I've just spent the past few days in Vancouver at the annual Agora Financial Investment Symposium. It's always an interesting conference.
This year, Jim Rogers, of Investment Biker fame, spoke at the conference. Rogers, as usual, predicted the bull market in commodities has much further to run. He likes cotton, sugar, and coffee – all are 60% to 80% off their all-time highs. He advised attendees to pocket those little sugar packets that hotels have lying around for coffee and tea.
I spoke as well. The big theme to cover was "Seeking Profits in a Time of Risk and Scarcity," which is something I focus on all the time in my advisories. We own a number of scarce assets – everything from water rights out West, to oddball industrial metals, to office space in Tokyo.
Energy, though, is always the big subject at conferences right now. I think we've reached a point in this investment cycle where the focus will now shift to ideas that ease the high cost of energy through new energy-efficient products and materials.
Alternatives to hydrocarbon fuels also get a lot of attention. Wind, for example, is getting a lot of ink lately thanks to T. Boone Pickens' forceful editorials supporting it. Pickens, who made billions in the oil and gas patch, has focused his latest efforts on water and wind.
To tell you the truth, I haven't closely investigated clean energy since I started investing two decades ago. Alternatives like solar, wind, and geothermal simply couldn't compete with coal, oil, and natural gas on cost. But that's all starting to change...
Sunday, July 27, 2008
Saturday, July 26, 2008
CHIMERICA companies are better bets right now than ordinary U.S. stocks
Well, one of the things that's so appealing about Chimerica companies is that they are growing by as much as 40% to 80% a year. (That's ten times faster than America's top businesses.)
This gives you the potential to make absolutely incredible gains, in a very short period of time...
»For example, a CHIMERICA company called Jinpan International (JST) has seen its net income soar 66% over the last several months – even as the global economy has slowed down. Why? Because these guys make electricity equipment in China, which the Chinese economy desperately needs – no matter what's happening in the financial markets
Not surprisingly, Jinpan's share price (the stock trades in America) has also SOARED. If you bought shares of Jinpan (JST) in March 2007, you could have seen as much as a 175% return on your investment.
Even better, if you'd bought shares five years ago, you'd have made as much as 21-times your money. That turns a $5,000 stake into $105,000.
As you can see, these "CHIMERICA" companies are China's high-growth superstars of tomorrow – available to you and me on U.S. exchanges today.
But these stocks businesses have long-term plans too. They're not out to make a quick buck and pack it in. They're literally the future Walmarts, Verizons, and Best Buys of China.
That's why Fortune 500 companies like Microsoft, Intel, GlaxoSmithKline, Panasonic, DaimlerChrysler, and close to 50 other business heavyweights are already doing business deals with "CHIMERICA" companies.
Microsoft, for instance, just formed a business partnership with Comtech Group – a "CHIMERICA" company that's quickly cornering China's lucrative video display market. If you'd invested $5,000 in Comtech's stock in 2002, you could be sitting on as much as $125,000 in profit today.
You probably get the point — CHIMERICA companies have incredible growth potential.
So it's pretty clear why these CHIMERICA companies are better bets right now than ordinary U.S. stocks.
This gives you the potential to make absolutely incredible gains, in a very short period of time...
»For example, a CHIMERICA company called Jinpan International (JST) has seen its net income soar 66% over the last several months – even as the global economy has slowed down. Why? Because these guys make electricity equipment in China, which the Chinese economy desperately needs – no matter what's happening in the financial markets
Not surprisingly, Jinpan's share price (the stock trades in America) has also SOARED. If you bought shares of Jinpan (JST) in March 2007, you could have seen as much as a 175% return on your investment.
Even better, if you'd bought shares five years ago, you'd have made as much as 21-times your money. That turns a $5,000 stake into $105,000.
As you can see, these "CHIMERICA" companies are China's high-growth superstars of tomorrow – available to you and me on U.S. exchanges today.
But these stocks businesses have long-term plans too. They're not out to make a quick buck and pack it in. They're literally the future Walmarts, Verizons, and Best Buys of China.
That's why Fortune 500 companies like Microsoft, Intel, GlaxoSmithKline, Panasonic, DaimlerChrysler, and close to 50 other business heavyweights are already doing business deals with "CHIMERICA" companies.
Microsoft, for instance, just formed a business partnership with Comtech Group – a "CHIMERICA" company that's quickly cornering China's lucrative video display market. If you'd invested $5,000 in Comtech's stock in 2002, you could be sitting on as much as $125,000 in profit today.
You probably get the point — CHIMERICA companies have incredible growth potential.
So it's pretty clear why these CHIMERICA companies are better bets right now than ordinary U.S. stocks.
Within the edible oil industry, the Chinese olive oil market is now the focus of global attention
The first US president with a Yale B.A. and Harvard a M.B.A. has finally clarified what led to the country’s crippling bank bailout and credit crisis.
At a closed Republican fund-raiser in Houston last week – one at which video recording was banned, but one attendee captured on a mobile phone – President Bush described what caused the US’s current economic malaise this way:
“Wall Street got drunk – that’s one reason I asked you to turn off your TV cameras – it got drunk, and now it’s got a hangover. The question is, ‘How long will it sober up and not try to do all these fancy financial instruments?’”
On Monday the White House tried to clean up the President's statement.
A Bush spokesperson said,
“The markets were using very complex financial instruments that had grown up over the years, and when confronted with the shock of this housing downturn, they did not fully understand what the consequences were going to be.”
Oh baby, you know this one is right in my wheelhouse.
I can’t stop singing the chorus of The Band’s “Up On Cripple Creek.”
But, other than to reveal my new excuse for getting hammered – “The bartender and bar were using a very complex system of service and pricing while I failed to grow up over the years and when I was confronted with closing time I did not fully understand consequences of ordering three doubles…”
I will demure on this one.
Instead, I’ll just leave this one teed up for you.
On “Wall Street got drunk,” I eagerly await your comments via the exercise of your First Amendment guarantee of free speech – use it while you still have it – this White House still has six months left to work on that.
And, I promise, if you grip it and rip it; I’ll run a bunch of your responses next week.
Now, onto more oily thoughts.
Up, With Two Olives Please
I spent the past two weeks researching Iraq’s oil industry for a story I wanted to run today.
It’s a heck of a story.
Then every financial writer on the planet spent the same time writing, on alternating days, about oil or the failure of deregulation as expressed by federal mortgage lenders.
So, I am going to spike the Iraq piece and save it for a time when the financial media have moved onto to their next obsessions such as – gold that’s found in offshore oil wells that were purchased with loans from Freddy Mac… and about an ex Fannie Mae accountant who’s now a gas station attendant who refuses to let customers buy $4.50 gas with gold or bottles of first growth Bordeaux, because neither are legal tender.
Just like sticks aren’t money… just like birch bark isn’t money… just like yak poo isn’t money… just like gold is not money. Unless, that is you own a website or you write books about grand monetary conspiracies... that’s just pure gold.
Though, I do wonder how the customers of those websites’ manage to pay for the stuff they buy. It must be very time consuming to get all that the gold into the little wires that brings the Internet from house to house.
So, no oil this week, okay, maybe just a drop or two, later, down at the bottom – but nothing heavy like a discussion of Iraq’s geology. Like you, I am simply awash in oil stories.
Instead, this week, I want to share with you a story about outrageous consumption. You see, since 2005, China has been the world’s biggest consumer of oil… edible oils that is.
In fact, the Chinese now annually consume about 44 pounds of edible oil per person.
And, for the past six years that rate has risen at a steady 10% a year, which is a trend that should peak around 2111.
In the next couple of years, the country’s bean oil, palm oil, olive oil and grape seed oil imports will top a combined 350 million tons.
Within the edible oil industry, the Chinese olive oil market is now the focus of global attention.
At a closed Republican fund-raiser in Houston last week – one at which video recording was banned, but one attendee captured on a mobile phone – President Bush described what caused the US’s current economic malaise this way:
“Wall Street got drunk – that’s one reason I asked you to turn off your TV cameras – it got drunk, and now it’s got a hangover. The question is, ‘How long will it sober up and not try to do all these fancy financial instruments?’”
On Monday the White House tried to clean up the President's statement.
A Bush spokesperson said,
“The markets were using very complex financial instruments that had grown up over the years, and when confronted with the shock of this housing downturn, they did not fully understand what the consequences were going to be.”
Oh baby, you know this one is right in my wheelhouse.
I can’t stop singing the chorus of The Band’s “Up On Cripple Creek.”
But, other than to reveal my new excuse for getting hammered – “The bartender and bar were using a very complex system of service and pricing while I failed to grow up over the years and when I was confronted with closing time I did not fully understand consequences of ordering three doubles…”
I will demure on this one.
Instead, I’ll just leave this one teed up for you.
On “Wall Street got drunk,” I eagerly await your comments via the exercise of your First Amendment guarantee of free speech – use it while you still have it – this White House still has six months left to work on that.
And, I promise, if you grip it and rip it; I’ll run a bunch of your responses next week.
Now, onto more oily thoughts.
Up, With Two Olives Please
I spent the past two weeks researching Iraq’s oil industry for a story I wanted to run today.
It’s a heck of a story.
Then every financial writer on the planet spent the same time writing, on alternating days, about oil or the failure of deregulation as expressed by federal mortgage lenders.
So, I am going to spike the Iraq piece and save it for a time when the financial media have moved onto to their next obsessions such as – gold that’s found in offshore oil wells that were purchased with loans from Freddy Mac… and about an ex Fannie Mae accountant who’s now a gas station attendant who refuses to let customers buy $4.50 gas with gold or bottles of first growth Bordeaux, because neither are legal tender.
Just like sticks aren’t money… just like birch bark isn’t money… just like yak poo isn’t money… just like gold is not money. Unless, that is you own a website or you write books about grand monetary conspiracies... that’s just pure gold.
Though, I do wonder how the customers of those websites’ manage to pay for the stuff they buy. It must be very time consuming to get all that the gold into the little wires that brings the Internet from house to house.
So, no oil this week, okay, maybe just a drop or two, later, down at the bottom – but nothing heavy like a discussion of Iraq’s geology. Like you, I am simply awash in oil stories.
Instead, this week, I want to share with you a story about outrageous consumption. You see, since 2005, China has been the world’s biggest consumer of oil… edible oils that is.
In fact, the Chinese now annually consume about 44 pounds of edible oil per person.
And, for the past six years that rate has risen at a steady 10% a year, which is a trend that should peak around 2111.
In the next couple of years, the country’s bean oil, palm oil, olive oil and grape seed oil imports will top a combined 350 million tons.
Within the edible oil industry, the Chinese olive oil market is now the focus of global attention.
Friday, July 25, 2008
Reasons why oil prices have pushed higher
I hope members of Congress are paying attention to this issue of IDE, because I’m about to reveal one of the biggest (and most ignored) reasons why oil prices have pushed higher… and exactly how to fix it.
The best way I can explain it is to compare Congress to a doctor.
When you’re sick and go to the doctor, you tell him how bad you feel.
Your doctor then determines – based on your symptoms – why you’re sick and how to make you feel better. Not only will he work on lessening your symptoms, but he’ll also give you medicine – be it an antibiotic or whatever – that treats the root cause of those symptoms.
Now imagine that you have a bacterial infection and instead of giving you those antibiotics, he simply told you to take some Tylenol for the temperature and some over-the-counter allergy medicine for the stuffy nose.
Sure you’d feel better, but if you stopped taking the medicine you’d feel sick again since the cause of the symptoms – the bacterial infection - was never treated.
This is exactly what’s going on in America. Congress spends too much time trying to eliminate symptoms without curing the underlying disease.
In the case of the oil market, what are the symptoms? Well, higher oil prices for one. And a growing amount of speculation is another.
This week Congress took a good, hard look at those symptoms, and they think that limiting speculation in the oil markets is the cure. But did Congress ever wonder what caused this excessive speculation in the first place?
If speculators see one investment rising 10 percent per month and another by five, they’ll buy the one that gives them the best return. So in reality, speculators are just reacting to higher oil prices by buying and looking for the return. They aren’t the cause of high oil prices, just a symptom.
So what caused higher oil prices? We know the obvious answer of more foreign demand from Brazil, India, Russia and China. But this isn’t the only reason why oil prices have gone up so much…
Considering a barrel of oil is priced in US dollars, wouldn’t the 40 percent devaluation of our dollar over the past eight years contribute to higher oil prices?
You bet it has.
My reasoning is very simple, too. As the devalued dollar pushes oil prices higher and higher, speculators look to the oil market as a place to make some decent gains. So they enter the oil market and make bullish bets. As investment increases and the dollar devalues further, prices move higher.
Now these speculators are getting bold. They’ve made good money in the oil markets and ramp up speculation… and you can see exactly where this is heading.
If it weren’t for Congress’ spending money like a bunch of irresponsible dolts, the value of the dollar may have never dropped by 40 percent and the price of oil would be much, much lower today.
The best way I can explain it is to compare Congress to a doctor.
When you’re sick and go to the doctor, you tell him how bad you feel.
Your doctor then determines – based on your symptoms – why you’re sick and how to make you feel better. Not only will he work on lessening your symptoms, but he’ll also give you medicine – be it an antibiotic or whatever – that treats the root cause of those symptoms.
Now imagine that you have a bacterial infection and instead of giving you those antibiotics, he simply told you to take some Tylenol for the temperature and some over-the-counter allergy medicine for the stuffy nose.
Sure you’d feel better, but if you stopped taking the medicine you’d feel sick again since the cause of the symptoms – the bacterial infection - was never treated.
This is exactly what’s going on in America. Congress spends too much time trying to eliminate symptoms without curing the underlying disease.
In the case of the oil market, what are the symptoms? Well, higher oil prices for one. And a growing amount of speculation is another.
This week Congress took a good, hard look at those symptoms, and they think that limiting speculation in the oil markets is the cure. But did Congress ever wonder what caused this excessive speculation in the first place?
If speculators see one investment rising 10 percent per month and another by five, they’ll buy the one that gives them the best return. So in reality, speculators are just reacting to higher oil prices by buying and looking for the return. They aren’t the cause of high oil prices, just a symptom.
So what caused higher oil prices? We know the obvious answer of more foreign demand from Brazil, India, Russia and China. But this isn’t the only reason why oil prices have gone up so much…
Considering a barrel of oil is priced in US dollars, wouldn’t the 40 percent devaluation of our dollar over the past eight years contribute to higher oil prices?
You bet it has.
My reasoning is very simple, too. As the devalued dollar pushes oil prices higher and higher, speculators look to the oil market as a place to make some decent gains. So they enter the oil market and make bullish bets. As investment increases and the dollar devalues further, prices move higher.
Now these speculators are getting bold. They’ve made good money in the oil markets and ramp up speculation… and you can see exactly where this is heading.
If it weren’t for Congress’ spending money like a bunch of irresponsible dolts, the value of the dollar may have never dropped by 40 percent and the price of oil would be much, much lower today.
When event X takes place, gold soars
People buy gold for all kinds of nutty reasons... But Event X is what actually makes gold go up. Each time it's happened, gold has absolutely soared. So you simply look out for Event X, and then you buy.
It's really simple, as I'll show. It has nothing to do with end-of-the-World paranoia or complicated statistics...
Event X first happened in 1973-75, and gold tripled. Event X happened again in 1978-80, and gold had its steepest ascent ever, rising from $150 to peak at $850.
The only other time we've seen Event X is, well, now. And once again, gold has been soaring.
How high can gold go? Our two historical examples suggest that gold simply keeps going – almost infinitely. In short, as long as Event X is in place, gold just keeps going higher.
So what is Event X? It's simply when interest rates fall so low, they don't keep up with inflation. As long as we're in that situation, gold goes up. The logic is incredibly simple... As soon as people get paid less interest than the rate of inflation, they're willing to own gold (which pays no interest).
It's really simple, as I'll show. It has nothing to do with end-of-the-World paranoia or complicated statistics...
Event X first happened in 1973-75, and gold tripled. Event X happened again in 1978-80, and gold had its steepest ascent ever, rising from $150 to peak at $850.
The only other time we've seen Event X is, well, now. And once again, gold has been soaring.
How high can gold go? Our two historical examples suggest that gold simply keeps going – almost infinitely. In short, as long as Event X is in place, gold just keeps going higher.
So what is Event X? It's simply when interest rates fall so low, they don't keep up with inflation. As long as we're in that situation, gold goes up. The logic is incredibly simple... As soon as people get paid less interest than the rate of inflation, they're willing to own gold (which pays no interest).
Thursday, July 24, 2008
If you catch just one biotech bull market, you will never have to work again
I've said that many times the average biotech bull market has been good for 566% gains in less than three years.
At the moment, biotech is looking incredibly bullish right now. Yesterday was the turning point...
Yesterday, shares of biotech giant Genentech shot up 13% as big pharmaceutical company Roche offered to buy it out completely. Roche will have to up its offer... likely valuing Genentech at over $100 billion.
If $100 billion Genentech can sell to a "Big Pharma" company, then every biotech stock has to be in play right now. And biotech just went from the back pages to the front pages... This is when you want to be a buyer.
Biotech has been the quiet performer this year... Oil, bank stocks, and real estate have garnered all the headlines. But biotech has been the stealth winner... Shares of XBI – the S&P Biotech Index Fund – have quietly hit new highs.
Consider the Rydex Biotech Fund (RYOIX), for example. Back in 2000, during the last biotech peak, this fund had $1.4 billion invested. Then, for eight years, biotech stocks did nothing. Assets in the fund absolutely collapsed... bottoming earlier this year at around $60 million – that's more than a 95% fall in assets.
But, what's this? In just the last few weeks, assets in the fund have more than doubled! Investors are quietly creeping in.
Biotechs are an exceptional bargain now, when you size them up on simple, traditional measures of biotech value (like price-to-sales, for instance).
In short, while the companies' stock prices have done nothing in eight years... their businesses have kept growing, so shares are a great value.
Now biotech meets our three criteria for buying:
1.
It's cheap. The businesses have grown for eight years while the share prices have done nothing.
2.
It's ignored/hated – as the 95% peak-to-trough fall in the assets of the Rydex Biotech Fund suggests.
3.
We're finally seeing an uptrend. The Rydex fund has doubled in size in no time. The XBI Biotech Index Fund is hitting new highs.
At the moment, biotech is looking incredibly bullish right now. Yesterday was the turning point...
Yesterday, shares of biotech giant Genentech shot up 13% as big pharmaceutical company Roche offered to buy it out completely. Roche will have to up its offer... likely valuing Genentech at over $100 billion.
If $100 billion Genentech can sell to a "Big Pharma" company, then every biotech stock has to be in play right now. And biotech just went from the back pages to the front pages... This is when you want to be a buyer.
Biotech has been the quiet performer this year... Oil, bank stocks, and real estate have garnered all the headlines. But biotech has been the stealth winner... Shares of XBI – the S&P Biotech Index Fund – have quietly hit new highs.
Consider the Rydex Biotech Fund (RYOIX), for example. Back in 2000, during the last biotech peak, this fund had $1.4 billion invested. Then, for eight years, biotech stocks did nothing. Assets in the fund absolutely collapsed... bottoming earlier this year at around $60 million – that's more than a 95% fall in assets.
But, what's this? In just the last few weeks, assets in the fund have more than doubled! Investors are quietly creeping in.
Biotechs are an exceptional bargain now, when you size them up on simple, traditional measures of biotech value (like price-to-sales, for instance).
In short, while the companies' stock prices have done nothing in eight years... their businesses have kept growing, so shares are a great value.
Now biotech meets our three criteria for buying:
1.
It's cheap. The businesses have grown for eight years while the share prices have done nothing.
2.
It's ignored/hated – as the 95% peak-to-trough fall in the assets of the Rydex Biotech Fund suggests.
3.
We're finally seeing an uptrend. The Rydex fund has doubled in size in no time. The XBI Biotech Index Fund is hitting new highs.
The trend toward gold is spilling into other financial areas
Of the hundreds of "inflation" stories I've heard of in the past year, the most incredible is the one coming out of Vietnam...
Vietnam is experiencing every problem that causes a rush into precious metals... inflation is an incredible 27%, interest rates are over 8%, the stock market was down every day in May, and unemployment has more than doubled (from 2% in '07 to 5.1% this year). Household wealth is drastically declining.
Now here's the interesting part: How are the Vietnamese people reacting to all of this? Did they buy stocks? Real estate? Maybe inflation-protected securities? Or did they just sit on cash?
None of the above.
Vietnam's economic and monetary problems have sent its people fleeing to gold. Not gold stocks... but physical gold bullion. They're hoarding it and hiding it from their government. Hard figures on the size of the local gold trade aren't available, but current estimates are that the public owns 16 million ounces, including 1.3 million ounces imported in the first quarter of 2008. Of this, only about 10% has been deposited into banks (which actually pay 2.5% interest on gold). The remaining 90% is likely under mattresses or hanging around the owner's neck.
The trend toward gold is spilling into other financial areas. After a long period of quoting land prices in Vietnamese dong (the nation's currency), landlords are now setting prices in gold in order to avoid the devaluation. Nguyen Trung Vu, general director of the Ky Moi Real Estate Co, said that while it is complicated, "I think that making transactions with payment in gold will become a trend."
Vietnam is experiencing every problem that causes a rush into precious metals... inflation is an incredible 27%, interest rates are over 8%, the stock market was down every day in May, and unemployment has more than doubled (from 2% in '07 to 5.1% this year). Household wealth is drastically declining.
Now here's the interesting part: How are the Vietnamese people reacting to all of this? Did they buy stocks? Real estate? Maybe inflation-protected securities? Or did they just sit on cash?
None of the above.
Vietnam's economic and monetary problems have sent its people fleeing to gold. Not gold stocks... but physical gold bullion. They're hoarding it and hiding it from their government. Hard figures on the size of the local gold trade aren't available, but current estimates are that the public owns 16 million ounces, including 1.3 million ounces imported in the first quarter of 2008. Of this, only about 10% has been deposited into banks (which actually pay 2.5% interest on gold). The remaining 90% is likely under mattresses or hanging around the owner's neck.
The trend toward gold is spilling into other financial areas. After a long period of quoting land prices in Vietnamese dong (the nation's currency), landlords are now setting prices in gold in order to avoid the devaluation. Nguyen Trung Vu, general director of the Ky Moi Real Estate Co, said that while it is complicated, "I think that making transactions with payment in gold will become a trend."
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