Sara Nunnally's  Instablog

All I have to say is two words, and you'll understand what I'll be talking about today: General Motors...

In its 100 years of existence, General Motors has been at one point the most successful company in the world. Too big to fail, analysts said... Well, we've heard that line before... and we've seen it proved wrong. On June 1, General Motors filed for bankruptcy.

Chrysler had also filed on April 30, and both companies shut down dealerships across the nation. That left a vacuum... And foreign automakers are sure to gain surprising market share on the back side of this recession.

Now, you might be thinking that GM and Chrysler – and we'll talk about the auto industry more in a minute – are just the unfortunate victims of the current global economic crisis.

You'd only be half right.

The crisis has certainly brought about these companies' demise in quick fashion, but American automakers have been losing ground for the past 30 years or more.

And it hasn't just been the auto industry. Movements in sectors like energy, materials, technology and pharmaceuticals have all seen major acquisitions in the past three decades.

Take, for example, the $369.8 million acquisition of WCI Steel, Inc., based in Ohio a year ago. The buyer? OAO Severstal, a Russian company. Or the $352 million acquisition of Bentley Pharmaceuticals last year by Israel's Teva.

The point? The American Brand has been under fire since before I was even born. And what does that mean? Two numbers...

The first: 16,613.

This is the number of U.S. companies that have been bought by foreign companies in the past 30 years. That's more than 10 acquisitions a week... And according to one source, the average amount paid by a foreign company for a U.S. company is $201.2 million.

And that brings us to our next number...

$1.5 trillion.

This is the value of U.S. companies that have been bought by foreign companies in the past 30 years. That's more than $960 million a week...

The top industries by value are Oil and Gas, Telecom, and Drug. Let me break some numbers down for you:

·         $156.8 billion in Oil and Gas acquisitions

·         $143.3 billion in Telecommunication acquisitions

·         $132.1 billion in Drug acquisitions

But there are other industries that are integral to this country's infrastructure, like electricity and gas distribution, and metal and metal products. Transportation. And importantly, the acquisitions made over the past 30 years have had another effect: A full 20% of America's exports are now made by foreign-held companies.

That's a bit scary. So...

What's next?

If the global economic crisis is any indication, this trend will continue... But what does this mean for American investors?

Well, we can fall back on rhetoric, as though we were running a political campaign, and commiserate with each other about the death of American brands.

Or, we can take advantage of this trend and identify key sectors that you can invest in. It's easier than you think... and it doesn't require fancy brokerage accounts with high international investment fees...

I told you we'd get back to the auto industry. But you have to ask yourself, what's the next step for the auto industry? The trend, as I see it, leaves you several choices...

You can, if you want, buy the foreign automakers: Toyota (TM:NYSE), Honda (HMC:NYSE), Hyundai (005380:Seoul and pinksheet listings), Nissan (NSANY:OTC) or Fiat (F:Milan).

Of these, Hyundai is the only one positive for the last year... up 25%. Toyota and Honda are down between 5-10%, Nissan is down about 5%, and Fiat about 26% down. But if you consider the movement over the past six months, Nissan, Hyundai, and Fiat are up more than 80% while Toyota and Honda are up only 30%.

Or, you can buy U.S. automakers, hoping that leaner, meaner companies will come out strong on the other side of this recession. Ford is up about 340%. GM ended its history at just under even. But Ford is looking awfully toppy after its amazing run higher.

Neither of these two choices is ideal, and both rely on the resilience of the American consumer.

But there is one choice that will cover both of these categories without the risk of the penny-pinching consumer.

Buy technology.

If tomorrow's cars are trending toward fuel efficiency and hybrid technology, then automakers across the board will be implementing technology. That means battery technology.

Battery components... Particularly for nickel metal hydride and lithium ion batteries.

EV World and Freedonia Group estimate that battery demand will jump to $22.8 billion a year by 2012. The main components of batteries are metals, chemicals and polymers. And while nickel metal hydride batteries currently hold the lion's share of the market, lithium ion batteries are proving to be a more efficient and powerful type of battery.

Interestingly, lithium is a difficult element to pin down, and its uses are so varied that it's hard to get specific production and usage data. There is one thing though... The U.S. Geological Survey from 2008 says that only two companies produced a large array of downstream lithium compounds in the United States from domestic or South American lithium carbonate. One of those companies is FMC Corp. (FMC:NYSE).

FMC has a whole division dedicated to lithium production that has been in existence for more than 60 years. It is a worldwide leading developer and supplier of lithium-based materials for primary and rechargeable batteries.

In mid-December 2008, FMC announced it was joining an alliance of more than 14 companies in order to pursue the commercial production of lithium ion batteries for auto manufacturing.

The alliance is called the National Alliance for Advanced Transportation Battery Cell Manufacture, and it is receiving support from the Department of Energy, the Department of Defense, and U.S. truck and auto makers. The alliance is expected to need between $1 billion and $2 billion in funding over the next five years, much of which will come from the government.

No surprise, the U.S. has been lagging behind Asia in battery technology, and this alliance is trying to balance the scales. So let's take a closer look at FMC Corp.

In the second quarter of 2009, FMC's earnings were $1.10 per share, in the face of a strong recession and a slashing of revenue by 13% compared to the prior year.

The company had a profit margin of 8.98% and an operating margin of 16.86% in the second quarter of 2009. Both are better than the industry averages.

It's P/E ratio is at about 10.91, significantly lower than competitors like Dow Chemicals or DuPont.

What's the potential? If we take a look at the company's chart, and extend the recent uptrend out a few quarters, FMC climbs back nearly to its all-time high of $76.56. That's about a 50% gain from current prices... a fantastic way for you to profit, especially from the auto industry – an industry so many investors are avoiding these days like the plague.

 

Disclosure: No positions

Invest In Currencies

Hot Commodity Trends: Investors Flock To Currencies

A Taipan Publishing Group Investment Research Report

As the global economic recovery inches ahead, investors are seeking out new investment ideas. The hottest sector right now for commodity investments is currencies.

The world revolves around the U.S. dollar… Major commodities are priced in dollars. Most of global trade is done in U.S. dollars. The dollar is the biggest foreign reserve currency in the world.

That’s why currency investors need to know what the dollar is doing at all times.

It’s kind of like a heliocentric point of view: The greenback is still the King Currency.

Let’s take a look at what’s been happening with the dollar over the past week, and what currency investors need to know before they wade into these markets.

On Tuesday, news services such as MarketWatch reported that the U.S. dollar was soaring after Federal Reserve Chairman Ben Bernanke’s comments on the economy.

The news article, by Polya Lesova, reported, “The dollar rose against most other major currencies Tuesday, as comments by Ben Bernanke eased concerns that policy-makers won't act decisively to head off inflation spawned by efforts to counter the credit crisis.”

In other words, the Fed’s exit strategy will be slow and vague, as to keep any transition smooth.

But this news was not greeted with smiles from all the analysts.

Bloomberg’s Scarlet Fu and Sapna Maheshwari reported, “The dollar will weaken as ‘considerable skepticism’ about U.S. monetary policy leads foreign investors to view it as a risky asset, said Steven Englander, chief currency strategist at Barclays Capital Inc.”

In fact, the U.S. dollar fell against all 16 currencies Bloomberg tracks, and 0.4% against the yen.

Interestingly, it climbed 0.4% against the euro.

But that climb didn’t stick around. Earlier today, CNNMoney reported that the greenback fell to nearly a seven-week low against the euro.

“The dollar slipped on Thursday, edging close to a seven-week low against the euro and a basket of currencies as slight gains in European shares suggested risk appetite was holding up after a mixed bag of corporate earnings,” reported CNNMoney.

This has kept the U.S. Dollar Index below 79, and is giving the currency a bearish tone.

But with renewed interest in the euro and other currencies, investors have ample ways to play these currency moves. And the type of currency investor may surprise you…

The Wall Street Journal found, “Even as volumes have been declining among institutional currency investors, the individual-investor side keeps increasing.”

This news is perfect timing, as Taipan Publishing Group’s currency expert Harinder Singh is now the editor of Currency Profits Trader.

Here’s what Harinder has to say about these recent currency moves:

The equities markets continue their gains this morning, helping currencies as usual, which has pressured the U.S. Dollar Index to below 79. A dip below 80 for the index last week was bearish and negated the hope for holding and reversing from that level. The U.S. Dollar Index now has to emerge above 79, and then will find resistance near the 80 area as it attempts to rebound from the oversold level.

There are some other factors affecting the U.S. dollar…

“The commodities gains continued in the morning with crude oil above $65 and gold near $950, helping commodity currencies like Aussie and Canadian dollars, and putting additional pressure on the U.S. dollar,” says Harinder.

It seems that oil is taking over the role of gold as an inflation hedge and storehouse of wealth. Oil is trading at $64.50 this morning despite recent data that says crude inventories surged last week. According to The Wall Street Journal, “oil inventories increased by 3 million barrels last week, contrary to analysts’ expectations of a 1.7 million barrels draw. Gasoline stocks also rose more than analysts’ estimates.”

Over the past five trading sessions the price of oil has rallied along with the rest of the market on an expected increase in demand and a falling dollar. But an extra 1.2 million barrels in the weekly numbers is a lot. You would expect it to sell off.

With such a large hangover in oil supplies and low demand, why isn’t oil at $30 like many predicted? It would seem that the price of crude is like Wile E. Coyote – it has run off a cliff, stopping in mid-air, legs churning, waiting to look down.

It could because oil is priced in dollars and investors are seeking an inflation hedge.

A bigger question is why has gold not broken through $1,000 per ounce when the greenback is heading for $1.60 per euro.

According to Reuters, “Spot gold was at $947.00 an ounce at 1214 GMT, from $948.15 an ounce late in New York on Tuesday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange were flat at $946.90 an ounce.”

Oddly, that’s exactly where gold was trading this time last year. That said, gold has been in an ascending triangle and keeps attacking the $1,000 mark. It will break it on the first CPI report that shows real inflation.

In the meantime, if the dollar stretched into oversold territory, it might experience a rebound.

Harinder notes, “The rebound may not change the current downtrend of the U.S. dollar (unless the index can cross above 80); still the correction can offer new opportunities.”

But investing heliocentrically in the U.S dollar isn’t the only way to profit from currencies.

True currency investors know that everything is connected to everything… like a spider web. If a fly gets trapped in one section, the spider feels it no matter where he is.

Take the British pound, for example…

The pound sterling has definitely been affected by the U.K.’s shrinking GDP. RTT News reported, “The UK's sterling that plummeted against its major rivals following the second quarter GDP report declined further ahead of commencing the New York session on Friday.”

Second quarter gross domestic product for Britain shrank 0.8%. Before this data came out early Friday morning, analysts had forecast a loss of only 0.3%.

The Associated Press reported, “[Britain’s] economy has now shrunk by 5.6 percent since the second quarter of last year, the biggest drop since quarterly records began in 1955.”

Yet, this second quarter GDP report is somewhat positive, because, despite the decline being worse than expected, it was still less of a decline than the previous quarter. This 0.8% drop is one-third of the 2.4% loss in the first quarter.

Overall, Britain’s economy is improving, just not as quickly as anticipated. Reuters stated that the GDP numbers “served a reminder of how fragile things are.”

“Britain was the first major country in the region to publish GDP data for the period and, even if the fall paled next to the first-quarter drop of 2.4 percent, it prompted some economists to question how fast things will normalise there,” reported Reuters.

Specifically, many economists are concerned that the drop may indicate that the third quarter will not see any growth either.

Harinder Singh, editor of Taipan Publishing Group’s newest service, Currency Profits Trader, had anticipated a lower GDP number. Before the GDP report came out, Harinder wrote, “Expectations are for a quarterly decline of 0.3%, while the previous quarter’s decline was 2.4%. I have a feeling the actual decline could be worse than 0.3%.”

In fact, Harinder has an overtly bearish approach to the U.K. and the British pound:

I see lot of problems for the British economy and hence for the pound sterling. It has held well due to some positive data, such as a monthly retail sales gain of 1.2% from last month, which saw a decline of 0.9%. The U.K. budget deficit may approach 100% of GDP, and some banks and insurers still may not be solvent without additional help. The IMF has warned the U.K. to control its deficit spending, otherwise it could hurt the currency.

To profit off today's recession, take advantage of these 3 hot commodities. Visit Taipan Publishing Group's site, 3 Hot Commodity Trends, for more information.




Disclosure: No positions