The latest effort by Stratfor Gobal Intelligence details how the United States became an unintended global power, mostly through it's important geography as is laid out in this vlsual from Stratfors latest effort.
Over the space of a few hundred years, the United States of America became a global powerhouse of business and politics, with the most powerful military the world has ever seen.
Although I have made many comments over the past few years regarding the demise of the U.S. dollar due to it's massive debts, Keynsianmonetary policy and stalemated congress, I have also said many times that I never bet against the U.S. Yes, I have bet against the U.S. dollar, but not the U.S. economy. To bet against such a powerhouse country of pure business, is a fools game.
Will the world's power structures in 20 years look the same as they do today? Probably not. Emerging markets like China, India and Brazil are on the rise, and Russia is still a powerhouse in energy production. Germany will continue to power the Euro zone in one form or another, and second tier countries like Indonesia, Mexico, Canada, Australia and several eastern European countries are chugging along just fine.
However the USA is, and will be for the forseeable future, the first engine of global industry. This chart of per capita growth is a prime example of the power the USA has on global growth.
In your portfolio don't ever count out the good ole USA. As I said, that is a fools game. Count out individual companies, and maybe even certain sectors, but never count out this massive business powerhouse.
As I pointed out in a previous post, I do not work for Stratfor, nor do I benefit in any monetary way in suggesting they are one more valuable resource when considering macro events for your portfolio over time.
You can acess their latest efforts at Stratfor.com.
That has been the mantra of the entire investment industry for 40 years now. However the cracks in the dam of diversification widen immensely when the markets go sideways, or begin to fall, as they are this year (and probably for years to come). Here are some reasons why diversification may well be a huge money pit over the next few years.
Ten years ago, if you invested in most diversified mutual funds, you would have made approximately zero on all your investments to date. (Ten years of ZERO!!!) The mutual fund industry is the most bloated, overpaid and valueless industry in the world today, in this writers humble opinion. They charge you fees from 2-4% for essentially "not managing" your investments. Many of the managed mutual funds out there are actual closet indexers (they follow the index of the country or market they are invested in by buying the large cap stocks as they appear in order in the index) You would do better simply by buying an index fund yourself and paying the .05% fee instead of 3-4% fees. Why is that?
Well there are several reasons for this behavior not the least of which is the fact that (and this has been subject of scientific studies) a trained monkey, picking stocks over an extended period utilizing diversification, on a statistical basis, does as well, within 1 or 2%, as almost all of these fund managers. In other words, they have no specific skill in picking stocks using diversification. Diversification works when there is a bull market, but there is no protection when markets plunge (as in 2000 or 2008) and the next two years could be absolutely devastating for fund investors. That is probably why there has been $50B (approx) removed from these funds over the summer. Being long term investors, most of those won't be back to the market anytime soon unless it is to pick specific stocks in small bull markets.
There have been many studies over the years in regard to this. In the current market, being manipulated by governments around the world employing Quantitative Easing (QE), large traders like GS, JP and the like using super computers and flash trading, in a market notable only for it's very thin trading, the word that comes to mind is "fraudulent" when it comes to stock prices, especially the large cap supposedly "blue chip" variety.
The fund industry wants you to believe that diversification will be your investment savior, however many savvy investors today know too well how this industry works. Just ask yourself, were you diversified in 2000? Were you diversified in 2008? Did your fund have investments in Enron? AIG?, Dot Bombs? Fannie? Freddie? Nortel?, JDS Uniphase? Citi, GM, Chrysler, AA, etc etc??? Did your funds make you "ANY" money at all? We need to change our thinking, now, and dramatically!
There is, in fact, a way to use this bloated industry, to pad your Retirefund over the next few years. There are indeed stocks out there, flying under the radar (thankfully) of this bloated industry, simply because no tainted ratings agency has noticed them (yet) or because these small caps are not yet big enough for the industry to promote to fund managers. I,m not talking about the \'under $2B\' range of stocks that the managers consider small cap. I,m talking about really small, micro cap entities that are forging niches in future markets that haven't hit the big time yet. That is where smart investors are looking in this market.
Find those gems that have a foot hold in new markets, are front runners with nimble and smart management, in a market soon to be targetted by the big dogs of the fund industry.
Now you are on to something. Something that truly makes sense, in a senseless market. Today, you have at your finger tips all of the technology you need and more. More than the so called experts have ever had in the past, so, use it! Do your home work. Dig for information, and evidence of advantage in micro caps, and stay on top of that information. Prosperity will follow.
Using this simple strategy last year, I advanced my own retirefund by over 220 per cent. Last month alone, I doubled my money on one stock and I believe that over the next two months, it will double again.
This month another of our picks is up 36% on discovery of a new green tech energy process that may revolutionize how we deal with (and utilize) carbon emissions.
Are they all home runs? Of course not. Anyone who tells you they only hit home runs is lying through their teeth. However, if you hit a home run every 5th time at bat, then you will be a heavy hitter over the year. If you get a single, a double or a walk on 3 of the other 4, you will win the batting championship, hands down.
The Obama administration has been pushing for over a year to get derivatives trading out of the banks basements and back rooms and into the light of exchanges. The central point of the legislation being hashed out at this writing will force the most derivative trading to be done in a public forum, administrated by exchanges.
This will shed some light on the trillions of dollars in nominal value which changes hands every day in derivatives like credit default swaps (CD'S) and other paper as well as many futures and options contracts. Exchanges such as the Chicago mercantile Exchange, the ICE, Euronext and other online exchanges, stand to benefit from the move to openness in derivatives trading.
However, there is another market that stands to benefit from this legislation. that is the market for online (internet) domain names. Here are some that are currently offered for sale:
Maybe in this crazy market environment, it is time for your portfolio to take a turn toward technology, in a market that is still flying under the radar of most investors. Just a thought!
"Bulls make money, bears make money, pigs get slaughtered" Jim Cramer - Mad Money
Yes, Jim Cramer can drive you nuts with his ranting and raving about stocks and investing. Sometimes he is right, sometimes he is wrong (just like the rest of us) but of all of his rantings, I sure like the quote "Bulls make money, bears make money, pigs get slaughtered". Jim drives home this simple thought every night on his CNBC show, Mad Money.
Jim's style can grate on serious investors and newbies alike, but one thing is for sure, he does try to enlighten the small retail investor and this quote is far and away, one of the best pieces of advice he gives every single night to his viewers. If you don't listen to this golden piece of advice, you stand to lose your shirt, and more.
If your investment strategy is to throw money on hot stocks and hope for a home run, then you should change the game. You are better suited to the game of craps at the local Casino. With that attitude, you may actually do better at the Casino, than in the market.
Economic forecasts are never certain. If you put three economists in the same room, you will end up with three entirely different opinions of where the economy, and by extension, the market is headed. Don't invest in stocks because of an economic forecast! Invest only when you have done your own home work on an individual stock, it's market niche, it's earnings/potential, it's management, it's trading range, and analysts opinions. (Actually we like stocks that are under the radar of analysts, but is for another post).
The bottom for traders is this! If you have a stock that is up say 20% to 30% and you don't take at least "some" profit, then consider yourself a pig, and expect to get slaughtered. You don't have to sell because a stock is up, but taking "some" money off the table when you are up is simply a fact of good trading.
If as opposed to "trading" you consider yourself a long term investor and you are not concerned with short to medium term profits, you may still wish to "take some off the table". It just make sense because, as you've heard many times, "a bird in the hand is worth more than two in the bush"!
And Pigs can't fly! but of course, you already know that!
Good investing- HP
PS: and by the way, don't forget to pay down some debt this year. A great investment is not to owe more money than you have. You don't want that burden in retirement, especially in this environment.
Is the air getting thinner up here, or am I just having a "Deja vu" moment after a year of Lehman Brothers, Bear Stearns, Merrill Lynch, AIG, bailouts, GM, Chrysler, Fannie, Freddie, the mortgage crisis, gold spikes, Greece, Portugal, Derivative doldrums, dollar demise, Euro borrow, Volcanoes, sub prime, Fab Fabrice, Bernie madoff and who ever else "made off" !!
Should we feel good about the great earnings reports coming in this quarter, or feel nervous because those earnings may be thin air themselves as bailouts and new accounting rules fudge the real numbers? And what was the problem with those big investment banks....hhmmmm, oh yes, now I remember, the 3 $Trillion or so in poisoned mortgage derivatives those banks somehow do not show on their books any more? Hmmmm.......Now where oh where did those numbers get to.......must have misplaced them I guess.
Actually, since I have done quite well over the past 12 months, I'm feeling pretty good. Maybe I'll go to the black jack table again and try my luck, or maybe roulette this time. No, craps, now that's the ticket.......or maybe......well.......if I took my winnings and put it in the bank for awhile........hmmmm decisions, decisions!
What would these two events do to the economic outlook of North America, and the world, for the next 50 years? Are these events even possible? Are they likely? Are they "pie in the sky" theories?
In a recent article ( see World changing technology ) we discussed a new, technological breakthrough, by a small California Company, Carbon Sciences, which may allow large emitters of CO2 to not only capture it, but turn the CO2 into gasoline.
As if that announcement wasn't eye opening enough, they claim that they can do this with no measurable pollution result. Researchers also state that the process will work just as well with oil sands and shale deposits. As if that isn't enough to get investors attention, they advise that, although it can be refined in traditional refineries, this synthetic oil is best refined in micro refineries which can be built for 25% of the cost of today's refineries. The United States Government has already approved construction of one such micro refinery to test the UTA Lab's breakthrough technology.
The coal being used is one of the cheapest, Lignite, which is found in abundance in Texas and around North America. Texas lignite coal sells for $18 per tonne. The coal conversion technology uses one tonne of coal to produce 1.5 barrels of crude oil. One barrel of crude produces 42 U.S. gallons of gasoline. In other words, $18 worth of coal yields 63 gallons of gasoline: 0.28 cents per gallon! In other words, if this technology proves out, both the USA and Canada (as well as many other democracies around the world which have abundant supplies of coal, will own centuries worth of cheap energy, and become net exporters of that energy!
Without having first hand knowledge, I will wager here, that the oil industry has a big stake in this technology and who better to develop such innovation than the deep pocketed U.S. oil companies. It is in their financial interests to keep the good ole US of A hooked on it's product(s). As both China and India grow their middle class, energy production needs to use every resource.
As Natural Gas companies ramp up production from traditional finds as well as giant shale deposits which exist all over North America, the price of that resource continues to drop. North America has the largest deposits of Natural gas in the world today, and that resource alone could power North America for hundreds of years.!
So how do we, as investors, digest this new information and how can we make it work for our portfolio's?
In the short term, until new technologies are accepted and come on stream, the price of oil will creep up as this shaky recovery takes shape. However, as these technologies get proven and are adopted large scale, the price of oil could sink dramatically (still several years out). If oil can be produced from a cheap, abundant supply of coal, on shore in North America, without damaging the environment, then the whole dynamic changes. I'm not an economist, however here are some possibilities that come to mind:
1. Coal mining would intensify throughout North America, creating blue collar jobs in small communities currently devastated by the economic down turn, with the resultant economic spin offs to equipment suppliers and construction companies, to those mining companies.
2. A new boom in refinery construction would also create hard hat, engineering and tech jobs, as well as create the same sort of spin offs to suppliers.
2. Oil sands production will halt, because you cannot dig bitumen for processing at $25 per barrel. (Even though the UTA process works on bitumen as well as coal)
3. Investments in OPEC oil resources would be severely tested as demand from it's largest customer, the USA, begins to drop dramatically.
4. As more power plants can be built using cheap oil and Natural gas (as well as nuclear and wind energy), the demand for Electric Vehicles (EVs) will grow, along with the demand for Lithium which will be used to store energy.( A contrarian argument can be made here for the growth of Hybrid vehicles instead of electric, because of cheaper gasoline.
5. Shipping oil via tankers may drop significantly.
6. Railways will be winners as coal and natty gas are shipped throughout North America and more petroleum based products are again made on this continent and shipped trans continent. (Warren Buffet you old investor you!)
7. The usd will continue to slide, until these events begin to unfold, at which time it will strengthen once again.
8. Industry will return, at least in some form, to North American communities powered by cheap energy.
9. Huge, energy market speculators, like JP Morgan, will no longer be able to hold the American consumer hostage by holding tankers full of oil offshore and spiking the price so they can sell into the inflated market.
10. New Fuel Cell Stack, Power plants powered by plentiful natural gas will be built, reducing co2 emissions, and helping to "electrify" the transportation industry along with Wind Energy.
These are only some of the possible outcomes, and I am sure that more learned readers than I can come up with a myriad of possibilities. No matter how you slice it, if these technologies take hold, along with the Fuel Cell industry, the Lithium boom , Wind energy and Solar, and the advent of the Electric car, the economic outlook for this continent will brighten once again, as we lead the world in production and possibilities.
Last year we told you to "hold on to your Loonies" as the Canada buck was trading around .77 usd at the time. Needless to say, we told you so! This week both the National Post and RBC are telling you the same thing, forecasting that by the end of the second quarter, the Loonie will trade "above" the U.S. dollar.
There has even been a spike in put options of late which allow the buyers to sell Aussie dollars for the Canada buck (Loonie). As the world searches for more places to "stash their cash", Canada has been at the forefront. The soundest banking system on the planet (Four of the five major banks just reported profits above analysts expectations) coupled with many natural resources, makes Canada a good bet for foreign investors and with the latest Canadian budget, that outlook brightens further, as the Canadian Government has done away with restrictive bureaucracy that kept, especially, American V/C firms from investing in Canada. With those restrictions gone, more capital is looking to Canada for safety as well as innovation in energy, bio tech, mobile web technology and numerous other businesses.
Canada projects (and so do many economists around the world) that it will be first mature economy to emerge from deficit spending. As the largest supplier of oil to the United States, and with an abundance of Natural Gas, hydro power and recently wind power, Canada is well positioned in the energy sector, with the largest consumer of energy right next door.
Add to that the fact that Canada holds over 20% of the worlds fresh water supply while it's citizens make up only .03% of the worlds population, and the outlook becomes brighter still. Oh yes, have I mentioned Canada is the #2 suppler of diamonds to the world, (the #1 supplier of "non-blood" diamonds) and is in the top 3 % of suppliers of Potash, gold, copper, nickel, uranium, platinum, etc. It's known reserves of natural gas is second only to the United States at present, but will probably take the number one spot as exploration ramps up for shale gas.
Even manufacturing is flying in Canada as Bombardier of Montreal takes on the Giants of Aerospace, Boeing and Lockheed Martin, at least in the regional jet space, while it's rail car division signs more new contracts in Europe and Asia for high speed rail in the $Billions. Ballard Power Systems, the granddaddy of fuel cell technology is signing contracts in Europe and especially India to supply those areas with clean tech portable power for their mobile web expansion. Ottawa based Wilan Technologies has signed 212 licenses for it's mobile web technology and on March 11th, it stands to reap even more rewards from it's patents as Apple and 18 other tech giants face a Markham hearing in a Texas court to determine how much they have infringed on Wilan's patents.
Magna International, Inc. is an Ontario, Canada based company, which produces a massive amount of auto parts for many players in the auto industry. It also has a new division, Magna E-Car Systems, that provides integration of components and systems, as well as the development and production of innovative complete-vehicle solutions, from engineering to turnkey systems, for all hybrid and electric vehicle programs around the world. Magna also manufactures other automotive systems, assemblies, modules, and products.
Encana is a major natural gas supplier, with huge investments in shale gas from Texas to New York, from Vancouver to Nova Scotia besides it's already extensive regular natural gas projects. Encana recently split into two entities, leaving most of it's oil business to a new company Cenovus a now lean oil player based in Calgary Alberta. As two separate entities since November 2009, these two companies figure to factor in to the North American energy market in a big way over the next decade.
TD Bank, Canada's second largest bank, is expanding into the U.S. market at a time when many U.S. banks are ripe for the taking, and it expects that it's U.S. arm may outpace it's Canadian system of 2,000 branches in the not too distant future. Currently, without that growth, it already stands at North America's 7th largest bank by capitalization.
In 9 out of the last 10 years, Canada has not only been in "the black" but has actually paid down debt in each of those years, while the rest of the G20 sank deeper. Even with this years deficit, caused by international events rather than domestic, Canada's "per capita" debt is less than half that of America.
The Loonie is outshining the usd for good reason. Natural Resources, Natural Gas, Oil, Aerospace, mobile web technology, Clean Tech, energy, auto, bio science and banking are only some of the strengths of the "True North strong and free", so as we said before, hold on to your Loonies, and reap the rewards of years of restraint and good management. Canada's investment landscape is becoming a lot less boring, and a lot more profitable.
"Capitalismistheastoundingbeliefthatthemostwickedestofmenwilldothemostwickedestofthingsforthegreatestgoodofeveryone" John Maynard Keynes
"ThebestwaytodestroytheCapitalistsystemistodebauchthecurrency" Vladimir Lenin
As more Billionaires are made, and the current ones increase their wealth in leaps and bounds, in the same year that workers are tremendously punished, and stand to lose their futures, one wonders if Capitalism itself isn't the third system to meet it's fate after National Socialism (Nazism) and Communism. Today, the pure Capitalist system is shown wanting, as never before. Let's call it "Kudlow Capitalism" after CNBC's very outspoken, cheer leader, of the billionaire club, Larry Kudlow. You know, the TV host who never allows anyone with a different slant on Capitalism to talk more than 20 seconds without either cutting them off or talking over their voices. The same guy that is now blaming President Obama for all the troubles, along with Fox news, who now resemble the Nazi propaganda machine of the 1930's
When "investment banks" hoardtankersfullofoiloffshore, awaitingariseinoilprices, so as to pounce on the unsuspecting consumer like a cougar, isthatgoodfortherestoftheeconomy? Remember, thisisnotanoilcompany that needs storage space for a glut on the market, butan "investmentbank"! Shouldtheybeallowed to speculateonsuchalargescale, insuchanecessarycommodity? Oilspeculationisonlyoneexampleofthe "fingersinthecookiejar" mentalityofbiginvestmentbankslikeJPMorganandGoldman Sachs. AsI'vesaidbefore, iftheprice of oilis $70, youcanprobablychockup $25ofthatpricetothesetypesofgiant, marketmoving, speculators. (That'sabout36% ofthecostoffillingupyourcarsgastank). NowonderGShascometobelabeleda "Giantvampiresquid" smotheringthefaceofsocietywiththeirtentaclesfollowingthesmellofmoneyintoeveryorifice.
Several years ago, GS collected a $300,000,000 fee to help the country of Greece essentially fudge the numbers of their national debt. (to allow the lying Greek government to get into the Euro zone by skirting the necessity to disclose it's total debt ratio) Now their bets against that same debt stand to make them even more money. Essentially they gave Greece a reason to burn the house down, then bought insurance against the fire. Is this fraud or just good money management. You decide if they deserve the title of Vultures of Wall Street! (See Bank Bets - New York Times )
Investors in the Euro have already decided, by dumping their Euro's. Greece may yet get bailed out by it's Euro partners, but don't count on it. Why should hard working, prudent Germans, who have recently been told they cannot collect old age security pensions until after age 67, suddenly feel the urge to bail out free spending and freeloading Greeks, who can retire at 60. With Spain Portugal and Italy waiting in the wings for their own rescue, why would Germany and France (who have troubles of their own) even consider it. Greece should be ejected from the Euro zone unless or until they get their sick fiscal house in order, and their bulging debt under some sort of control. Civil unrest will result.
Speaking about sick fiscal policies and massive debt, TheUnitedStatesbudgetforecastsa $1.7Trilliondollardebtforthisyear, bringingtotaldebttoaround $14T (dependingonwhichnumberarecrunched) byyearend. If America continuestopumpliquidityintothesystem, thestormcloudsof2008will begintopailincomparisonwiththoseformingover2010andbeyond. TheU.S. GovernmentisnowthesolebackerofmortgagesintheCountrythroughit'scontrolofFannieMaeandFreddieMac. Iftheynationalizedthosetwoentitiesrightnow, thatwouldaddover $5TrilliontotheU.S. Debtbook. AddtothatthefactthatChinaisowedabigchunkoftheUnitedStatesdebtatatimewhenatradewarwiththeCountryloomslargeandthosestormcloudsgetdarkerstill. Chinaholds $2TrillionintheirFEaccount, (including $800BillioninU.S. debt) hasbeenstoringupmassiveamountsofcommodities, isaheadintheproductionofgreenenergyinitiativesandhasmorethanthreetimesthepopulation, sowhoisbestsuitedtowithstandaprotractedtradewar? Coupleallofthiswiththecontinuing "gamingoftheU.S. system" bythevultures of Wall Street, andthepictureforprosperityintheGoodOleU.S. ofAisdimmingdaily.
Whethertheinfusionofmoneycomesfromtaxpayers (TARPandit'silk) orfromcommonshareholders, (asinConradBlackscase) thereisalwaysavampiresquidswimmingnearbytolatchonandleacheverybitofmoneyitcansettleit'stentaclesupon. WhydoesthegeneralpublicalwaysseemsurprisedwhenWall Street Vulturespayouttotheirexecutives, over $100Billioninbonusesforoneyearofspeculation, whiletheAmericantaxpayerisgivenabillthatneitherthey, theirchildrenortheirgrandchildrenwillbeabletopay.
Itissaidthat, "powercorruptsandabsolutepowercorruptsabsolutely". Sincetheearly1970'swe'vebeenfedthemantra" greedisgood" and "freemarketscanregulatethemselves" (greedgood - regulationbad - ie: Larry Kudlow and company) andthatGovernmentshouldjustgetoutofthewayandletmarketsregulatethemselves. Wearenowreapingthepainfulrewardsofthatmindset.ThevulturesofWallStreethaveproventhat "Greediscorrupt, andabsolutegreediscorruptionabsolute"! Theoppositeofgreedisnotthrift. Itisgenerosity. GenerosityisawordcompletelylostonWallStreet. Vulturesaren'tgenerous, indeedtheydon'treallycarewhotheyfeedupon, butonlythattheyfeed.
Thecrookssettledinandtookoverthestoresolongagothattheyhaveconvincedthepolicethattheyareactuallytheowners. Onlywhentherealownersreturnanddemandchange, willrealchangeoccur, butdon'tholdyourbreath. Everytimethatnotiontakesshape, thecrooksrally the troops in Washington and the uninitiated across America, then threatentoclosethegreat Casino, andeveryonegoesawayuntilitrestocksandre-opensforbusinessagain.
Maybeit'stimetotear down the Casino and start again!
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