Higher Education Research Institute and a trustee of the State University of New York system.

Even large tuition increases have not fully offset state cuts, since many state legislatures cap how much colleges can charge for each course. So classes get bigger, tenured faculty members are replaced with adjuncts and technical courses are sacrificed.

State appropriations for colleges fell by 7.6 percent in 2011-12, the largest annual decline in at least five decades, according to a report from the Center for the Study of Education Policy at Illinois State University. In one extreme example, Arizona has slashed its college budget by 31 percent since the recession began in 2007.

It is this cumulative public divestment — and not extravagances like climbing walls or recreational centers advertised on a few elite campuses — that is primarily responsible for skyrocketing tuitions at state institutions, which enroll three out of every four college students.

Colleges have found ways to hold costs per student relatively steady. Since 1985, the average amount that public institutions spend on teaching each full-time student over the course of a year has barely budged, hovering around an inflation-adjusted $10,000, according to a State Higher Education Executive Officers report. But in the same period, the share of instruction costs paid for by actual tuition — not the sticker price, but the amount students actually pay after financial aid — has nearly doubled, to 40 percent from 23 percent.

Current DateTime: 01:52:11 02 Mar 2012
LinksList Documentid: 22528753“I understand why students are angry,” said George Blumenthal, the chancellor of the University of California, Santa Cruz, where student protests have erupted. “They have to write bigger checks every year, and they can’t get into the classes they want. The reality is they’re paying more and getting less.”

In cutting educational subsidies, states may be penny-wise and pound-foolish, Ehrenberg said.

Economists have found that higher education benefits communities even more than it benefits the individual receiving the degree. Studies show that an educated populace leads to faster economic growth and a more stable democracy, and benefits the poorest workers the most. The post World War II economic boom, for example, has been attributed to increased college enrollment thanks to the G.I. Bill.

Less-skilled workers have much to gain from enrolling in higher education, given the wage premium that additional training brings. State funding cuts not only reduce the ability for the poor to receive more training, but also disproportionately limit access to the fields that are most important to economic and job growth: sciences, engineering and health care.

These courses are especially expensive to teach partly because of equipment and safety precautions. Because these skills are in such high demand, professors also have more opportunities in the private sector and so can command higher pay.

This story originally appeared in The New York Times

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Syria: Can Assad fight his way to political survival?

Despite the death and destruction his security forces are raining down on opposition-held neighborhoods in Syria, President Bashar al-Assad is unlikely to succeed in crushing a year-old rebellion. International revulsion at the crackdown and the breadth of an uprising that has seen Syrians take up arms in a fight to the death also make it increasingly unlikely that Assad will manage to reestablish the status quo ante through military force. But even if he can't win, Assad may have reason to believe, as he surveys the national and international battlefield he has created, that he can nonetheless fight to a messy draw. The difference between a draw and a defeat, for Assad, now amounts to this: Will he be at the table when a political solution to the conflict is negotiated?

The European Union on Monday announced new sanctions against Assad's regime in support of demands that he end his assault on opposition strongholds and accept an Arab League plan that requires him to surrender power. But the EU measures amounted largely to an incremental tightening of those previously imposed. The meeting in Tunis last Friday of the "Friends of Syria" ad-hoc forum also confirmed that while Western and Arab powers concur on the need for Assad to step down -- and before that, to halt his assaults on rebel-held areas and allow in humanitarian relief supplies -- there is limited agreement on new strategies to pursue those goals. Western powers have no appetite for direct military involvement in Syria, not only because of post-Iraq, Afghanistan and Libya intervention fatigue, but because the sectarian and regional political stakes in Syria's conflict threaten region-wide chaos. Support for direct military intervention appears to be lacking even if those doing the fighting are not Western troops: Qatar failed in its efforts to persuade the Friends of Syria to back intervention by an Arab force that would invade Syria to open humanitarian corridors to besieged cities.

(PHOTOS: Free Syrian Army Joins Anti-Assad Protests)

Qatar has since defaulted to the Saudi view that arming Syria's rebels is, as the Saudi foreign minister, Prince Saud al-Faisal, put it, "an excellent idea." The vociferous advocacy of the Gulf states for funneling weapons to the insurgents reinforces widely held suspicions that they're probably already doing so. There may even be some non-lethal aid from Western countries, including communications equipment, medical supplies, night-vision goggles and other such equipment, reaching rebel forces. But the Saudis, who reportedly walked out of the Friends of Syria forum at one point, allegedly decrying its "inaction," could not persuade the forum to endorse even that idea.

The U.S. certainly remains skeptical of the proposal to send weapons to the opposition. "We don't really know who it is that would be armed," said Secretary of State Hillary Clinton in a CBS interview last weekend, noting the amorphous nature of the opposition and the fact that some of its elements are inimical to U.S. foreign policy goals. The Syrian opposition had the backing of al-Qaeda and the Palestinian Islamist organization Hamas, she said, raising the question of who the U.S. would be supporting if it provided arms. "Despite the great pleas that we hear from those people who are being ruthlessly assaulted by Assad, you don't see uprisings across Syria the way you did in Libya," she continued. "You don't see militias forming in places where the Syrian military is not, trying to get to Homs... So if you're a military planner or if you're a Secretary of State and you're trying to figure out do you have the elements of an opposition that is actually viable, that we don't see."

(PHOTOS: Inside Syria's Civil War)

The U.S. and its allies may have hoped to crown the Syrian National Council (SNC) as the legitimate representative of the Syrian people, as they did with the Benghazi-based Transitional National Council ahead of the intervention in Libya last year, but the fact that the Tunis gathering hailed the SNC as "a" rather than "the" representative of the Syrian people was telling. The extent of the SNC's authority on the ground remains questionable, and even its influence over the Free Syrian Army -- the umbrella insurgent organization of defectors from the regime's army and civilian volunteers, whose own control over fighting units on the ground appears to be limited -- is far from established. Some have argued that providing arms will help to organize the rebellion and build up the political authority of the SNC leadership under whose auspices such arms would be provided. But Clinton's concerns may have been underscored by Sunday's news that some of the SNC's most senior leaders had broken away to form the Syrian Patriotic Group, challenging the effectiveness of the SNC and giving less equivocal backing to armed rebellion.

While the majority of U.N. member states have backed the Arab League plan, Assad still enjoys strong support from Russia and Iran, and countries such as China and Iraq insist that any solution in Syria be based on diplomatic reforms and dialogue with the regime, rather than its a priori replacement. Needless to say, the Assad regime concurs: Even while it continued to rain artillery fire down on Homs and other opposition strongholds on Sunday, the regime also managed to stage a referendum on a package of constitutional reforms. Opposition leaders denounced the vote as a farce given the war being waged, and there's no way it could be taken as a sign of national consensus behind Assad-led reforms. But even if the regime's claim of a 57% turnout was exaggerated, Western journalists in the major cities of Damascus and Aleppo saw thousands of young voters turning out to participate in the poll in spite of opposition calls for a boycott. That served up a timely reminder that Assad's regime retains a substantial support base, with a number of key constituencies -- particularly his Alawite sect that dominates key military units, as well as Christians and other minorities that together make up as much as a third of the population -- fearful of their prospects should the rebellion triumph.

(MORE: Three Acclaimed Journalists Die Covering the War in Syria)

By militarizing the political contest in Syria, Assad has effectively created a sectarian civil war that presents the Syrian population with stark choices that work in his favor. And the more intense and protracted the military conflict becomes, the greater the danger that the de facto leadership of the rebellion passes to more extreme and sectarian elements -- which, of course, reinforces Assad's own hold on his core support.

All sides in Syria, then, appear to be hunkering down for a protracted civil war -- a conflict of a type that, given the external backing on which the combatants rely, is unlikely to end in a rout by either side. And if it ends at the negotiation table, as the Balkan wars of the 1990s did, Assad will be hoping at least to secure his place as a key player at the table. Indeed, even the SNC in a statement last Friday appeared to walk back from its refusal to engage with the regime, saying that negotiation -- if the regime first agrees to a cease-fire -- "is still possible and is likely the best way to achieve the desired goal of regime change." Council members and Western diplomats also tell reporters that Russia's role remains crucial in achieving any settlement to end the violence, despite its dissent from the international consensus.

No surprise, then, that European Union officials were careful following the adoption of the new sanctions on Monday to stress the importance of the role of Kofi Annan, the former U.N. Secretary General who has been appointed as joint U.N.-Arab League envoy for Syria. His job, of course, will be to talk the Assad regime and its enemies into some sort of workable compromise that can end the violence.

MORE: Just When They Needed It Least: The Syrian Opposition Fractures Again

VIDEO: Why They Protest: Egypt, Libya and Syria

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Indian court dismisses Yahoo case

AppId is over the quota
AppId is over the quota
2 March 2012 Last updated at 14:12 GMT Yahoo says there is no document to show that its website has violated any law The Delhi High Court has dismissed a criminal case against Yahoo India which was accused of hosting "objectionable" content on its web pages.

Yahoo was among 21 web firms, including Facebook and Google, accused of hosting material that could cause communal unrest.

Yahoo says there is no document to show that its website has violated any law.

The case was launched by journalist Vinay Rai. A separate civil lawsuit against the internet firms continues.

Judges in India have threatened to block sites that fail to crack down on offensive content.

Last month, Facebook and Google said they had complied with the court directive and removed "objectionable" material.

Late last year, Communications Minister Kapil Sibal met officials from Google, Facebook and other websites and said the government would introduce guidelines to ensure "blasphemous material" did not appear on the internet.

The Delhi High Court in January asked Facebook and Google India to "develop a mechanism to keep a check and remove offensive and objectionable material from their web pages" or "like China, we will block all such websites".

'May be revived'

"The summons issued against Yahoo India is set aside," the Press Trust of India quoted Delhi High Court Justice Suresh Kait as saying.

The judge, however, said that a private complaint against the website could be revived if credible and actionable evidence was filed against it.

Communications Minister Kapil Sibal has taken a strong line on the issue

Yahoo India's lawyer Arvind Nigam said summons were issued against the site "without application of mind by the trial court", he said.

"I wish to know what is the case against me," he added.

Yahoo has always maintained that the complaint filed in the court had nothing to do with its content as it was about alleged objectionable material retrieved from websites like Zombie, Orkut, YouTube, Facebook and Blogspot.

The criminal case has been brought by journalist Vinay Rai.

A separate civil lawsuit, which makes similar accusations, against a number of the same internet companies is proceeding. Yahoo is still involved in that. Microsoft successfully appealed to be dropped from it.

Many firms say it is impossible to pre-filter material.

Google India has argued that it is not feasible to pre-monitor material posted by "billions of people across the globe".

In an earlier court hearing, Google lawyer NK Kaul said that the issue also related "to a constitutional issue of freedom of speech and expression, and suppressing it was not possible as the right to freedom of speech in democratic India separates us from a totalitarian regime like China".

Facebook says policies are in place that enable people to report abusive content.

In December, Communications Minister Sibal said: "My aim is that insulting material never gets uploaded. We will evolve guidelines and mechanisms to deal with the issue. [The companies] will have to give us the data, where these images are being uploaded and who is doing it."

Mr Sibal was angered by morphed photos of Prime Minister Manmohan Singh and Congress president Sonia Gandhi, as well as doctored images of pigs running through Islam's holy city of Mecca.

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Forcing Defendant to Decrypt Hard Drive Is Unconstitutional, Appeals Court Rules

Forcing a criminal suspect to decrypt hard drives so their contents can be used by prosecutors is a breach of the Fifth Amendment right against compelled self-incrimination, a federal appeals court ruled Thursday.

It was the nation’s first appellate court to issue such a finding. And the outcome comes a day after a different federal appeals court refused to entertain an appeal from another defendant ordered by a lower federal court to decrypt a hard drive by month’s end.

Thursday’s decision by the 11th U.S. Circuit Court of Appeals said that an encrypted hard drive is akin to a combination to a safe, and is off limits, because compelling the unlocking of either of them is the equivalent of forcing testimony.

The case at hand concerns an unidentified “Doe” defendant believed to be in possession of child pornography on 5 terabytes of data on several drives and laptops seized in a California motel with valid court warrants.

The Atlanta-based circuit held:

First, the decryption and production of the hard drives would require the use of the contents of Doe’s mind and could not be fairly characterized to a physical act that would be non-testimonial in nature. We conclude that the decryption and production would be tantamount to testimony by Doe of his knowledge of the existence and location of potentially incriminating files; of his possession, control and access to the encrypted portions of the drives; and of his capability to decrypt the files.

The court added: “Requiring Does to use a decryption password is most certainly more akin to requiring the production of a combination because both demand the use of the contents of the mind, and the production is accompanied by the implied factual statements noted above that could prove to be incriminatory.”

The defendant in April had refused to comport with a Florida federal grand jury’s orders that he decrypt the data, which was encrypted with TrueCrypt. A judge held him in contempt and jailed him until December 15, when the circuit court released him ahead of Thursday’s ruling.

“The government’s attempt to force this man to decrypt his data put him in the Catch-22 the Fifth Amendment was designed to prevent — having to choose between self-incrimination or risking contempt of court,” said EFF senior staff attorney Marcia Hofmann, who had filed an amicus brief in the case.

In the other decryption case, the Denver-based 10th U.S. Circuit Court of Appeals on Wednesday sided with the government’s contention that Colorado bank-fraud defendant Ramona Fricosu must be convicted before the circuit court would entertain an appeal of a decryption order.

The court did not address the 5th Amendment arguments and instead said the case was not procedurally ripe for appeal.

Fricosu’s attorney, Philip Dubois, said in a telephone interview Friday that new developments in the case may moot the constitutional showdown in his client’s case.

He said a co-defendant, Scott Whatcott, has forwarded passwords to the authorities.

Dubios said it was not immediately known whether those passwords would unlock the hard drive in the Toshiba laptop seized from Fricosu with valid warrants in 2010. If they do, then the 5th Amendment issue is off the table, Dubois said.

If the passwords don’t work, Dubois said, Fricosu “will definitely make her best effort” to decrypt the laptop, although she may have forgotten the password.

U.S. District Judge Robert Blackburn has ordered Fricosu to decrypt the laptop by month’s end.

Dubois said that, on Monday, he would provide Judge Blackburn with the 11th Circuit’s opinion in the child pornography case as part of a last-ditch effort to halt the decryption order.

That said, Blackburn is not bound by the 11th Circuit decision because his court is in the 10th Circuit.

David Kravets is a senior staff writer for Wired.com and founder of the fake news site TheYellowDailyNews.com. He's a dad of two boys and has been a reporter since the manual typewriter days.
Follow @dmkravets and @ThreatLevel on Twitter.

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Jim Cramer's $5 Gas Plays

The average U.S. price of gasoline jumped 18 cents a gallon in the past two weeks due to rising costs of crude oil and related concerns about tensions in the Middle East, although supplies of fuel remained plentiful in most of the country, according to the Lundberg Survey. The national average cost for a gallon of regular gasoline rose to $3.69 on Feb. 24, according to the nationwide survey of gasoline stations. To capitalize on the higher gas price, CNBC’s Jim Cramer says oil and gas drilling companies are shifting away from natural gas and focusing more on oil. The Lundberg Survey suggests the price of gas isn’t likely to fall anytime soon, so Cramer thinks these companies may enjoy increased profits for some time. Given the continued shift to oil, Cramer thinks select oil and gas names can be bought on dips. Click ahead for his preferred plays. By Drew Sandholm with Reuters Published 29 February 2012When this story was published, Cramer’s charitable trust owned Apache, ConocoPhillips and Schlumberger.  Photo: Jimmy Jeong | Bloomberg | Getty ImagesDevon Energy engages in the acquisition, exploration, development and production of oil and natural gas. Although based in Oklahoma City, it currently owns oil and gas properties across the U.S., including the Permian Basin in Texas and New Mexico, the Rocky Mountains and elsewhere. Executives decided that it’s the right time to look for additional oil prospects and the company has a new find that’s being kept under wraps, Cramer says. If it’s big enough, this latest discovery could move the needle for the stock, he adds. Photo: Magnumhunterresources.comHeadquartered in Houston, Magnum Hunter Resources is an oil and gas drilling and exploration company. The company is currently split between 51 percent oil and 49 percent gas, but is focusing more and more on the oil business. In an interview with Cramer, CEO Gary Evans said his company is drastically increasing output and basically transforming itself into a “drilling factory.” In its most recent quarter, the company delivered a 455 increase in production. It was also able to increase reserves by 44 percent in just sixth months’ time. Cramer thinks this is a very risky stock, though, because small players like this can get hit with funding problems. So he can only recommend it on a speculative basis. Oklahoma City-based SandRidge Energy is also seeking to profit from higher U.S. gas prices. The oil and gas drilling and exploration company is increasing production and acquiring additional oil properties, Cramer says. Cramer had been ambivalent on SandRidge’s stock lately, but after the company reported strong earnings last week, he’s recommending it again. He praised CEO Tom Ward for his execution. EOG Resources is “one of the most undervalued oil companies on Earth,” Cramer said. It was the top producer in the U.S.’s two largest domestic reserves: the Bakken shale in North Dakota and the Eagle Ford shale in Texas. Cramer thinks EOG’s Eagle Ford properties are worth more than the price of the whole company. Not only is EOG one of the largest oil and natural gas companies in the U.S., it also has proven reserves in the Canada, China, Trinidad and the U.K. Continental Resources has a major presence in the Bakken shale, an oil rich region that stretches from western North Dakota to eastern Montana along the Canadian border. The Bakken could be the largest domestic oil find in nearly 50 years, according to CEO Harold Hamm. In turn, Continental is trying to turn North Dakota into the U.S.’s largest oil producing state outside of Texas.

Photo: Angela Macdonald Smith | Bloomberg | Getty ImagesApache is an independent energy company based in Houston. It engages in the exploration, development and production of natural gas, crude oil and natural gas liquids. Cramer thinks it has lots of growth potential, and he expects its stock will continue to push higher. Photo: David Paul Morris | Bloomberg | Getty ImagesFor investors who like to play it safe, Cramer recommends ConocoPhillips. He considers Conoco one of the most shareholder friendly companies, as it boasts a 3.5 percent dividend yield, and has executed meaningful share buybacks. The Houston-based company is also unlocking value for shareholders by breaking itself up, Cramer said. Conoco is spinning off its downstream refining and marketing business while keeping its faster growing exploration and production business, he said.

The world’s largest oil service company, Schlumberger is also the biggest beneficiary of the huge increase in oil production lately. After all, exploration and production companies have increased their capital expenditure budgets by 30 percent over the last two years, Cramer said. Schlumberger fits into every part of the oil service business, but Cramer likes that it gets 80 percent of its sales from outside of the United States. In other words, it has less exposure to the weak natural gas business, unlike some of its competitors. It has a 60 percent market share in the lucrative deepwater drilling services business. As oil companies continue to ramp up production, Cramer thinks Schlumberger could see earnings growth of 30 percent next year. With the stock currently selling at 14 times next year’s earnings estimates, Cramer thinks SLB is a “steal” at current levels.For investors who can stomach risk, Cramer points to National Oilwell Varco. The Houston-based company is the leading maker of oil rigs, as well as associated drilling and production equipment. It enjoys a 70 percent market share in this area. What makes this stock risky is that rigs are expensive, long-term investments, so the company needs oil prices to stay elevated for longer periods of time to see the demand tick up. The longer oil drillers think oil prices will stay elevated, the more likely they are to buy oil rigs from National Oilwell Varco. With the price of gas on the rise, Cramer thinks U.S. politicians will finally embrace natural gas as a transportation fuel. After all, President Barack Obama spoke positively about nat gas during a recent speech at the University of Miami. “We’re launching a program that will bring together the nation’s best scientists, engineers and entrepreneurs to figure out how more cars can be powered by natural gas – a fuel that’s cleaner, cheaper and more abundant than oil,” Obama said. To Cramer, the change in attitude toward nat gas will only help Westport Innovations. The Vancouver, Canada-based company designs natural gas-powered engines. While WPRT is one of Cramer’s favorite speculative plays on nat gas vehicles, some investors may be concerned because its stock has run up lately. It climbed by 20 percent year-to-date and by 263 percent since Cramer first recommended it in January 2010. JPMorgan downgraded it recently because it thought the stock was too expensive. Cramer still thinks the stock could go higher, and argues that the nat gas vehicles market is big enough for multiple players. As gas prices climb, Cramer thinks U.S. policymakers may soon embrace the possibility of natural gas as a transportation fuel. Not only is nat gas considerably cheaper than gasoline or petroleum, it’s also 30 percent cleaner than petroleum and of great abundance in the United States, Cramer says. Obama had long supported battery-powered electric vehicles, but now seems to entertain the idea of powering American cars with natural gas instead of petroleum. Obama first mentioned natural gas during the State of the Union in January. If Washington is becoming friendlier to nat gas, it could be good news for Clean Energy Fuels. The Seal Beach, Calif.-based company designs, builds and operates natural gas fueling stations across the country. It’s building a nat gas superhighway along the U.S.’s major trucking corridors.

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