Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Updates, which I will be conducting throughout Europe during the summer of 2013. A three-course lunch will be followed by a PowerPoint presentation and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store at http://madhedgefundradio.com/ and click on ?STRATEGY LUNCHEONS?.
New York City - July 2
London, England - July 8
Amsterdam, Netherlands - July 12
Berlin, Germany - July 16
Frankfurt, Germany - July 19
Portofino, Italy - July 25
Mykonos, Greece - August 1
Zermatt, Switzerland - August 9
Anyone wondering about the long term future of the US economy should take a look at the chart below. It shows the unrelenting growth of services? share of American GDP growing from 25% to 45% over the last sixty years.
Far and away the fastest growth area has been in health care, and with the first Obamacare programs starting in September, that growth is set to accelerate. Financial services have also been a serious growth creator, for better or for worse. You can turn the chart upside down and the shrinkage in our manufacturing base is equally illustrated.
This is not necessarily a bad thing. Would you rather be mining coal or designing a website? These statistics make us the envy of the world, as services are where the future lies. By creating so many key technologies, our country has been the most successful in climbing up the global value chain.
Services largely comprise pure intellectual content, require no raw materials, and the end product can be transmitted over the Internet. There is a reason why nearly a million foreign students have flocked to the US for an education. Emerging nations like China and South Korea, which only see services generating 10%-15% of their GDP, are wracking their brains trying to figure out how to play catch up.
Global Market Comments
June 13, 2013
Fiat Lux
Featured Trade:
(JULY 16 BERLIN STRATEGY LUNCHEON),
(ANOTHER NAIL IN THE NUCLEAR COFFIN),
(SCE-PF), (NLR), (CCJ)
(THE CHINA VIEW FROM 30,000 FEET)
(FXI), (DBC), (DYY), (DBA), (PHO)
Southern California Edison Trus (SCE-PF)
Market Vectors Uranium+Nuclear Enrgy ETF (NLR)
Cameco Corporation (CCJ)
iShares FTSE China 25 Index Fund (FXI)
PowerShares DB Commodity Index Tracking (DBC)
PowerShares DB Commodity Dble Long ETN (DYY)
PowerShares DB Agriculture (DBA)
PowerShares Water Resources (PHO)
Come join John Thomas for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Berlin, Germany, at 12:00 noon on Tuesday, July 16, 2013. A three-course lunch will be followed by a PowerPoint presentation and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $219.
The lunch will be held at a downtown Berlin hotel within sight of the Brandenburg Gate, the details of which will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
Southern California Edison (SCE/PF) has announced that it is permanently closing its controversial nuclear power plant at San Onofre. The move is only the latest in a series of closures implemented by utilities around the country, and could well spell the end of this flagging industry. This is further dismal news for holders of ETF?s in the sector, like the Market Vector Uranium + Nuclear Energy ETF (NLR) and Cameco (CCJ).
SCE?s problems started in July, 2012 when a faulty steam generator tube released a small amount of radioactive steam and the plant was immediately shut down. An inspection revealed that 3,000 additional tubes were showing excessive wear, possible due to a design flaw, or perhaps their exposure to 45 years of high intensity radiation.
Supplier, Westinghouse, owned by Japan?s Toshiba Group, rushed in with a replacement generator, which failed within a month. That prompted the Nuclear Regulator Commission to demand a full license reapplication, which promised to be a contentious and expensive multiyear slugfest. That was all SCE needed to throw in the towel and move for permanent closure. About 1,100 workers will be laid off.
San Onofre has been a continuous target of environmentalist litigation since it was opened in 1968. You could have found a better place to build a nuclear power plant than the birthplace of the environmental movement. After the Fukushima nuclear disaster in 2010, another Westinghouse plant, Senator Barbara Boxer was not too happy about it either. It turns out there was no practical evacuation plan in the event of an emergency. Some 25 million people live within 100 miles of the facility, and there is no way you move these numbers anywhere in a hurry. The region is totally gridlocked even in a normal rush hour. That prompted Boxer to lead a series of congressional hearings, not just about San Onofre, but the entire aging nuclear industry nationwide.
The development means that Southern California Edison will have to write off the $2.1 billion in capital investment and upgrades that it has carried out over the last 20 years. Decommissioning will cost another $2 billion. These are the most expensive and toxic demolitions on the planet. Stored nuclear waste will remain on sight until a national solution is found. The costs will be entirely passed on to the region?s long-suffering electric power consumers.
I know the San Onofre plant well, as it is right on the border of the Marine Corps. base at Camp Pendleton. My dad was stationed there during WWII and was followed by a long succession of descendants. I used it as a landmark for inbound VFR flights to the base. I also practiced amphibious assaults on the beach, with traditional landing craft, light armored reconnaissance vehicles (LAR), and advanced hovercraft (LCAC). I also had to swim once. On R&R, San Onofre offered one of the best surfing beaches on the coast.
I am not holding my breath for the nuclear industry. For more depth on the topic, please see my earlier piece, ?New Nuclear Demolished by New Natural Gas? by clicking here.
Not Exactly a Crowd Pleaser
A Navy Assault LCAC
I have long sat beside the table of McKinsey & Co., the best management consulting company in Asia, hoping to catch some crumbs of wisdom. So, I jumped at the chance to have breakfast with Shanghai based Worldwide Managing Director, Dominic Barton, when he passed through San Francisco visiting clients.
These are usually sedentary affairs, but Dominic spit out fascinating statistics so fast I had to write furiously to keep up. Sadly, my bacon and eggs grew cold and congealed. Asia has accounted for 50% of world GDP for most of human history. It dipped down to only 10% over the last two centuries, but is now on the way back up. That implies that China?s GDP will triple relative to our own from current levels.
A $500 billion infrastructure oriented stimulus package enabled the Middle Kingdom to recover faster from the Great Recession than the West, and if this didn?t work, they had another $500 billion package sitting on the shelf. But with GDP of only $5.5 trillion today, don?t count on China bailing out our $15.5 trillion economy.
China is trying to free itself from an overdependence on exports by creating a domestic demand driven economy. The result will be 900 million Asians joining the global middle class who are all going to want cell phones, PC?s, and to live in big cities. Asia has a huge edge over the West with a very pro-growth demographic pyramid. China needs to spend a further $2 trillion in infrastructure spending, and a new 75-story skyscraper is going up there every three hours!
Some 1,000 years ago, the Silk Road was the world?s major trade route, and today intra-Asian trade exceeds trade with the West. The commodity boom will accelerate as China withdraws supplies from the market for its own consumption, as it has already done with the rare earths.
Climate change is going to become a contentious political issue, with per capita carbon emission at 19 tons in the US, compared to only 4.6 tons in China, but with all of the new growth coming from the later. Protectionism, pandemics, huge food and water shortages, and rising income inequality are other threats to growth.
To me, this all adds up to buying on the next substantial dip big core longs in China (FXI), commodities (DBC) and the 2X (DYY), food (DBA), and water (PHO). A quick Egg McMuffin next door filled my other needs.
Global Market Comments
June 12, 2013
Fiat Lux
Featured Trade:
(JULY 8 LONDON STRATEGY LUNCHEON),
(TESLA GETS AGGRESSIVE ON MARKETING),
?(TSLA), (GM), (F),
(WATCH OUT FOR THE CHIHUAHUA GLUT)
Tesla Motors, Inc. (TSLA)
General Motors Company (GM)
Ford Motor Co. (F)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in London on Monday, July 8, 2013. A three-course lunch will be followed by a PowerPoint presentation and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $229.
I?ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private club on St. James Street, the details of which will be emailed to you with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
Tesla (TSLA) CEO, Elon Musk, has taken off the gloves and is offering an innovative new hybrid lease that promises to bring in thousands of new buyers of his revolutionary, all electric S-1 sedan.
The package eliminates the downside risk that concerned prospective customers about the resale value of their cars down the road. Under the program, Tesla will buy back your car at 50% of the purchase price after 36-39 months. This equates to a rate of depreciation that is on par with other premium, high-end vehicles, like Mercedes, Porsche, and Jaguar.
Assuming that you buy the 85 kWh, 270 miles range S-1 for $79,900, this works out to a monthly payment of $1,025, also in line with the market. Tesla people tell me that since the plan was announced, 90% of the buyers have opted for the lease option. Many are actual cash buyers who are placing the maximum $50,000 down with the intention to pay off the $30,000 balance in six months, just to get the free put option on the vehicle.
Tesla is also moving full steam ahead with its national supercharger network, which will enable electric car owners to drive coast to coast. Only 45 minutes is required to obtain a full charge. Just last night, my S-1 upgraded itself online and I was presented with new superchargers in Gilroy and Bakersfield, California. I can now make it down to San Diego.
Elon has promised to take his family on such an expedition as soon as the infrastructure is in place some time next year. I am considering my own trip from San Francisco to Chicago, which according to MapQuest, I could do in 30 hours. After all, it will be free, less the investment of my own time at the wheel, and the wear and tear on the tires.
When I was a teenager during the 1960?s, I hitchhiked from the West to the East coast more than 30 times. I used to race my younger brother from Los Angeles to New York, who finally won with a record time of 49 hours. I met a lot of strange people in those days. Once, I was picked up in Texas by a nervous, chain-smoking woman driving a souped up Dodge Dart fleeing a violent husband, seeking refuge in California. She drove like a bat out of hell the entire way, and we made the Golden State in record time. It?s funny, the things you remember.
A drive across the Great American Desert can have a cleansing, almost rejuvenating effect, as long as you don?t mind the country western music on the radio. The last time I did this was during the eighties, when I drove my ?sister to graduate school at Texas A&M. That little foray found me line dancing with a bunch of drunken Aggies in a College Station bar. How is it that everything surreal that happens to me always occurs in Texas?
But I digress. Tesla has quit making the 40 kWh, 130-mile range version of the S-1, as virtually all demand was for the long range model. The waiting list is now down to two months, which is why they took the next step on the marketing front. The four-wheel drive Model X is still on schedule for 2014, and I am number 645 on the waiting list for that vehicle. I have already wired my Lake Take house for 220 volt recharging. Who cares what the price is!
When I stop at traffic lights in the city, I still get applause and thumbs up from cheering groups of pedestrians. And then there are those little notes tucked under the windshield wipers from admiring young women asking for rides. That, alone, is worth the $100k. The State of California has already sent me my $2,500 Clean Vehicle Rebate, and I plan to claim my $7,500 Qualified Plug-in Electric Drive Motor Vehicle Credit (form 8936) on my federal tax return this year.
I have received a lot of emails about the weekend Barron?s article panning Tesla. Elon says he can drop the cost of his batteries from $400 to $200 in five years, making his planned mass market $40,000, 200 mile range ?Gen III? Tesla profitable. General Motors (GM) says he can?t. Given the recent track record of the two companies, I am more inclined to back Elon.
Let me tell you what is really going on here. The automobile establishment absolutely hates Tesla, because Musk has proven everything they said was impossible. Tesla doesn?t advertise, as its innovative, low cost business model sells all of its cars online. This is why they are banned in Texas, which hasn?t the slightest interest in seeing non-oil forms of transportation succeed.
Tesla also doesn?t advertise. Open the pages of Barron?s, and you will find ads extolling the virtues of General Motors, Ford, (F), and Chrysler, but not one from the disruptive Tesla. It?s the same with the financial industry. Barron?s often publishes damning expos?s on tiny companies you have never heard of, but extolls the great wisdom and foresight of PIMCO, Fidelity, and Morgan Stanley, their largest advertisers. That is the free market, capitalist world we live in.
Gen III Tesla
Made in America
You never know what the third, fourth, or fifth derivative impacts a major economic trend can cause. That is how the collapse of the housing market has created a Chihuahua glut in California, where evicted homeowners are handing over their pets to animal shelters.
The diminutive Mexican canine enjoyed a boom in popularity in recent years, thanks to movies like Beverly Hills Chihuahua and Legally Blonde. Celebrities, like Paris Hilton, have also helped promote the breed, flaunting one in front of the paparazzi. Animal shelters in the Land of Fruits and Nuts have been so overwhelmed they have had to ship the ultra-cute, but utterly useless animals to pounds as far away as Toronto.
Will the unintended consequences of Greenspan?s low interest policy never end? Give the poor Chihuahuas a break! We can count on future dislocations to release more Chihuahuas on the market, as well as other exotic pets. How do you think all those alligators got into the New York sewer system and pythons in the Chicago subway?
