Expect up to 50% gains from this government dollar magnet in the next 6 months
Today's Financial News - Posted February 11, 2009
Will an early 20th-century remedy fix a 21st-century convergence of deflationary supertrends?
by J. Christoph Amberger
Baltimore—TFN: So you were looking for direction from Treasury’s “Turbo Tax” Geithner yesterday?
The murky, backtracking, convoluted path straight into swampland, morass and bogs that he pointed out inspired nothing but the urge to sell. Maybe stack the pantry with canned goulash and bags of egg noodles. And supplement home armory with a quality product or two manufactured with pride by the good folks of Smith & Wesson Holding Corp. (which, incidentally, is planning to almost double its annual revenue and grow through selective acquisitions in the next 3-5 years).
What a miserable day in the markets it turned out to be!
If the markets reflected investor trust in government and economy, Washington was handed a vote of no confidence. And if you still need independent confirmation, look no further than at whom President Obama is targeting his sales effort. Not at those who provide capital and create jobs. Not even at economists.
But the segment most susceptible to populist manipulation.
There is, of course, room for a purely technical rebound. But overall, I see no reason to believe that government action will have a positive effect on the markets.
*** Credit crunch and an incrementral increase in consumer spending may be the focus of Washington politicians. But what few realize is that the current crisis may just be a catalyst. Because, covered up by a tide of loose cash, the past fifteen years have not just triggered a global deflation spiral via the competition for ever-cheaper manufacturing labor.
The concept of value itself has been hollowed out by the Internet.
It occurred to me the other day as I was setting up a website in WordPress.
Now, if you must know, I am not naturally inclined toward technology. And I didn’t have to. As a publisher of a thriving information business, I had a large staff… complete with a half-dozen web designers, web developers, web masters that cost me an arm and a leg every year.
Setting up a functional website used to take months. There were hours of planning, sketching, programming. Having a picture added to an .html page was the equivalent of requesting someone’s firstborn. If you took it to the even less eager external webmasters, you had to figure at least four months and $50,000 in cost.
In December, I set up a decent website in two hours. And it didn’t cost me a penny. (Yes, you can check it out: http://www.fencingclassics.wordpress.com…) And if I can do it, a monkey can, too.
Somewhere, everywhere, there are webmasters looking for new niches to justify their plumber-like hourly compensations.
It doesn’t stop here. Forget about retail versus Internet sales. That’s old news. Look at the music industry. Movies. Porn. Telephone. Film and photo development. Magazines, newspapers, newsletters. Scientific journals. Wills, contracts, incorporations. Education and entertainment. Postage stamps. Billing. Heck, even medicine—a colleague just related how a doctor promised to do “more research” on a set of symptoms… and pulled out a BlackBerry.
Services, content, information that used to command premium fees are now not just available free… but people expect them to be free. No matter that acquiring the skills involved to perform those tasks… as a lawyer, web designer, even scienties… required years and hundreds of thousand of dollars.
And that was when the going was good! (People have already forgotten that the past eight years raised their wealth and standard of living quite impressively—so that even a small decline now seems painful.)
Imagine the millions of freshly unemployed, newly frugal, or adolescent bored who’re spending hours online every day, adding content. Some of it even useful… and all free. And merely by being available free, every piece of content pressures the for-pay competition to conform to the smallest common denominator.
Which is zero. Zip. Free!
But if everything needs to be available free… where is the money coming from for its creation? Even the most ardent volunteer needs to eat. And they’re still charging you for the Idaho potatos at the store.
And that is the crux of the current crisis.
Government sponsorship for scientific research already demands that results be made available free of charge. With government now proposing what Gov. Mark Sanford of South Carolina called a “savior-based economy”… in which the government provides jobs and compensations to what used to be free-market industries… how long can it be until the first class-action lawsuit claiming that banking services, engine tune-ups, food should be free.
After all, the taxpayer has already paid for it!
To think that it was just twenty years ago, that even those most committed to pursuing this model… the Soviet Union and East Germany… abandoned it as unworkable.
*** So as we wave a fond farewell to the free market, let’s try to figure out a way to make the transition period work for us.
The government dole will favor some sectors that were unable to compete in the past due to larger competitors or non-competitive products.
Politically correct transportation is one of them.
You will have noticed that nobody has been invoking “our addiction to foreign oil” since last fall. Indeed, as cyclical highs were superseded by cyclical lows, oil prices have fallen so low, gasoline again costs only half of what they charge for bottled water at the gas station.
Undeterred by demand realities, Washington will push alternative-fuel development. And billions of dollars are earmarked to create products for which currently there is no organic consumer demand at all.
Such as hybrid vehicles.
Parking lots full of unsold Priuses at U.S. dealerships and ports are no hindrance to government to stimulate supply by pumping money into building more.
The stimulus compromise in the Senate bill includes $2 billion in direct grants for battery development and manufacturing, as well as expanded tax credits for buyers and manufacturers of plug-in hybrid vehicles. It also includes a tax break for new-car buyers and money for the federal government to buy plug-in hybrids and flex-fuel vehicles.
Sooeey!
One of the companies I expect to come out with flying colors from the tussle at the government trough develops, manufactures, and sells high-energy power systems based on its phosphate-based, lithium-ion technology.
Just their buzzwords “hybrid vehicles” and “lithium battery” ought to be good for speculative bursts of 20-50%.
Will I be making this recommendation available free?
You must be kidding! We’re not socialists—yet.
We will be revealing this stock to members of our HotStockConfidential premium service on Thursday morning. So there’s still time to join us… at recession-level membership prices. Just click here to join us!
Next Article: This wasn’t supposed to happen
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