Investing: Food For Optimists

 

 (Drivebycuriosity) - Pessimism rules! "Battered by the 14 percent decline in the S&P 500 since 2000, the worst financial crisis since the Great Depression and the so-called flash crash 21 months ago, investors are staying away from stocks", writes Bloomberg (bloomberg). I reckon that the media & markets are focusing way too much on current economic problems and are ignoring the long term perspectives which might be much more positive than the pessimistic majority believes.

The Wall Street Journal has an encouraging piece called "The Coming Tech-led Boom" ( online.wsj.com could be behind a pay wall now). The authors claim that " we sit on the cusp of three grand technological transformations with the potential to rival that of the past century". They compare the current situation with "the emerging technologies circa 1912—electrification, telephony, the dawn of the automobile age, the invention of stainless steel and the radio amplifier—which fostered a growth period at the begin of the last century".

Transformation 1: "Information technology has entered a big-data era. Processing power and data storage are virtually free. A hand-held device, the iPhone, has computing power that shames the 1970s-era IBM mainframe. The Internet is evolving into the "cloud"—a network of thousands of data centers any one of which makes a 1990 supercomputer look antediluvian." This leads to "astronomical feats of data crunching which enable heretofore unimaginable services and businesses, we are on the cusp of unimaginable new markets".

Transformation 2: "Smart manufacturing….. we are just entering an era where the very fabrication of physical things is revolutionized by emerging materials science. Engineers will soon design and build from the molecular level, optimizing features and even creating new materials, radically improving quality and reducing waste".
Engineers will use "devices and products (which) are already appearing based on computationally engineered materials that literally did not exist a few years ago: novel metal alloys, graphene instead of silicon transistors (graphene and carbon enable a radically new class of electronic and structural materials)".

The authors continue: "This era of new materials will be economically explosive when combined with 3-D printing, also known as direct-digital manufacturing—literally "printing" parts and devices using computational power, lasers and basic powdered metals and plastics. Already emerging are printed parts for high-value applications like patient-specific implants for hip joints or teeth, or lighter and stronger aircraft parts".

Transformation 3: An "unfolding communications revolution where soon most humans on the planet will be connected wirelessly"
"Coupled with the cloud, the wireless world provides cheap connectivity, information and processing power to nearly everyone, everywhere."

Indeed, all these "transformations" could add to a strong wave of opportunities. I believe that these micro-revolutions will create a lot of wealth in the ongoing decade and could rekindle the sluggish growth of the global economy.  Many companies should benefit from the described technological revolutions and their rising profits should create more tax income for the governments and alleviate their debt problems. 
 

I believe that investors should think long term, especially for their retirement planning, and they should be braced for a decade of new growth & prosperity.

Stock Markets: Advantage DAX

The year started with solid gains for the international stock markets, thanks to the rising risk appetite of investors. So far, Germany has been the best performing G7 country (bespokeinvest.com). The DAX, the German stock market index, gained around 10% year to date and almost 30% since last September (de.finance.yahoo).

The recent rally is no surprise. It seems that the German economy is the winner of the Euro crisis. Since last summer the Euro dropped around 10% (finance.yahoo.com). The German companies gained a huge advantage because now they can sell their products cheaper on the global markets.

Germany also has the lowest interest rates in Europe because it is regarded as the European safe-haven. The relatively low financing costs give the German economy an additional advantage against their global competitors.

By the way: The Dax is a collection of multinational corporations (de.finance.yahoo.com ). Companies like Volkswagen, BASF (chemicals), ThyssenKrupp (infrastructure & steel) and others earn a large part of their revenues overseas and participate in the growth of China, Brazil and other emerging markets.

The DAX, which contains just 30 stocks like the Dow Jones, is a bit more volatile than its American counterpart because of the high weighting of the financials (Deutsche Bank, Commerzbank, Allianz, Munich Re). For my taste the DAX has too little technology in it. The business software company SAP, a rival to Oracle, is the only noteworthy German global player in the technology sector. Therefore the DAX lacks the sex appeal of the NASDAQ.

International investors have to calculate the wild swings of the Euro on the currency markets. This year a rising Euro added to the gains. But in the last year, a falling Euro temporarily worsened the losses. It looks like Euro & DAX are now marching lock-step because both react to the changing risk appetite. The swings of the Euro could magnify the volatility of the DAX.

The DAX now has a bet that Europe will recover soon. Investors who want to take this risk could do that with an ETF on the DAX. The provider of the iShares family offers the iShares DAX® (DE) (de.ishares.com), which is traded in Germany with the number DE0005933931 (de.finance.yahoo.com). The same provider has another ETF, the iShares MSCI Germany Index Fund (EWG), which is traded on New York Stock Exchange  (finance.yahoo.com). This ETF depends on a different German index, calculated by Morgan Stanley, the MSCI Germany Index.

Disclosure: I don`t own any DAX stocks.

Internet: Ripe For An Explosion?

 

(Drivebycuriosity) - The Internet economy of the G-20 nations (industry nations plus leading emerging markets  wikipedia) will nearly double in value by 2016, predicts the Boston Consulting Group (allthingsd.com). They expect that the compound revenues of Internet companies will grow from $2.3 trillion in 2010 to $4.2 trillion during this period.

How boring! This would mean just an annual growth rate of around 10 % (including the compound interest effect). You can do this calculation easily here (.moneychimp.com/calculator).

I reckon this alleged growth rate is way too low. Leading Internet companies like Google, Amazon, eBay, Netflix, Facebook, Twitter, Tumblr, Baidu (China), Yandex (Russia) and others are growing at least 20% annually. And there are many startups and copycats which add to the growth. The Blog Techcrunch sees a "cambrian explosion" in startups which are offering software & services for Internet users (techcrunch.com).
  
You also could count Apple (revenue growth around 70%) as part of the Internet economy - a least partly. iPhones & iPads are used mainly for surfing the World Wide Web and the Californians are expanding into the huge download-markets for music, films, games and books via iTunes, iBooks et.al.

The prices for tablet computers, smart phones and other internet connected devices are rapidly shrinking - thanks to Moore`s law (wikipedia). These means that billions of people in the emerging markets will get affordable access to the Internet. The combination of globalization & technological progress could lead to an explosion of global use of the Internet.

And more and more consumers and companies are storing their data on the Internet or are using external IT-services (cloud computing) (wikipedia) to save from investing in expensive hardware & software. For instance Amazon.com has or will open data centers in Brazil, India and Singapore to offer cloud services to the fast developing regions.

All these developments should add up to an annual growth rate of at least 20%. Using the compound interest calculator again I get the number of $6.9 billion. If I act a bit more optimistic and dare a growth rate of 25% (in the case that the alleged explosion in the emerging markets will be realized) then the number jumps to $8.8. This would mean almost a quadrupling of Internet fevenues. Time will tell!

Disclosure: I hold stocks in Amazon.com, Apple & Baidu.

Globalization: What We Could Learn From Caterpillar

The media are painting a picture of doom & gloom. If we believe the newspapers and the leading Internet channels then things are getting worse and worse. But many companies which are now reporting their numbers from the fourth-quarter 2011 and their guidances for this year are painting a different picture.

Take for instance Caterpillar (finance.yahoo). This morning the blue-chip heavy machinery maker reported that in Q4 revenues (construction and mining equipment) climbed 34.6% Y/Y, earnings jumped 58% (reuters.com). Caterpillar's results cap a record 2011 in terms of revenue and profits, and it posted its biggest yearly growth rate for sales and income since 1947, writes Reuters. The world's sales leader in bulldozers, excavators and other earth-moving machinery also predicted that demand for its construction and mining equipment will remain strong this year despite the slow recovery for construction in the U.S. and Europe, reports Bloomberg  (bloomberg).

The industry bellwether said it is more optimistic than it was three months ago that a global recession won't occur in 2012 and expects the threat of a recession in Europe from the sovereign debt crisis to ease by the middle of the year, quotes the Wall Street Journal (.wsj.com). The company anticipates the global economy expanding 3.3% this year, modestly better than in 2011.

It seems that the multinational corporation benefits from the growth in emerging markets and a construction boom in China, India and other uprising countries.

This data fit to the message that the durable goods orders in U.S. climbed 3% in December and were 10% higher than a year before (bloomberg). It seems that manufacturing in the U.S is getting stronger, thanks to the solid global economy, especially in the emerging markets.

Disclosure: I don´t have any position in caterpillar.

Investing: IBM & Intel - Old Dogs Can Learn New Tricks

The earning season Q4 2011 started with some surprises. 2 of them were the numbers from IBM and Intel. Both technology bellwethers beat expectations of the analysts and showed solid profit & revenue growth instead of the still sluggish global economy (marketwatch) (marketwatch). 

It seems that these "old dogs" can still learn new tricks. IBM was founded in 1911, Intel began 1968. Instead of becoming bores in their old age, these companies keep up-to-date with technical progress. It seems that they used the last recession as a call to restructure and to become more efficient and are now continuing to do so. Both are playing the technology revolution and globalization to unlock new markets  and to expand them. We learned from Charles Darwin that continuous adjustments to the challenges of our environment are necessary to survive and to be successful. IBM & Intel are role models of how to adapt to a continuously changing environment.

To emphasize this idea I present here some quotes from their recent earnings calls where management discussed their numbers with analysts (you can find a lot of transcripts here seekingalpha.com/tag/transcripts ) .

IBM reported (seekingalpha) that in the fourth quarter "we grew revenue, expanded growth, pretax and net margins and delivered operating earnings per share of $4.71, up 11% year-to-year. For the full year we delivered an operating EPS of $13.44, up 15%".

They added, "we continued to build our momentum in software, our performance reflecting both strong demand for our offerings and leadership sales execution. Our software revenue was up 9%, driven by aggressive growth in our focus areas,"

Further they declared: "Our Services business delivered powerful margin and profit growth, with combined pretax income of 17%. Services revenue growth was again led by growth markets, which were up 13% at constant currency.
We're continuing to expand into new countries and territories to build out IT infrastructures in support of economic growth and to take a leadership position in key industries.
We're going to invest in market opportunities and we're going to drive productivity where it's more challenging".

IBM`s Chief Financial Officer Mark Loughridge said that his company has benefited recently from its investments in growing technology sectors, such as business analytics and cloud computing. "Revenue from business analytics--which mines data to gain insight--gained 16% in 2011, while revenue from cloud computing, which allows users to access their data over the Internet, more than tripled for the year."

Intel reported (seekingalpha): "We surpassed $50 billion in revenue for the first time, after crossing $40 billion for the first time just last year. This was our second consecutive year of more than 20% revenue growth".

They plan to invest massively in the future: "We are planning on another strong year, with revenue growth in the high single-digits and gross margin at the high end of our historical range, at 64%. Importantly, we will continue to invest in our business in 2012. We are forecasting an increase in capital spending to $12.5 billion as we build the world's first high-volume manufacturing factories for 14-nanometer process technology. We are also forecasting an increase in investment in research and development of $1.8 billion. We are making critical investments in R&D for Ultrabooks, data centers, phones and tablets. In addition, we are making R&D investments in core capabilities like security, SoCs and extending our process technology leadership."

Both companies are reacting swiftly to new trends and calibrate their businesses to the rhythm of the markets. These efforts pay. IBM is close to an all-time-high (finance.yahoo), though Intel is still way below its peak in 2000 but the stock shows an upward trend since spring 2009 and is outperforming the S&P 500 since then (finance.yahoo). I reckon that IBM & Intel are role models for investors who are seeking companies which have a high likelihood to benefit from technology revolution and globalization.

Disclosure: I don`t have any positions in IBM & Intel stocks.

Globalization: What We Could Learn From Intel

Intel did it again. The Q4-numbers of the technology bellwether beat the expectations of the analysts as they did in many quarters before (blogs.barrons) (marketwatch).

The chip goliath benefited from the growth in emerging markets. During the earnings call with the analysts (you can find the transcript here seekingalpha) Intel CEO Paul S. Otellini explained (seekingalpha): "Emerging markets now account for 2 out of every 3 incremental units of PC demand, a shift that's rewarding Intel and the PC companies that have a long-standing, deep presence in these markets".

Otellini declared further:" Looking back at the last 12 months of reported data, emerging markets like India and Indonesia grew 22% and 37%, respectively. China, now the largest PC market in the world, represents 20% of all PC demand, and grew a remarkable 15%".

The Intel CEO believes that the rapid growth will continue to drive his business in the coming years: "China has a household penetration rate of just 35%, versus almost 90% in the U.S. China is the world's largest market for mobile phones with more than 950 million subscribers. It's also at the forefront of the smartphone boom and will be the home of the world's first 32-nanometer smartphone".

These quotes show that emerging markets fuel the growth of the global economy, especially of the technology sector. I believe that this growth will continue many years because of the adaption process in many regions of the globe. The people in China, India and plenty of other countries want to adapt to Western standards of living as fast as possible.

The adaption process gets boosted by Moore´s law (wikipedia), which describes the long term trend of rapidly falling prices for technology because of the rapid technological progress. Therefore more and more companies & consumers in the emerging markets can afford to buy computers, tablets, smartphones and other internet connected devices for expanding their business or improving their leisure time activities.

Disclosure: I don`t have any positions in Intel stocks.

Commodities: Natural Gas In Free Fall, When Does Oil Follow?

The price of natural gas is in a free fall. This week the price of the energy commodity plumetted to the lowest point since 2002 (bespokeinvest.com). This is reaction to the mild winter in the U.S. (reduced demand for heating) and a rising supply (businessinsider.com). But the oil price is sticking close to the $100 mark and didn`t move much in the recent months (marketwatch). This is somewhat surprising because both commodities are used for heating and producing electricity.

It seems that the market for natural gas reacts to the economic fundamentals and the market for oil doesn`t. The market for oil ignores the mild winter in the U.S. and Europe and the rising oil production in the U.S. and other Non-Opec-countries (cnn.com). It also ignores the shrinking demand for the commodity in the U.S. and Europe. Bloomberg wrote that gasoline consumption fell to the lowest in 10 years in the U.S., which is the world’s biggest crude consumer (bloomberg). U.S. demand for oil products in the latest four-week period was down 7.2 percent from a year ago, according to Societe Generale SA. I guess that U.S. companies and consumers now are reacting to the high gas prices at the pump and to the mild winter.

But it seems that the price for Oil is not driven by the facts, instead just by speculation & rumors about what could possibly happen in the future. In the spring the price for oil was high because of speculation that the war in Iraq might almost last forever, hindering the oil flow from this important producer country. As the war ended the change was ignored because of speculation that Iraq`s oil production would need many years to recover. Now Iraq is back on the oil market, but this is again ignored because of speculation that Iran may reduce its supply or close the straits of Hormuz, stopping the oil transports from the Arabian neighbors (drivebycuriosity).

These rumors are spread by a mighty group of speculators who seem to control the market for oil, including a bunch of hedge funds, who invested billions of dollars into the commodity, and banks like Goldman Sachs, who earn big amounts by trading commodities.

The situation reminds me of 2008 as the price of oil climbed to $147 even the recession had already started.  This price explosion was caused by rumors about alleged supply disruptions spread by Goldman Sachs and others (drivebycuriosity). In the second half of 2008 the price of oil imploded because the exorbitant high oil price destroyed the demand for this commoditiy.

Movies: My Week With Marilyn

 

(Drivebycuriosity) - Congratulations, Michelle Williams! Last weekend the actress gained the Golden Globe for "Best Performance by an Actress in a Motion Picture - Musical or Comedy" (imdb). Williams incarnated Marilyn Monroe in the movie "My Week with Marilyn", directed by Simon Curtis (imdb).

It`s a charming film about Marilyn `s little love adventure while she was shooting an unimportant flick ("The Prince and the Showgirl") 1957 in England. Williams represented a very complex Marilyn. If we believe the plot the mega-star was sometimes very unsure and innocent. Otherwise she indulged in the freedom provided by her English visit, including a short love affair, almost as a child would.

Williams`performance gives the film a lot of grace. I also enjoyed the nostalgic patina of the flick, which fit well into the now apparently fashionable 20th century movies  ("Iron Lady", "Edgar", "The Rum Diary").

Investing: Time For An Uranium Revival?

Uranium stocks are the bad boys of the stock markets. They fell in disgrace after the shock from Fukushima (CNBC). Japan will reduce its nuclear power and eco-centric Germany will fully abandon it.

But otherwise energy is getting more and more expensive. Oil costs now around $100, around 4-times the average price of the 90s. There is a lot of speculation that the supply of this energy commodity might be endangered by political tensions (Iran conflict). Alternative energy sources like photovoltaic or wind power are still very expensive and inefficient. Therefore China, India and other nations are still expanding their nuclear power to reduce their dependence from the unreliable oil supply and to keep up with the rising energy demand in the coming years.

This week uranium stocks showed a rally. The management of Denison Mines (DNN), one of the smaller North American uranium mines, announced that it expects a 40% Y/Y increase in uranium production this year (seekingalpha.com). The company also plans to "aggressively" pursue exploration and developments projects in the U.S., Canada, Mongolia, and Zambia.

Maybe this year we will see a revival of uranium mining stocks, especially if the price of oil continues its rise and the economies in U.S and Asia continue getting stronger creating a rising demand for energy. But uranium mining stocks still have an above-average high risk because of political resistance. Some stocks like Dension Mines, are too volatile for my taste (finance.yahoo). The stock price of Dension Mines is still too close to the $1 mark. Below that it would be a penny stock, which are usually off limits. The stock of the Canadian-based Cameco (CCJ) — the world's largest uranium miner (finance.yahoo) - looks more reasonable.  But this company also depends on the skill of the management and on finding and exploring new uranium resources. Special events like a water invasion in one of the mines could spoil the profit of a whole year.

Investors who want to bet on an uranium revival could buy an ETF on uranium miner stocks. I found just one pure play on this metal: The Global X Uranium ETF (URA). This ETF invests in a basket of uranium miner stocks (globalxfunds.com) (seekingalpha.com).

Investors who want to try their luck with the whole nuclear sector could buy the Market Vectors Nuclear Energy (NLR). This is a basket (finance.yahoo) (seekingalpha) of uranium miners plus stocks of energy producers who use nuclear plants like the U.S Constellation Energy Group (CEG  finance.yahoo).

But these ETFs, which are diversified portfolios, are still risky because there might be a high correlation between the stocks (going the same way). Therefore I would consider these ETFs just as a cautious addition to a well diversified portfolio.

Disclaimer: I don´t own uranium stocks or other energy related investments.

Globalization: On Asia We Can Trust

If we believe the headlines the world is following Europe into a new recession. But the facts show a much more benign picture of the global economy.

Today we got news that the industrial production in China is reaccelerating. Bloomberg reported that  Chinese manufacturing increased 12.8% in December from a year earlier, more than the median estimate of 12.3% in a Bloomberg survey and a 12.4% increase in November (bloomberg).
On Sunday we learned that the industrial production in India rebounded to a growth rate of 5.9% in November (minus 4.7% October  bloomberg). Today we also were informed that the exports of Singapore rose in December driven by pharmaceutical shipments and that the Japanese government maintained its assessment that the economy is still picking up from the March earthquake (bloomberg).

Last week people in  Beijing were rioting. Not, because their children don´t get enough food; no, they got angry because the newest Apple  gadget, the iPhone 4S. was sold out (bloomberg).

These data show that Asia, the growth engine of the global economy, isn`t damaged by the European mess, instead it`s gaining steam. The new strength in  Asia should also rekindle the economies in U.S. and Europe. Today we heard that the Empire State factory index, an early indicator for manufacturing in the U.S.,  jumped to 13.5 in January (December 8.2  marketwatch), a sign that the U.S. economy might gather steam too.

Iran Conflict: And The Winner Is……

The Iran conflict rules the headlines. There is much ado about possible sanctions against the country (because they are accused of developing nuclear weapons) and how Teheran could respond to these measures. Now Iran is threatening that it might to close the Strait of Hormuz, an important waterway, and hence stop the transport of most of the Arabian oil to the west. As a respond the price of oil sticks close to the $100 mark even as the demand for oil is falling in the U.S. and Europe (bloomberg). Without the Iran conflict the price of oil would be significantly lower, because the price of oil contains an Iran premium (marketwatch.com).

The winner of the Iran conflict is ……..Iran! The country has just one noteworthy source of income : Oil. Teheran is one of the leading exporters of oil and an influentual member of OPEC (wikipedia). Because the country`s wealth and fate depends on oil, Teheran is getting stronger when the price of the commodity is rising.

The Iran conflict has been smoldering for years (wikipedia). All the talking about possible sanctions and the measures already taken didn´t stop Teheran from advancing it´s nuclear program yet. The Iranian government didn`t show any reaction at all.  All the talking about possible sanctions & reactions didn`t do any harm to the Iranian government but the notorious conflict keeps the price of oil artificially high for years.

The high & rising price for energy is harming the U.S., Europa and Asia and is slowing the upswing of the global economy, but it is beneficial for Iran. For years the artificial high oil prices, the Iran premium, flush billions of dollar into the cash boxes of Teheran. The Iranian government can use these amounts to strengthen its global power and to invest in their nuclear program and in their army. Therefore the conflict makes Iran stronger & stronger.

Movies: The Iron Lady

 

(Drivebycuriosity) - What a mess! Europe could badly need a very charismatic person to bail it out. It is interesting timing that recently started the movie "The Iron Lady" in some cinema theaters. It`s a biopic about Maggie Thatcher who changed history and revitalized the UK, at least for some decades.

The film, directed by Phyllida Lloyd (imdb), isn`t a political manifest, nor does it care much about the economic aspects of the Thatcher revolution. Instead Lloyd and her script writer Abi Morgan ("Shame") painted a very emotional picture. As usual the story is told in flashbacks. It`s about winning power and loosing it. The flick shows both, the pain and deprivation of the old age and the short intoxication of gaining power and influence.

The center of the movie is - of course - Meryl Streep. It´s really impressive how this American actor incarnates the very English politician. The Hollywood icon plays both characters perfectly, the elderly person who is loosing her grip on reality, and the very optimistic courageous woman who is fighting everyone for her ambitious convictions by using charm and a lot of wit. By the way: "Iron Lady" is shot in a pleasant tone with a bit of patina and more entertaining than I expected.

Well done, Mrs. Streep, Mrs. Lloyd and crew!

Investing: Who Needs Fund Managers Anyway?

One of the articles that got recently my attention was a Bloomberg report with the headline "Funds Trail S&P 500 Index By Most Since 1997" (bloomberg). The S&P 500 (Standard & Poor’s 500 Index) is the traditional benchmark for the performance of U.S. stocks and the Wall Street.

Bloomberg reported that "equity mutual funds had their worst year since 1997 relative to the Standard & Poor’s 500 Index". Among about 4,100 funds that invest in large-cap stocks, 17 percent beat the benchmark index for U.S. equities last year, the least since the 12 percent recorded in 1997, based on data from Chicago-based Morningstar Inc. Most funds performed worse than their benchmark gauges, wrote Bloomberg.

This is not a surprise. The average of the managed funds performs generally worse than the index because they are very costly and burn a lot of money. The fund managers are usually clueless and are just gambling with the money of their clients. When the stocks fall, they get pessimistic and sell. They have to buy the shares back, when stock prices rise again. Very often they sell cheap and buy dear.

The transactions (selling & buying of stocks) add to the other costs of the fund (salaries of the fund managers, research, administration, lawyers, marketing and more). These transaction costs are paid with the money/portfolio of the clients and deteriorate the performance of the fund. To say it shortly: Managed funds are a waste of money.

Investors who want to participate in the stock market find cheaper alternatives: ETFs (Exchange Traded Funds) on indices. There are at least 2 ETFs which track the S&P 500:  The "iShares S&P 500 Index Fund" (IVV) (finance.yahoo) and the "SPDR S&P 500" (SPY) (finance.yahoo).

These funds invest only in stocks which are part of this index and they have the same structure (you can find more informations, including how the deal with dividends on the blog portal Seeking Alpha seekingalpha.com). Investors can buy & sell these ETFS on the stock market like stocks with the same transaction costs.

These ETFs are more cost-efficient than the usual (managed) funds because they save the money for research & funds manager (which they don´t need) and have less costly transactions (speculations). Who needs fund managers?

Investing: Monsanto - Feeding The World?

Recently we learned that the population of the world crossed the mark of 7 billion. The UNO predicts that the global population could reach the mark of 10 billion by the year 2100. How can we feed so many people?

The answer is rising productivity. For centuries farmers are boosting their harvests by cultivating better seeds and modernizing their cultivating and harvesting methods. Now they get some help from genetic engineering (wikipedia). More and more farmers use genetically engineered seeds which are more resistant against fungal infections, viruses, droughts, chilly weather and other challenges and improve therefore indirectly their crop yields.

This also is a topic for investors with a long term view. Last week Monsanto reported strong numbers (thestreet.com). The company is a multinational agricultural biotechnology and the leading producer of genetic engineered seeds (wikipedia) (monsanto.com).

In the first quarter of their new business year Monsanto`s revenue rose  33 percent to $2.44 billion as farmers in the southern hemisphere bought more genetically modified corn seed, the management explained (bloomberg). They reported that Latin American farmers grew more genetically modified corn. They also said that U.S. orders are ahead of last year (seekingalpha.com).   

The management also is very optimistic about the long term. It claims that genetic engineering is still in an early phase of a long-term technology cycle. The situation today seems be comparable with the electronic industry in the 60s of the last century which brought us computers, Color-TV, copy-machines and similar technologies. Today just 10% of the seed used in the U.S. are genetically enhanced. Monsanto therefore expects a large potential to grow.

The Monsanto stock is a wager on the growing use of genetic engineering in farming. But the stock (finance.yahoo) also has a lot of risks of course. There is a huge political resistance against genetics, which might result in restraining laws and very costly legal fights. There also are competitors, like the German chemical company BASF, who may develop attractive products and could conquer the markets. Some of the fantasy might be already priced in the stock price.

Disclaimer: I don´t have any position in Monsanto and BASF.

Globalization: Europe - The Center Of The World?

Europe is the center of the world, other regions are irrelevant! This is the message the media want   us to believe. They are excessively focussed on the old continent.  Every political action in Europe dominates the headlines in the media and influences the stock markets in U.S. and Asia.

This Eurocentric picture of the world fit to the 17th century, when Europe indeed ruled the globe and possessed most of the world`s wealth. But the obsession with Europe doesn`t fit to the reality of 2012. We have still the Sistine Chapel and the Cologne Cathedral, but we don`t dominate the world any more. The Eurocentric picture ignores the huge and growing economies in America & Asia.

The recent economic news from U.S., including rising retail sales and an improving labor market,  show that the American economy is now getting stronger - instead of the European mess. The data show that Europe isn`t big and important enough to slow the U.S. economy down. And the other engines of the global economy are running too, including China, other emerging markets (Turkey, Mexico) and the former Sovjet-empire (Russia, Ukraine). The (economic) world is now too big and too dynamic to be seriously endangered by a small group of countries.

The strength of the economies in U.S., Latin America and Asia should also contribute to the healing of Europe. At least the German economy, which is focused on exports, should benefit from the ongoing growth of the global economy. In turn a stronger Germany could stabilize the ailing rest of Europe.

Movies: Carnage

 

(Drivebycuriosity) - Dealing with conflicting interest is always a challenge. It gets more complicated when more than 2 people are involved. The movie "Carnage", directed by Roman Polanski (imdb), is a fine example for this.

The film shows just 2 married couples who are talking about a conflict their sons had before on a schoolyard, costing one of the boys 2 teeth. "Carnage", which is based on a theater play by Yasmina Reza (wikipedia), is very spartan; you see just 4 actors staying in a single room.

But anyway, I had a lot of fun watching the flick. I enjoyed spotting how the characters tried to settle the conflict in the beginning, but got more and more agitated and how the situation escalated in the run of the movie. Both couples were middle class, but on the opposite sites of the spectrum. There was a growing dynamic between the couples and also between the married spouses, reflecting conflicts of social status, education, income, sex, Weltanschauung, whatever. These conflicts lead to dialogues which were sharp and sometimes funny.

"Carnage" benefitted of course from the superb actors: The parents of the injured boy and hosts of this event were played by Jodie Foster, as a very political correct but unemployed book writer and collector of art books, and John C. Reilly as her husband and proud owner of an appliance store. Their counterparts were represented by Kate Winslet, as a slick investment banker, and Christoph Waltz, playing an extremely busy and self-conscious attorney.

My favorite was Waltz. I was fascinated how the Austrian actor`s character couldn´t care less about all the fuss and indulged his own ignorance. I want to see more from Waltz. I also enjoyed spotting Kate Winslett loosing her coolness and Jodie Foster getting more intense as her liberal conviction got more and more cornered while the earth bound John C. Reilly tried to be a rock in all the turbulence.

Bravo Herr Waltz! Bravo Mrs. Winslett & Foster! Bravo Mr. Reilly!

Culture: Hung, at Knitting Factory, Brooklyn, New York

 

 (Drivebycuriosity) - Attending a heavy metal concert gives me always a vitalizing experience. I enjoy the dynamic and the power the performers radiate. 

Recently I watched a gig from "Hung", a heavy metal group based in New York (myspace). They performed at the "The End of The World"  show at Knitting Factory in Brooklyn, New York (knittingfactory.com) which had a lot of local metal bands. 

"Hung" delivered the usual power but they added an unusual melodic element - a violin. The violin player, who`s style reminded me a bit to Nigel Kennedy (wikipedia), was a valuable ingredient. Her play gave the performance more melodic structure and made it more intense. 

Well done "Hung"!

Oil: Another Bubble Ready To Pop?

The demand is shrinking, but the price is rising anyway. This is the situation on the market for oil. But this could change soon.

At least in the U.S., the world´s largest consumer of energy, the demand for oil is falling. This week the U.S. government published that the total petroleum demand fell in the last week of December 2.6 percent to 18 million barrels a day (bloomberg).

We got more data from MasterCard,  which counts payments at gas stations made by credit cards and checks (bloomberg). They reported that last week the U.S. gasoline demand sank 14 percent from the prior week to the lowest level in more than seven years of records. Fuel use fell below a year earlier for the 18th consecutive time last week, slipping 3 percent from 2010 levels. Fuel demand over the previous four weeks was 3.4 percent below a year earlier, the 41st consecutive decline in that measure.  Gasoline consumption in 2011 fell 1.6 percent from 2010.

These data are more impressive if we compare them with the still climbing retail sales in the U.S. The U.S. consumers spend more money for goods & services, but they save on gasoline.

I reckon that oil demand in Europe, where retail is much weaker than in the U.S., is falling even faster. I couldn´t find statistics for that but other interesting numbers. Gasoline supplies in independent storage climbed to the highest level in almost six months in the European hub of Amsterdam-Rotterdam-Antwerp, reported Bloomberg (bloomberg). Stockpiles rose 14 percent to 706,000 metric tons in the week to last Friday.

All these statistics show that the users of oil react on the high oil price. The commodity costs now around $100, around 4 times the average price we had to pay in the 90s! Last year the U.S. gasoline price rose 6.5%. Companies & consumers are trying now to burn less energy. For instance modern cars need much less gasoline than old one. Home appliances like refrigerators, washing machines and dishwashers are a lot more energy-efficient and use less electricity. The high gas prices are also dampening the appetite to drive. Companies, which are more cost conscious than consumers, also are anxious to save as much energy they can. For instance airlines are replacing their old planes with modern jets which burn less fuel.

While the demand for oil is curbed by more efficiency, thanks to the technological progress, and a sluggish economy, the supply of oil is still sputtering. The OPEC nations are keeping their output level, because thy need the money to please their unruly population. Independent producers like the U.S. are pumping much more oil & gas, thanks to the technical progress, which helps to unlock the resources. Even Russia  stretched its oil production in the last year significantly.

The oil market ignores these developments for now. The market is obsessed with the Iran conflict. The price of oil doesn`t reflect real supply & demand. Instead it reacts on speculations that Teheran may endanger the supply of oil by military actions. But I believe that the Iranian government is just playing games and will avoid a real war against the U.S. and Europe. As soon as the market will become aware of that it should react to the real supply and demand situation which means  the oil bubble could pop.