Here is a PREVIEW of 2007, some thoughts on the coming year and beyond for investors plus some of the 2007’s oncoming issues and concerns. These are investment subjects and trends you should be aware of:
2007 is the year gold breaks through to new value heights in response to a dollar depreciating dramatically against the Euro and failing under America’s huge dept load. 2007 is also the year of “exchange” stocks like NYX and CME. 07 will continue to be a strong year for metals stocks and ‘commodities’ stocks like IGE, and for broad-spectrum consumer commodities stocks like Altria and Nestle.
The rise since the turn of the century of powerful- and often corrupt- hedge fund managers, flush with pension fund money, university endowment money and oil money, who can bring hundreds of millions of dollars, even billions of dollars, to bear on targeted individual company shares, sometimes can make markets difficult for small investors. Because company shares CAN be manipulated, especially downward, leveraging with huge sums of money. We don’t see hedge funds being controlled by the SEC any time soon. So it is important to be SURE you’re right and to hold your ground. The world today is a cherry-picking market- and will be for as far into the future as we can see. Fortunately we are very good at this; it’s what we do
Copper, titanium, gold and platinum have been strong metals plays for three years, especially if you’ve been following Market Witch into Brazil’s stocks starting in 2005. As this decade draws toward its close and we begin the second decade of the new century, steel and aluminum will become the two most sought-after commodities
As will WATER. We’ve talked about this for six years: water is the new OIL. USA can emulate the Brazil model and become energy independent with ethanol. But unpolluted fresh water is fast becoming rare and valuable. Look for Corning (GLW) to begin manufacturing substrate materials for water and sewage filtration systems as well as diesel engine ‘clean-air’ products
Look for Corning (GLW) to introduce a green laser, throwing ‘video” wide open. Color “television” and all color “video” broadcasts, in whatever format, work via a base color spectrum of red blue and green. Green so far has been unattainable. All three make it possible to ‘broadcast’ video images- from something like a pointer- onto any flat surface. Corning is THE major producer of flat glass for LCD panels and flatscreen TVs- products with a near-60% growth rate for 2007. But Corning also is becoming a powerhouse in solar energy panels manufacture
Americans are beginning to discover that the role of Superpower requires a real, a young, a highly-trained, and a very large, military. Public policy cannot be enforced by 35-year-old American weekend warriors with wives homes small children and National Guard status. The US will have to reinitiate a military draft or will find itself soon unable to back up its policies. And USA’s Superpower status will be lost
The United States is fast becoming a Third World Country (see Market Witch May, 2005: Third World America)having lost its Middle Class, and is fast moving toward 5% rich- 95% poor status. This means the US ‘consumer’ economy has changed dramatically. The US now is a country much more like 1950s Argentina than like the prosperous happy 20th-century USA of the 1950s and 70s and 90s. The American Middle Class, a new phenomenon which arose following the American victory of the Second World War and which spawned the vast ocean of prosperous consumerism our nation enjoyed for half a century, has been destroyed by globalization and elitist American politics. Prosperity for most Americans now is a memory of the 20th century. Ordinary Americans have little no job security, monumental health care problems, retirements that are in jeopardy, and are increasingly living in a land in which it is impossible to “educate yourself into upward mobility” and prosperity. Globalization together with the effects of outsourcing and the relative economic successes of economies in India, China Indonesia Mexico and even Russia, has both RAISED the poor world’s standard of living and LOWERED ours. Working class Americans are headed toward comparatively Third World wage scales
Fidel Castro will likely die soon, throwing Cuba’s island future open to possibilities. Will this potentially-rich island nation choose to follow an American of Brazilian or Costa Rican model? Or will it follow the path of Chavez and Venezuela?
America’s manufacturing base has been enormously damaged. Traditionally, America always has been able to pull itself up by its bootstraps when new ideas new inventions and new technologies, often discovered and created during wartime and funded via a combination of military and civilian R&D, then spill over in peacetime into the consumer marketplace. Spawning new consumer products, new technologies that have broad consumer application, and creating new American industries. Which in turn brings Americans the untold wealth everybody became used to for half a century. We believe this may happen again. But not for five to ten years. It also may not happen at all. Because the US public education system has also been badly damaged
The US paper currency, backed by nothing tangible, and under enormous pressure from a gigantic US public debt, will buckle this year- probably beginning in March- and will fall dramatically against the Euro. We will see $1000 gold this year. We will see the paper currency of global choice become the Euro. And we will see the beginnings of the re-emergence of gold as the ultimate world currency: a state of affairs not much different than 1000 years ago, or 3000. Bernanke, faced with “stagflation” and with more than forty million Americans living at below poverty level, will have to lower Fed rates to try to jumpstart the US economy instead of raising rates to quell inflation. He may not have the good sense to do it. Raising the Fed rate to 5.25 was premature, and a huge mistake.
2007 is the third year we’ve spoken about a phenomenon we call “monetization” in which a profession, an industry, or a field of endeavor, once and formerly a “cottage industry,” is essentially taken over by “big money” and by entrepreneurs who have no other motive than to exploit the field and make the most possible profit to the detriment of all else.
-during the 1970s we saw this happen with American banking and insurance, and oil.
-during the 1980s “big money” took over medicine and “health care” and one result now is that fifty million Americans have no health care insurance.
-during the 1990s this same phenomenon affected law and education. One result now is that an undergraduate “college education” costs $125,000 and is not cost-effective, and leaves graduates hugely debt-burdened and WITHOUT any “credential” that ensures a high-paying job or career.
This first decade of the new century has brought with it the monetization of commodities, basic materials, and natural resources.(See Market Witch April 2004: Too Many Ants, Not Enough Picnics). There
now is an acute global awareness that there is simply “not enough to go around” …
…and the world is scrambling for iron ore, aluminum, nickel, titanium, gold, copper, agri-products, fresh water, and the rest. These problems will not go away. And these shortages will grow more acute next decade, when the world begins a new wave of global infrastructure buildout, and there is not enough steel. Or copper. Or aluminum.
Unless there’s a WAR. And THAT too takes steel. As well as a traditional military. We Americans are not really IN World War III yet, even though Islam already has declared it. Historically, it’s 1938-1939. By the time it becomes 1941 Iran will have nukes. And probably will use them.
Here is a list of the top ten largest countries in the world, by area in square miles:
- Russia 6,592,850 square miles
- Canada 3,855,101
- United States 3,794,083
- China 3,705,405
- Brazil 3,300,169
- Australia 2,969,906
- India 1,269, 211
- Argentina 1,073,518
- Kazakhstan 1,049,155
- Sudan 967,500
This is not 21st century thinking. View ISLAM not as a series of small “tribal” nations but rather as a SINGLE UNIFIED FORCE intent upon (a) bringing down the United States and (b) ruling
the world under Islam. These “nations” of Islam are “fantasy” nations many of them arbitrarily cobbled together by the British Crown during the early days of the 20th century.
Let’s tally them
up, West to east, to create ISLAM: Morocco, Algeria, Libya, Egypt, Saudi Arabia, Yemen, Oman Syria, Jordan, Turkey, Iraq, Iran, Afghanistan, Pakistan.
Now the list of the world’s ten largest countries looks like this:
If we add some of the wilder and more marginal and underdeveloped “nations” of Islam like Sudan, Kazakhstan etc, the two largest countries in the world are Russia and Islam, a dead heat. Many of these “nations” of Islam have enormous wealth in many natural resources, not just oil, resources that are in short supply and gaining in value weekly. AT LEAST TWO of these nations, Pakistan and Iran, have primitive nuclear weapons capability. Currently, the world’s strongest economies (available resources, work force, manufacturing capability, debt level, productivity, etc) are Brazil, China, USA, India, Saudi Arabia and Iran. TWO of those very strong economies are in ISLAM. A THIRD one, Afghanistan, has the largest and most financially successful Outlaw Economy (poppies/opium) on earth.
Islam is a backward, misogynistic and violent culture. But it may be Islam’s destiny to rule the 21st century in a medieval and barbaric manner. What stands between Islam and its goal? US. The USA. And we are 6% of the world population. The American presence in Iraq has dramatically strengthened Islamic Fascism’s support base all over the Islam world. Our failure to send the necessary US troops into Iraq –or for that matter into Saudi Arabia, which is where US troops should have initially been sent- has allowed Iran to destabilize Iraq. We will almost certainly have to fight a war with Islam within 36-48 months. Why? Because Islam refuses to allow us not to. This war almost certainly will include nuclear confrontations. And very possibly nuclear exchanges. The price we’ve paid in the US for a decade or primitive religious zealotry is the destruction of the country’s knowledge, education, science and research and development base. The USA has only six per cent of the world’s population, and cannot hope to maintain a leadership position without science and technology and highly-educated Americans. Our country also is so deeply divided culturally and politically that it may not be able to defend itself or its interests in a time or real war.
Europe is in deeper trouble with Islam than we are. Key traditional European cultures are being challenged and damaged by immigrants who have no intention of assimilating, but are in fact intent on changing western Europe into a much more Islamic landscape. France has in the past 12 months become more aggressive toward Islam than we are.
We also face scary issues with the Avian Flu/ H5N1 virus. A bio-epidemic/pandemic Avian flu (H5N1) event is most likely to occur in late 2007. If we get through 2007 without one, a strengthening global science and medical-research curve plus a more sophisticated level of preparedness will lessen the chances of a major crisis, one that would have enormous global economic effects. If we DO have an Avian Flu pandemic it is more likely to occur during the Northern Hemisphere’s hot summer months.
The USA has initiated yet another new industry, though still small. We are the world’s purveyor of bio-agriculture and bio-engineered products: foods, additives, metal-substitutes, construction materials, fuels, even medicines and pharmaceuticals. We are big fans of Monsanto (MON). 2007 also is the year of CORN as a new energy source, and the year ETHANOL begins to achieve validity as a transportation energy source.
China’s economy will collapse in an environmental calamity, but not any time soon. As 2007 brings the M&A business to Europe, it brings the IPO business to China. China also is fast becoming a banking titan. This brings additional problems to the US because China, now cash-rich, no longer sees gain or safety in placing that wealth in American dollars. Shanghai at the end of the decade will be the world’s largest shipping port. Macao, the new gaming/resort capital, is open for business. The powerhouse world economies now are Brazil, China, India, Russia, Australia, Germany, Holland, and South Africa, and to a lesser extent, Mexico. China’s enormous industrial buildout and its continuing willingness to view its citizens as expendable and its skill as a “pirate” economy, ignoring patents and ripping off products to market replicas, make China a formidable contender to become the global economic superpower. China is cash-rich. Most of that cash has been stored in US Treasury notes. 2007 is the year China switches from the dollar to the Euro, to gold, to real estate. Expect the dollar to respond accordingly.
The next great Internet areas of expansion are video and VoIP (Voice over Internet Protocol) … and despite an economically-troubled America, our businesses and industries are reportedly still experiencing data growth of 50% per year: don’t let anyone tell you “tech” and “networking” is in decline. Four key phrases define America’s current digital/electronic world:
-On-Demand World: entertainment on demand coming to Americans via the Big High Speed Digital Pipeline, through HDTV, and through various hand-held mediums. ALL ‘video’ is about to become ‘on-demand.’
-Enhanced Wireless World: there are now 197 million cell phone subscribers in the US, way past the “tipping point,” and we are beginning to see available the kind of “enhanced” cell phone features and services-including streaming video- that have been available in Finland Korea and Japan for many years.
-Hand-held World: video games, teleconferencing, live market tapes, movies and television shows, spread-sheets broadcast from one end of the LAN to the other (and soon from one end of the country to another) via various hand held PDAs? It’s here. YouTube is just the start.
-Wall-Screen World. Big digital flat glass screens are everywhere: in restaurants in sports arenas, in the airport, at stadium rock events, in lobby security at your office building, on the wall of your living room, replacing art…
As the latter years of this decade features the “monetization” of basic materials natural resources and metals, the SECOND DECADE of the new century will feature a global infrastructure build out (especially in the Southern Hemisphere) that will require untold amounts of steel.
We began our Market Witch efforts twelve years ago studying American mainstream and pop culture and investing in America and American companies and products on that basis…Barbie® dolls, Harleys, Pentiums, iPods, Oreos… but as the US has lost economic clout and become a Third World country, we’ve moved to a global perspective and we go with the worlds strongest economies and their products. WE are still not investing in China or India, but we are investing in American companies that do. We believe the economies of both India and China are more fragile and vulnerable than most people realize and may actually be weaker at the end of the decade than they are now. Currently the strongest economy is Brazil, with other South American economies on deck. Europe, and especially, Germany, is much stronger than it was a year ago. The two strongest investment sectors of the coming year will be mining and metals, and “the business of selling money”-brokerages, “exchange” stocks, and specialty financials like GFI Group. The dollar will continue to decrease in value this year both against other developed nations’ currencies and against metals.
It certainly looks as though America is in a silent-movies “Perils” of Pauline” scenario- tied to the railroad tracks with the train coming fast. Our government will have to wake up to the danger its currency is in. Our real faith ultimately remains with Americans themselves and in their inventive genius.
The old America of the 20th century has receded into history… but as always, we expect that some new idea that originates here in the US (not in China, which steals its technology from our patents) (not in Islam, which does not have the technology to build a flashlight unless that technology is purchased on the black market or downloaded from an American web site) will kick off a new technology and a new industry in future… and that the US may again regain its preeminent position as the world’s cradle of invention. Ben Franklin said: “An investment in knowledge always pays the best interest.” Our country would do well to remember these words.