- The deep-sea drone: Not just for hunting missing passenger jets
- When falling stocks in your portfolio can be a good thing
- On alert for a dollar rally… and a new gold slump
- Falling knife alert: A warning about Chinese Internet stocks, and a far better opportunity right now
- The alarming shortage of single women in a major U.S. city… choosing our words carefully… and more!
“Why are submarines painted black?” reads question No. 12 on a submarine FAQ maintained at the U.S. Navy’s website.
“Submarines are painted black to help them hide,” says the answer. “It is essential for submarines to hide while doing their job. The black color has proven to best help the submarine hide in the ocean.”
The history of submarines is, to a great extent, a history of how to stay hidden. A 1984 New York Times story describes a race “pitting American and Soviet designers of submarines against Soviet and American designers of systems for detecting submarines.”
Thirty years later, the U.S. Navy is about to deploy a game changer… and as our Byron King is wont to say, it’s highly investable.
But first… we should back up a bit.
“The long, yellow torpedo-like object is not a weapon,” Byron explained last month. “It’s an unmanned underwater vehicle (UUV) — a drone of the deep sea.”
You might recall the Navy deployed this deep-sea drone in the Indian Ocean last month to search for Malaysia Airlines Flight 370. If you have a really good memory, you’ll recall Byron tipped you off to its deployment days before it became front-page news. That’s the advantage of having Byron on our team and having his extensive connections inside both government and industry.
We didn’t go into great detail at the time… but perhaps you surmised the Navy did not develop this high-tech wonder just in case a jetliner vanished without a trace.
Today, we share the rest of the story.
“The Navy wants to monitor the global water column and track submarines across the world,” says Byron. And the deep-sea drone — Project Bluefin, as it’s known — is key to making it happen.
Understand it’s an early-stage prototype. But already Byron says it’s proven it “can go into the water, submerge to ungodly depths, maintain station and geoposition for weeks at a time (maybe longer… that’s classified), navigate around with high precision, do interesting stuff and return to mama when the bell rings.
“The idea is to go far down, into the ‘deep sound channels’ of the world’s oceans, and listen upward, so to speak. How deep? Well, press accounts cite 12,000 feet, from its operations in the Indian Ocean looking for debris from Malaysia Airlines Flight 370; but assume a 50% safety margin, so think 18,000 feet.”
Bluefin will play a huge role in anti-submarine warfare (ASW). As Byron explained in our virtual pages a year ago, the Pentagon considers ASW relevant again, for the first time since the collapse of the Soviet Union. The Russians and the Chinese are both adding to their sub fleets.
“As other nations build and buy more and more submarines, the need for anti-submarine warfare platforms increases proportionally. In many respects, ‘other’ submarines may represent a great asymmetrical threat to Navy, much like guerilla fighters in recent land conflicts.”
Like it or not, a new Cold War appears to be shaping up. And it will direct a massive flow of investment dollars for years to come… both in conventional warfare and the financial-warfare realm we talked about on Wednesday. Byron pulls together the full story behind a once-a-generation moneymaking opportunity when you follow this link.
The major U.S. stock indexes are stabilizing after getting pummeled for two straight days. The S&P 500 is barely changed at 1,871.
The big economic number of the morning was housing starts, and it surprised to the upside — rising 13.2% from March to April. On the other hand, it was all condos and apartments. The housing recovery remains stalled.
“A stock that moves against you can be the best thing to happen to you,” says Jonas Elmerraji, with some timely guidance.
In his entry-level newsletter Penny Stock Fortunes, Jonas zeroes in on small stocks Wall Street overlooks. “By definition, a stock needs to be underpriced from the get-go in order to get our attention.
“At the very least, it’s foolish to assume that other investors will suddenly see the error of their ways from the very moment we decide to click the ‘buy’ button. That just doesn’t happen in the real world. Instead, when we buy mispriced small stocks, we’ve got to be ready to play the waiting game for our investment thesis to play out. That’s investing for you.”
But how is a falling share price good for you? “A stock drop gives you a good opportunity to buy more if you still believe it’s undervalued. But for us, the benefits are much bigger. Because the stocks we buy are the smallest names on Wall Street, the possibility of an acquisition is always on the table. And often, a drop in a stock’s price is the only way to get a company bought.”
Case in point — a computer-storage maker Jonas eyed last year. It fell 40%… and then rocketed up when a buyout offer came through. Result: 24% gains in only three months. The lesson: “Taking a haircut on a small-cap position opens the doors to a much bigger acquisition premium.”
“We could see an extended dollar rally begin any day now,” says Greg Guenthner of our trading desk.
He directs our attention to this chart of the dollar index, which measures the greenback against a basket of six other currencies, primarily the euro…
“You can see how the index is approaching levels that typically signal a bounce,” says Greg. “In early 2013, what looked like a massive breakdown turned into a strong rally that pushed the index over 84. This rally also coincided with gold’s big fall from $1,600.”
A dollar rally has the potential to tank gold back toward its $1,200 lows from last year.
For the moment, gold is holding its ground: The spot price is down about $3, to $1,293.
“It’s time to start looking for bargains in Chinese Internet and media stocks again,” advises Rick Pearson of Agora Financial’s Catalyst Trader.
Rick warned us in late March to steer clear during April because that’s when U.S.-listed Chinese firms file their 20-F Forms with the SEC. Accounting “irregularities” have a way of surfacing in those reports… and when that happens, traders tend to dump all their Chinese holdings in a panic, even the ones with clean books.
But April of this year passed uneventfully. So Rick is putting his considerable China experience — he learned to speak Mandarin while an investment banker in Hong Kong — back to work.
“With over 500 million users, China boasts a bigger Internet market than the U.S. and Europe — combined!” Rick enthuses.
“But it gets even better. Not only is China’s Internet market the world’s largest, but it is still the world’s fastest growing. There are still over 750 million people in China who are not online. But an increasing number of them will be joining the Internet ranks each coming year.
“Chinese Internet stocks have been on fire for over 18-24 months. Many popular Chinese Internet stocks rose by five-10 times. Examples include Vipshop (VIPS), YY Inc. (YY) and Qihoo (QIHU).”
Recently, many of these names have pulled back 30% or even more. But Rick says it’s not a buying opportunity: “The easy money has already been made in these names, and what remains is a risky gamble. Even though some of these names represent great businesses, the shares themselves could fall by another 30-50%. It simply isn’t worth it to jump in this late in the game.”
Instead, Rick is turning his attention to provider of Chinese Web content that stands to double in the next 12 months. The catalyst? Strong earnings in each of the next four quarters. An additional catalyst? It’s cheap enough to be buyout bait.
For access to all of Rick’s recommendations, look here.
“Seriously, please move here,” blogger Jeff Reifman urges single women.
Mr. Reifman lives in Seattle, where he’s a tech writer and consultant. He recently crunched some local demographic figures and reached a startling conclusion, as summarized by the Puget Sound Business Journal: “A Seattle blogger is blaming Amazon.com Inc. for making it more difficult for single straight males to find dates.”
Amazon’s headquarters is in Seattle, and it’s hiring. By his reckoning, the firm’s local workforce already skews male by a 3:1 margin. Thus, he surmises that by year-end, there will be 130 single men in Seattle for every 100 single women.
Hmmm… We seem to recall that’s the same ratio of young men to young women brought about by China’s one-child policy. Just sayin’…
“Vladimir Putin is a thug,” a reader writes by way of reply to something we sent out a few days ago with the subject line “Vladimir Putin’s Gutsy Decision”:
“But then,” the reader goes on, “what could you expect of an ex-KGB leader? I want to deflate the notion of a ‘gutsy decision’ by a thug, so here goes.
“A pragmatist is someone who believes that the good is whatever works in a given situation. He has little or no concern for ethics, standards, principles, values and, least of all, human lives. For example, if he has to sell his mother down the river to achieve his aim, he will do it in a heartbeat. If a situation changes, then so will his approach. A practical person, on the other hand, undertakes an action only if it does not compromise his values and principles. Now that would be a true ‘gutsy decision-maker.’
“And about ‘the world’s supreme military power’: I wouldn’t be too enamored with that label. I would consider it to be demeaning, unless you believe that power comes through the barrel of a gun. It does not. It’s force that comes through the barrel of a gun. Force is destructive, whereas power is constructive. Think about it.”
The 5: Hmmm…
The reader is referring not to an episode of The 5, but rather a “lift note” that went out to every reader of The 5 a few days ago. These are messages whose only objective is to get you to click to a newsletter promotion.
[If you just fainted at the realization that we’re actually engaged in commerce around here, we’ll give you a moment to come to. It’s true. We have a payroll to meet, the whole nine yards…]
Word choices matter, whether in The 5 itself or an associated sales message — and rest assured your editor ponders both closely.
Putin had to calculate costs versus benefits in deciding whether to visit his nation’s new province in Crimea a week ago today. Surely he knew the State Department would label the act “provocative.”
But he went and did it anyway. Whatever you think of the decision, it required “guts” in the rawest sense of the word.
Or even another part of the anatomy, but using that word would have distracted from the message… Heh.
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Oh, yeah… “enamored” with being “the world’s supreme military power”? Yes, we get the distinction between force and power as the reader describes it. Or might versus right.
All we meant was that no one holds a candle to the U.S. military when it comes to the ability to put firepower on targets. Anyone who has a beef with Washington has to think and act “asymmetrically” — whether it’s a couple guys setting off roadside bombs in Iraq or Putin potentially scheming on… well, that brings us back to the promotion we wanted people to click to. Go here for the full story.