M
May 2009
Investments and Globalization
accounts for about two-thirds of the stock
market’s capitalization,) they get 44.2% of their
revenues from abroad.
Another indicator of globalization is the
amount of U.S. government debt held abroad.
China is the leader with $739.6 billion, followed
by Japan with $634.8 billion, and the oil
exporting companies with $186.3 billion.
In terms of the ratio of debt to GDP, the
U.S. is fifteenth. The other 14 leading countries
are in Europe, with Ireland holding down the
position of number one with a ratio of 811
percent.
The above indicators of globalization
refute the old idea that foreign stock was a noncorrelated asset class.
Peter Hanson took the microphone and
added that large U.S. companies are global
conglomerates. They operate through hubs,
centers through which they handle their foreign
exchange (forex) speculations.
Hanson addressed the effect of foreign
trade imbalances on the value of the dollar.
A persistent foreign trade deficit makes
the dollar weaker, which in turn makes U.S.
products cheaper abroad, increasing sales of
U.S. products, but foreign products become
By William Parmenter, editor
“The Impact of Globalization on Your
Investments” was the title of the talk by three
principals of Astor Capital Management on May
16, at the Los Angeles chapter AAII meeting at
Skirball Center
Lead-off speaker was Mark S. Wolfkiel,
senior vice president of the firm, who started his
financial services career more than a score of
years ago in Chicago as a trader.
Globalization can be discussed in terms of
political, social and economic aspects. The talk
dealt with the economic aspects of globalization.
In the 1950s Modern Portfolio Theory
came up with the idea of diversifying investments
by investing in three classes of non-correlated
assets. They were stocks, bonds and alternative
investments. In those days, foreign stocks were
regarded as alternative investments.
But, no longer.
Foreign stocks are
regarded as in the same class as domestic stocks,
due to globalization. Examples are: Bridgestone,
(Japan),
Budweiser,
(Belgium),
Gerber
(Switzerland), and Aquafresh, 7-Up, Miller Beer,
and Woolite (all U.K.).
Likewise big domestic stocks are also
foreign, due to their foreign revenue.
For
example 60 percent of the Dow 30 companies get
more than 50 percent of their revenue from
foreign countries. Intel gets 80 percent of its
revenue from abroad, while IBM gets 60 percent
of its revenue from overseas.
As for the S&P 500 companies, (which
Table of Contents
Mark Wolfkiel
Frank Barbera
Joe Falcon
Don Gimpel
Don Gimpel
Orange County
1
Investments and Globalization
p.1
The Economic Rollercoaster
p.3
Energy, Where Are We Headed? p.5
The Direction for Energy
p.8
.Education Nuggets
p.10
AAII Meeting Announcements p.10
more expensive in the U.S. and it becomes more
expensive to travel abroad. In this case U.S.
foreign debt increases and bullion decreases. U.S.
mainland assets and resources are bought up by
foreign creditors. This is the situation of the U.S.
today.
A long-term foreign trade surplus makes
the dollar stronger, making the dollar stronger
abroad, making U.S. products more expensive
overseas, so sales decrease. Foreign products
become cheaper in the U.S. and it becomes
cheaper for U.S. citizens to travel abroad. In this
case the U.S. Treasury stockpiles money and
bullion increases. American investors reach out
to buy up foreign assets and resources. This is the
situation of China today, which is piling up
foreign reserves, and aggressively buying up
foreign commodity resources (especially in
Africa) and energy resources.
The microphone was passed to Jim Mott,
who addressed asset allocation.
Mott said he checked with his broker on
what was hot right now. Answer: canned goods
and ammunition.
Does that mean we should be out of the
market, just because the market, (in a secular
bear), plunged off a cliff in fourth quarter 2008?
Mott’s incomplete answer to that was: If
you don’t try, you can’t do; if you don’t do, why
are you here? Catchy as the answer was, as a
slogan, it did not address the issue of staying in a
market that has been vaporizing peoples’ life
savings.
Is a good allocation scheme the answer?
According to Dr. John Litner, of Harvard
University, a good allocation scheme helps. He
advocates 45 percent stocks, 35 percent in bonds,
and 20 percent in alternative investments.
Alternative investments include REITs, forex and
commodities.
Wolfskiel resumed speaking, talking about
due diligence. He enumerated seven points to look
for in a managed account product.
Is the firm registered with the CFTC
(check with www.cftc/gov). Is the firm a member
of the NFA (National Futures Assn.). Does the
firm have a disclosure document? Has it been
reviewed by the NFA?
Does the firm have an independently
compiled performance track record? Is there an
active outside auditor? Is there transparency
concerning trades executed? Are those trades
on theme, or off? What kind of redemption
liquidity is there? Can you avoid lock-up
periods?
Astor Management trades in forex. In
2007, $3.2 trillion was traded daily—the
world’s biggest market. The volume is 300
times greater than the NASDAQ market. Forex
trades 24 hours a day five days a week.
Forex market participants include central
banks, commercial banks, investment banks,
large corporate treasure departments, investment
managers, hedge funds, retail brokers and
managed accounts.
Astor Capital Management works with
the Gibraltar FX Program. Comparative results
from October, 2007 until April, 2009 were:
Los Angeles County Meeting Schedule
Westside Computer Group – Don Gimpel, 310/276-9875
dgimpel@prodigy.net Sat. June. 6, at 10:30 a.m., Veterans of
Foreign Wars Memorial Bldg. Culver Blvd. & Overland Avenue,
Culver City, Topic Market Timing with Steve Hunter. Special
Event, as Hunter has extremely sophisticated software.
Pasadena Group – Meets at 7 p.m., meets at Lamanda Library,
140 S. Altadena Drive, Pasadena. (Meets third Tues. of the
month, except for August and December.) Topic TBA
Mutual Fund Group – Gunter Hagen 310/457-7404,
ghagen1@yahoo.comTopic and date TBA., at Fairview Library,
2101 Ocean Park Blvd., Santa Monica. The meeting is free to
the public
Stock Selection Group—Norm Langhout, 310/391-6430,
normlang@ca.rr.com. Fourth Wednesday of the month at 7 p.m.
Fairview Library, 2101 Ocean Park Blvd., Santa Monica. Topic
TBA
San Fernando Valley Group – Mid Valley Library Community
Room, 16244 Nordhoff St. North Hills, Topic, TBA
IBD Meet-Up/AAII CANSLIM Group –Fairview Library, 2101
Ocean Park Blvd., Santa Monica. Date and topic TBA
Los Angeles Chapter Skirball Center at 9 a.m, Sat. June 20.
Timothy Bock, on “Wealth Engineering,” and Douglas Fabian, on
“ETF Strategies in a Difficult Market”
2
is the vice president for marketing for Sierra
Core Retirement Funds and editor of the Gold
Stock Technician Newsletter.
Barbera’s lucid and penetrating weekly
columns of financial technical analysis of the
economic scene can be found by clicking on his
name in the right-hand rail column on the home
page of Financial Sense Observations, found at
www.financialsense.com.
His column entitled, Stock Market
Update, dated May 12, is recommended as a
good introduction and companion to his
presentation at Skirball on May 16. (In that
column he reviews the technical data on
breadth, sentiment and volume to make the case
that the market is poised, after a sharp bearmarket rally, for another steep leg down in a
secular bear market.)
Barbera opened his talk with a rapid
review of the 2005 to 2009 period. Talking
about mortgage defaults, and the great credit
bubble, he pointed out that technical analysis
gave advance warning to the emerging credit
crisis and collapse.
In an unprecedented situation, mortgage
equity withdrawals, when subtracted from
growth, made economic growth less than it was
represented. The secular bear market started in
2000.
What happened? The credit markets
were nuked with a neutron bomb, as the
economy entered the deepest global recession in
60 years. Countless financial institutions were
vaporized in the global bomb burst.
Global market cap declined by $30
trillion. U.S. real estate plunged $13 trillion.
Unemployment
zoomed,
with
hidden
unemployment making the actual jobless rate
about double the official U.S. number.
Official U.S. unemployment is 8 percent.
Counting those who gave up looking for a job,
the rate is 13 percent. The actual rate, taking the
fudge out of government numbers is 17 percent.
(See John Williams at www.shadowstats.com.
for his three-level evaluation of employment
statistics.)
Gibraltar:
$1,000 went to $1,260.
DJIA and S&P 500: $1,000 went to $580.
MSCI EAFE:
$1,000 went to $500.
Astor uses algorithms and professional
software.
Their thousand algorithms take
advantage as quickly as possible of the smallest
discrepancies in prices in different currency
markets.
In the Q and A session, following the talk,
the question was posed, what is the difference
between Astor and Long Term Capital
Management (which infamously imploded in
1998, threatening to take the financial system
down with it).
Astor caps its leverage at 20 to l, whereas
LTCM used leverage up to 200 to 1. Astor caps
its trades at $50 million, has no Nobel Prize
winners on board and trades only in forex.
What about the tax situation on profits?
The tax situation is about 15 percent better than a
straight stock portfolio.
Contact information: Astor Capital
Management, phone 312-207-2000, website
www.astorcm.com, located at 233 S. Wacker
Drive, Sears Tower 94th floor, Chicago Ill, 60606.
Account constraints: minimum account is
$50,000: management fee is 2 percent;
performance fee is 20 percent, off the high water
mark; no lock-up period; program liquidity is one
business day.
Riding the Economic Rollercoaster
By William Parmenter, editor
Frank Barbera, CMT, gave the audience
an exciting, and authoritative ride on what he
called the ‘economic rollercoaster’—from
deflation to hyper-stagflation.
People were grabbing the armrests of their
seats to hold on during Barbara’s cyclone-racer
run through the volatile financial scene on May 16
at the Los Angeles AAII chapter meeting at
Skirball Center.
Barbera is well-known to AAII Los
Angeles chapter as a popular annual speaker. He
3
For those who think the bear case is
more persuasive, the economy may be slipping
into a depression. Barbera rates that possibility
with a 40 percent probability, forecasting that
the S&P 500 could decline in the next two years
to 400. Equity investors need to play good
defense, especially over the next two years.
If the market declines, do not buy into a lot of
cheerleading, because it could get ugly.
If you see that the market cannot go up
on good news, it means the market is in great
trouble.
Both Japan and China are going to buy
fewer U.S. Treasuries. They are not going to
fund the U.S. anymore. A backlash presages a
rise in rates.
The dollar index could trend lower this
summer. A falling dollar and rising rates are
things investors do not want to see.
The price of gold, a capped money
supply, could go up. From June through
December, 2009 there could be a 40 to 50
percent gain in gold mining stock prices.
Mining stocks can be very trying on the
nerves, but, because they are very volatile, they
are the only sector that gives you a chance to
make 20 percent every year. You have to get in
and get your 20 percent and get out for the rest
of the year.
Whither gold? $1,000 this year. $3,000
by 2011, forecasts Barbera.
And, silver? Silver is more rare than
gold, as it is not found alone, but as a derivative
of lead and copper mining. The 20-year deficit
in silver is punctuated by the fact that silver has
many industrial uses, and is now consumed
more than ever.
Now, silver is at $13 an ounce. Within
the next few years Barbera expects it to rise to
$100.
Silver should outperform in the next few
years like never before. Silver is part precious
metal and part industrial metal, so its price
declines in a recession.
The outlook, measured by prospective
higher gold and silver prices, is for a sharp
Barbera moved on to the present and the
outlook for the future. The S&P 500 rallied this
spring on a scale not seen since the 1930s. Is that
a harbinger of recovery?
No, according to Barbera, it was a bear
market rally. Look at the chart of the S&P 500
against the 20-month moving average. The
moving average is moving sharply lower. No way
have we seen the bottom, more decline is coming.
It takes months to build a base to develop the
foundation for a recovery to occur.
(See the chart on page 2 of Barbera’s
column, Stock Market Update, previously cited.
Other charts referred to in this article will be
found in the same column.)
Looking at market breadth, various gauges
point in a negative direction. One, the 200-day
moving average of the CBOE Options A/D ratio
is way below its declining 200-day moving
average and falling at a very sharp pace. Two, the
nine-week RSI of the CBOE Ratio has a strong
down tend, and is all the way back up to a fully
overbought condition. Three, the NASDAQ
McClellan Summation Index, having some of the
most overbought values ever seen, is poised to
have NASDAQ give back much of its recent
gains.
Considering
sentiment,
Barbera’s
Composite Sentiment Index has risen to near zero,
with odds being high that it will stall and reverse
to retest the lows. The ‘green shoots’ blowing
through the economy, in Barbera’s view,
constitute evidence of a counter trend decline, a
correction, that should be dead ahead.
As for volume, Barbera monitors volume
and money flow via watching the NASDAQ
market. The recent bounce in price was much
more impressive than the bounce in volume, a red
flag, supporting that the long-term moving
average of NASDAQ Money Flow is still
declining sharply.
For those who think a new bull market is
on the way, the best thing the market can do is
pull back and correct, allowing the market the
potential to stabilize, build a base and possibly
rally later on.
4
decline in the value of the dollar.
Barbera’s suggestion for the future is for
the investor to become his own central banker, by
holding at least five percent of his portfolio in
precious metals.
If there is a hyper-inflation, with a cash
value decline, the value of the precious metal
portion will soar, and the precious metals increase
will offset the cash decline.
If there is an economic catastrophe, the
U.S. will put up an electronic fence to stop money
movements out of the country.
Barbara suggested the Central Fund,
(symbol CEF) domiciled in Calgary, Canada, 96
percent backed by metal, and run by Philip and
Stefan Spicer. It is a closed-end fund, started in
1961. Its website is: www.centralfund.com.
The 52-week price range has been from
$7.76 to $14.40. The price hit a low of $8.25 in
Oct., 2008, and since then has come up to over
$12 in a flattening upward trend. Currently the
price is above the 50- and 200-day moving
averages. Investors can own the Central Fund in
an Ameritrade Account in the U.S. in order to
have U.S. control.
If the dollar falls, all forms of paper
money will fall in value. The 10-year scenario is
for a falling dollar and precious metals to go up.
Could such a thing as a dollar collapse
happen in the U.S? As improbable as it might
seem, it happened in other countries within
memory: to the Weimar Republic of Germany in
1923, a country with a strongly unionized, big
industrial base. Also, Mexico had a peso collapse
in 1995, Russia had a ruble collapse in 1998, and
Argentina had a currency collapse in 2002.
The U.S. is pointed to a hyper stagflation
with the price of imports to rise and wages and the
dollar to go down. Falling discretionary spending
in a service economy is a big problem.
Gold and silver are to be viewed as
purchasing power insurance on your money.
To pose the question again, could a
currency collapse happen in the U.S.? Yes, a
collapse could occur in the U.S. too, said Barbera,
and probably will happen in the next few years.
Energy, Where Are We Headed.
By William Parmenter, editor
Joe Falcon and Dr. Don Gimpel
presented a point-counterpoint presentation on
Energy: Whither Are We Heading? Can We Get
There” at the March 21, AAII Los Angeles
Chapter meeting at the Skirball Center.
Falcon is a principal at J.A. Falcon and
Associates, Consultants in Energy Systems,
with six decades of experience in the energy
field with an emphasis on nuclear power,
geopolitics and oil, alternative energy sources
and energy economics.
Gimpel, past president of AAII Los
Angeles chapter, had a five-decade career in a
variety of areas, with experience with nuclear
and fossil fuel fired plants, refineries and
chemical complexes.
Falcon started by posing the question,
“what is the energy problem?” leading to an
evaluation of the energy situation. Gimpel, in
his turn, moved into a discussion of investing in
energy.
In a sentence, the crux of the energy
problem is that the world is running out of
cheap, clean energy resources.
This could affect our lives, soon.
“Civilization…will come to an end sometime in
this century unless we can come to a way to live
without fossil fuels,” according to David
Goodstein, professor at Cal Tech.
A 1972 MIT study concluded that there
was a possibility of a collapse in world’s quality
of life. And, that conservation would merely
delay but not eliminated the inevitable.
How does the U.S. stand on resources?
It is in a strong position. The U.S. ranks
number one in coal, oil shale and lignite, and
number two through four in seven other
categories. But, on the weak side, U.S ranks
number seven in natural gas and number 13 in
oil.
Another problem is that the U.S. does
not have a plan for its energy future. It is
5
And for natural gas, the technique of ‘fracking’
made it possible to drain a natural gas field.
The U.S. is poised to spend substantial
money on an upgrading of its inefficient
electricity grid. The current grid needs to be
upgraded to be able to transfer large blocks of
power through the U.S on high voltage lines.
A disproportionate amount of media
attention has been given to clean and renewable
energy sources, considering that the dirty,
polluting four (oil, coal, gas and nuclear)
produce 90 percent of the U.S.’s energy. (The
weighting is: oil, 39 percent; coal, 24 percent;
gas, 23 percent; and nuclear, 4 percent.)
Clean and renewable energy sources
only produce 10 percent of the country’s energy
(biomass, 3 percent; hydro, 2.2 percent; solar, 1
percent and other, the remainder), according to
Brett Conrad of Longboard Capital Advisors.
The renewables in the news include:
biomass (ethanol and biobutanol), hydro, solar,
geothermal, wind, tidal power, and ocean
thermal. It will be a long time before they are
really significant. As Jean Laherrere said,
“Renewables cannot replace fossil fuels in the
next 50 years (nor can Colorado oil shale). (See
www.ecotopia.com/Apollo2/).
If you are thinking of raising
renewables, the most profitable and productive
is algae, producing 3,700 gallons per acre, per
year, with a dollar value between $7,000 and
$17,000. In descending order of profitability
some other renewable energy crops are: palm
oil, corn (ethanol), coconut, jatropha and
rapeseed.
Using corn, soybeans, canola and
rapeseed as energy sources reduces the food
supply on a planet where hundreds of millions
of people live on the brink of starvation, and the
population grows by 80 million a year.
The production of ethanol from corn
only profits the companies that are receiving
government subsidies to produce it. Ethanol is
difficult to handle in pipelines and tanks.
Ethanol made from corn requires as much
energy to produce as it delivers. On the other
stumbling around, buffeted by special interests,
and pursuing false leads, according to Falcon.
The U.S. must face two issues. One, it
needs a long-range energy plan. Two, it needs a
transition plan to get us from here to our future.
Question, is the solution nuclear energy,
renewables, or both?
About now we are experiencing the effects
of running out of world oil, as production of
energy has peaked and started to fall.
The U.S. Energy Department projects that
the U.S. will have available and affordable energy
to at least 2030, and it will be about the same as
what is being used now.
Cost, however is a big factor. Currently
the importation of about 14 million barrels a day
of oil (at $40 a barrel) costs a $176 billion a
year—a huge wealth transfer.
The U.S. can ease its energy problems
greatly by: increasing nuclear energy production
from eight to 18 quads; increase coal production
by 27 percent; use the increase in coal to produce
oil to supply cars with 15 quads; make cars and
trucks 10 percent more efficient; and increase
domestic oil production by 4 quads.
Problems will first start to show up in
transportation, particularly in aviation fuels.
Gasoline has the highest energy potential per
weight. The first experiments are occurring to see
if planes can run reliably from renewables.
Can the U.S. arrest its oil problem by
importing oil?
Not really.
All producing
countries with the exception of Saudi Arabia have
declining oil production and sharply rising
internal consumption. Those countries include
Russia, Norway, Iran and U.A.E. (see the website
www.graphoilogy.com. for more information).
Isn’t more oil being found? Not lately.
The last giant oil field was found in 1980. In
2004 the New York Times reported that for the
three previous years oil companies had spent more
money in exploring than they had recovered in the
dollar value of the reserves found.
Some new techniques have helped in
recovering more oil from existing fields. For
instance, the use of horizontal drilling helped.
6
ground as radio waves and converted back to
electricity. Despite skepticism from 90 percent
of the experts, the CEO of PG&E Peter Darbee
said, “if it works it will provide a tremendous
breakthrough for society.” (See Fortune
magazine, page 25 of the May 25, 2009 issue.)
If it works, a breakthrough of that
importance, coupled with a complete renovation
of the nations’ electricity grid, allowing it to
transfer large blocks of power throughout the
U.S with high voltage transmission lines would
have a revolutionary impact. Eventually the
fossil fuel companies would shrink and be
displaced, and electricity would become the
nation’s energy lifeblood.
Geothermal resources are in abundant
supply in the American west, far away from
where it is needed. To effectively harness that
energy requires upgrading of the nation’s
electrical grid with long distance high voltage
lines.
Wind power, generated by turbines,
work well when the wind is blowing at a speed
near the turbines design level. When wind
speed falls, output falls, requiring a backup
system. Distribution of the electricity produced
requires a more sophisticated electric grid.
Will the generation of more energy in
the future affect global warming? Or, did you
mean global cooling? The temperature of the
lower troposphere from 1980 to 2004 gradually
rose to a peak of .3 of a degree. Between 2004
and 2007 temperature retreated the same .3 of a
degree, to register no net gain.
Global warming just may be caused by
solar flux (sun spots). From 1860 to 2000
temperature anomalies have been closely
correlated with sunspot cycle length.
A couple of other energy issues are
worth considering. One, what is the cheapest
fuel to heat your home?
Based on a
standardized cost/mil BTU, the cheapest are
coal at l0.l; hard firewood at 12; and electricity
with a heat pump at 16.12. Kerosene lags at
29.85 and number two fuel is farther behind at
32.61.
hand, ethanol produced from sugar cane (as in
Brazil) is profitable and useful, as it produces
several times more energy than it takes to make it.
Biobutanol is a winner, the fuel of choice
of British Petroleum, as it delivers four times
more energy than is required to make it.
Regarding hydro power, the U.S. has
already put dams on major rivers, so there is little
growth possible from this energy resource. Tidal
power is a resource for the future, but the main
place it would be feasible is on the New England
coast.
Solar thermal and solar electric devices are
getting more efficient all the time. An efficient
solar electric plant big enough to power Los
Angeles would be about 31 square miles in size.
It could be sited in the Mojave, but what is New
York going to do? (Refer to www.the oil
drum.com/node/3412.)
As perplexing as that question is, when
one stops to think that all fossil fuels are
derivative of solar energy, the long-range solution
to the planet’s energy problems seem inevitably to
rest on solar energy. Many, many times the
amount of energy needed to power all man’s
activities fall on the earth daily in the form of
unused solar energy. The question comes down to
how to collect solar energy, store it and distribute
it cheaply and efficiently.
George Friedman, the futurologist, in his
book The Next Hundred Years, discusses the
emergence of collecting solar energy in space
receivers and beaming it back to earth in the form
of microwave radiation and then distributing it as
electricity. He expects this major development to
come near the end of the century and to be
subsidized by government support. Friedman
expects the development to kick off a massive
economic boom. For more information see his
web site at www.stratfor.com.
Solaren, a Manhattan Beach, Calif., startup
has inked a deal with Pacific Gas and Electric
(PG&E) to build a space-based solar energy
power station and supply electricity to the utility.
By 2016 the power station will collect 200
megawatts of electricity that will be beamed to the
7
the last two minutes of his talk—it’s a gas.)
Nathan Lewis: Powering the Planet.
Two, does not energy production cause
pollution. Yes, the dirty four (oil, coal, gas and
nuclear) are highly polluting, and have become
subject to government intervention and antipollution campaigns.
But methane, a potent polluter, is largely
unaddressed, coming as it does from: cows
passing gas, natural gas systems, landfills, coal
mining and solid waste from domestic animals.
(www.eia.doe.gov/eiaf/1605/ggrpt/methane.html.)
AAII members are interested in energy,
the lifeblood of transportation and industrial
society, as investments. Here is a watch-list of
possible companies, passed on with the caveats of
buyer beware, you are on your own and do your
homework.
TICKER
SYMBOL
COSWF
FSLR
DO
COMPANY
NAME
RIG
XTO
PBR
Syncrude
First Solar
Diamond
Offshore
Transocean Inc.
XTO Energy
PetroBras
SU
PBEGF
CSIQ
Suncor Energy
PetroBank
Canadian Solar
What is the Direction for Energy?
By William Parmenter, editor
This article is Dr. Don Gimpel’s
contribution to the presentation by Joe Falcon
and Gimpel on Energy: Whither Are We
Heading? Can We Get There” at the March 21,
AAII Los Angeles Chapter meeting at the
Skirball Center.
Gimpel, past president of AAII Los
Angeles chapter, had a five-decade career in a
variety of areas, with experience with nuclear
and fossil fuel fired plants, refineries and
chemical complexes.
Most investors are futurists, according to
Gimpel, but there are two problems connected
with being a futurist. One, you must make the
right investment choice. Second, your timing
must be right.
How can one research energy
opportunities?
One
source
is
at
www.eia.doe.gov/oia/aeoref_tab.html. This site
takes you to the DOE, EIA Forecast Tables to
the year 2030. There you will learn that
consumption, the ten-year Treasury note and
real disposable personal income are all going
up, and that energy intensity is going down.
The same site will tell you that in the
next five years the production of oil, natural gas
liquids, dry natural gas, coal, nuclear power and
hydropower will be flat.
Other information of importance is that
consumption, gas cost and oil prices are going
up.
Going down in price are coal and
electricity.
Where is the investment opportunity in
municipal solid waste, going up at 2.7 percent a
year, wood/biomass, going up at 1.8 percent a
year, wind turbine growth is barely going up at
1.1 percent a year? All are tame. But, solar
energy is compounding at a rate of 27.7 percent
a year—now there is investment opportunity.
BUSINESS
IDENTIFIER
Canadian oil shale
Offshore drilling
Offshore drilling
Drilling and services
Oil and gas producer
Brazilian oil and
shale
Athabascan tar sands
Active in the Bakken
Solar
cells
and
systems
For up to date research, take a good look
at Google Energy Investment Strategies at the
site: www.EnergyInvestmentStrategies.com/peakoil. Click on Investment Ideas in the left-hand
column.
Investors can learn more at one of the
CalTech on-line seminars on energy. Go to
http://Today.CalTech.edu/theater and enter the
word energy in the box. Watch one of the
following recommended seminars:
Jim Woolsey: Energy Independence
Steve Koonin: Energy Research at BP
David Goodstein: Out of Gas (don’t miss
8
wind energy are winners. Electric car drives in
mid-sized to large cars are winners. Anything
related to domestic natural gas is a winner.
Watching energy futures is a great way
to identify hot markets. Go to: http://tfccharts.w2d.com/marketquotes/ZQ.html. Look
for one year growth of: crude oil from $48 to
$58; coal, flat at $59; natural gas, from $4.52 to
$5.59 and uranium, from $50 to $64.
For investors, here is a watch-list,
presented by Gimpel with the caveat of buyer
beware, do your homework, and you are on your
own. (Duplicates on Falcon’s watch-list have
been removed.)
Sales are expected to shift from light
trucks back to cars. By 2030 mild and full hybrid
systems will dominate new car sales. From a base
of 500,000 in 2000, auto sales of various kinds of
hybrids (electric, electric hybrids and flex fuel) is
expected to grow to 12 million a year by 2030.
Biofuels to power cars is projected to
increase from five million gallons, to 30 million
by 2022, to 40millioin by 2030. (These fuels
would be various kinds of ethanol, biomass to
liquids and renewable diesel).
It is expected that the importation of
natural gas will diminish as the domestic supply
grows. The gap between domestic supply and
consumption was 16 percent in 2007. That gap is
projected to narrow to 3 percent by 2030.
The growth of electricity use is expected
to decline (which makes sense, since the per
capita electricity use in the U.S. is second highest
in the world, after Canada). The rate of electricity
use growth declined from 9 percent a year in
1950 to 1.1 percent in 2007, and by 2030 is
expected to marginally decline to 1 percent.
How will generators be powered? By 2030
the largest sources of power will be coal, natural
gas and nuclear. Renewable power will be a
growing factor.
Renewable power is projected to increase
from 60 billion kilowatt hours in 1990 to 450
billion kwh by 2030. The renewables that really
increase during that period are biomass and wind.
(Waste, geothermal and solar only will increase
slightly.)
What will happen to fuel economy for
cars? From a base of 25 mpg in 1980, it will
increase to 30 in 2008, and up to 41 by 2030.
What kind of car and fuel will you buy?
In 2007 alternative light vehicles (cars and trucks)
will increase from 10 percent to a projected 63
percent by 2030. The composition of that 63
percent will be 10 percent diesel, 10 percent
alternative fuel, and 43 percent electric drive.
Gimpel’s investment advice is go with the
flow. Do not invest in LNG. Solar energy is
growing rapidly but from a small base. It will be
a small factor well into the future. Biomass and
TICKER
SYMBOL
HTE
COMPANY
NAME
Harvey
Trust
SPWRA Sunpower
ESLR
Evergreen
Power
FSLR
First Solar
HTM
ORA
WND.V
ENOC
COMV
GEX
BUSINESS
IDENTIFIER
Energy Canadian oil and
gas producer
Solar-electric
Solar Solar Cells
Solar-electric
modules
U.S. Geothermal
Geothermal
power
Ormat Technologies Geothermal
Western
Wind Turbines
Energy
EnerNoc
Energy control
systems
Comverge
Energy capacity
Energy ETF
Alternative
energy
What about the prospects of nanosolar?
Nonosolar developed a process for printing
photoelectric cells on a flexible substrate using a
lithographic process. They can print photo cells
by the mile. Their current production is sold out
for three years, with the first year’s production
purchased by Germany. They are expanding
production. It is a privately owned company.
When you are considering investing in
9
www.PhiladelphiaFed.org/research-abddata/real-time-center/survey-of-professionalforecasters.
Don’s Page: Find important economic
and
market
indices.
Go
to:
www.AAIILosAngeles.org. Go to Don’s Page
and look at BYOG (Be Your Own Guru) 10
Economic Indicators.
He also pointed out that the
computerized investors group will be meeting at
10:30 a.m., Saturday, June 6 at the VFW
building in Culver City. The topic of the
meeting will be market timing, presented by
Steve Hunter of Ultra F.S.
Hunter has
extremely sophisticated software, which he is
bringing from the Rocky Mountains. This, said
Gimpel, is a special event.
energy you have to keep in mind the strategic
thinking of the OPEC cartel, which controls a
major percentage of the world’s oil supply.
OPEC knows it has a limited resource that
will run out in a few decades. It must maximize
the total income from its resources, because it has
nothing to fall back on. OPEC needs money to
keep its restive populations in check.
OPEC strategists know the Western World
is short-sighted. It knows that the spread between
supply and demand of oil is very narrow. By
making small adjustments in the supply, OPEC
can run the price of oil up or down at will.
When OPEC runs the price of oil down to
the break-even price of coal or non-OPEC oil,
western financial institutions become reluctant to
finance energy projects. At that point the West,
especially the U.S., continues to be vulnerable,
because it stops developing oil fields, mines and
other productive energy sources.
Orange County AAII Announcements
.
For information about the Orange
County chapter of AAII and their meetings, go
to aaiichapterorangecounty@yahoo.com., or
contact the president, Bob Welge at 714-5932312.
Note to Pro Forma Contributors:
Education Nuggets
By William Parmenter, editor
Dr. Don Gimpel gave a five minute talk on
investor education at the May 16, Los Angeles
AAII chapter meeting at Skirball Center.
Gimpel reviewed several websites useful
to investors. They included:
Decision Moose: where to get the latest
market
timing
signals,
at
http://DecisionMoose.com/Moosignal.htm.
Guru Grades: tells how well the
investment gurus are performing with their
predictions. (They are mostly wrong.)
See
www.cxoadvisory.com/gurus/#snapshot.
Economic forecasts: To obtain economic
forecasts from a trusted source, the Federal
Reserve Bank of Philadelphia. Go to:
Please have your copy emailed to the
editor, William Parmenter by the fifth of the
month. Letters and comments are welcome. If
you want to email an article on a topic of
interest, you will have a chance to appear in
print, and inform Pro Forma readers.
Book reviews are welcome. Mail disks
to: 319 Walnut Ave., Apt. 2, Long Beach, CA.
90802, or use email to send copy to the editor at
wparme1@lausd.net, or call (562) 437-2412.
For distribution of Pro Forma concerns,
contact Mike Erdei, circulation manager, at
m.erdei@att.net .
10
Pro Forma
Pro Forma Editor
Circulation Manager
Pro Forma Editor, Emeritus
William Parmenter
Mike Erdei
Orvis Adams
SIG GROUP CHAIRMEN
IBD Meet-up/ AAII CANSLIM
Mutual Fund Group
Options Group
Pasadena Group
Palm Springs Group
San Fernando Valley Group
Westside Computer Group
Norman Langhout
Gunter Hagen
Robert Morgan
Ivan Wong
Patti Gammino
Evan Press
Don Gimpel
Pro Forma is offered free of charge exclusively via email and is also available for downloading from the
Los Angeles Chapter web site at: www.aaiilosangeles.org.
The American Association of Individual Investors is an independent nonprofit corporation formed
for the purpose of assisting individuals in becoming effective managers of their own assets through
programs of education, information and research.
Pro Forma is published for advising members of the groups' activities and for sharing information. All material
compiled without verification of accuracy to a specific task or computer system. All material provided in the newsletter
is for educational and illustrative purposes only. Comments are the views of their author and no other person or
organization. Investing is an inherently risky business. Investors may loose their entire investment or more. Past
performance is not a guide to future return.
11