Monday, March 30, 2009

Mining Sector Doesn't Need Banks

In the magical world of FinanceLand, it seems evil Dr. Doom has landed on the capital (Stall Street), and with a zap from his freezing ray-gun, has permeated the landscape with a thick layer of frost.

The effect: Traditional sources of financing – indeed, virtually every type of credit – have been placed in an Ice Age-like deep freeze. Facing a major crisis of confidence, banks underwent a 180-degree turn: Whereas they were previously almost force-feeding us loans, banks are now terrified to even include them on their menus.

Larry Potter

Saturday, March 28, 2009

Dollar Could Be...

...Ready to Move Higher Again ...

Two pieces of recent economic data have me expecting more of the same risk-averse capital to be driving the U.S. dollar back higher soon:

Japan's exports plunged nearly 50 percent in February — an obvious sign global demand has come to a screeching halt. Tack on the slowdown in exports for the U.S., China, and Germany and you've painted a real ugly picture for the export side of the global economy.

U.S. fourth-quarter GDP sunk by 6.3 percent. This was more than had been expected. Perhaps it's a lagging indicator. But such a dramatic slowdown bodes ill for any bounce-back strength out of the U.S. consumer.

Larry Potter

Wednesday, March 25, 2009

Americans are buying gas guzzlers again.

Remember how you couldn't get a cut-rate price on a fuel efficient car last summer? Well, times have changed. Every small car in the market is stacked up at dealerships.

Honda Fits are piling up in dealers' lots. Meanwhile, gas guzzlers are selling like hotcakes!

For example, at the end of February, Honda had 22,191 of its gas-sipping Fits on dealers' lots — enough to last 125 days at the current sales rate. The industry generally considers a 55- to 60-day supply healthy. As recently as July, Honda only had a nine-day supply of Fits.

And it's not just Honda. According to The Wall Street Journal, Toyota Motor Corp. has enough Yaris subcompacts to last 175 days. Chrysler LLC has a 205-day supply of the Dodge Caliber.

And Chevrolet dealers are sitting on a mind-blowing 427 days' worth of Aveo subcompacts.
Meanwhile, the new, re-designed Camaro muscle car has customers lining up around the block!

* Car sales are REALLY booming in China! China's vehicle sales surged 25 percent in February, the first gain in four months. The tally in the first two months of the year rose 2.7 percent to 1.56 million. That contrasts sharply with a 39 percent decline in the United States to 1.35 million new vehicles.

* Rig Counts Are Dropping. The number of U.S. rigs drilling for oil and natural gas is plunging. According to Baker Hughes, the number of rigs drilling for oil is down by 13, to 215. That's 126 fewer rigs than there were last year. And rigs currently drilling for oil represent just 19.8 percent of total drilling activity.

Rigs directed toward natural gas were down by 27 at 857 ... 576 less than last year's level of 1,433.

Monday, March 23, 2009

An astronomical sum is still not enough!

Why not? Because of a series of very powerful reasons:

First, most of the money is being poured into a virtually bottomless pit. Even while Uncle Sam spends or lends hundreds of billions, the wealth destruction taking place at the household level in America is occurring in the trillions — $12.9 trillion vaporized in real estate, stocks, and other assets since the onset of the crisis, according to the Fed's latest Flow of Funds.

Second, most of the money from the government is still a promise, and even much of the disbursed funds have yet to reach their destination. Meanwhile, all of the wealth lost has already hit home — literally, in the household.

Third, the government has been, and is, greatly underestimating the magnitude of this debt crisis. Specifically,

The FDIC's "Problem List" of troubled banks includes only 252 institutions with assets of $159 billion. However, based on our analysis, a total of 1,568 banks and thrifts are at risk of failure with assets of $2.32 trillion due to weak capital, asset quality, earnings, and other factors. (The details are in Part I of our white paper, and the institutions are named in Appendix A.)

When Treasury officials first planned to provide TARP funds to Citigroup, they assumed it was among the strong institutions and that the funds would go primarily toward stabilizing the markets or the economy. But even before the check could be cut, they learned that the money would have to be for a very different purpose: an emergency injection of capital to prevent Citigroup's collapse. Based on our analysis, however, Citigroup is not alone. We could witness a similar outcome for JPMorgan Chase and other major banks. (See Part II of our white paper.)

AIG is big. But it, too, is not alone. Yes, in a February 26 memorandum, AIG made the case that its $2 trillion in credit default swaps (CDS) would have been the big event that could have caused a global collapse. And indeed, its counterparties alone have $36 trillion in assets. But AIG's CDS portfolio is just one of many: Citibank's portfolio has $2.9 trillion, almost a trillion more than AIG's at its peak. JPMorgan Chase has $9.2 trillion, or almost five times more than AIG. And globally, the Bank of International Settlements reports a total of $57.3 trillion in credit default swaps, more than 28 times larger than AIG's CDS portfolio.
Clearly, the money available to the U.S. government is too small for a crisis of these dimensions.

Larry Potter

Monday, March 16, 2009

The Next Big Thing in Autos

By Andrew Gordon

Auto companies are in horrible shape. Will GM survive? Has Toyota seen its best days? Is Ford's funk temporary or permanent?

You should stay away from them. But why not invest in the next big technology the auto companies will need? All of them have plans to introduce or step up the production of battery-driven cars beginning around 2011-12.

The batteries being used today won't be the batteries that will be used in a few years. Nickel-cadmium batteries are on the way out. On the way in are lithium-ion batteries, with twice the capacity and half the weight. Plus, they work fine in hot or cold weather.

This market is flying under the radar. From $9 billion today, it could reach $150 billion in the next 10 years.

There are about 30 car manufacturers around the world dying to get their hands on this new technology. And those companies that have already begun production have the best chance of becoming big players in this market.

Saturday, March 14, 2009

The U.S. dollar recently set new highs... touching a level not reached since early 2006.

But the move that sent the dollar above overhead resistance hasn't held.

All the efforts to push back to those highs have been met with overpowering selling pressure.

Both the bears and bulls have been participating, no doubt about it. But the bears have been in the driver's seat lately.


Larry Potter

Tuesday, March 10, 2009

What actions should you take?

A good program will get you excited to get started. All you will be thinking about is "Firing"!

Taking action is critical to your success, but first take the time to make a plan.

This is the second half of getting ready. You have to know WHAT you want to achieve, but you also need to figure out HOW you will use what you've learned to achieve it. Then, take action!
When we took our first real estate investing program years ago, we skipped right through to taking action. We didn't carefully consider our long-range objectives. So we didn't have any real idea of what we should be getting out of the program. We just knew that we wanted to be rich real estate investors. The sooner the better!

Had we taken a few hours to set realistic, specific goals for ourselves, we could have saved tens of thousands of dollars on repairs and fines for the kind of buildings we shouldn't have bought, and three years of headaches with terrible tenants. And we could have achieved our goal of becoming millionaire real estate investors that much faster.

Taking good programs and learning from mentors is an excellent way to acquire the tools you need to take action and realize your dreams. But save yourself money and pain by getting "Ready" before you "Fire." Then - later - the "Aiming" part comes really easy.

Larry Potter