- Published on Monday, 04 June 2012 08:00
- Written by Sara Nunnally, Editor, Inside Investing Daily
- Hits: 545
Yes, there's plenty to complain about. But whining won't make you rich. For that, we need to take advantage of the opportunities in front of us.
It's my new mantra... Opportunity, opportunity, opportunity. As a writer, I sometimes get stuck putting my opinion out there.
For the past several years, I could be forgiven for that -- there are a lot of things to be pissed about:
- A corrupt and inept government
- Inane regulations that don't protect me or other consumers
- Rampant greed in big banks and other big corporations
- Partisan fighting in Congress
- Global posturing and conflicts
The list could go on and on...
But for as real as these issues are, and for as necessary it is to talk about them, I've forgotten that my job is to bring you opportunities. It's actually in my job description.
Now, that doesn't mean we ignore what's happening in politics or economies around the world.
Indeed, these issues are key to big-picture investing. I use how the Federal Reserve is manipulating interest rates to find out how the U.S. dollar is really valued, and what that means for things like commodities, other currencies and our own debt situation.
I use the rampant greed in big banks to see how a $3 billion JPMorgan loss affects banking regulation and enforcement. What will that do to other banks like Citigroup, who just shelled out $153 million in a settlement over fraudulent loans?
In each of these areas is an opportunity.
That means from now on, "if it bleeds, it leads" is only part of what we bring to you... I want to make sure that blood is green. Or at least bubbling with dollar signs.
Big-picture investing is what I give my Macro Trader readers. I love finding huge, glacial shifts that are headed for a tipping point. These inflection points can be extremely profitable, and the trend can give investors years' worth of trades and opportunities.
Let me give you some examples.
- When the British pound collapsed back in the 1990s, George Soros made roughly $1 billion in one week.
- When the market crashed in 1987, Paul Tudor Jones made a reported $80-$100 million.
- When the mortgage crisis hit in 2007, hedge-fund manager John Paulson made $3.7 billion in a single year. And as the crisis continued, Paulson pocketed another $1 billion profit in 2008.
Of course, these are extreme examples of investors with a lot of money in the markets, but the point is, each of these investors took advantage of a major shift in the global market.
These shifts can take years to set up, but only weeks to make investors profits. And there are plenty of opportunities along the way. So let me give you a couple major shifts I've been looking at in Macro Trader.
The Global Money Shift
This is the idea that money is flowing out of developed (and possibly decaying) economies and into growing markets. It's happening at three different levels.
First, the U.S., Europe and Japan will decline in monetary influence over the next decade and more. (I told you these shifts take years to set up.) That money will be flowing into growing markets like China and India.
Second, these growing markets are going to shift from an export-based economy to a domestic demand-driven market. Instead of being the cheap labor markets, they will be manufacturing for their own consumption, which means demand for higher wage jobs and ultimately more internal consumption.
And third, those cheap labor jobs will filter down into emerging and frontier markets. Places like Vietnam and Peru, and even certain countries in Africa, could really boom.
With the Global Money Shift, you'll find opportunities on each of these levels.
Short the heck out of the euro, or make some bearish bets on U.S. indexes; seek out companies that are taking advantage of increased domestic consumption in growing markets (I like Starbucks for its growth potential in China and India); and check out some of the new exchange-traded funds that give you access to frontier markets (Vietnam is one of my favorites, and a beautiful place to visit).
As you make these investments, over time, there will be clear winners and clear losers. You can start to pile on the opportunities, as John Paulson did during the financial crisis.
But I want to share with you one other major shift that many of us have been talking about here at Insiders Strategy Group.
The Grand Energy Transition
Nearly all of our editors have touched on this idea over the past year... and it was a huge topic at our Natural Resource Investing Summit in Toronto in early May. (You can see what we said here.)
We've seen global conflict and wars over oil. Economies have risen (see OPEC nations) and countries have had economic shocks (see the U.S. during the embargo) all because of oil.
But what if there was another resource?
I'm talking about natural gas. The world has a glut of natural gas right now, and prices of this energy source have been falling for years.
This has set up another massive shift. Robert Hefner calls it the Grand Energy Transition.
In his book The Grand Energy Transition: The Rise of Energy Gases, Sustainable Life and Growth, and the Next Great Economic Expansion, he writes that heating costs for 65 million American homes have fallen by $20 billion.
Prices are coming down, technology is ramping up, and heads are starting to turn toward natural gas as a cleaner, abundant and domestic (for us, at the very least) energy source.
Industry is starting to use more natural gas and less coal.
Alternative fuel makers are turning natural gas in to synthetic fuel for jets and cars.
New pipelines are going to bring even more natural gas from our friendly neighbor Canada rather than shipping oil from across the ocean.
And fracking technology is opening up vast resources in unexpected places, boosting economies.
Again, this shift offers investors opportunities on a number of levels. And our editors have been all over this sector. In Macro Trader, I've turned readers on to a global leader in that synthetic fuel with gas-to-liquid technology.
That company is Sasol Ltd (SSL:NYSE). It's one of the few pure plays in this niche of the sector, and as the Grand Energy Transition heats up, this company could be leading the way.
The Grand Energy Transition and the Global Money Shift are just two of the major shifts we're monitoring in Macro Trader. There are many others, like the re-ranking of the U.S. economy after the coming recession, the great migration of people into mega-cities that will spark huge infrastructure opportunities, and the healthcare industry's big changes coming in coverage, the wave of patent expiries and the dynamic biotech sector.
As these shifts develop and unfold, so do opportunities. So along with our "rant-able" issue like the problems with our government, we'll be able to recognize where the profits lie.
Editor's Note: The biggest spending spree in modern history? It has nothing to do with 79 million baby boomers or bailout plans. It's a spending spree the likes of which the industrialized world has never seen before. I'm talking about nearly $1 trillion every year -- for the next 20 years -- that's on track to flood into this red-hot sector. But which companies are likely to benefit the most? And how can you get your own slice of this massive new spree? Get all the details here.
Getting Back to America
By Jared Levy, Editor, Option Strategies Weekly
What do euro-bank bailouts, LTROs, credit default swaps, China's GDP decline, European contagion, Greece, Spain, Italy or austerity have to do with what is happening in your backyard?
In most cases, absolutely nothing. Let me explain.
America is the greatest nation on Earth.We are one of the youngest and most powerful nations; formed out of a rebellion from the controlling governments of Europe and the U.K.
Our founders broke the rules of the game that had been played for centuries. They formed a free nation that thrived on its own and set an example that much of the world has tried to duplicate.
Ironically, many Americans have again become "slaves" to the rest of the world's problems. Even a country like Greece (with a GDP that's less than the state of Ohio) sends shockwaves through our stock market and our psyche.
Even if Greece breaks from the eurozone, it would have little or no real impact on any of us or the rest of the world, other than those who bought Greece's sovereign debt. Besides, those savvy enough to make Greek debt investments should know how to insure them anyway (unless of course you're a trader for JPMorgan).
The point is, while the world goes into panic, even over events that are not worthy of alarm, we are forced to suffer. Last time I checked, we still have a pretty darn good life here as Americans and I will show you how to capitalize on it.
We have resources and opportunity here in the U.S. that have little or nothing to do with the rest of the craziness around the globe. Companies like Waste Management (the guys who probably pick up your trash) are thriving American enterprises... and there many more.
Our upcoming summit in Las Vegas is built around surviving (and thriving) in the "New America." Part of this means it may be time to move beyond the typical "emerging markets" and look at "emerging trends," perhaps right here in the U.S.
Some of these trends can be sparked and motivated by occurrences anywhere in the world, but many of them are happening right here in front of your eyes.
We Are an Emerging Trend
For the past quarter-century, "emerging" markets like Asia, Australia and Latin America have been all the rage, fetching billions of American investment dollars.What disturbs me most is that the bulk of my colleagues -- who made and lost money -- never really knew what they were investing in!
Investors were/are buying companies having never even seen a single product those companies produce. Then when the _____ hits the fan, many of these esoteric companies lose 40%, 50%, even 80% of their value because they simply stopped getting the monetary benefit of a bunch of foreigners (like us) buying their stock without having a clue about their business.
Peter Lynch and Warren Buffett both believe in "invest in what you know." Both of them are extremely wealthy and neither of them made their fortunes investing in CDOs or Chinese startup companies; they made it in names like Ford, Philip Morris, MCI, Volvo, General Electric, Allstate, Geico and Coca-Cola.
Right now there are real opportunities right here in the States. The best part is you probably know and use these products and services on a daily basis, but these potential and "unique investment opportunities" have been ignored until now.
Example: Commodity Crunch
This Euro-China mess has created negative price pressure for many commodities, because of fear of a drop in demand. My colleagues in the industry are all saying, "sell commodities," but I am thinking that we should "buy" something else...
Like other commodities, almighty crude oil has moved lower, but not nearly as much as other raw goods. It is mainly because OPEC has its greedy fingers manipulating supply, but also because the majority of the world's oil comes from an area of the world that can be likened to a barrel full of gunpowder surrounded by blindfolded leaders tossing lit matches at it; and did I mention many of those leaders don't like U.S. very much?
I say, "good for them!" because as the world is tormented with high oil and gasoline prices, we are pushed harder to innovate. Here in the U.S., we have a ton of a little thing called natural gas that when manufactured and treated a certain way can be transformed into CNG (compressed natural gas), which is quickly becoming one of the main alternatives for diesel and petrol.
This week I offered my Option Strategies Weekly subscribers a way to trade America's transformation to a multi-fuel society. The key players have potential to reap big rewards in what I am calling the "quiet revolution" of energy.
So while the world panics, we see innovation taking place right here at home. The only thing left to do is invest in America and wait...
Chart of the Day: Teach a Man to Fish...
By Adam English, Associate Editor, Inside Investing Daily
An old and tired Chinese proverb states, "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."
Now, hundreds of years later, governments are taking the lesson and applying it to a much broader perspective.
Qatar's Hassad Food Co., the agricultural investment arm of the state-run Qatar Investment Authority, is shifting its focus to commercial food production and away from price and supply security. It is very close to finishing an A$500 million investment program in Australia. Pretty soon, it'll be bringing wheat and wool back home.
Qatar certainly isn't the only nation looking abroad for agriculture. When we look at the Chart of the Day, we see why...
More than 1,200 major international land deals covering more than 80 million hectares have been made since 2000. The vast majority of them occurred after 2007.
Saudi Arabia and China are prime examples of two very different reasons why imports are surging in Asia and the Middle East.
Saudi Arabia maintained self-sufficiency in wheat production for 30 years. The policy virtually depleted all of its aquifers and it has been forced to stop watering its fields. By 2016 it will rely solely on imports.
In spite of its massive geographic size, China has functionally hit a cap for the yields from its arable land. There simply isn't enough useful domestic land left to accommodate its needs.
Both countries targeted Argentina. Nearly 7% of Argentina's arable land is owned by foreigners, but new laws capped future purchases to 1,000 hectares.
The next big target is Africa. Almost 5% of Africa's agricultural land has been bought or leased by investors since 2000. That is about the size of Alaska and California... combined.
For investors, this will translate into upward pressure for food and arable land prices for many years to come.
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