Climateer Investing

Thursday, January 6, 2011

UPDATED: Rare Earth Mania: What the Heck is Molycorp Worth? (MCP; SHZ; REE; AVL)

UPDATE: "Valuation: The Disconnect Between Molycorp and the Chinese Rare Earth Producers (MCP)".
Original post:
On Dec. 28, in "Corrected: Rare Element Resources Ltd, Molycorp both Up Over 10% on China Move (REE; MCP)" I said:

...My short side radar is starting to glow. The perfect play for the Chinese would be to maintain a very tight supply to Japan and the West until MCP, Lynas and REE go into production and then crash the market.

There is currently no way to figure discounted cash flow values for these mines so folks are taking proven, probable and even possible reserve numbers, multiplying by their favorite integer and then forgetting to discount back. That spells opportunity to those panthers sharp enough to wait patiently in the tree until the moment comes to pounce....

Here's one serious attempt at valuation by McCulloch Capital via Business Insider:

A Deep Dive Into Red Hot Rare Earth Stock MolyCorp -- Is It Really Worth $4.7 Billion?

Molycorp (MCP) is up 400% from its August IPO, boosted in part by news that China will further restrict exports of rare earth metals (REEs) to meet domestic demand.

Given the fact that China controls over 95% of world REE production, the frenzy over new REE sources is understandable, particularly in light of the growing demand from consumer electronics and green technologies.
But can this company, which doesn’t even expect to restart mining operations at its Mountain Pass mine until late 2012, really be worth $4.7B?

Call me old-school, but in my book, the value of a business is the present value of its expected future cash flows.

Below is a simple discounted cash flow model of this business. It suggests Molycorp MIGHT be worth nearly $1B IF management successfully executes AND REE supplies remain tight for the foreseeable future.
Molycorp Discounted Cachflow (DCF)

Let’s examine the assumptions to consider what you would have to believe for $1B to be a reasonable valuation:
Revenue: Shown below is management’s projected 2013 production capacity and prices, which suggest $500M in revenue is possible. The revenue then doubles by 2016 to reflect management’s belief that they can double capacity if warranted.

Management 2013 Capacity and Price Projections

The Big Question: What will REE prices look like in the short and long term?
On the one hand, these 2013 forecasted prices are double the prices Molycorp is currently getting. According to the most recent 10Q, Molycorp is selling lanthanum oxide for only $3.46/Kg. Similarly, their Q3 weighted average price is $3.30/kg (versus the forecasted 2013 price of $20.41/kg)....MORE

Betting on Citigroup to Trade Above $5.00 By February 19th (C)

UPDATE: "Citigroup Q4 Could Make or Break the Bank" (C)"
Original post:
Not me, an options spread trader. I'm unidirectional.
[sounds religious -ed]
The stock closed yesterday at $4.97, up 7 cents on the day.
From Schaeffer's Research:

Option volume is a little heavier than usual on Citigroup Inc. (C), with roughly 975,000 contracts changing hands so far -- just north of C's average daily option volume of 826,000 contracts. Call options account for most of the day's activity, with about 792,000 of these bullishly oriented contracts crossing the tape.

Drilling down on the day's major block trades, one speculator

constructed a long call spread by purchasing 50,000 February 5 calls, and simultaneously selling 50,000 February 5.50 calls. By building this back-month spread, the trader is revealing that he expects C to rise above stubborn resistance at the $5 level by the time February-dated options expire....MORE

Wednesday, January 5, 2011

Everything You Ever Wanted to Know About Yuan/Dollar Exchange Rates and Trends

FT Alphaville pretty much says it all:

More yuan appreciation, real-ly?

A report Wednesday morning from Reuters, which spots an article in a Chinese-language newspaper:

China will let the yuan rise about 5 percent against the dollar in 2011 to combat inflation, an official newspaper said on Wednesday, while a former central bank adviser said the country needs to free up the currency. …
The yuan’s gains would be particularly strong in the first half of this year, the China Securities Journal said in a front-page editorial.
The Chinese-language newspaper is a leading voice on domestic economic affairs. Its views do not represent official policy, but do shed light on thinking in Beijing. Investors expect the yuan to be about 3 percent higher in a year’s time, according to pricing in offshore forwards markets. China let the yuan rise just 3.6 percent in 2010.
Last year there was much frustration among US policymakers with China’s unwillingness to allow the yuan to appreciate more, especially after the country promised to do just that in June. In October, US politicians put forward a punitive bill as retaliation, though it didn’t go anywhere.
At the time we recommended this sharp analysis by Ed Dolan, who explained why everyone should calm down:

In nominal terms, the yuan has strengthened about 2.5% since China’s June 19 decision to ease its currency policy. That works out to an annualized rate of nominal appreciation of almost 8%. The simplest way to calculate real appreciation is to add on the difference between China’s inflation rate (3.5%, according to August data) and US inflation (about 1%, or even less if the dip in the September figures holds up). Doing so gives us an annual rate of real appreciation of more than 10%. Two or three years of that would pretty well eliminate the 20 to 40% undervaluation that critics are talking about. …
In order to slow the rate of nominal appreciation, the PBoC would have to step up its currency intervention. Chinese inflation is already accelerating month after month. Slowing nominal appreciation from its recent 8% pace would increase inflationary pressure even more, both by keeping import prices from falling, and via the newly minted yuan that intervention pumps into China’s domestic money supply. With inflation accelerating further, the rate of real appreciation might not slow by much, if at all.
As Reuters says, China allowed the yuan to rise 3.6 per cent (nominally) last year, but have a look at this chart from The Economist showing the difference between the nominal and real appreciation in the yuan last year:

As you can see, all of that appreciation took place after June, and the real rate of appreciation was closer to 8 per cent for the whole year....MORE

"Is China Green Agriculture The Next Chinese Fraud?" (CGA)

In a move that stunned Wall Street, how the heck did we miss this one?
China.................check
Green................check
Agriculture........check
We've never posted on CGA although it and CAGC have popped up in the feed-readers and terminals a few hundred times.
The stock is down 10.72% at $8.08.
From ZeroHedge:

After Muddy Waters came out with research two months ago that singlehandedly destroyed recent Chinese NYSE IPO, RINO, we predicted that there would soon develop a cottage industry of micro investment firms who do diligence on various Chinese frauds (and there are many of them), establish a short base, and subsequently release a research report in the name. Today we get the latest such possible casualty: meet China Green Agriculture, a Xian, China firm founded in 2000, which "engages in the research, development, manufacture, and distribution of humic acid based compound fertilizers in China... The company also engages in the development, production, and distribution of agricultural products, including fruits, vegetables, flowers, and colored seedlings."

Sure enough the company IPOed on the NYSE in mid-2008, and if the just released research report by J Capital Research is correct, the firm is about to join such other disgraces as RINO in the NYSE IPO dunce corner. To wit: "In this report, we present compelling evidence that China Green Agriculture (NYSE:CGA) has significantly over-stated its true revenues and earnings. We estimate that CGA’s value is no more than $2.85 per share, as opposed to its current market price of $9."

From the report, the key concerns with CGA, which mirror almost verbatim those that Muddy Waters had with RINO, are the following:

Vastly Inflated Revenue

False Claims About Technology

Questionable Tax Reports

Possible Self-Dealing

Excessive Purchase Price for Gufeng Subsidiary

Improbable Margins

Dubious Related-Party Transactions

Huge Multiple Paid for Gufeng

Excessive Share-Based Compensation

and most troublingily:

No Response from CGA: Over more than a year, we have made repeated requests in person, in writing, and by telephone to CGA executives, including the company chairman, to verify or disprove the information in this report or to provide even one telephone number for even one sales office. While affable and communicative, the company has in every case refused to provide any specific responses to our questions....MORE

How Much will Noble Energy Be Taxed On Their Big Israeli Gas Find? (NBL)

Last Wednesday we posted "Noble Energy Has More Upside on Huge Gas Find (NBL)" with the stock at $87.50.
We followed up on Thursday with the counterpoint: "Barron's Does Some Hatin' on Noble Energy (NBL)"

Now the stock is trading at $83.86, down 4.16%, I forgot to post a major writeup by the Wall Street Journal, and a reader sends me some material non-positive (c'mon, you thought I'd say 'non-public' didn't you) information.
First the Journal story:

Big Gas Find Sparks a Frenzy in Israel

TEL AVIV—Two years ago, Ratio Oil Exploration LP, an energy firm here, employed five people and was worth about half a million dollars.

Today it sits at the center of a gas bonanza that has investors, international oil companies, Israeli politicians and even Hezbollah, Israel's sworn enemy, clamoring for a piece of the action.

Ratio's market capitalization now approaches $1 billion. The rally at Ratio is thanks to the company's 15% stake in a giant offshore gas field called Leviathan, operated by Houston-based Noble Energy Inc....

Much More between the ellipses

...Amid the stock-market frenzy, the Israeli government started considering changing its 1950s-era energy royalties and tax regime, to boost the government's take of any gas find.

Earlier this year, Finance Minister Yuval Steinitz said he was considering changing terms retroactively—meaning the government could extract better terms on previously assigned leases. Noble and Israeli oil executives went on the offensive.

A retroactive change would be "egregious" and "would quickly move Israel to the lowest tier of countries for investment by the energy industry," Noble's chief executive, Chuck Davidson, wrote Mr. Steinitz in April.

The company enlisted high-level negotiators, including the U.S. State Department and former President Bill Clinton, to lobby against any change.

Mr. Clinton raised the issue in a private meeting with Israeli Prime Minister Benjamin Netanyahu in New York in July, according to a Clinton aide. "Your country can't just tax a U.S. business retroactively because they feel like it," the aide said Mr. Clinton told Mr. Netanyahu.

Mr. Netanyahu was noncommittal, the aide said. A spokesman for Mr. Netanyahu declined to comment on the meeting.

Finance Minister Steinitz has so far ignored the pressure. Last month, he said a government-appointed committee had made preliminary recommendations to abolish tax breaks for energy firms and impose steep tax increases of 20% to 60% on windfall profits. Any tax changes are subject to approval by Israel's cabinet.
"Israel is sovereign to make its own decision and change its tax regime," Mr. Steinitz said in an interview.

Shares in energy companies plummeted on news of the tax increases. Delek Energy said it would have to reevaluate the Tamar field. "This really threatens our ability to deliver the project on schedule," said Gidon Tadmor, the CEO. Funding for development of the gas field is now on hold, he said, due to banks' concerns about the new tax regime....MORE

And here's the Israeli Ministry of Finance's "Summary of Draft Conclusions by the Sheshinski Committee":

...Main Points of the Committee's Conclusions
Leaving the existing rate of royalties and some of the tax benefits

Canceling the depletion deduction

Oil and gas profits levy  The initial rate of the levy will be 20%, and it will rise gradually to 60% according to the amount of the excess profits.

The proposed formula is of the R factor type:

Financing development of the gas deposits  During the first years of production from the deposits under development, the Committee will recommend fiscal solutions to resolve the problem.

Application - The proposed changes will apply as of the date of the decision, to all oil and gas deposits, since this involves taxation of future profits.

Significance
The share of the state and the public in the net profit after repayment of the investments from the sale of the gas and oil will increase from one third to about two thirds of the relatively profitable deposits.

The increase in the state’s share in the revenues will come mainly in later years in the life of the deposit, and therefore the impairment of the debt repayment capabilities and of the ability to establish the reserve is minor.
The impairment of the entrepreneurs’ incentives to operate in the industry is minimal, and will not result in non-development of existing and new deposits.

The proposed system is gradual and suitable for a broad spectrum of global situations, and responds dynamically to changes in price, or in the scope of the gas that is marketed, or to changing investment needs....MORE

Conclusion:

"Sell 'em all, they aren't worth the paper they're printed on.":

I've mentioned* that one of my mentors was the best trader I've ever met. Creative, intelligent, disciplined (and bankrolled).
From time to time though, he would lose his mind and run around the floor screaming

"Sell 'em all, they aren't worth the paper they're printed on"....

and from Can you trust the First Bank of Nigeria?

...One of my mentors, and one of the sharpest traders I ever met, had the most common flaw of students of markets, hubris. In his case it was non-fatal, more of a cost of doing business:

1) He had somehow ended up with some of the
Boston Chicken-Einstein/Noah bagel bonds. We know how that worked out:

...Short-sellers got teary-eyed this week following word that old faithful Boston Chicken (Nasdaq: BOST) finally bit the Chapter 11 bankruptcy dust. Though hardly unexpected, Monday's announcement dropped the stock to $0.50 a share, down an astonishing 97% from its 52-week high near $16.
Source (scroll to "A Chicken Autopsy")
He knew it was a finance scam "but the debentures paid 11%"

2) He got into a rigged blackjack game in Yugoslavia. Lost half-a-mil. Said he started to think it was was fixed when he was down a couple hundred.
Wife: "Then why the hell did you keep playing?"
Him: "I thought I could beat it".

Out at $83.86.
Now let's find a Yugoslav blackjack game!

Tickerspy Screws Up With New Rare Earth Index While Creating Possible "Death of Equities" Moment (MCP; SHZ; REE; REMX)

Maybe not so much the Death of Equities cover:

click for larger graphic

But more like this ad from Internet.com:

P R E S S R E L E A S E S

Corporate Information

INTERNET.COM'S ISDEX, THE INTERNET STOCK INDEX, BREAKS 1,000, A GAIN OF 1000% IN LESS THAN FOUR YEARS

The dateline on that one is March 10, 2000, the day the NASDAQ set its all-time closing high, 5048.62.
I am not saying the rare earth stocks topped today, just that the feel is similar.
Besides, the REE stocks are only up three digits, on average.
Anywho, here's Tickerspy:

Tickerspy.com Announces New Stock Index Tracking Rare Earth Mining Stocks, Including Molycorp, Rare Element Resources, China Shen Zhou Mining, and Avalon Rare Metals

PR Newswire
PRINCETON, N.J., Jan. 5, 2011

PRINCETON, N.J., Jan. 5, 2011 /PRNewswire/ -- Tickerspy (http://www.tickerspy.com), an investing website featuring over 250 unique, proprietary Indexes, announced the creation of the Rare Earth Mining Stocks Index, which includes among its components Molycorp (NYSE: MCP), Rare Element Resources (NYSE Amex: REE), China Shen Zhou Mining (NYSE Amex: SHZ), and Avalon Rare Metals (NYSE Amex: AVL)....MORE

Here are the components:

Ticker

Links

AVL

$7.29

+11.5%

+81.3%

+104.8%

+287.8%

+143.8%

Spy AVL, Post

LYSCF

$2.11

+5.5%

+33.5%

+50.7%

+348.9%

+283.6%

Spy LYSCF, Post

"A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Prices?"

Not a groundbreaking paper but interesting. From the IMF:

January 2011
Abstract

This paper investigates the causes of extreme fluctuations in commodity prices from 1990
to 2010. Analyzing two very distinct commodities—crude oil and fine wine, we find that
macroeconomic factors are the main determinants of commodity prices. Although supply
constraints have the expected effect, aggregate demand growth is the key factor. The
empirical results show that while advanced economies account for more than half of global
consumption, emerging economies make up the bulk of the incremental change in demand,
thereby having a greater weight in commodity price formation. The results also show that
the shift in the composition of aggregate commodity demand is a recent phenomenon

20 page PDF
HT: Real Time Economics

"Pimco's Gross Says Investors Should Fear `Mindless' U.S. Deficit Spending"

From Bloomberg:

Pacific Investment Management Co.’s Bill Gross said investors should favor emerging market corporate and sovereign debt as “mindless’ U.S. deficit spending may result in higher inflation, a weaker dollar and the eventual loss of America’s AAA credit rating.

Buying debt in emerging market countries with higher real interest rates and wider credit spreads will offer more return as well as protection from dollar depreciation as U.S policy makers run up record deficits at the expense of economic growth, Gross, the manager of the world’s biggest bond fund, wrote in his monthly investment outlook.

“The problem is that politicians and citizens alike have no clear vision of the costs of a seemingly perpetual trillion dollar annual deficit,” Gross wrote in a note on Pimco’s website today. “As long as the stock market pulsates upward and job growth continues, there is an abiding conviction that all is well and that “old normal” norms have returned. Not likely. There will be pain aplenty."...MORE reportage

Here's Gross' "Off With Our Heads!"

Here's the wrap-up:

Investment Implications

An astute mantis-like investor must defer immediate gratification, make a 180˚ turn from that sexy looking female with those long green legs (long term bonds) and mend his ways fast! It is still possible to earn an attractive return from bond strategies (such as PIMCO’s Total Return strategy in 2010), and the way to do it is to focus on “safe spread” that emphasizes credit, as opposed to durational risk.

These “safe spreads” include: emerging market corporates and sovereigns with higher initial real interest rates and wider credit spreads; floating as opposed to fixed interest obligations; and importantly currency exposure other than the dollar.

For those inclined to lunch on stocks, remember to go where the growth is – developing as opposed to developed markets. If the U.S. must pay an eventual price for mindless deficit spending, then find countries and currencies that appear to have their act under control: Canada, Brazil, and yes even Mexico with its drug related violence. Mexico has a net national savings rate that exceeds our own by 20% of GDP.

Above all, remember that all investors should fear the consequences of mindless U.S. deficit spending as far as the mantis eye can see. Higher inflation, a weaker dollar and the eventual loss of America’s AAA sovereign credit rating are the primary consequences. Fear your head – fear your head.

Commodities: "We Have No Bananas"

First we read about "Florida citrus under siege from greening disease" in 2008 and "Florida orange groves still shrinking, USDA says" this year.
Now it's bananas.
How the heck am I supposed to meet the First Lady's nutrition guidelines?
From the New Yorker:

Can scientists defeat a devastating blight?

ABSTRACT: A REPORTER AT LARGE about Tropical Race Four, a soil-borne fungus threatening Cavendish banana cultivation. More than a thousand kinds of banana can be found worldwide, but a variety called Cavendish, which a nineteenth-century British explorer happened upon in a household garden in southern China, represents ninety-nine per cent of the banana export market.

The vast majority of banana varieties are not viable for international trade: their bunches are too small, or their skin is too thin, or their pulp is too bland. Although Cavendishes need pampering, they are the only variety that provides farmers with a high yield of palatable fruit that can endure overseas trips without ripening too quickly or bruising too easily.

The Cavendish, which is rich in Vitamins B₆ and C, has high levels of potassium, magnesium, and fibre; it is also cheap—about sixty cents a pound. In 2008, Americans ate 7.6 billion pounds of Cavendish bananas,...MORE

AIG Smackdown: Frontpoint's Steve Eisman vs. Fairholme's Bruce Berowitz (AIG)

If I were an AIG competitor I would be mighty unhappy that my prudent investing and operating behavior turned out to be a mug's game while my taxes were bailing out and then subsidizing AIG.
AIG took risks that were suicidal and the company should have gone down (and without the 100% payout to Goldman)

You have sat too long for any good you have been doing.

Depart, I say, and let us have done with you.

In the name of God, go!

-Oliver Cromwell to the Rump Parliament

20April1653

From Insider Monkey:

David Einhornpublicly came out against St Joe (JOE) a couple of months ago. Bruce Berkowitz already had a sizable position in St. Joe. It seems like Einhorn has won the first round. This is not the first time this year a notable hedge fund manager publicly criticized one of Berkowitz’s large holdings and took the opposite side.

In April, FrontPoint Partners’ Steve Eisman prepared a presentation about AIG, valuing the company at $7/share in his best case scenario. “AIG has no common shareholder equity remaining on its balance sheet”, Steve Eisman wrote in the presentation. “It would likely be insolvent if not for government support, in our opinion.”

In a better-case (yet unlikely) scenario, Steve Eismanestimated the value of AIG’s remaining businesses at $116 Billion. That would leave equity holders with a gain of roughly $7 Billion, or $7 a share, he said. The stock went down 5.3% after Eisman’s presentation, closing at $37.59....MORE

Previously:

AIG to Borrow from Treasury to Pay Fed as Part of Exit Plan
"AN INTERVIEW WITH BRUCE BERKOWITZ: Why the Fairholme founder finds AIG, Bank of America and Citi very attractive now." (AIG; BAC; C)
The AIG Deal: Stink, Stank, Stunk (AIG)
"After shorting subprime, Eisman says short AIG" (AIG)
Fairholm's Bruce Berkowitz: Banks worth a second look (BAC; C)
"Berkowitz’s Fairholme Increases Bet on AIG Recovery" as Some Analysts Question Results (AIG)
"NYT Digs Further Into the AIG Backdoor Bailout" -CJR (AIG; GS)
More on the KBW Downgrade of AIG (and $6.00 price target) AIG
On Forcing all broker-dealers to go private (BAC; C; GS; JPM)
"At AIG, What Is Left to Sell?" (AIG)
AIG Tangible Common Equity -$162.06 a Share, Analyst Says (AIG)
American International Group: AIG Reserves Deficient - Sanford Bernstein (AIG)
AIG Shares: Still Not Worth Anything.
American Intl Group: Downgraded to Underperform at Sanford Bernstein; $10 target (AIG)
"AIG Gets The Dreaded "Going Concern""
Credit Suisse Analysts on AIG: ‘Little to No Value for Common Equity’

And many more.

Tuesday, January 4, 2011

Rare Earth Mania: The Coming Opportunity for Buyers of Molycorp Puts (MCP)

set caps on lock: FIRE
DO NOT BUY THE OPTIONS TODAY!
THIS POST IS MEANT AS A HEADS UP FOR A COMING TRADE THAT WILL REQUIRE SKILL, TIMING AND LUCK.

The stock is trading at $61.02 up 6.12% after hitting an all-time high of $62.78 earlier in the day.
The lock up period for insider sales ends on January 20. The near series options expire on January 22, the February's on the 19th.
The Jan. 55's currently $2.95-3.10 or the Feb. 50's currently $3.90-4.10 would seem to have the best risk/reward characteristic.
These prices are for reference purposes, THEY ARE NOT SUGGESTED ENTRY POINTS.
CAPS off

The major negative is Headline Risk: because the company is not in production the stock moves on hypen'tout.

An announcement similar to the Hitachi* or Sumitomo** deals would have the carnival barkers out in force and could move the stock 5-10% against you before the selling starts.
This is real money in play and the insiders will do anything short of actually showing an operating profit to keep the stock up. For example, this, from Reuters, Dec. 30:
Molycorp in Talks with More JV Partners: CEO

Here's the prospectus.
There's also an S-8 for ~~4 million shares at $22~~ somewhere.I was working from memory, the actual numbers are 4,112,685 at $21.73. Here's the filing.
Here's the most recent 10Q.

*Molycorp, Hitachi Metals in rare earths venture
**Molycorp and Sumitomo Agree to USD$130 Million Equity and Debt Investment in Molycorp in Exchange for Rare Earth Supply Agreement

Crapsky! I Forgot to Include the Punchline to"Today's Rare Earth Winner: China Shen Zhou Mining & Resources Inc. (SHZ) UP 15%..."

Original post: "Today's Rare Earth Winner: China Shen Zhou Mining & Resources Inc. (SHZ) UP 15%; Climateer Investing to Change Name..."
The joke is:

...It mainly mines fluorite, an ore mainly used by the steel industry as a melting agent, and by the chemical industry in making hydrofluoric acid, but not one of the 17 rare earth elements. While it might contain traces of those elements, they hardly seem worthy of warranting the mark up in the miner's share price. This looks more of a case of investors piling into a stock that says "China" and "mining."...
-Motley Fool

Similar to yesterday's ""Thompson Creek Won't Comment On Takeover Rumors, Says Stock Incorrectly Caught Up in Rare Earth Hype" (TC; MCP)"

I read somewhere that Johnny Carson's First Rule of Comedy was "Get the words in the right order". I suppose that would cover "Don't forget to include the punchline".

What's Moving: SemiLEDS Corporation (LEDS)

We're still eight days from earnings and someone is optimistic.
The stock is up .43% at $27.87 with the NASDAQ down .84% on the day.
Here's the one month chart:

The company priced their Dec. 9 IPO at $17.00, above the expected $14.50-$15.60 range.
Here's the earnings date announcement:
SemiLEDs to Announce First Quarter 2011 Financial Results on Thursday, January 13, 2010

And here's the final prospectus.

DARPA and Smart Dust

Why do I think the next secular bull market will be based on some combination of materials science, advanced manufacturing and nanotechnology?

From the American Ceramic Society:

Missouri S&T gets funding to develop battlefield ’smart dust’

Edited By Ann Spence • August 19, 2010

Smart dust components. (Credit: University of California Berkeley Robotics
and Intelligent Machines Lab.)
A significant trend in electronics technology is the increasing ability to provide adaptive features into smaller and smaller electronic devices. An example of this technology trend are electronic motes. Electronic motes are devices that can:

Support the collection and integration of data form a variety of miniature sensors.

Analyze the sensor data as specified by system level controls.

Wirelessly communicate the results of their analyzes to other motes, system base stations and the internet as specified by system automation.

Motes are also sometimes referred to as smart dust. One mote is composed of a small, low powered and cheap computer connected to several sensors and a radio transmitter capable of forming ad hoc networks. The computer monitors the different sensors in a mote. These sensors can measure light, acceleration, position, stress, pressure, humidity, sound and vibration. Data gathered are passed on to the radio link for transmission from mote to mote until data reaches the transmission node.

One of the original developers of motes was the DARPA. The defense angles are pretty obvious. For example, In conjunction with a remotely piloted vehicle, a GPS sensor, a magnetometer and a radio transmitter, battlefield commanders would have a clear picture of the field and enemy location and thus would be able to react accordingly without resorting to the use of mines. Other potential applications include intruder surveillance, robot-based sensor collections and manufacturing process surveillance.

To further military surveillance technology, Missouri S&T has been awarded $4.465 million through the U.S. Army Research Laboratory. According to an S&T press release, the funds will be spent developing motes that can detect the presence of various chemicals, electronic signatures and human activity.

Jagannathan Sarangapani, a professor of electrical and computer engineering at S&T and principal investigator for the project, says the motes are capable of sharing information with each other and even interacting with existing Wi-Fi networks to spread messages. In the battlefield, the motes would be deployed in dangerous areas to effectively “listen in the wind” for evidence that someone is in a sensitive or restricted area.

The sensor side of motes is pretty well figured out. However, since Sarangapan and others at Missouri S&T selected to work on this project are all experts in electrical and computer engineering, that suggests the hurdles now have to do with how to actually power the sensors, securely network them and extract useful real time data. That’s no small task. S&T will also be working with two small businesses to help make the technology more feasible: KalScott Engineering in Lawrence, Kan., and Avetec in Springfield, Ohio. The former is experienced in remote sensing and delivering UAV data; the latter brings expertise in computer modeling and integrating complex systems.

But, the ideas for possible application and use of motes in just about any field is limitless. They can be used in conjunction with power meters, water meters and other utility meters to transmit data automatically to a central node or to an electromagnetic truck capable of temporarily powering up the motes in a certain area. Moreover, they can be used in agriculture to give a clear picture of the temperature, humidity, water level, etc for a given location. Motes can be embedded into structures to give constant or periodic reports on structural integrity such as salt content levels in concrete. Furthermore, motes can be used in traffic management and monitoring by placing these devices on major intersections and streets.

One of the limiting factors in the development of motes is the battery. Although a bigger battery would mean a longer life for the mote and farther transmission capabilities for its radio link, smaller motes with smaller batteries are usually more versatile and flexible. Some form of energy scavenging is probably in the works for the motes.

As the Mandarin speaking partner says to me: "What is cooking?".

UPDATED: Today's Rare Earth Winner: China Shen Zhou Mining & Resources Inc. (SHZ) UP 15%; Climateer Investing to Change Name...

...to:

Inner Mongolia Baotou Steel Rare Earth (Group) Hi Tech Co Ltd blog.

Should be good for a triple in pageviews.
SHZ is up 15.18% at $9.57, for no particular reason.

UPDATE:
Crapsky! I Forgot to Include the Punchline to"Today's Rare Earth Winner: China Shen Zhou Mining & Resources Inc. (SHZ) UP 15%..."

With the Stock Up Four-fold Look For Molycorp to Sell More Shares (MCP)

Following up on this morning's Bloomberg story "Pre-Market: Molycorp up 7.5% on Wild Ass Speculation (MCP)"
At current prices it makes more sense to dilute the stock a bit than to jv the deal but hey, that's just me.
"From Bloomberg (who are on top of the story):

Molycorp May Need Extra $200 Million to Boost Output

Molycorp Inc., owner of the largest rare-earth deposit outside China, said a proposed doubling in production would need as much as $200 million of extra investment, and it may pursue joint ventures to raise the cash.

Molycorp is considering raising the 2012 output target for its Mountain Pass mine in California to 40,000 tons from 20,000 tons. That would add $100 million to $200 million to the project’s estimated $531 million cost, Chief Executive Officer Mark Smith said today in an interview on Bloomberg Television’s Inside Track....MORE

Cool Stuff At General Electric Research and Development: Batteries; LED's; Grid (GE; AONE; CREE; RMBS)

A subject near and dear to our hearts.*
The stock is down a dime at $18.18 after trading at a 7 1/2 month high of $18.35.
From GE:
In the Lab With the GE Brain, EVs, & Vscan

Over the holidays, scientists at GE Global Research provided a closer look at some of their latest technologies with a series of lab videos that featured next-generation LED lights, composite materials for jet engines, and coatings to keep ice off of turbine blades.

The research team has provided another inside look, this time highlighting the GE Brain, the latest in electric vehicles research, and the lab’s role in developing GE’s handheld ultrasound, Vscan. (They’re the same technologies featured in the Global Research team’s playful vision of what might be fueling Santa’s toy lab of the future.)

As Charles Theurer describes in the video below, just as the world’s energy needs have outgrown the current electric grid system, the world’s digital needs have outgrown the current IT infrastructure. Enter the GE Brain, which is a mobile, low-cost sensing, processing, and communication hub that will one day serve as a platform for a high-powered decision network with artificial intelligence. The goal is to use technology such as the GE Brain as a companion to help interpret the vast amounts of data that’s available.

In this video, Lembit Salasoo — who we recently featured in our story about GE’s battery breakthrough for large vehicles such as buses and trucks – explains the hybrid drivetrain that is also part of the project. The battery technology Lembit’s team is working on has the potential to cut battery costs by 20 percent by pairing a sodium battery with a lithium battery. It essentially combines the pick-up that today’s passenger EVs have with the power storage that big industrial batteries offer....MORE
Previously:

July 21, 2009
Q&A: Mark Little, Head of GE Global Research- "GE is pushing the smart grid and thin-film solar, but don't expect new kinds of nuclear reactors. "
Oct. 28, 2009
"Can R&D Save General Electric?" and "GE's Risky Energy Research" (GE)

Possibly.
Combined with lobbying and firing Immelt.

Dec. 31, 2009
Cheers! To a decade of innovation at General Electric’s labs (GE)
March 18, 2010
Watch Out First Solar: "GE outlines R&D efforts with CdTe thin-film technology" (FSLR; GE)
July 15, 2010
"Immelt Stakes General Electric's Growth on Higher R&D as NBC, Finance Shrink" (GE)
July 15, 2010
General Electric to Offer $200 Million Smart Grid Prize (along with Kleiner, Perkins; Rockport Capital; Foundation Cap...) GE

UPDATED:Pre-Market: Molycorp up 7.5% on Wild Ass Speculation (MCP)

Update: "With the Stock Up Four-fold Look For Molycorp to Sell More Shares (MCP)"
Original post:
Rare Earth.
Two magic words right now.
MCP is up $4.34 at $61.84 following this Bloomberg story:

Molycorp May Double Planned Rare-Earth Metals Output to Meet Global Demand
Molycorp Inc., owner of the world’s largest rare-earth deposit outside of China, may double its planned production to help meet global demand after China cut export quotas.

The Greenwood Village, Colorado-based company’s board asked its management to take a “very hard” look at raising 2012 output to 40,000 tons from 20,000 tons, Chief Executive Officer Mark Smith said yesterday in an interview on Bloomberg Radio. Production will be 3,000 to 5,000 tons this year, he said....MORE

The Word for the Year is Innovation--And President Eisenhower Stops By

You are going to be hearing the word a lot over the next twelve months.
Here are some recent examples:

New York Times, January 1, 2011
When Innovation, Too, Is Made in China

Washington Post, January 2, 2011
Can cash prizes for innovation get the economy rolling again?

ABC's "This Week" January 2, 2011
Transcript: White House Adviser Austan Goolsbee
WHEN ASKED HOW TO GIVE THE ECONOMY A PUSH IN THE RIGHT DIRECTION, GOOLSBEE SAID:

"I think the focus has got to be on investment, on exports, and on innovation.

I am in full agreement. I also want to share one of the most farsighted speeches ever delivered in the USA, President Eisenhower's Farewell Address to the American People, January 17, 1961.
Most folks know his warning on the military-industrial complex:

...In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.
We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together...

But they don't remember what followed immediately after:

...Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.
In this revolution, research has become central; it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government.

Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present--and is gravely to be regarded.
Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite....

Something to think about.
We'll see if my meme-spotting is prescient.
I'm pretty sure Eisenhower was.

Monday, January 3, 2011

Northern Uranium to Pursue Rare Earths, Change Name (NTU.asx)

I mentioned the transmutations that small companies can go through back in 2008's "Chameleons on the Pink Sheets":

...A classic history would be a Vancouver "junior resource" company in 1979, after the collapse of the oil and gold markets became a solar deal in '81 , an Aloe Vera deal to the yuppies mid '80's, a biotech in '86 ("we're the next Amgen"or "A cure for AIDS"), then on to neutraceuticals or spas, Indian casinos, software, then the great "i", "e-" and ".com" gold rush. Someday I'll get around to checking if some lunatic scammer actually went with "e-iTrade.com".

The next group of parasites were the "homeland security" companies, then land deals. The "resource" scams never went away and became more prominent in 2002 after gold had moved off its $252 bear market low. We're in the Green boom (happy Earth day by the way) now, who knows what's next....

Today in EuroInvestor:

...The recently re-named Homeland Security Network, Inc. (Pink Sheets:HYSN), doing business as Global Ecology Corporation (GEC) announced today

"Rare earth"miner" Qiao Xing Universal Resources (XING) was in the telecom biz until Nov. 30, 2009.

In the case of Northern, well, rare earth deposits often occur in conjunction with uranium and if you can get a higher multiple at the cost of changing your stationary, go for it.
One quick note: although this post has a "jokey" tone to it Northern is partnered with French nuclear giant Areva. That in itself doesn't make Northern a buy but it means that someone with mining experience has decided to take the gamble.
Here's the announcement of the change in focus and name change.

Rare Earth: Avalon Jumps 20%, No News (AVL; MCP; REE)

The stock is up 20.67% at $7.52.
As we saw in "Rare Earths: What's in Your Mine? (MCP; REE; RES.tsxv; AVL.TO)" the company actually has a better mix of the rare earth elements than Molycorp.
The stock went on the AMEX on Dec. 22.

"Thompson Creek Won't Comment On Takeover Rumors, Says Stock Incorrectly Caught Up in Rare Earth Hype" (TC; MCP)

Too funny.
The stock is up 6.73% at $15.71.
From Street Insider:

Shares of Thompson Creek Metals (NYSE: TC) are surging higher on unsubstantiated takeover rumors reported at financial websites Briefing.com and theflyonthewall.com and the hype surrounding rare earth stocks.

Company spokesperson, Pamela Solly, said she has seen the rumors but told StreetInsider.com, "we don't comment on market rumors."

Solly also explained that the stock has been incorrectly caught up in the rare earth hype. "We are not in the rare earth business," Solly said. The company has two molybdenum mines, and is constructing a cooper/gold mine....MORE

Florida Man Accused of Swindling Investors in “yogurt-based product to re-grow hair,”

From PatrickPretty.com:

A Florida man who served jail time in an earlier scheme in California has been arrested by the Miami Beach Police Department and agents from the Florida Office of Financial Regulation (OFR), amid allegations he swindled investors in a “yogurt-based product to re-grow hair,” OFR said.

Joseph P. Fox, president of Telogenesis Inc. of Miami Beach, was charged with Grand Theft and Organized Scheme to Defraud in his sale of Telogenesis stock.

Beginning in 2007, Fox sold Telogenesis stock for $1,000 a share to at least 59 investors. All in all, he gathered $380,000 in the scheme and used most of the money to support his lifestyle, OFR said....

...A website from which a Telogenesis product was pitched as being available “very soon” for $1,999 included links to medical journals that appeared to have no tie to the product — and also to Oprah Winfrey’s website....MORE

Dahlman Rose Raising Price Target On Molycorp (MCP)

The stock is up 6.89 (13.81%) at $56.89.
From Benzinga:

Dahlman Rose & Co. is raising its price target on shares of Molycorp, Inc. (NYSE: MCP) to $85. It has a Buy rating on shares.

In a note sent to investors, Dahlman Rose writes, "The company has entered into JVs with Hitachi and Sumitomo. We believe that both partnerships create long-term value for shareholders. The JV with Hitachi will allow Molycorp to develop rare earth magnets in the US, helping the company complete its mine-to-magnets manufacturing supply chain. While the agreement with Sumitomo provides Molycorp with attractive financing and access to the wealth of mining expertise that Sumitomo has developed over many years.
We are increasing our price target to $85 per share from $49. We believe that the moves by China will be supportive of the medium-term prices for REE."

Dahlman was part of the selling group when MCP IPO'd:

Morgan Stanley_____________________________

J.P. Morgan

CIBC Credit Suisse

Stifel Nicolaus Weisel Dahlman Rose & Company Piper Jaffray

Knight/Houlihan Lokey

Griffiths McBurney Corp.

Prospectus dated July 29, 2010.

JP Morgan Says Buy GM Calls Using the Proceeds from Your Sell Ford Calls (GM; F)

Alrighty.
GM is trading up 2.14% at $37.65, F is up 2.83% at $17.26.
From ZeroHedge:

In a bid to preserve groupthink, and to finally let Getco off the hook from going chapter if GM's price were to ever drop below $33, JPM's Equity Derivatives desk led by Adam Rudd, who is recommending a trade based on Himanshu Patel's view that GM is massively undervalued, has just come out with a trade recommendation to buy GM March $38 calls funded by selling Ford $17 calls. After all can't let a government funded post-reorg story ever go to waste. And for JPM's functioning retard clients, here is the trade's explanation: "We believe that this trade may be particularly attractive for those investors who anticipate outperformance of GM relative to Ford." One quick look behind the scenes indicates that this call is nothing more than a less than glaringly obvious attempt to recreate the options trading frenzy seen in Ford stock in mid/late October in GM, now that Ford derivatives mania is over.
From the report, which seeks to open a new room in the 2011 hedge fund hotel, which is already chock full with a variety of other names, but most notably Apple, which has been occupying the presidential suite for two years now...

We recommend buying March $38 (~103%) calls on GM for $1.55 (~4.2%) and selling March $17 (~101%) calls on Ford for $0.91 (~5.4%) for a net credit of around 1.2%. This strategy is known as a call switch trade (selling a call on one stock to fund a call on another stock). In this way, an investor has a long GM/short F position, in a rally. If both stocks are below their respective strike prices at expiry, the investor would simply retain the 1.2% net premium that is received upon entering the trade. Figure 1 shows the scenarios (GM and Ford share price moves between now and March expiry) under which the call switch trade would generate either a profit or a loss.

What is surprising is that while JPM is obviously going all out on GM, it is throwing out that other momentum driven name, F, which is likely about to see a short-term top based on this call...MORE

What's not to love about a GM convertible?
('61 Vette Roadster)

Société Générale's Albert Edwards: "SocGen Bear Takes a Bite Out of China" (Jan. 3, 2011)

From the Guardian:
Analyst famous for his Ice Age thesis sees a new economic crisis on the way

Stock markets ended 2010 on an upbeat note. The FTSE 100 index reclaimed the 6000 mark before slipping back, but still registered a 9% gain, while the S&P 500, the most widely watched US index, has regained the level seen before the collapse of Lehman Brothers.

There is an air of optimism among investors and a confidence among economists that a much feared double-dip recession has been avoided. A tough moment, then, to be bearish?

Not for Albert Edwards, the best known and longest-standing bear in the City. He has seen nothing to dent his Ice Age thesis – the term he coined as long ago as 1996 to describe the relative decline of equities versus bonds. He thinks there may still be another Japanese-style economic "lost decade" to endure. "Big structural bear markets take 19 years on average and have four recessions," he says. "We've had two."

Edwards is thus sticking to two eye-catching predictions. Stock markets will revisit their March 2009 lows (3512 for the FTSE 100). And, despite the hints in recent months of a return of inflation, gilt yields will fall below 2% (from 3.5% today) as deflationary forces reassert themselves. Oh, and for good measure, prepare for the hard landing in China and the crash in commodity prices.

Ridiculous? Well, remember that Edwards' Ice Age call in 1996 has proved to be a winner: even if you include the stock market's dotcom bubble years at the end of the 1990s, equities are still a long way behind bonds since 1996.

Remember, too, that Edwards' forecasts were generally rubbished at the time. His dismissing of the supposed Asian Miracle in the mid-1990s as "Noddynomics" was resented – until the Asian currency crisis of 1998....MUCH MORE

Recently:
Corrected: Société Générale's Albert Edwards "This Will End in Tears-Again" (December 15, 2010)

Société Générale's Albert Edwards:“Commodity and emerging-market bulls ignore the weak Chinese leading indicator at their peril...” (DEC. 1, 2010)
(lots o'links)

Corn Rationing Needs to Begin (CORN; MOO; DBA)

The futures are up 3 1/2 cents at $6.325.

From AgWeb (Dec. 31):

The corn market is extremely tight heading into the New Year, and analysts expect short supplies and heavy use to keep upward pressure on corn prices in 2011.

"The corn market has one job and one job only—to go high enough to make people stop using the product," says Ryan Turner, risk management consultant for FCStone, Kansas City. "We are past the point of encouraging more supply." Turner predicts 2011 corn futures prices will exceed 2008 highs. "I don’t know if it will happen in January or June, but it will happen," he says.

Soaring corn prices will slice into demand, with corn exports expected to fall first followed by feed usage. Analysts anticipate the cattle industry to begin rationing earlier than other livestock sectors due to poor margins, but rationing in poultry, hog, and dairy will be close behind. "It will be very painful," Turner adds.

USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) put the carryout for the 2010-11 U.S. corn crop at 832 million bushels, less than half the previous year’s carryout of 1.7 billion bushels. USDA pegs the average U.S. farm price for the 2010-11 crop at $4.80 to $5.60/bu. World supplies have also tightened: USDA’s latest estimate for world ending stocks for the 2010-11 crop is 130 million metric tons, a nearly 12 percent drop from the previous year’s 147 million metric tons.

Looking ahead to the 2011-12 crop, Chad Hart, agricultural economist with Iowa State University, calculates the full cost to grow corn in Iowa will be $4.25 to $4.50/bu., but revenues will be more than $5/bu., leaving at least a 50-cent-per-bushel margin. "That’s a really good margin, similar to 2007-08, when the first big push in ethanol occurred," says Hart.

Recent extension of the tax credit for ethanol blenders could mean ethanol plants use more of the current corn crop than the 4.8 billion bushels USDA projects. "Everyone in the ethanol production and marketing chain is seeing positive margins," says Hart. Only runaway corn prices coupled with low gasoline prices could slow ethanol production next year, he adds...MORE

"China stocks surge in Hong Kong as 2011 begins" (YZC; CEO; PTR)

Damn theres a lot of money chasing returns.
From Chinavestor:

The Hang Seng Index (INDEXHANGSENG:.HSI) kicked off 2011 with a healthy 400 points jump on Monday as investors embraced the new year. The rally was universal, stocks that advanced outnumbered those that fell six to one among 42 members of the Hang Seng Index (INDEXHANGSENG:.HSI). The Shanghai Composite Index (SHA:000001) was closed for the day.

Energy and resource and airline stocks led the rally. China's only NYSE listed coal miner, Yanzhou Coal Mining Co. (NYSE:YZC) advanced 3.4% followed closely by CNOOC Ltd. (NYSE:CEO) and China's largest oil producer, Petrochina Co. Ltd. (NYSE:PTR)....MORE

Sunday, January 2, 2011

"In Investing, It’s When You Start"

Yes Virgina, endpoints matter.
A beautiful visualization of the graphs that Mr. Ibbotson made so famous in his yearbooks. Here's the latest, the company was purchased by Morningstar in 2005: Stocks, Bonds Bills and Inflation.

From the New York Times:

Click through for the whole chart.
HT: Clusterstock

Investors Business Daily: "Reversal And Resistance To Define 2011"

A major piece from IBD:

Has Fed Done Its Job?
1The Federal Reserve has unleashed a massive, unprecedented monetary easing to rev up an economy that's growing far too slowly to create jobs.

The Fed's move to buy $600 billion more in Treasuries to pump cash into the economy seemed to buoy stocks late in 2010, fueling takeovers and firming consumer spending. The president's 11th-hour deal with Congress to extend tax cuts reinforced hopes that Washington had paved the way for the economy to gain real momentum.

But only big numbers — sustained GDP growth well over 3% — will signal success. Growth likely topped 3% in Q4, better than in the prior two quarters. But that is probably not enough to make much of a dent in unemployment, now at 9.8%.

Even if the Fed's asset buys do their trick, many Americans will feel the pain of the last recession. State and local governments will probably shed staff. Most hiring could come in services, not in manufacturing and construction where job losses were concentrated.

Housing demand remains weak, now that the prop of the homebuyer tax credit has expired. Stronger hiring will help, but the glut of foreclosed homes and rising mortgage rates will weigh against a recovery.
And exports? Seemingly a key to growth for every nation, they face a big question: demand? With Europe facing austerity-led stagnation to contain a debt crisis, and Asian nations trying to keep their hot economies from boiling over, global growth is expected to slow.

For the Fed, the trillions of dollars of asset purchases and other liquidity steps risk creating a new round of asset bubbles at home and abroad.

China, India and other Asian nations are raising interest rates and taking other steps to curb accelerating inflation. Barely on the radar in the U.S., inflation could take off here as the economy picks up.
Fed Chairman Ben Bernanke insists that policymakers have lots of time to withdraw liquidity before inflation becomes an issue. But they will always face pressure to keep the spigots open. Financial markets have grown more dependent on the Greenspan — now Bernanke — put as investors count on the Fed to step in to support equities.

High joblessness soured voters on Democrats in 2010. If job conditions don't improve by the end of 2011, President Obama's re-election prospects will be in serious jeopardy.

The Coming Budget War
2 On March 4, the federal government runs out of money. That is to say, its current funding expires on that date because Congress and the White House could not finish a proper budget in 2010. Instead they resorted to a stopgap continuing resolution to keep the government from shutting down.

That will give the Republican House majority a challenge: a two-month window to make good on promises to Tea Party groups to rein in federal spending. GOP lawmakers indicate they intend to try.
Republicans feel emboldened after stopping the $1.2 trillion omnibus spending bill that Democrats tried to push through at the end of Congress' lame-duck session.

Insiders say the leaders will try to roll back spending to levels maintained by the previous administration. Since George W. Bush presided over a steady expansion of federal spending, outlays would still be historically high.

The deficit in 2008 was just below $500 billion. It was $1.29 trillion in fiscal 2010. Without stimulus packages or bailouts in 2011, the GOP's modest goal should be attainable....MUCH MORE

Hilary Kramer: "Nine game changers for 2011"

We last visited hilary in a January 2008 interview with Paul Kangas and I closed with the comment:
At the close Hilary was 1 for 3 but hey, in the majors they're paying $45,000 per at-bat for that kind of performance...

KRAMER: Yes, Paul. I believe we have seen the bottom and we are going to now see a bull come back into Wall Street....
That was 14 months before the actual bottom. The Dow Jones Industrial Average had fallen 1700 points from the all-time intraday high but had a further 6100 points to drop.
Here she does some big picture stuff at MarketWatch:

Commentary: Trends to move markets and help you profit

The new year is almost here, and evidence that we are about to see better economic growth, corporate profitability, and yes, higher stock prices in the new year is piling up.

A warning: Markets like this one are tricky to navigate, full of dead ends for the unprepared investor.
I’ve identified nine game changers that will affect your money in 2011. Read on to find out which trends will move the markets and help you profit, where you should — and should not — put your money, which sectors will be hot, and just how high the indexes will go.
China’s torrid growth
Markets around the world breathlessly watch China to see how the country is managing inflation, fearing that the Chinese juggernaut will slow too much. Well, yes, growth probably will slow — but most analysts expect that. A fall from 10% annual growth to 7% to 8% in the coming years is already priced in, not to mention that an economy that is growing at that rate is doing just fine.

The true risk with China is that too many investors are playing yesterday’s winners. Entrepreneurialism, higher wages, insatiable energy consumption and a middle class that keeps growing and purchasing are unstoppable trends in China in 2011.

The smart way to make money in China these days is by going after the companies that will profit from those trends, like China Nepstar (NPD 3.83, +0.40, +11.66%) , a drugstore chain. Read about three risks to avoid when investing in China stocks on InvestorPlace.

Commodities stay hot, get even hotter
Gold will hit $2,000 an ounce in 2011, but that’s not where you should put your money, no matter what Wall Street wants you to think. The real story is scrap metal, steel and coal....MORE
If China cools dramatically the commodity plays would be on the short side.
If oil, and thus gasoline, prices tip the U.S. economy back into recession all long side bets would be off.Unfortunately she also said:

"20 predictions for the next 25 years"

There is opportunity every morning and in every event.
It's what you make of the situation, not the situation itself, that matters.
[good grief, that concludes our Pollyanna moment -ed]
From the Guardian:

From the web to wildlife, the economy to nanotechnology, politics to sport, the Observer's team of experts prophesy how the world will change – for good or bad – in the next quarter of a century

1 Geopolitics: 'Rivals will take greater risks against the US'
No balance of power lasts forever. Just a century ago, London was the centre of the world. Britain bestrode the world like a colossus and only those with strong nerves (or weak judgment) dared challenge the Pax Britannica.
That, of course, is all history, but the Pax Americana that has taken shape since 1989 is just as vulnerable to historical change. In the 1910s, the rising power and wealth of Germany and America splintered the Pax Britannica; in the 2010s, east Asia will do the same to the Pax Americana.

The 21st century will see technological change on an astonishing scale. It may even transform what it means to be human. But in the short term – the next 20 years – the world will still be dominated by the doings of nation-states and the central issue will be the rise of the east.

By 2030, the world will be more complicated, divided between a broad American sphere of influence in Europe, the Middle East and south Asia, and a Chinese sphere in east Asia and Africa. Even within its own sphere, the US will face new challenges from former peripheries. The large, educated populations of Poland, Turkey, Brazil and their neighbours will come into their own and Russia will continue its revival.

Nevertheless, America will probably remain the world's major power. The critics who wrote off the US during the depression of the 1930s and the stagflation of the 1970s lived to see it bounce back to defeat the Nazis in the 1940s and the Soviets in the 1980s. America's financial problems will surely deepen through the 2010s, but the 2020s could bring another Roosevelt or Reagan.

A hundred years ago, as Britain's dominance eroded, rivals, particularly Germany, were emboldened to take ever-greater risks. The same will happen as American power erodes in the 2010s-20s. In 1999, for instance, Russia would never have dared attack a neighbour such as Georgia but in 2009 it took just such a chance.
The danger of such an adventure sparking a great power war in the 2010s is probably low; in the 2020s, it will be much greater.

The most serious threats will arise in the vortex of instability that stretches from Africa to central Asia. Most of the world's poorest people live here; climate change is wreaking its worst damage here; nuclear weapons are proliferating fastest here; and even in 2030, the great powers will still seek much of their energy here.
Here, the risk of Sino-American conflict will be greatest and here the balance of power will be decided.
Ian Morris, professor of history at Stanford University and the author of Why the West Rules – For Now (Profile Books)

2 The UK economy: 'The popular revolt against bankers will become impossible to resist'
...MORE
I liked the comment by the guardian's writer on energy:

4 Energy: 'Returning to a world that relies on muscle power is not an option'...
Chris Llewellyn Smith is a former director general of Cern and chair of Iter, the world fusion project, he works on energy issues at Oxford University