Tuesday, April 14, 2009

Lithium: Bull market fundamentals and why invest in New Oil - Lithium for Electric cars? Updated TNR.v, SQM, WLC.v, CLQ.v, BYD, GOOG, TTM, GM, F, IOH, OIL,

We were recharging our own batteries recently and sharpen our sword. With all this intensive news flow in the field it is important to step back and make clear what is making this trend not just a trade for a couple of months, but The real Next Big Thing and The Bull Market.
We took a couple of books in order to have a better perspective on the general market conditions and particular coming Green-Tech Boom.
First one is "10 World-Changing Trends. The Jubak Picks by Jim Jubak.
"A January 2008 independent study by Nielsen NetRatings found more than 1 million people like you look to Jim for advice and commentary. That's nine times as many as any other investment columnist on the Web."
Second was "Clean Money. Picking Winners in the Green-Tech Boom by John Rubino.
"John Rubino is co-author, with GoldMoney’s James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine and edits GreenStockInvesting.com."
We have thrown into the mix of wisdom some of Warren Buffet timeless observations, who is our bed time reading favorite and all unconventional stuff as usual is our own.
Our conclusions for your own thinking consideration are following:
Jim Jubak has identified ten Macro Trends in the world and we were happy to find out that his findings are already in our portfolio. Here is our contrarian soul takes over: with one million readers he is wildly followed - trends are becoming Macro plays.
John Rubino helped us to translate Obama Dreams into market applications: "Solutions for global warming or Peak Oil will be worth literally trillions of dollars..."
With recent announcements on aggressive Infrastructure building for Electric Cars in China, Europe and USA; news from Toshiba about quick-charge Lithium-ion batteries and Electric Cars models rolled over by all major automakers, it is clear for us that Alternative Energy and Mobility are converging into Electric Cars solution with Lithium becoming New Oil - commodity of the 21st century.
Lithium could become the Key to investment strategy into this "...next great bull market...its going to be bigger and longer lived ten tech-stock and housing booms combined, according to John Rubino:
1. Why clean tech will be the investment opportunity of our lifetimes.
2. Why the hottest sectors are also the most complex and risky."
We are not sure who will build the best battery, who will sell the most popular car (or will they make any money by doing it), we have read somewhere that at the beginning of automaking there were more then 3000 automakers and still remember Etoys, Commerce One and Ariba.
We are getting old, lazy and more and more would like to bet on a "Sure Thing": like selling ink to FED for them to print money and try to sell it to public for a par value.
Lithium for us, particularly after Toshiba news, is that Next Big Thing. Risk of the new disruptive technology still exists, but place in periodical table guarantees at least that there is no Lighter Metal which could be used for High Density Energy storage where it matters most - in Mobility revolution. All major automakers has taken Lithium-ion based batteries as a standard and money are pouring in from guys like John Doerr and Warren Buffet. It is good enough for us. We are using our Dragon approach.
But back to Jubaks Macro Trends - will Lithium as New Oil for Electric cars stand its test?
1. Go where the Growth is - and it means putting some money in the developing economies of China, India, Brasilia and the rest of the gang.
For China and India to endorse Electric Cars could be The Only solution to bring Mobility to at least part of the population and it is not a theory any more - it is happening fast. India's Tata Motors TTM has announced first Nano with a basic price tag of US2000 which opens Mobility to vast consumer base, electric version to be rolled out later. There is an interesting observation that for first time buyers in China and India, who never experienced performance of gasoline based engines, it will be easier to sell Electric Cars, but here we think that running cost and improving performance will be really the key. Conclusion: it is happening now and Lithium play is in line with High Growth play.
2. The Rise of the Global Blue chips. These companies are emerging from the world's emerging economies to challenge Coke, IBM, and Wal-Mart on the global scale.
We have mentioned Tata Motors TTM already, if you missed they own iconic Jaguar and Range Rover among other things by now. These deals are actually killing their balance sheet now, but they are ready to sell their Nanos in Europe and USA as well. GM and Ford are crying now about Japanese automakers, wait until Chinese and Indian guys will start make cars and batteries for that matter. BYD company from China with Warren Buffet is not a bad company as well.
"China has about 200 lithium battery enterprises, accounting for40 percent of the world battery production. BYD company limited is not only an auto producer but also the leading enterprise in lithium battery production"
All these guys in the Electric Cars sector will need Batteries and Lithium supply secured for years to come to make them.
3. The world is getting wealthier and older at the same time.
Jubak has put here different meaning to apply this Trend to retirement money managing. We will make an application of this Demographic trend to Lithium. In retirement planning running costs are taking over above other considerations. In the Developed world Electric Mobility Unit could become the solution for aging Baby Boomers: they are Empty Nester's, need low running cost: Electric Cars now are estimated to be from 0.25 to 0.5 USD per gallon equivalent, need security, driving range is local - it must be small, secure and easy going. Think about not cars, but something futuristic with anti collision devise based on GPS and easy to get in and out. Once energy storage solution will be improved based on Toshiba claim for Lithium-ion batteries design of full Electric Vehicle could be out of today's GM and Ford comprehension: you do not need to play around transmission any more, actual electric motors could be inside the wheels.
4. Inflation, the beginning of new era.
Lithium as other commodities will be driven by Supply and Demand and with Inflation its price will be rising. More money chasing the same amount of Real Hard Assets will put prices up even without Increasing Demand. Inflation is a monetary policy decision to go for Growth. Recent Obama policy for growth will have Inflation as an outcome.We are well positioned with Lithium in this macro Trend as well.
5. Energy. As the world runs out of cheap oil.
It is how we started our Next Big Thing investigation.
We are still thinking that there is more life in the world than just counting effects of Budget Deficits and Quantitative Easing complications for sovereign currencies. After all our Gold and Silver plays are so far from close to our heart drive and energy of new and coming - it is almost like slipping into Dark Ages when the main drive is survival, are we all gonna end with miserable army trucks moving our gold bars? Is there any life at all after Obama Stimulus? What Chinese are gonna be driving for that matter? We are looking for new drives, new ideas, once we move into Inflation stage of recovery from second Great Depression - what will be hot? Gold and silver will preserve value and maybe even will become Reserve Currency - we are in this field already. What is next? Energy security? Peak oil? As financial system became totally unsustainable because of cheap credit, corrupted Agency relations and pure Greed, so the basis of modern life based on cheap energy consumption is becoming the next bubble to burst. Will it lead to downsize when oil will be used mostly for Military Applications? You can not fight the war with batteries so far, only oil can drive tanks, fighter jets and aircraft careers. With all rock style accessories without any substance so far Obama is keen on one thing: energy security - he is ready to debase the currency US Dollar, to cut Medicare, to tax "rich", but he is pushing on alternative energy and energy efficiency. He must be known something that we do not believe so far: cheap oil is gone and even stronger - oil is gone for ordinary consumer within next twenty years.
6. The Commodities crunch. Natural Resources demanding world.
Here our Lithium idea is spot on the money. It is price will be driven by restricted by Nature Supply and by rising Demand if all our Trends will work out for our application. It is already one of the major concerns. Demand could come almost overnight in mining terms and exploration and mining development are taking years and so far only handful number of companies are in the game in our High Leveraged Junior sector - who are developing future Lithium projects to become mines for new Bull.
7. Food. Tne new Oil.
We will send you to the book for understanding of this Trend. For our Lithium theme it means, that ethanol is not the solution to mobility so Brazil will be welcome to our Lithium Demand club - they will make more money on selling food then ruining the old new cars on it. Gas will not be cheap any more as well - Food Demand will push Agri business to the edge of using more and more fertilisers for which production Gas is an essence. Food production and its Distribution will become Lithium solution based as well.
8. The Environment, at last.
Here Lithium is The Play. Lithium based solutions are providing necessary Medium for all other Clean Energy Sources in the High Energy Intensive Mobility applications. Lithium-ion batteries are a storage of Energy. Electric cars are as clean as their Energy source - Electricity Generation and here you are welcome to John Rubino. There are some estimations that in USA off peak power is enough for recharging at least 10% of recent car fleet overnight. Nuclear power will be the solution on mass scale in our opinion, but you can chose from Solar, Wind, Geothermal and other alternative opportunities as well.
11. Hidden Technology. Tech stocks are dead; long live technology investing.
Lithium here is the necessary material to make all this Clean Tech and Green Energy revolution happen in the Mobility rim. Also it is important that other REE are found with Lithium like Tantalum which is necessary for High Technology Applications like super capacitors and High End Optics.
12. The stability premium.
Even we can get tired to invest in all Mambo Jumbo and places which are run by despots of different kinds, who will put shadows on our Green Dreams by eating babies or taking our properties overnight. With recent high volatile markets stability will receive its premium and our Next Big Thing Lithium must be based on a stable grounds. It is becoming the matter of Energy Security. This Bull is in its infancy and we would like to run it for years to come in a relatively secure environment. So we are very pleased that we can find stable from political point of view places for our Lithium Play in good old Canada and some top experts in the area are based there as well.
Do not forget that apart from recognisable Warren Buffet quotes all unconventional stuff about Juniors and Lithium combined in the Next Big Thing is our own made, there are No Investment Advises Here and before further study of our ideas, names and links remember Berny Madoff twist to the Effective Market theory - do not expect anyone to make money for you apart from yourself. Do your homework, read our legal disclaimer and welcome to the Next Big Thing.
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