November 18, 2013
- Disaster relief — subtle weapon in a new Cold War
- Sector shows four years of continuous growth: Elmerraji says it’s not over yet
- The phenomenally stupid way investors are piling back into Europe
- Saudi America, accelerated: Best way to play the U.S. oil boom
- The New York Stock Exchange’s “garage sale”
- ATF’s less-than earth-shattering discovery…the virtues of New Zealand (or not)… and an extraordinary offer available for only a few hours more
“This is exactly the kind of mission we train for,” says Lt Col. Jeff Menasco, commander of the U.S. Air Force’s 36th Airlift Squadron.
His unit is in the Philippines, delivering relief from the typhoon that struck 11 days ago. The Navy also has a presence; the aircraft carrier USS George Washington led an eight-strong flotilla that arrived last Thursday.
On Friday, Chinese state media fretted about playing catch-up in the aid game: “We believe China should send its warships to the Philippines too,” said the Global Times, a newspaper close to the Communist Party.
Evidently, the Global Times editors didn’t like seeing reports in Western media about how Coca-Cola and Ikea have sent more aid than the Chinese government. “That won’t help Beijing’s campaign to win over neighbors with its soft power,” said The Associated Press.
The aftermath of the typhoon spotlights nothing less than a new Cold War.
In November 2011, when Hillary Clinton was still secretary of state, she declared, “The United States stands at a pivot point” — withdrawing troops from Iraq and Afghanistan and shifting attention to East Asia. The D.C. wonk class has spoken of “the pivot” ever since.
“Two years on,” writes Addison Wiggin in the latest Apogee Advisory, “we daresay history might well look upon this moment as the formal declaration of a new Cold War.” More than two decades after the demise of the Soviet Union, China has become the new “default adversary,” according to James Dobbins of the RAND Corp.
The Philippines have a mutual defense treaty with the U.S. The Philippines also have a territorial dispute with China. You can see where this might become a problem.
After Clinton’s successor John Kerry met with the Philippine foreign minister last month, the Washington Analysis and Assessment Service read between the lines of his pro-forma remarks and concluded that as far as the Obama administration is concerned, “the U.S. has a direct interest in resisting Chinese territorial claims in the South China Sea”
“Put it another way,” said Addison: “Washington is bound and determined to intervene in a messy dispute over islands in the South China Sea. The spaghetti-looking lines on the map nearby represent the competing territorial claims of not only China and the Philippines, but three more nations as well. The long U-shaped line is China’s claimed domain.”
“America,” writes Independent Institute foreign policy scholar Ivan Eland, “is now borrowing money from China to subsidize the defense of rich East Asian allies in their quest to militarily counter… well… China.”
The investment angle, you ask? Addison makes the case for two ETFs that can profit from “the pivot.”
Stocks came out of the gate strong this morning, the Dow cresting 16,000 and the S&P 1,800.
But at last check, the S&P has retreated below that round number, while the Nasdaq and Russell 2000 are slightly in the red.
Gold has given up its Friday gains, and then some; as we write, the bid is $1,282. Crude has retreated below $94.
“Auto stocks have been utterly killing it for the last four years,” says Jonas Elmerraji. Say what you will about the bailouts of GM and Chrysler, but “since early 2009, we’ve been in a financial environment that’s more or less purpose-built to move new cars.
“For starters,” he says, “the median age of an automobile in the United States is currently 11.4 years. That’s the oldest fleet age in the history of our data — and it points to pent-up demand for even more parts and even more new car sales in the next several years.
“At the same time, practically free credit for the foreseeable future is another huge factor for car sales growth.
“As the chart above shows, we’ve seen nearly straight-up sales growth for new cars since 2009.”
Jonas currently holds five auto-related names in the Penny Stock Fortunes portfolio… and after checking out two industry shows in Las Vegas, he’s looking to add more.
“Investors are piling into European stocks,” says Chris Mayer, feeling a tinge of trepidation.
Investors have pumped $2.05 billion into U.S.-based funds that invest only in European stocks… and all of that net gain has come in the last three months.
“Investors, as a class,” says Chris, “are not among the brightest of our species. Collectively, they are often as dumb as a bag of hammers.”
So in a quest for Spain exposure, they go for the iShares Spain fund (EWP). “Here is a telling chart. It shows you the shares outstanding for EWP have almost doubled since July as demand for the fund as soared.”
So what’s the problem? According to Horizon Kinetics, the top 10 companies in the index get three-quarters of their revenues from outside Spain. “I remember when I was in Spain and looked at Spanish companies, it struck me how few of the listed companies were actually plays on Spain.”
“Here is some advice,” Chris concludes: “If you are going to invest in a fund, take a look at what is actually in fund.” And if you’re wondering, Chris’ favorite European play — what he called “the biggest fire sale in history” — is still a buy.
The U.S. is accelerating its drive to reclaim its title of the world’s leading oil producer.
Byron King just got through reviewing the annual World Energy Outlook issued by the International Energy Agency: “In 2012, IEA forecast that the U.S. would overtake Saudi Arabia as the world’s largest oil producer by 2017, based on extensive use of new tech like fracking. Now this year, in 2013, IEA is advancing its prediction ahead. According to IEA, the U.S. will overtake Saudi Arabia as the world’s largest oil producer of oil by 2015.”
But the IEA says it won’t last: By the mid-2020s, the OPEC countries will once again account for most of the increase in global supply.
“The IEA report is filled with all manner of assumptions that might or might not be valid,” Byron cautions. The right way to play it, no matter what the long-term outcome, is the oil services sector. “These guys have many great, profitable years ahead of them. IEA or no, in my view, there’s much more to come from the shale gale, both at home and abroad.”
Colon cancer patients have new cause for hope, according to our Ray Blanco on the science-and-wealth beat.
Ray’s following a company that’s already developed a proven breast cancer test. “The key,” he says, “is to identify the most predictive genes in a cancer type and then build a test that can use these genes to help a patient make a decision regarding his or her cancer treatment. To do this well, large studies in which an outcome can be compared with the particular genomic profile of a patient’s tumor have been necessary.”
One such study has just been published. “The results,” says Ray, “support the accuracy of the test’s ‘recurrence score,’ a genome-based measure of risk of disease recurrence. Furthermore, the study showed that the company’s scoring was also predictive of disease-free and overall survival in patients.
“We’ve amassed a large number of new cancer therapies in the past few years,” Ray sums up, “but without good diagnostics, we may be misusing, underusing or overusing them. Gene-based tests help make the best use of our therapeutics, helping patient health as well as reducing health care costs.”
Far from the glitz of the main trading floor of the New York Stock Exchange lies an unglamorous section known as “the garage” — a name that goes back to when people parked their horses and carriages there.
“It’s where you can find one of my favorite types of securities,” says our income specialist Neil George — “ones most investors and even most brokers have never heard about.
“Minibonds are a hybrid of stocks and bonds,” he explains. “In fact, they’re really nothing more than bonds that trade on a stock exchange.”
With a minibond, “the company enjoys the proceeds of a stock sale without having to jump through SEC hoops… and its dividend is treated like a debt, so the company gets a tax write-off, and it’s not considered taxable income subject to corporate tax.”
What’s it to you? “Minibonds trade for a fraction of what regular bonds costs. Standard bonds usually have a face value of $1,000. Minibonds tend to have a face value of just $25.”
So it’s easy to get started. Neil recently recommended a basket of minibonds paying 7-8%, delivering you 16 payouts per year — payouts that, unlike a dividend, can never be cut.
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Your tax dollars at work: The Bureau of Alcohol, Tobacco, Firearms and Explosives recently got around to buying a 3-D printer to see if this 3-D-printed-gun thing really works.
Short answer: It does. “The ATF,” writes J.D. Tuccille at Reason.com, “chose the Liberator, the first successfully fired model, to test.” That’s even though innovators have moved onto models made with real metal, as we documented last week.
ATF posted a fact sheet on its website promising, “ATF makes every effort to keep abreast of novel firearms technology and firearms trafficking schemes.” Don’t you feel better now?
“Of course,” writes Tuccille, “the whole advantage of 3-D-printing technology, and other innovations that enable DIY [do-it-yourself] manufacture of restricted and forbidden objects, is that they render the law largely unenforceable, since the activity takes place away from officious eyes.
“You can put any statute you want on the books, but there’s not much you can do to regulate what goes on in home workshops. Which is why the Department of Homeland Security has pronounced 3-D-printed guns ‘impossible’ to control.”
It really is revolutionary… and it’s already leading the way to new fortunes for early investors. It’s not too late to become one of them.
“For the reader that wrote in about Numbeo, you can look at all the statistics you want,” begins today’s mailbag, returning to the cost of living in New Zealand.
“But until you’re the one handing over the cash,” our correspondent continues, “that’s where the difference is. The people living there making minimum wage ($13.50/hour NZD) are crying just like minimum wage earners in the U.S., saying that it’s not a decent wage for anyone to live on. That will show you how expensive things really are there. Not to mention all the little taxes and fees for everything. They nickel-and-dime you to death. (Even though their smallest coin is 10 cents.)”
“We are Canadians who have lived in the U.K. for 15 months and in New Zealand for a total of 63 months over the past 14 years. As your recent contributor stated, numbeo.com is a good start in making comparisons, but it is not the whole story. The facts rule, so here are some:
1. 39% of Americans hold passports, 56% of Canadians, 71% of Brits and 75% of New Zealanders. So much for the opinion that Kiwis can’t afford to travel.
2. Price comparisons exclude the fact that there are some things that Kiwis do not have to spend on: winter clothing, snow shovels, snow tires, etc., tipping.
3. And some things they spend far less on: health care, insurance, legal services, sports and spectator sports — for example, for the price of one round of golf at Pebble Beach, you can belong to a very good oceanside golf course in NZ for a year!
“New Zealand has ACC, which pays for the bulk of costs incurred by accidents , thus dramatically reducing health care costs and eliminating associated lawsuits.
“Yes, gasoline is expensive, but distance travelled is considerably less for most folks (we average about 600 miles a month in NZ, half what we drive in Canada).
“Finally, the cost of government is far less in NZ, which has one less level of bureaucrats (municipal and federal, that’s it. In Vancouver, we support four levels of government!). When the NZ government tried to introduce a saltwater fishing license, the backlash caused them to give it up.
“Your efforts keep people thinking. Keep up the good work.”
The 5: Thanks. Our thread on New Zealand has carried on far longer than we ever expected… but part of the fun of bringing you The 5 each day is finding out what interests our readers.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: Your best available price on all six of our entry-level newsletters expires tonight at midnight.