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Posts Tagged ‘ideas’

Google Inc. (NASDAQ:GOOG) Earnings Trading Idea

November 7th, 2012

J.W. Jones: We recently discussed the impending release of third quarter earnings for Google (GOOG), analyzed the expected move in light of then-current options pricing, Read more…

Earnings, Education, Markets, OPTIONS, Technology

Two "Alternative" Ideas for $100 Oil

June 10th, 2011

Two

“If you grow it, biofuel will come,” isn't much of a slogan. So let me be blunt: Biofuel is important because we need it.

My current prediction: Oil prices will hold fast and end 2011 above $100, and this will keep biofuel an important ongoing business and investment sector.

Whether the economic recovery is slower than expected or OPEC raises its production, ultimately it's a moot point — gasoline is finite and we now have affordable technology to “create” gasoline.

And while oil supplies won't dry up today, the next day or for a generation, it's not going to get any cheaper to find oil, refine it and distribute the finished product.

Leaner government means higher fuel prices

And while it might seem odd, I think a coming budget fight will help boost oil prices — and by extension, gasoline. Federal spending and the deficit will be the single most important issue going into the campaign season.

The less the federal government spends, the better. This is not politics, this is just business.

The answer from a practical, economic and even political standpoint is a greatly streamlined budget with far more disciplined spending. I think this will invigorate the economy, which will in turn push up the price of gasoline.

But don't think for a moment that thousands of scientists, engineers, and companies will sit idly by as they watch a market grow for a gasoline alternative.

Biofuel — renewable because it comes from plants — is an obvious solution, but not an easy one. Corn-based ethanol, which makes up 10% or so of the gasoline in your tank, hasn't been a resounding success, and some would argue it's becoming a boondoggle.

At this point, the United States can't meet the 15% maximum ethanol blend with corn-based ethanol alone and feed people for a reasonable price at the same time.
But other forms of biofuel change the game entirely.

Cellulosic ethanol is a strategic alternative

Current federal law (and more and more states) calls for a dramatic rise in sugar-based ethanol, which I refer to as cellulosic ethanol because it comes from the sugar trapped in the cell walls of plants. Other biofuel, including plant-based diesel, algae-based fuel and even higher-tech cellulosics like isobutanol, are chock-full of potential.

What matters here? The science, the process, scalability and, of course, the economics matter. A few technologies look to have mastered all these elements, and these are the ones investors must keep an eye on.

The market recently welcomed two cutting-edge players, Gevo (Nasdaq: GEVO) and Solazyme (Nasdaq: SZYM), and the stage could well be set for more.

Gevo derives isobutanol from cellulose. Isobutanol is a replacement for gasoline, with no special parts or engine modifications needed — something that ethanol is not. Solazyme has created a method to make algae-based fuel on a huge scale quickly, efficiently, and increasingly economically.

Action to Take –> The bottom line is the strong the recovery, the higher the price of oil, and the more interested Wall Street will be in a piece of the biofuel pie.

And while the future will no doubt be volatile, I renew my call on this sector. Biofuel has as much potential as anything I've seen.

Note: You can tell I'm excited about the investment opportunity in biofuels, but there are a number of game-changing ideas in the market. From tiny power plants that can be buried in your lawn, to revolutionary pain killers made from cobra venom, there are more game-changing ideas I think could be “the next big thing.” To get briefed on these opportunities, and several others that I think could return many times your money, please watch this video.


–Andy Obermueller

Disclosure: Andy Obermueller and/or StreetAuthority, LLC hold a position in NASDAQ:GEVO, NASDAQ:SZYM.

This article originally appeared on StreetAuthority
Author: Andy Obermueller
Two “Alternative” Ideas for $100 Oil

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Two "Alternative" Ideas for $100 Oil

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Compound Effort Over Time

May 4th, 2011

In a previous Daily Reckoning, we offered dear readers a look at one of our principles of financial success. “Financial Escape Velocity” we called it.

Today, we give you one of the principles of success in life: “Compound Effort Over Time.” You’ve heard of the ‘miracle of compound interest.’ Well, there’s a similar miracle at work in the rest of life…

“I’m about ready to give up,” said Jules (23) over the telephone.

The young man graduated from college two years ago. He could have easily entered the family business. Instead, he decided to try to make his career in one of the world’s most difficult métiers – as a singer, musician, songwriter.

He moved to Brooklyn, which seems to attract young musicians like London attracts fund managers. He took courses at Julliard conservatory. He wrote songs. He put them on the Internet. He sang at ‘open mic’ nights in clubs and bars.

But after 6 months, it didn’t seem to be going anywhere.

Meanwhile, his sister, Maria, voices similar disappointment and impatience.

She too has chosen a difficult career; she trained as an actress, moved to LA, and had – like her brother – approached her career in a disciplined, organized way.

But these are not careers where discipline and organization come easily or pay off readily. There are no fixed hours. And no fixed route to professional advancement. Half the work you do, at least it seems to us, is just figuring out what work to do.

Maria has had some success on TV and the movies. But she hasn’t gotten the major roles she hopes for.

“I’ve been in LA for two years already. I’m going to keep at it for another 3 years, according to my plan. But if it still isn’t working, I’m going to have to find something else to do.”

It’s a rough life. Maria lives in a tiny studio apartment and works from dawn to dusk trying to get acting jobs. She supports herself, barely, by doing modeling work on the side. Jules, meanwhile, is literally a starving artist, working one day a week as a handyman to help pay the bills.

We don’t know how others do it, but our children couldn’t afford to be starving artists without family support. Rents are too high. Health care…transportation – if they were forced to pay 100% of their living costs, they’d have to give up on their artistic careers and find other lines of work.

The point we are making is that success doesn’t always come immediately. And it’s not easy to sustain a career that doesn’t provide quick, positive feedback. But in our experience, it pays to stay the course.

Starting out in life, young people are practically interchangeable parts. They leave school not knowing much of anything. If they can read and write clearly, they have an advantage over most college graduates. But school doesn’t prepare them very well for real life. School problems are bounded, controlled, and simplified. Usually, they are idealized, with the confusing parts taken out. In history, for example, they are taught broad themes…and specific ‘facts.’ But the sequence of events in real life doesn’t follow simple scripts. Instead, it is endlessly complex.

Historical characters are like stick figures, heroes or villains according to the storyline. In real life, they are like the people we know personally – they have their positive qualities and their negative ones; they perform well in some circumstances and poorly in others. They are neither good nor bad…but subject to influence.

That’s why you cannot make a good history out of recent events; you know it too well!

In every discipline, the phenomenon is the same – in school, the complexities of real life are removed so that students can be tested on set groups of memorable, learnable, understandable bits of stripped-down, sanitized ‘knowledge.’

That is why more education does not always lead to more success in the real world. In fact, it could go in the opposite direction. The better you get at handling the artificial world of academia, the worse you may do at solving the real world’s infinitely nuanced challenges.

Problem solving in the academic world typically involves a part of the brain – but only a part of the brain. It is the ‘rational’ part…the part that remembers facts, reads, writes, and connects the dots. That is the skill measured by the SAT tests, for example. They are tests of ‘scholastic aptitude.’ And they are pretty good at measuring what they are supposed to measure. If you able to do the kind of tricks the tests require, you’ll be able to handle the kind of work they give you in school.

But life sends very different tests your way. Life’s tests involve many, many more variables – so many that your ‘rational’ mind is frequently overwhelmed. The human face, for example, is capable of hundreds…or thousands…of different expressions. Some people seem better able to read these messages than others.

In the world of textbooks, other people scarcely matter. You read. You write. You check the boxes. But once you get into a workplace, you are faced with an entirely new test. How well can you get along with others, motivate them, lead them?

In school, tests are anticipated. In real life, you never know when you will be tested. You never know what you will be tested on. And even when you are in the middle of an important test, you often don’t know it.

In some careers you are able to apply the body of knowledge you picked up in school, but not many. In most careers, you have to learn on the job – a new body of knowledge, often additional, sometimes completely new and different. And unless your job is to throw the switch on a toll bridge, or to collect tolls on a toll road, your new knowledge is likely to involve a great many things that are uncertain…unknowable…and variable.

Even in ‘routine’ careers there is still plenty of room for career advancement and money-making. But it requires you to step beyond the routine. If you are a schoolteacher, for example, you might have to write a book on education…or start a school of your own. Or, if you are a carpenter, you could set up a carpentry business…or use your skills to build something rare and interesting enough that it could be sold at high margin…or mass produced.

Generally, the more formulaic the work, the less scope for making money at it. The more limited, that is to say, the more like school any job is, the less likely you are to turn it into a source of wealth, power, or outsize success.

But assuming you are doing something that is not routine, not formulaic, and not limited (an assembly-line worker, for example, may be able to earn a good living…but it is not a way to build a fortune), what is the secret to making a success of it? Ah, glad you asked. At least part of the secret is sticking to it. Here’s why…

If your work is not simple and not formulaic, you need to use a fair amount of creative thinking, innovation and entrepreneurship to get ahead. Sometimes your work can be reduced to simple, school-like thinking. More often, it is more complex…involving subtle judgments about people…guesses about how others will react…mastering new technology and leadership skills needed to get others to follow your plan, and so forth. It may involve raising money…’selling’ your ideas…taking a chance on a new career or a new business…convincing clients to leave their habitual sources…or convincing employees to work harder…or better.

You may have to develop a new product. Or, maybe you have an insight that tells you how to invest your firm’s resources more productively.

Whatever it is, it is likely to require more than your ‘school brain’ to make it happen. It is likely to involve wisdom…intuition…and ‘people skills.’ It is likely to require more of you – your brain…your personality…your heart. And maybe soul too.

It is likely to require trusted contacts, seasoned hunches, educated guesses…

Where do these things come from?

Malcolm Gladwell’s book, Outliers, makes the point that there is no secret to success. Successful people just put in more hours than other people. Our point today is similar. Success is usually the product of compound effort over time. It takes time to develop contacts. It takes time to develop trust – both of your own team and outside clients/customers/associates. It takes time and experience to develop the hunches and instincts that are useful in real life. It takes time too to understand other people and learn how to work with them. It also takes time to build a foundation of human and financial capital that allows you to take advantage of the insights and opportunities that experience bring you.

Time does not work in a linear, mathematical way. As with compound interest, time pays off geometrically. As contacts, experiences, wisdom, innovations and intuition are added one to another, your opportunities multiply. A $100,000 deal that you might have done when you were 25 grows into a $1 million deal 5 years later. And instead of doing two deals a year…you might do 10 a year.

This is also why it is so important to put in lots of time. Gladwell refers to the Beatles, major league athletes and people such as Bill Gates. In every case, he found that the leading figures in their industries put in thousands of hours – usually far more than their competitors. They may appear to be ‘gifted.’ Their achievements may seem effortless. But they are almost always the product of time.

Not only that, but the time spent at the end is much more powerful than the time at the beginning. You can see this by looking at charts of compound interest. Starting from a low base, the first series of compound interest produce little difference. But at the end, the results are spectacular.

Start with a penny. Double it every day. At the end of a week you are still only adding 32 cents per day. By the end of the third week, however, you’re adding more than $10,000 per day. So you see, the last increments of time are much more important than the first.

It doesn’t exactly work that way in real life, of course. Hang around too long and you get tired…and the lessons you’ve learned might not be applicable to the new realities. Suppose, for example, that you had learned to make the perfect buggy whip, at age 55, in 1910! Or imagine that you were the leading expert on silent movies…just before the ‘talkies’ started. Or maybe you were cornering the classified advertising market…just as Craigslist and eBay made their appearance.

But aside from that kind of a setback, time compounds your advantages. At age 20, you may know less than everyone in your business. But then, you work 10 hours a day, while others only work 8 hours. In 20 years, you may know more than just about anyone. Then, who gets the new contracts? Who finds the new opportunities? Who has pricing power?

Who makes money?

Compound interest works because each addition is then put in service to earn another increment of gain. Compound effort works the same way. Every insight, innovation and useful contact helps bring on another, bigger and better one.

Remember, success is competitive. While you are adding to your business capital, your competitors tend to wear out…move on…or retire. Sticking to it is not easy. People tend to get distracted. They often want easier, simpler, faster opportunities. They give up their accumulated capital…and take up something new. That leaves you in a commanding position.

Stick to it.

Regards,

Bill Bonner
for The Daily Reckoning

Compound Effort Over Time originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Bill Bonner, the founder of the the Daily Reckoning released his latest book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas in April 2011.

Read more here:
Compound Effort Over Time




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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Protecting Yourself from the Inexorable Decline of the US Dollar

April 1st, 2011

Free Baron von NotHaus!

Free our money!

Poor Mr. NotHaus. He thought he was doing something good…something that needed to be done. His idea was to mint silver coins, which he called Liberty Dollars, or simply Liberties.

These were real coins, with real value. In fact, their value has been going up. Silver has been the big star of the latest hard money drama; compared to gold – which has also gone up nicely – silver is at its highest level since 1984. And compared to itself, it is as high as it has been in 30 years.

Silver has now gone mainstream. Even Jim Cramer advises listeners to buy the physical metal. They would be glad if they had. Almost nothing has outperformed it.

Compare Mr. von NotHaus’s money to the money issued by the US Treasury Department. The Treasury’s dollars have no precious metal content – none. At best, their content comes from trees and cotton plants, with a scrap value that is probably negative. Meaning, if it loses its value as money, you’ll have to pay someone to haul it away.

The record on that point is clear. Go back to when the Fed was set up to protect the value of the dollar in 1913. If you want to buy the same things, you’ll need 50 times as many dollars today as you have back then. Since 1971, when the last traces of gold were removed from the dollar-based monetary system, the feds’ money has lost value even faster.

The past is prelude. The feds are working hard to make the dollar worth even less in the future. Given the Fed’s current enthusiasm for debasing it, in a few years, the dollar may have no value left.

Even state governments – hardly visionaries – are looking for ways to protect their citizens from the feds’ fast-disappearing cash. A dozen are considering measures to coin their own money. Smart families are setting up their own reserves of real money – gold. Nobody trusts the dollar over the long term.

So, who do the authorities haul to the hoosegow? The guy who mints honest money in tiny quantities…or the guy who puts out $2.2 trillion in “paper” money that is sure to lose its value quickly?

Go ahead…take a guess.

Poor Mr. von NotHaus got taken to court…and may be taken to prison…for competing with the feds’ monopoly on issuing money. The Constitution – Article 1, Section 8, Clause 5 – gives Congress the power to issue money. Apparently, it makes it a federal offense to compete.

According to the Wall Street Journal report, that provision was cited in paragraph 33 of the indictment against Mr. von NotHaus and then later removed from the charges against him. What was left to convict the man on, we don’t know. But the court did so. And now he must appeal…or face penalties, possibly time in jail…and possibly a long time.

But what about the rest of us? Are we sentenced too? Will we be forced to pay the price for the feds’ goofy monetary policies?

Your editor is now flying back from California. He has no Internet connection, but he has a copy of Barron’s and The Wall Street Journal with him. Alas, he will have to read them.

Among the ideas we found in Barron’s was an article on gold. As background information, throughout the entire 11-year bull market, as far as we know, Barron’s never counseled its readers to buy gold. On the contrary, it generally discouraged them. Whenever it mentions gold, it talks about it as though it were some sort of crank market phenomenon…a marginal investment for the marginally insane.

As Michael Santoli put it in this week’s issue – gold is “not terribly useful.” He quotes a fellow named Jeffrey Christian who believes gold buyers are in for a “gut check” – a drop in the price of 15% to 20%.

He may be right about that. Every bull market has its countertrends and back-stepping. We’d be delighted to see the price 20% lower. “Buy the dip,” we’d tell you.

But as to the usefulness of gold, Mr. Santoli is dead wrong. Yes, gold is useless – most of the time. And, as anything but money and jewelry (a form of money in many countries), it is useless all the time.

But sometimes it is almost essential. When the other money – the feds’ money – goes bad, you need some good money to protect yourself. That’s the role gold has always played; it is natural, uncompromised money.

It does nothing – but it hides no mistakes.

It holds no press conferences – but it tells no lies.

It makes no promises – and never delivers less.

And anyone who bothers to mint coins of gold or silver is doing the world a favor.

Free Baron von NotHaus!

Bill Bonner
for The Daily Reckoning

Protecting Yourself from the Inexorable Decline of the US Dollar originally appeared in the Daily Reckoning. Daily Reckoning founder Bill Bonner recently wrote articles on stagflation and the great correction.

Read more here:
Protecting Yourself from the Inexorable Decline of the US Dollar




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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The VIX Summit, a.k.a. the CBOE Risk Management Conference

March 30th, 2011

About a month ago I had an opportunity to attend the CBOE Risk Management Conference, which could easily had been called as the VIX Summit. This was the first time I attended this conference and in retrospect, I have little doubt that if VIXophiles were only to attend one conference per year, this would be the one to go to.

Where else can you find several hundred like-minded souls who obsess about the VIX and volatility on a daily basis? Where else could you holler out “Hey, Mr. VIX?” in a crowded room and expect at least a dozen heads to turn?

This year’s agenda tells part of the story. Some of the sessions I had the pleasure of attending included:

  • VIX Option Strategies
  • Tail Risk Protection: A Panel Discussion on Why and How Investors Might Hedge Downside Risk
  • Volatility ETNs and ETFs: A Panel Discussion on the Construction and Usage of Volatility-Based Investment Products
  • Equity Correlation and Macro

    ETF, Uncategorized

Is A Police State Worth Fighting For?

December 22nd, 2010

In 43 BC, over 2,000 years ago, warring consuls Antony, Lepidus, and Octavian were duking it out with each other over control of Rome following Julius Caesar’s assassination the prior March.

Each had legions at his disposal, and Rome’s terrified Senate sat on its hands waiting for the outcome. Ultimately, the three men chose to unite their powers and rule Rome together in what became known as the Second Triumvirate. This body was established by a law named Lex Titia in 43 BC.

The foundation of the Second Triumvirate is of tremendous historical importance: As the group wielded dictatorial powers, it represented the final nail in the coffin in Rome’s transition from republic to malignant autocracy.

The Second Triumvirate expired after 10 years, upon which Octavian waged war on his partners once again, resulting in Mark Antony’s famed suicide with Cleopatra in 31 BC. Octavian was eventually rewarded with nearly supreme power, and he is generally regarded as Rome’s first emperor.

Things only got worse from there. Tiberius, Octavian’s successor, was a paranoid deviant with a lust for executions. He spent the last decade of his reign completely detached from Rome, living in Capri.

Following Tiberius was Caligula, infamous for his moral depravity and insanity. According to Roman historians Suetonius and Cassius Dio, Caligula would send his legions on pointless marches and turned his palace into a bordello of such repute that it inspired the 1979 porno film named for him.

Caligula was followed by Claudius, a stammering, slobbering, confused man as described by his contemporaries. Then there was Nero, who not only managed to burn down his city, but was also the first emperor to debase the value of Rome’s currency.

You know the rest of the story – Romans watched their leadership and country get worse and worse.

All along the way, there were two types of people: The first group was folks that figured, “This has GOT to be the bottom; it can only get better from here.” Their patriotism was rewarded with reduced civil liberties, higher taxes, insane despots, and a debased currency.

The other group consisted of people who looked at the warning signs and thought, “I have to get out of here.” They followed their instincts and moved on to other places where they could build their lives, survive, and prosper.

I’m raising this point because I’d like to open a debate. Some consider the latter idea of expatriating to be akin to ‘running away.’ I recall a rather impassioned comment from a reader who suggested, “leaving, i.e. running away, is certainly not the proper response.”

I find this logic to be flawed.

While the notion of staying and ‘fighting’ is a noble idea, bear in mind that there is no real enemy or force to fight. The government is a faceless bureaucracy that’s impossible attack. People who try to do so usually discredit their argument because they become marginalized as fringe lunatics. Violence is rarely the answer, and it often has the opposite effect as intended, frequently serving to bolster support for the government instead of raising awareness of its shortcomings.

Unless/until government paramilitaries start duking it out with citizen militia groups in the streets, this is an ideological battle…and it’s an uphill battle at best.

Government-controlled educational systems institutionalize us from childhood that governments are just, and that we should all subordinate ourselves to authority and to the greater good that they dictate in their sole discretion.

You’re dealing with a mob mentality, plain and simple. Do you want to waste limited resources (time, money, energy) trying to convince your neighbor that s/he should not expect free money from the government?

You could spend a lifetime trying to change ideology and not make a dent; people have to choose for themselves to wake up; it cannot be forced upon them. And until that happens, they’re going to keep asking for more security and more control because it’s the way their values have been programmed.

When you think about it, what we call a ‘country’ is nothing more than a large concentration of people who share common values. Over time, those values adjust and evolve. Today, cultures in many countries value things like fake security, subordination, and ignorance over freedom, independence, and awareness.

When it appears more and more each day that those common values diverge from your own, all that’s left of a country are irrelevant, invisible lines on a map. I don’t find these worth fighting for.

Nobody is born with a mandatory obligation to invisible lines on a map. Our fundamental obligation is to ourselves, our families, and the people that we choose to let into our circles…not to a piece of dirt that’s controlled by mob-installed bureaucrats.

Moving away, i.e. making a calculated decision to seek greener pastures elsewhere, is not the same as ‘running away’…and I would argue that if you really want to affect change in your home country, moving away is the most effective course of action.

The government beast in your home country feeds on debt and taxes, and the best way to win is for bright, productive people to move away with their ideas, labor, and assets. This effectively starves the beast and accelerates its collapse. Then, when the smoke clears, you can move back and help rebuild a free society.

Regards,

Simon Black

for The Daily Reckoning

Is A Police State Worth Fighting For? originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Is A Police State Worth Fighting For?




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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3 Little-Known Government Projects That Could Change the Face of Tomorrow

December 10th, 2010

3 Little-Known Government Projects That Could Change the Face of Tomorrow

Not many people have heard of the Defense Advanced Research Projects Agency, DARPA for short, much less know what it does. But this little-known government agency was created by the Department of Defense in the late 1950s to ensure the U.S. military's technical superiority. Even more interesting to investors, it also controls about $3 billion in research funds that act like seed capital that is strategically distributed to the private sector in hopes of creating technological breakthroughs that can be put to use by the military.

As the Chief Strategist of Game-Changing Stocks, I'm always on the lookout for “the next big thing.” That's why it's a no-brainer to look through DARPA's current projects and ideas for potential blockbusters.

The agency tends to be the ground floor operation for broader Department of Defense goals, and if you can find a trend in new project ideas, you can get a good sense of companies that are worth following as they develop their technologies and bring a product to the market. This is kind of intel I live for.

But what makes this angle unique is that these breakthrough companies hired by DARPA offer a more defensive play than similar businesses. In this uncertain economy, it's very helpful to have a stable, reliable partner like the U.S. government. Uncle Sam is picking up the tab for the project they're working on — pretty nice if you're a small company!

Below, I've highlighted a few technologies I've found looking through DARPA's files that look like ground-breaking ideas if all goes according to plan. While it can take considerable time to take a new idea from “lab to fab” (laboratory to fabrication), the companies below already have a good start in their respective fields.

  • Neovision2: An effective military operation demands superior intelligence — both human intelligence (called “HUMINT”) and signals intelligence (“SIGINT”), the latter meaning radar and satellites. While the SIGINT problem has been solved by dozens of orbiting satellites, it's not perfect because the data still has to be analyzed and can never be as precise as human observers. But that mission is highly risky.

What the Pentagon wants from contractor Evolved Machines is a sensor that mimics HUMINT, one that can see and instantly interpret what's going on, identifying threats and convey that information in real-time to battlefield commanders. “Integration of recent developments in the understanding of the mammalian visual pathway with advances in microelectronics,” DARPA says, “will lead to the production of new revolutionary capabilities from the ground to the sky that will provide a new level of situational awareness for the warfighter.”

  • Blood Pharming: Blood used in combat zones is donated in the United States and is usually up against its expiration date (about 28 days) by the time it ships, let alone by the time it might be used. So the military wants to be able to produce transfusable universal red blood cells that can be grown in an automated, portable cell culture. In other words, one guy in the platoon wears a backpack that can grow blood. The company building this system is Cleveland-based Arteriocyte.

    Uncategorized

3 Little-Known Government Projects That Could Change the Face of Tomorrow

December 10th, 2010

3 Little-Known Government Projects That Could Change the Face of Tomorrow

Not many people have heard of the Defense Advanced Research Projects Agency, DARPA for short, much less know what it does. But this little-known government agency was created by the Department of Defense in the late 1950s to ensure the U.S. military's technical superiority. Even more interesting to investors, it also controls about $3 billion in research funds that act like seed capital that is strategically distributed to the private sector in hopes of creating technological breakthroughs that can be put to use by the military.

As the Chief Strategist of Game-Changing Stocks, I'm always on the lookout for “the next big thing.” That's why it's a no-brainer to look through DARPA's current projects and ideas for potential blockbusters.

The agency tends to be the ground floor operation for broader Department of Defense goals, and if you can find a trend in new project ideas, you can get a good sense of companies that are worth following as they develop their technologies and bring a product to the market. This is kind of intel I live for.

But what makes this angle unique is that these breakthrough companies hired by DARPA offer a more defensive play than similar businesses. In this uncertain economy, it's very helpful to have a stable, reliable partner like the U.S. government. Uncle Sam is picking up the tab for the project they're working on — pretty nice if you're a small company!

Below, I've highlighted a few technologies I've found looking through DARPA's files that look like ground-breaking ideas if all goes according to plan. While it can take considerable time to take a new idea from “lab to fab” (laboratory to fabrication), the companies below already have a good start in their respective fields.

  • Neovision2: An effective military operation demands superior intelligence — both human intelligence (called “HUMINT”) and signals intelligence (“SIGINT”), the latter meaning radar and satellites. While the SIGINT problem has been solved by dozens of orbiting satellites, it's not perfect because the data still has to be analyzed and can never be as precise as human observers. But that mission is highly risky.

What the Pentagon wants from contractor Evolved Machines is a sensor that mimics HUMINT, one that can see and instantly interpret what's going on, identifying threats and convey that information in real-time to battlefield commanders. “Integration of recent developments in the understanding of the mammalian visual pathway with advances in microelectronics,” DARPA says, “will lead to the production of new revolutionary capabilities from the ground to the sky that will provide a new level of situational awareness for the warfighter.”

  • Blood Pharming: Blood used in combat zones is donated in the United States and is usually up against its expiration date (about 28 days) by the time it ships, let alone by the time it might be used. So the military wants to be able to produce transfusable universal red blood cells that can be grown in an automated, portable cell culture. In other words, one guy in the platoon wears a backpack that can grow blood. The company building this system is Cleveland-based Arteriocyte.

    Uncategorized

The Fed’s Misguided Beliefs About Currency Debasement

December 6th, 2010

What does it mean?

30-Year Treasury Yield vs. 30-Year Mortgage Rates

The chart above shows that the 30-year Treasury bond yield is now higher than the interest rate on 30-year mortgages.

What does it mean?

The answer is not immediately apparent. On the surface, this chart indicates that the average American mortgage-holder is a better credit risk than the US government. After digging a little deeper, the picture doesn’t change very much. The average American mortgage-holder is genuinely trying to repay his debts. The US government isn’t.

Treasury bonds remain the global benchmark for safety and reliability. But at the same time, Federal Reserve Chairman, Ben Bernanke, is busy establishing a new global benchmark for dumb ideas. He is busy printing up dollars in the name of dollar stewardship.

The man considers it a good idea to sacrifice the dollar’s hard-won reputation in the pursuit of a lower unemployment rate. He considers it prudent to exchange America’s world-leading credit-worthiness for short-term economic benefits.

But the global economy does not operate according to the wacky theories of academia. It follows the common sense principles of the real world. Chairman Bernanke does not seem to grasp the fact that the Federal Reserve does not create jobs; the private sector does.

Nevertheless, last night on 60 Minutes, Bernanke defended his quantitative easing campaign as an essential assault against unemployment.

“At the rate we’re going,” said the Chairman, “it could be four, five years before we are back to a more normal unemployment rate.” Therefore, Bernanke continued, additional quantitative easing is “certainly possible… It depends on the efficacy of the program.”

In other words, the Chairman will continue to debase the dollar for as long as it takes to revive economic growth…or to destroy it. According to the academic theories that Bernanke embraces, the Federal Reserve can stimulate the economy by printing dollars and buying Treasury bonds, thereby lowering interest rates…and facilitating capitalistic ventures.

In the real world, however, currency debasement is just that, currency debasement…which is just a form of wealth destruction. And notwithstanding Ben Bernanke’s theories, destroying wealth never creates it.

Bernanke believes he is waging a war against economic malaise and unemployment. Unfortunately, his arsenal features a falling dollar and a rising inflation rate.

These dynamics are not lost on bond investors…or at least not completely lost. Yields on long-term Treasury securities have been climbing since August. Last week, the 10-year T-note yield pushed above 3.0% for the first time in months. 30-year bond yields have also been climbing.

So Bernanke’s tactics are working, right? Hardly.

The economy added a paltry 39,000 jobs in November, as the unemployment rate jumped to 9.8 percent, the highest level since April.

So if you’re keeping score at home, it’s…

Bad Economy: One

Dumb Ideas: Zero

Eric Fry
for The Daily Reckoning

The Fed’s Misguided Beliefs About Currency Debasement originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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The Fed’s Misguided Beliefs About Currency Debasement




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Guest Columnist for Steven Sears at Barron’s

November 18th, 2010

It may just be a coincidence, but each time I have been tapped as a guest columnist for The Striking Price on behalf of Steven Sears at Barron’s, there has been a spike in volatility just as I sit down to draft some thoughts. Perhaps Steven knows something I don’t, but if he does, he’s not telling.

Today in There’s Opportunity in Uncertainty, I build on some themes from a previous September column, Will Market Volatility Return to Crisis Levels? and discuss why I think those who have been earning a nice living by selling options steadily for the past two years or so may still be able to carry that strategy forward.

In today’s column, I also mention the sentiment cycle pioneered by Justin Mamis in The Nature of Risk. As that graphic has never appeared on the blog, I have decided to include it below for reference.

I will take up some of the ideas presented in the Barron’s column, including information risk and price risk, in this space going forward.

Related posts:

Previous Barron’s contributions:

Disclosure(s): none



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Guest Columnist for Steven Sears at Barron’s

OPTIONS, Uncategorized

Bill Gates Can’t Get Enough of This Stock

November 10th, 2010

Bill Gates Can't Get Enough of This Stock

The super-rich aren't like you and me. They can't invest a little here and a little there and hope to make serious returns. They have to bet big on particular investments to really get a payoff. And with such big bets to make, you can be sure they do lots of homework and then vet their ideas with the investment world's leading thinkers.

So when Bill Gates — one of the country's wealthiest citizens — makes repeated investments in an automotive retailer, my ears perk up. He's bought three large blocks of stock in the past 10 days, even as shares power higher to new 52-week highs. Is he crazy, or does he know something the rest of us don't?

The limits on insiders
Bill Gates already owns more than 10% of automotive retailer AutoNation (NYSE: AN), well above the 5% threshold that qualifies him as an insider (in this case he's deemed a “beneficial owner”). And like all insiders, he can only buy and sell stock during certain trading windows, such as after an earnings release. His latest moves came after the company, which operates 250 car dealerships in 15 states, reported third quarter results. In three separate filings, Gates acquired an additional 159,000 shares at an average price of $24, pushing his total ownership to 12 million shares — worth $288 million.

AutoNation's quarterly results were a mixed bag, highlighted by an impressive +4% jump in same store-sales, but offset by higher operating expenses that led the auto retailer to slightly miss profit forecasts. Gates likely figured that the sales trends were the most important metric to watch, and not quarter-to-quarter expense trends. That's what sets big picture investors like him apart from the analyst crowd. (Sure enough, AutoNation's October new car sales figures, which were released last Thursday, were up a healthy +15% from a year ago, slightly exceeding broader industry trends).

Analysts simply look at current trends and derive a target price. For example, UBS rates the shares a “sell” with a $20 price target (down from the current $26 share price), believing the stock is only worth about 13 times their projected 2011 EPS forecast of $1.55. Analysts at Buckingham Research predict shares will fall all the way to $18, citing tepid profit margins. If you looked at AutoNation's recent growth rates and profit margins, that price target makes sense.

But that's not a wise way to look at this stock. Instead, longer-term focused investors note that the U.S. auto and truck market has shrunk from 17 million vehicles in 2006 and 2007 to around 11 or 12 million these days. In the next few years, though, industry volume is likely to rebound back to the 13 or 14 million mark. And if that happens, Auto Nation's per share profits are likely to surpass $2 or even $2.50 a share. If the industry sells 15 or 16 million vehicles by 2014 or 2015, then the EPS math changes to $3 or $3.50. And that's likely how Bill Gates views this story. With potential earnings power like that, this $26 stock could easily approach $35 or $40, representing nearly +50% upside.

Action to Take –> This increasingly large bet from Bill Gates highlights the difference you should notice between the near-term analysts and long-term investors. While analysts incrementally raise and lower their estimates and target prices, big picture investors like Bill Gates can afford to look much farther out. And in this instance, he sees a pretty sunny view for AutoNation, and you might do well to follow his lead.


– David Sterman

P.S. –

Uncategorized

Why 2011 Could be the Year of the Oil Comeback

November 3rd, 2010

Why 2011 Could be the Year of the Oil Comeback

Like every investor, I try to read voraciously to get an edge. I'm always on the lookout for investment angles that haven't gotten much press but could eventually turn into a market-moving event. So my ears perked up last week when I saw that hedge fund traders have recently been aggressively buying energy futures, betting that we'll soon see oil move up to $100 a barrel. In subsequent days, it's become easier to see the signs of $100 oil popping up on people's radars.

For example, on Monday, Saudi oil minister Ali Naimi suggested that oil prices could move up to $90 without hurting global economic growth, up from a previous perceived ceiling of $80. That's led some to speculate that OPEC will try to maintain production at current levels even as signs are emerging that oil demand has begun to pick up.

Economic growth in emerging markets like Brazil and China remains robust, which led to a 1.4 million barrel jump in the third quarter, according to the International Energy Agency (IEA) and a 980,000 barrel uptick in Western Europe and the United States. Any further uptick in global demand could push oil demand back up to — or above — supply levels.

Analysts at Merrill Lynch see $100 oil by early 2011 for a more prosaic reason: They believe that the U.S. Federal Reserve's plan for quantitative easing (QE2) will weaken the dollar and raise the price of commodities, particularly gold, silver and oil. [Read: "How The Fed Will Affect Your Portfolio This Week"] The recent move in the dollar is a possible harbinger of things to come, according to Merrill: “We believe that oil is only starting to reflect a weak U.S. dollar against G10, leaving room for oil price rises as emerging market currencies strengthen against the U.S. dollar.”

Make no mistake, $100 oil is not nearly as lethal to the economy as $140 oil was a few years ago, but it still creates serious headwinds and tailwinds in a range of industries. Here a just a few impacts:

  • Airliners see a sharp drop in profits next year as rising jet fuel costs cannot be offset by commensurately higher fares. Carriers have already pushed through steady price increases in the past 18 months, but are pushing the limits of demand elasticity. Notably, while many carriers were nicely hedged against rising fuel prices a few years ago, they have largely bypassed hedging activities in this cycle. If they are to act, they should do so soon.

    Commodities, ETF, Uncategorized

This Stock is Locked in a Battle — Here’s How You Can Play Both Sides…

October 7th, 2010

This Stock is Locked in a Battle -- Here's How You Can Play Both Sides...

It is the job of every Wall Street analyst (known as a “sell-sider”) to convince clients to buy stocks on their buy list. Those clients — hedge funds and mutual funds also known as “buy-siders” — give the ideas a listen, but often form differing opinions on those very same stocks.

And right now, the two camps are clearly divided on one of the strongest tech stocks of the past 10 years. That stock is Equinix (Nasdaq: EQIX), which operates massive data centers that host major companies' websites and enterprise servers. Right now the company's detractors, largely on the buy-side, are showing the winning hand: shares fell an eye-popping -33% on Wednesday after the company reduced quarterly guidance.

At first glance, that sell-off may seem unwarranted as management simply shaved guidance by a very small amount. And the damage appears largely confined to just two customers, both of which asked for some price concessions on a new contract. Management was quick to note that business is otherwise trending well.

Sell-side analysts, which have always been very supportive of this stock, were quick to come to its defense. Even though shares fell from $105 to $72, Deutsche Bank still expects shares to move back to $100, Piper Jaffray's price target was lowered from $124 to $110. Merrill Lynch? Standing by its $130 price target, despite Wednesday's news.

To understand why analysts remain so bullish about this stock's future, you need to look to the past. Equinix developed a brilliant business strategy where major web servers from different companies sat right next to each other and are also plugged right into global Internet traffic points, known as co-location. The whole move to data centers has been an obvious one for IT managers, as it saves money and headaches, and Equinix's co-location services made the offer all the more compelling.

As Equinix's selling proposition lured customers in droves, the company's sales took off and EBITDA margins soared, steadily rising from 12% in 2005 to 40% in 2009. Not that Equinix has much to show for those impressive operating metrics — the company has continually poured all of its cash flow back into the business, and as a result, has generated negative free cash flow for each of the last four years.

Sell-side analysts have never had much problem with that, as they have assumed that once investments are complete, free cash flow would be bounteous. And in the next year or two, that is indeed expected to finally be the case. But the company's detractors hold a much more dim view of the long-term. They note that this is still a price-sensitive business, and they think that this week's modest shortfall — highlighted by some price concessions — is a harbinger of things to come.

In addition, bears say that major global phone companies such as AT&T (NYSE: T) hold the strongest long-term hand, since they actually operate the Internet's backbone and can set the pace on pricing. As of yet, that scenario hasn't played out, as Equinix's sales power ever higher.

To keep sales rising, Equinix has been making some fairly hefty acquisitions and is rumored to be planning another, this time for a European company known as Interxion in the coming weeks.
Not everyone on the sell-side is convinced that Equinix can keep pulling away from the competition. Citigroup just lowered its rating from “Buy” to “Hold,” citing concerns about stagnant growth at a recently acquired division and rising customer turnover. It thinks this week's modest pre-announcement is “an early sign-post that revenue growth for its core demographic in the U.S. may be slowing sooner than we anticipated.”

Kaufman Brothers believes that digital content companies such as major media firms may actually look to move away from the use of data centers and start hosting more servers on their own corporate sites. That would be a real blow to the data center industry. But most sell-side analysts remain quite bullish, and will probably keep pounding the table for the stock in the days ahead.

Action to Take –> Equinix is scheduled to meet with the investment community on November 11th. Ahead of that event, shares are likely to rebound from here as the sell-side talks up the big disparity between the current price and their price targets. So despite this news, shares may now be a short-term buy, but they increasingly look like a long-term sell. Shorts made a killing on this week's plunge, and many have likely covered their short positions. But as shares rebound, they are bound to attract fresh short interest. You can look to go long on this name now, and perhaps reverse course if shares move back into the $80s or $90s.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
This Stock is Locked in a Battle — Here's How You Can Play Both Sides…

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This Stock is Locked in a Battle — Here’s How You Can Play Both Sides…

Mutual Fund, Uncategorized

On Abnormal Returns TV with Tadas Viskanta

September 24th, 2010


Just a quick note to let readers know that yesterday I spent a half hour talking with Tadas Viskanta of Abnormal Returns on Abnormal Returns TV.

We discuss a wide variety of topics, with an emphasis on the VIX, VIX futures, VXX, contango, futures-based ETFs, and related subjects. We also talk a little bit about the ideas behind my last three posts on the blog:

  1. Diversification, Momentum and Sidestepping the 2008 Panic
  2. VIX and Historical Volatility Settling Back in to Normal Range
  3. The Education of a Trader

Thanks to Tadas for the opportunity to experiment with a new media platform. Going forward, I expect to be showing up in other corners of the internet not just in print, but also in an audio and/or video format as well.

Related posts:

Disclosure(s): neutral position in VIX via options



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On Abnormal Returns TV with Tadas Viskanta

ETF, OPTIONS, Uncategorized

9 Stocks that Have Consistently Raised Dividends for 25 Years or More

September 18th, 2010

9 Stocks that Have Consistently Raised Dividends for 25 Years or More

As income investors, we can get caught up in yields… almost to a fault. But there is something else you should be studying that could make just as big a difference to your long-term returns: dividend growth.

That's because dividend growth can make even lower-yielding stocks into big income producers over time. Take a look below at the income streams from a stock yielding 7% but not growing dividends, versus a 5% yielder that hikes payments +10% every year. If you held 1,000 shares trading at a $10 share price, here is the income stream each would produce over a year:

Uncategorized