The Taipan Group's 247profits e-Dispatch
Baltimore, New York, Chicago, Berlin, Bonn, London and Paris
August 27-30, 2004
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***Oil made Jed a millionaire, now alternative energy could make you a
small fortune�
***Exclusive e-Dispatch pick: Buy Ballard Power (BLDP:NASDAQ).
Ford, GM, Honda, DaimlerChrysler, Toyota, BMW - all will use Ballard
fuel cells! Read on�
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>From the Desk of Briton L. Ryle
Dear Friend,
Oil prices are on a one-way trip higher. Demand is at an all time high. The
world is currently burning 80 million barrels of black gold a day. Chinese
consumption is up 50% over last year. And supply simply can't catch up.
Oil experts think this may be the start of a "new era" when oil prices stay
above US$40 a barrel. That's clearly not good.
It's estimated that higher oil prices cost the US consumer over US$50 billion
in the first half of 2004. Over an entire year, that's US$100 billion that we
won't be spending on vacations, new clothes or the latest electronic gadgets.
And if American households scale back their spending to offset increased
energy costs, the economic damage could be even worse.
Little wonder, then, that a spike in oil prices has preceded 9 of the 10
recessions since World War II.
In fact, oil prices have the potential to shave a point or two off of US GDP.
The US economy already lost a half-point of GDP in the fist half of this year.
If oil stays above US$40, year-end GDP may lose a point and a half. Or
more.
And if you don't think the stock market is pricing in the potential of the US
economy heading back into recession, you've not been paying attention.
According to Lehman Brothers, each US$1 added to the price of a barrel of
crude oil costs US airlines US$280 million a year in higher jet fuel bills.
Every penny increase in the price of diesel costs the trucking industry
US$325 million a year. And you can bet those higher costs will be passed
right on to you and me.
Throw in the fact that the US economy is still losing ten times the jobs it's
creating, and we're staring right down the barrel of the prefect recessionary
economic storm.
For most investors, that's a bit unsettling, to say the least. And that's
probably why, according to TrimTabs, new money coming in to mutual funds
has run at half the weekly average over the last year. If that trend continues,
you can expect to see a lot more red for the Dow and NASDAQ.
But one of the basic principles of Taipan's Dynamic Market Theory is that
within every event, good or bad, macro or micro, there is a profit
opportunity. And that's why I'm writing to you today.
Because higher oil prices have the potential to speed up the development of
alternative sources of energy. And for savvy investors, this could be the
once-in-a-lifetime profit opportunity that so many look for - like investing in
Henry Ford in 1903 or Bill Gates in 1985.
So if you want to find out how you can turn every US$1 you invest into
US$10 or even US$20 over the next ten years, please, read on.
***Creative Destruction and the Free Market: You may be familiar with
Schumpeter's doctrine of "Creative Destruction." One of the founders of
Austrian economics, Joseph Alois Schumpeter believed that innovation and
technological advancement could only occur at the cost of existing
technology. In other words, to create something new you have to destroy
something old.
And if you're a history buff, you can see this cycle of creative destruction
play out over and over again. Horse-drawn carriage makers were driven out
of business by Henry Ford's Model T. Internet protocol is wreaking havoc
on long distance telephone companies. Even an innovation as simple as Wal-
Mart's economies-of-scale retail strategy has had a profound effect on small
local retail businesses of all kinds.
But right now, in my opinion, we are witnessing the beginning of the end of
perhaps the single most important industrial innovation the world has ever
known. I'm talking about the use of fossil fuels to power the global industrial
complex.
Now, before I go on, let me just say that the world's dependence on fossil
fuels isn't going to disappear overnight. It will take years. And it will be
painful. But it's simply a no-brainer that such a huge paradigm shift will make
some investors rich beyond their wildest dreams.
***The Last Barrel of Oil: Oil companies are in their heyday right now.
Chances are, it won't get much better for them. Oil prices and demand are at
an all-time high. Oil companies can charge whatever they want, and their
recent profit numbers prove it.
Oil refiner Valero Energy (VLO:NYSE) recently posted a 390% year-over-
year increase in second-quarter profits. Amazingly, net profits jumped by
US$504 million! At Chevron (CVX:NYSE), net earnings rose 158% to
US$4.13 billion in its most recent quarter. And there are many more stories
just like these.
But what's really interesting is that both Valero and Chevron have sold off
since they posted these blowout earnings numbers. So what gives? Shouldn't
these companies be setting new highs as they blow analysts' estimates out of
the water?
The answer would seem to be obvious. I believe the market is saying that it's
not likely to get a whole lot better for the big oil companies. So the savvy
traders are taking profits.
But what I think the market is missing right now is that the world is facing a
sea change in the way it generates and consumes energy.
So let me ask you now: How much do you think the last barrel of oil will be
worth? As a museum piece it might fetch a few hundred dollars. But as a
source of energy, it will be worth nothing.
In fact, it won't even be pumped out of the ground. All of the oil pumps will
have been left to rust away out in the oilfields years before that last barrel of
oil could be pumped. That's because it will no longer be economically
rewarding to pump and burn oil.
Oil companies know this. Automobile manufacturers know this. And that's
why they've already invested billions researching and developing alternative
sources of energy.
***Once in a Lifetime: If you're under 40 years of age, you will most likely
witness one of those "once in a lifetime" events like the moon landing or the
discovery of America. And if you know it's coming, you should be able to
make a fortune.
The best estimates available say that there are only 40 years of known oil
reserves in the world. 40 years, that's it. It may not even be that long. And
pretty soon, the need for alternative energy sources is going to hit panic
mode.
I'm waiting for the day a US President makes the declaration that America
will develop a viable alternative energy complex, sort of like Kennedy did
when he vowed that an American astronaut would walk on the moon by the
end of the 60's.
There's no more innovative, motivated and creative force than America
when it comes to meeting a challenge. The United States made it from
scratch to Neil Armstrong's famous steps two years before Kennedy's
deadline. And I have no doubt that America will respond the same way
when it rises to meet the alternative energy challenge.
And that challenge may come sooner than you think.
***The Alternative Energy Campaign: In April of 2004, President Bush
announced that the Energy Department had selected partners for more than
US$350 million in new research projects to remove roadblocks to
developing hydrogen fuel technology.
And on the campaign trail, Democratic hopeful John Kerry has pledged that
he will "�put America on the path to energy independence and create
hundreds of thousands of new jobs at the same time."
It doesn't matter who you vote for, alternative energy is going to be an
important campaign issue. And when both candidates start pounding the
table about alternative energy, you can bet these stocks are going to shoot
up like gangbusters.
But the reasons for exploring alternative fuels are much more than simple
economic ones. National security has to rank right up there. If it weren't for
oil, the problems in the Middle East would be regional instead of global. It is
the worlds' dependence on oil that gives terrorists a stage.
***What to Buy: Far and away the market leader in developing fuel cells for
automobiles is Ballard Power (BLDP:NASDAQ). Ford, GM, Honda,
DaimlerChrysler, Toyota, BMW - pretty much every carmaker out there is
buying from them.
And many of these already have fuel-cell cars in production. BMW's making
a 7 Series car powered by a fuel cell that'll do 140 mph and has a range of
180 miles. DaimlerChrysler is currently making 14 models - mostly vans and
Jeeps - powered by Ballard's fuel cells.
Ford, General Motors, Honda, Mazda, Mitsubishi, Nissan, and Volkswagen
are all making cars with Ballard fuel cells in them.
Ballard also provides the fuel cells for several ongoing and completed public
transportation projects in the US, Europe and Japan. The European fuel cell
bus project started in 2002. Thirty Mercedes busses that cost US$1.2
million each were delivered to London, Amsterdam, Barcelona and several
other major European cities.
Fuel cell bus projects have also been approved in Mexico, Brazil, Egypt,
China and Australia.
Despite some problems that still need to be overcome, like hydrogen storage
and refueling stations, there's clearly a lot of momentum behind the
development of fuel-cell-powered vehicles.
And Ballard's the purest play out there.
***Some Numbers: Though still largely an R&D company, Ballard is trading
at book value and less than three times its cash on hand. A few years ago,
this was a US$100 stock. Even this year, it's traded as high as US$15. And
now you can buy it for around US$6 a share.
Surprisingly, the company did US$94 million in revenues in 2003. Estimates
for 2005 run as high as US$160 million. Gross margins approach 50%.
The company still operates at a loss, but also has no debt. Dilution of the
shares is possible if Ballard needs to raise money, but they have better than
two years of cash on hand right now. So I wouldn't expect to see any
fundraising going on for at least another year.
Alternative energy stocks as a group should outperform the market over the
next three to six months. And the stock that I just recommended has been
showing signs that it is about to make a big move higher.
I've watched several intraday volume spikes form over the last ten days.
Each one took the price higher before it settled back down to a support
level. This is a clear sign that those in the know (whether it's mutual funds or
savvy investors) are buying this stock.
You should be able to buy shares of Ballard Power (BLDP:NASDAQ)
around US$6. And to make it official, I'll rate Ballard Power a strong
speculative buy at US$6. You can contact Ballard at: Ballard Power
Systems Inc, 4343 North Fraser Way, Burnaby, BC V5J 5, Canada.
***$3 a gallon? $4 a gallon?
The Big Three automakers have already invested billions in alternative
energy. And so has Big Oil. Because they know what's coming.
Over the next eight years, alterative energy could turn every $1 you invest
into $12 to $18. Or more. But you'll have to act fast. Alternative energy will
be a major presidential campaign issue - regardless of who is elected. So act
now and catch the first big move.
Use the Money-Flow Matrix Trader and find out exactly where to put your
money NOW:
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Earnings Announcements for August 30, 2004:
Alloy Inc., Certicom Corp., Dollar General Corp., Kellwood Co., Parlex
Corp., Petsmart Inc., Stratos International Inc., and Whitehall Jewellers are
some of the companies releasing earnings.
Sponsored by your free daily "WaveStrength Market Report" e-newsletter.
You can sign up for your copy here:
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***Quote of the Day:
"The Swift-boat controversy is not an ancient molehill turned into a
mountain. It's how we're stumbling toward a debate that the
Democrats don't want to have - but that everyone knows exists
anyway. The real issue here is Kerry's views on war and foreign policy.
Kerry is a McGovernite - a long-time member in good standing of his
party's dovish wing. Kerry has hidden that fact, but now the truth is
slipping out. When Kerry tried to transform his original radicalism into
a hawkish parable, those who knew him better rebelled. The ensuing
mess has forced the story of who John Kerry is, and always has been,
into the public's focus. Whatever secrets his journals and military files
may hold, the secret of John Kerry's actual views on war and foreign
policy is the more dangerous one - for him, and for us."
--Stanley Kurtz, August 27, 2004
***WORLD OF PROFITS***
*** "Again, our indicators are flashing red, with worst-case downsides of
1.5%."
Hong Kong's Hang Seng index sweated and struggled its way to 12,818.42
on Friday - a 34-point gain (0.2%) for the day and a 3.5% advance for the
week.
The charts show a gain of 40 to 60 points is possible on Monday.
*** "For tomorrow, our indicators point at a negative potential of minus
0.5%."
Nikkei 225 traders in Japan finished the week with a flourish on Friday,
chalking up an 80-point gain (0.7%) to leave the index sitting at 11,209.59 -
its highest close since August 2.
But trading was light and with an expected pickup in volume on Monday,
we're looking for investors to take some gains off the table before the
industrial production report. Mild losses around 15 to 35 points.
***DESK OF DENHOLM***
This just in from Taipan's resident Editor-at-Large, Martin Denholm:
***Double Trouble: Over in Japan, an ugly rise in unemployment means
citizens there are struggling to fire up the economy through spending. The
Japanese statistics agency announced today that household spending in July
suffered a 2.5% drop from June's figures, while the jobless rate jumped from
4.6% to 4.9% - the first rise since January.
Consumer spending makes up three-fifths of the nation's economic growth,
and rising unemployment combined with declining wage growth obviously
makes a pretty unappetizing recipe. Would you believe that over the past
three years wages have grown in just three months? Ouch.
The economy grew at a 1.7% annualized pace during the second quarter,
half the consensus forecast. With higher unemployment leading to a pullback
in household spending, that doesn't bode well for the current quarter's
growth prospects.
***Anyone for a Fat Cat? The average Brit earns an annual salary of
�24,600 (approx. US$44,200) and received a salary increase of 4.7% last
year - a figure than is inflated by hefty City (London's financial district) bonus
packages. Discounting the effects of those payments, the average salary rise
was 3.6% last year.
Meanwhile, the average UK company executive earns �600,000 a year.
And according to new research by The Guardian, that figured ballooned by
almost 13% last year. The study showed that 190 company directors
scooped up a cool �1 million or more.
These findings could spark controversy as they come at a time when some
are calling for executives to rein in their pay packages or risk alienating
ordinary investors. The National Association of Pension Funds (NAPF) says
directors should be more forthcoming regarding their pay in relation to those
employed at their companies. For example, Terry Leahy, CEO of grocery
store giant Tesco, has a pay package worth �4.3 million - an astonishing 335
times more than the average Tesco worker.
But there is progress: In 2002, director pay skyrocketed 27%, so 2003's
increase looks comparatively tame!
***Brits Booze� Companies Lose. One factor not included in The
Guardian's survey is the number of days lost each year because some boozy
Brits have hangovers! Employment agency Reed just published research that
shows the UK economy suffers a �2.8 billion hit each year due to workers
either taking days off entirely or doing their jobs while feeling like (insert
expletive here!) because they got smashed at the local "boozer" (pub) the
night before.
Brits spend an average of 2.5 days per year hung over while at work, with
2.3 days taken as "sick days." Then there is the hardcore bunch - the one in
three folks who admitted to taking five days off per year due to intoxication.
In total, that's ten million full working days lost. And half said the later closing
time due to come into effect in mid 2005 would adversely affect performance
the following day.
OK, I'm off to the pub. Have a great weekend.
***TAIPAN TIDINGS***
*** The group that recommended Taser International (TASR:NASDAQ) at
$4.00 and watched it rally to $64.00 now says�
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J. Christoph Amberger
Executive Publisher
and The Taipan Group's
247profits e-Dispatch Team
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Months
Simply by following a little-known "Secret Signal," this group generated a
total of 995% in the last ten months!
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