August 1, 2013
- “You should see some of the souped-up pickup trucks in the employee parking lot!” Byron King with an on-the-ground tale of U.S. manufacturing revival
- Eyeing bargains, wary about fraud: Jonas Elmerraji reconsiders his “China ban”
- The disease that cripples young boys… and the company that could stop it in its tracks
- Good location, lousy currency: Chris Mayer with the pros and cons from one of his recent trips
- Vancouver versus smaller, shorter events elsewhere… an easier workaround with Gmail’s new format… how to get even more of our best research free… and more!
“It’s hard to understate the gains in this report,” says a Bloomberg summary this morning.
The report they’re referring to is the monthly ISM manufacturing index. This number comes out on the first of every month. A number above 50 indicates expansion in U.S. manufacturing; below 50, contraction.
At 55.4, the July number is the best in more than two years.
Nothing ugly buried in the report’s internals, either. New orders? Up big. Production? Up huge. Jobs? Back in expansion territory.
Can’t chalk it up to government number fudging. This is a survey of actual businesspeople conducted by the private Institute for Supply Management.
The only cloud to this silver lining is that one month never tells the whole story. As you see, the number’s been in a mediocre range most of the last two years.
But even within that mediocre range lie remarkable stories of revival…
“When I head up toward Youngstown,” says Byron King, “I tell people that I’m time traveling to the future.”
Byron’s home base is Pittsburgh. Time was when he visited family friends in Youngstown, Ohio, he’d joke that he was doing “industrial archaeology” — driving through one bombed-out Rust Belt town after another.
No more. “Youngstown, and many other cities and towns along the way, are transforming. That is, the ‘shale gale’ energy boom — including development of the nearby Marcellus and Utica oil and gas plays — is pumping billions of new dollars into otherwise old, worn-out economies. The results are stunning.”
For example, “near Youngstown, the French company Vallourec has built a new plant to process oil field tubular goods. The gigantic facility cost over $650 million to build. Now it cranks out 350,000 tons of steel oil pipe and related products per year.
“Even more impressive, this is no dirty, grimy old industrial shed, like those that formerly dotted the region for much of the past century. No, this Vallourec site is almost a ‘clean room’ environment, filled with high-tech jobs that pay impressive wages. (And you should see some of the souped-up pickup trucks in the employee parking lot!)”
Byron’s been on top of these revival stories for more than 18 months now. And it’s still not too late to parlay those stories into big investment gains: He shows you why — and how to get started — right here.
Stocks did not react to the ISM number in the customary “good news is bad news” fashion of 2013.
Usually, a gangbusters economic number sends the major indexes tanking — on the theory that any sign of “recovery” would make it more likely the Federal Reserve will “taper” on its latest money-printing scheme.
But not today. If current numbers hold, the Dow will notch its first close above 15,600… and the S&P will break the 1,700 barrier.
Crude has zoomed this morning back toward its recent highs — currently $107.59.
In part, that’s a response to the ISM number — and robust manufacturing numbers from elsewhere in the world too. The eurozone rang in at 50.3 — the first reading indicating growth in two years. And China’s official figure rose slightly, to 50.3.
Gold tried to stage a recovery in after-hours trading yesterday, but it couldn’t hold. At last check, the bid was $1,311.
The date was January 2012. Our small-cap specialist Jonas Elmerraji had traveled to New York to attend a conference conducted by one of the biggest law firms in the world representing Chinese firms.
“One of the draws of the conference,” Jonas recalls, “was a panel of both short sellers and Chinese investors. That’s a little bit like sitting cats and dogs next to one another at a round table. They’re natural enemies. I’m not sure what our hosts were trying to accomplish by pairing the two side by side, but it sure was memorable.
“Things started off well enough,” Jonas goes on, “with both groups pointing out some of the cultural differences that create problems for investors.”
One common practice discussed, for example, was the tendency for Chinese companies to lie about their customer lists in SEC filings. They did it, they reasoned, to keep competitors from stealing their biggest customers. In the CEO’s eyes, it’s the moral thing to do.
“But to you or me,” Jonas writes, “it’s fraud, pure and simple.”
Jonas came back to our HQ in Baltimore and made a big decision for his readers based on what he saw: No more Chinese stocks.
Considering that over the past four years Chinese stocks have barely budged 7% while U.S. stocks have doubled, his readers weren’t missing much.
Now, 18 months later, Jonas is reconsidering. Carefully.
“I’ll be honest,” Jonas wrote recently. “I haven’t come to a definite conclusion when it comes to China. I think that it’s still too early to completely lift our ‘ban’ on Chinese stocks, but there could be some exceptional names that make it onto our radar in the latter half of 2013. They’ll require some extra diligence, to be sure, but the rewards could be well worth it.
“But we, as investors, need to draw a serious line in the sand: If a foreign company wants access to cash from U.S. markets, they have to play by our rules. The road to hell is paved with good intentions — providing a fake customer list is fraud, even if it’s done to protect the company from poaching rivals.
“The Chinese have a saying that ‘Muddy waters catch better fish.’
“Well, the waters are certainly muddy in the Chinese investing world right now, but the fish might just be worth the risks.”
“It’s painful to see young boys who should be bursting with youthful vitality confined to wheelchairs,” writes our biotech specialist Ray Blanco.
Duchenne muscular dystrophy is caused by a genetic defect linked to the X chromosome, so only males are affected. “Boys born with the mutation see their muscles waste away. They lose muscle endurance and the ability to walk and eventually their lungs lose the ability to breathe and their hearts their ability to beat. Most DMD patients can no longer walk by the time they’re 12 years old, and few live beyond the age of 30.”
Ray is eyeing the development of a drug that repairs the genetic defect behind the disease. As a result the body can once again produce the protein dystrophin, which we all need to keep our muscle fibers healthy.
Results from early trials look good: Patients’ production of dystrophin increased, and their ability to move around showed no signs of further deterioration. “With the data we’ve seen to date,” says Ray, “the benefit is very positive, and the risk is very low.” And the FDA has indicated it’s willing to accelerate its usual approval process.
Last week, Ray recommended his readers take some gains off the table from two of his recommendations — good for 100% and 160%. But as you can see, there’s plenty more where that came from. For access to Ray’s latest research, look here.
“Talking Turkey With Chris Mayer,” reads the headline of an article our globe-trotter sent us this morning.
Recently, Chris was interviewed by the frontier market specialist Chris Tell of Capitalist Exploits about… you guessed it… Turkey.
Here are some quick highlights from Mr. Mayer’s end on the good and the bad of Turkey’s current landscape…
The Good: “I like its location. It’s a good base to service the whole of the Middle East and North Africa. Turkey is a key energy hub largely because of where it is. And there are some formations that have geologists excited, and that they compare to America’s shale plays. It’s too early to call it, but there is potential for Turkey to produce more of its own energy.”
The Bad: “I think Turkey is a place of opportunity, though it may get worse before it gets better. Turkey’s central bank is trying to prop up the lira, but it has only so much firepower and it’s losing the battle.”
The Good: “The people I talked to were optimistic. I talked to people in manufacturing and in food products. They see the surge in demand coming out of the Middle East and Africa and even from Russia. And they see it in the sales figures they are registering.”
The Bad: “I heard rumblings, but did not really investigate while I was there, that the banks are a risk. They are leveraged and rely on short-term funding. Not a good combination.”
Conclusion: “I think the demographic growth trends in this part of world almost guarantee that the Middle East is going to be an important market. And Turkey’s economy is well placed to prosper because of it.
So mainly I plan to watch the themes we’ve been talking about — the continued growth of Turkey’s export-driven manufacturers, the growth of the domestic economy and the unfolding energy story — and perhaps most importantly, I’ll be looking for bargains.”
[Ed. Note: To date, hundreds of our readers have taken us up on an offer we’d never made — until last week.
You can get the fruits of Chris’ globe-trotting… Ray’s tech and biotech plays… Jonas’ penny-stock picks… Byron’s resource plays… Neil George’s income strategies… and Addison Wiggin’s big-picture Apogee Advisory.
In other words, we’re offering an unbeatable deal on six of our entry-level services. You won’t pay thousands of dollars for access… but your savings will easily add up to thousands. Follow this link to learn how it all works…]
“It costs no more to travel to Vancouver for four days than for two days,” writes a reader as people continue to weigh in on the future of our annual Symposium and the possibility of shorter events in other locations. “I doubt whether I would go for just two days.
“The benefits of the extra two days (in the four-day format versus a two-day format) far outweigh the additional costs, and this probably represents the ‘tipping point/factor’ in my ‘go’ versus ‘no go’ decision.”
“Over the last several years,” writes another, “I’ve read with interest about the Symposiums held just up the road from my home in Seattle, in beautiful Vancouver, British Columbia.
“But like many readers, time, family and upkeep has an already busy dad, husband and son-in-law busier than a cat on a hot tin roof. Because you’ve always held it so close to my home, I’ve always dreamed of going and bringing along the wife once we retire and are empty nesters. It’s not that far away for us, so I’m as disappointed as some of the attendees and readers at the thought of discontinuing it in Vancouver.
“So for my two cents, I agree with yesterday’s submission and others. Continue the big show in Vancouver, and sounds like there is enough interest to hold smaller events around the country.”
“My husband and I have never attended this conference,” a third writes, “because it is on the West Coast and we are not willing to travel that far at this stage in life. We do order the recordings, however.
“We would be willing to attend if it were on the East Coast. There are lots of great places to have it. For example, Charleston, S.C., and/or nearby resort islands. Or Alexandria, Va., perhaps, or the Washington, D.C., area. But not NYC, Atlanta or Florida. Someplace with charm, good hospitality, good food and lots to do.”
“I have attended the Vancouver Symposium for many years,” writes our final contributor on the subject today, “and have come to appreciate it more each year.
“Each year, there are always new speakers, and then many are repeats. There has been continuity and new and challenging speakers and ideas every year. From this perspective, it has turned out to be very good. However, I did not always believe this to be true. When I first attended, I thought it was both too long and too intense.
“I have come to realize that this perception was my problem and due to my lack of understanding about what this ‘symposium’ or any symposium was. I viewed this as a conference. I have attended many of those. I would spend a couple of days at those conferences and then sign up for another. Nothing about them was particularly eventful for me. The Agora Symposium is different.
“It has taken me some time to appreciate the value of its format and what it has become for Agora. I believe that the Vancouver Symposium has become a big part of ‘the Agora brand.’ I believe this for many reasons, and I’m not going to elaborate, but they include: the city of Vancouver the time of the year and the quality of the event itself.
“Agora has spent a lot of time and money promoting this event, and it has become what the promotions of the past have promised. Besides that, you have become very good at putting it on.
“The idea of smaller events in other cities may be a good one, but it should be to enhance, not replace, the Symposium. Vancouver should be the ‘creme de la creme’ (for Bill) or ‘lollapalooza’ ( if you want to attract young people). Let attendees work up to ‘the big league.’
“I do not have any idea about the financing of these events, and I know even less about marketing,
so you will have no trouble taking this email for what it’s worth. And because I am a Reserve
member, I am now on the cost side of every one of these events that I attend. Besides which, I have long since gotten considerably more value than my membership cost.
“Whatever is decided, I will be able to benefit in some way.”
“Regarding this Gmail issue with the new inbox tabs,” writes a reader after our heads-up yesterday: “There is another solution. In the settings menu (the icon that looks like a sprocket), choose ‘configure inbox.’
“On the left-hand side of the dialog disable all tabs except the ‘primary’ inbox. This will revert to the old style inbox with all mail going there.”
The 5: The best solutions are usually the simplest. On behalf of any Gmail reader who might not be getting his full dose of The 5, thanks!
Cheers,
Dave Gonigam
The 5 Min. Forecast
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