Posts

October 1, 2019

Global Market Comments
October 1, 2019
Fiat Lux

Featured Trade:

(LAUNCHING THE NEW MAD HEDGE BIOTECH AND HEALTHCARE LETTER)
(THE NEW AI BOOK THAT INVESTORS ARE SCRAMBLING FOR),
(GOOG), (FB), (AMZN), MSFT), (BABA), (BIDU),
(TENCENT), (TSLA), (NVDA), (AMD), (MU), (LRCX)

September 6, 2019

Global Market Comments
September 6, 2019
Fiat Lux

Featured Trade:

(SEPTEMBER 4 BIWEEKLY STRATEGY WEBINAR Q&A),
(INDU), (FXY), (FXB), (USO), (XLE), (TLT), (TBT),
(FB), (AMZN), (MSFT), (DIS), (WMT), (IWM), (TSLA), (ROKU), (UBER), (LYFT), (SLV), (SIL)

September 4, 2019

Global Market Comments
September 4, 2019
Fiat Lux

Featured Trade:

(HOW FREE ENERGY WILL POWER THE COMING ROARING TWENTIES),
(SPWR), (TSLA)

(ARE YOU IN THE 1%?),
(SNE), (HMC), (TLT)

August 21, 2019

Global Market Comments
August 21, 2019
Fiat Lux

Featured Trade:

(WHY YOU MIISED THE TECHNOLOGY BOOM AND WHAT TO DO ABOUT IT NOW),
(AAPL), (AMZN), (MSFT), (NVDA), (TSLA), (WFC), (FB)

August 13, 2019

Global Market Comments
August 13, 2019
Fiat Lux

Featured Trade:

(THE TRADE OF THE CENTURY IS SETTING UP),
(TLT),

(HOW TO BUY A SOLAR SYSTEM),
(SCTY), (SPWR), (TSLA)

How to Buy a Solar System

It’s just a question of how long it takes Moore’s law type efficiencies to reach exponential growth in the solar industry.

Accounting for 4% of the country’s electrical power supply today, we are only five doublings away from 100% when energy essentially becomes free.

The next question beyond the immediate trading implications is, “What’s in it for you?”

I should caution you that after listening to more than 20 pitches, almost all of the information you get from fly-by-night solar installation salesmen is inaccurate. Most don’t know the difference when it comes to a watt, an ohm, or a volt.

I think they were mostly psychology or philosophy majors, if they went to college at all.

The promised 25-year guarantees are only as good as long as the firms stay in business, which for many will not be long.

Talking to these guys reminded me of the aluminum siding salesmen of yore. It was all high pressure, exaggerated benefits, and relentless emailing.

I come to this issue with some qualifications of my own, as I have been designing and building my own solar systems for the past 50 years.

During the early 1960s when solar cells first became available to the public through Radio Shack (RIP), I used to create from scratch my own simple sun-powered devices. But when I measured the output, I would cry, finding barely enough power to illuminate a flashlight bulb.

We have come a long way since then. For years, I watched my organic bean-sprout eating, Birkenstock wearing neighbors install expensive, inefficient arrays because it was good for the environment, politically correct, and saved the whales.

However, when I worked out the breakeven point compared to conventional power sources, it stretched out into decades. So, I held off.

It wasn’t until 2015 when solar price/performance hit the breakeven sweet spot acceptable for me, about six years. Four years in, and it’s looking like I’ll probably get my money back in five. Thanks to global warming, my solar system is becoming more efficient, not less. Why, I can’t imagine.

Then I really launched into overdrive, attempting to get the best value for money and game the many financing alternatives.

The numbers are now so compelling that even a number-crunching, blue state hating Texas oilman should be installing silicon on his roof.

A lot are.

My effort was the father of the many solar research pieces and profitable Trade Alerts you have received since.

Here are my conclusions up front: Learn about “tier shaving” from your local utility, and buy, don’t lease. All electrical utility plans are local.

First, about the former.

Every utility has a tiered system of charging customers on a prorated basis. A minimal amount of power for a low-income family of four living in a home with less than 1,500 square feet, about 20% of the U.S. population, costs about 10 cents a kilowatt hour.

This is a function of the high level of public power utility regulation in the U.S. where companies are granted local monopolies. There are a lot of trade-offs, local politics, and quid pro quos that are involved in setting electric power rates.

My local supplier, PG&E (PGE) has five graduated billing tiers, with the top rate at 55 cents a kWh for mansion dwelling energy hogs like me (one Tesla in the garage and another on the way).

In order to minimize your up-front capital cost, you want to buy all the power you can at the poor person rate, and then eliminate the top four tiers entirely. Do this and you can cut the cost of your new solar system by half.

Your solar provider will ask for your recent power bills and will help you design a system of the right size.

Warning! They will try to sell you more than you need. After all, they are in the solar panel selling business, not the customer-value-for-money delivery business.

On the other hand, if you are a scientist or engineer, you can simply calculate these figures yourself. In my case, I use 18,000 kWh a year, but by installing only a 9,000 kWh/year system, my monthly power bill dropped from $500 to $50 a month.

This system cost me $32,000, or $22,400 net of the 30% alternative energy investment tax credit, giving me a breakeven point of four years and eight months. Hurry up because this tax credit expires in 2020.

Don’t focus too much on the panels themselves, as they are only 25% of a system’s costs. The big installers constantly play a myriad of panel manufacturers off against each other to get the cheapest bulk supplies.

The majority of the expense is for labor, the inverter needed to convert DC solar power to AC wall plug power, and permitting.

As for me, Mr. First Class All the Way, I specified only 19 of the best American-made, most efficient 335 kWh SunPower (SPWR) panels.

If I had settled for lower cost 250 kWh imported panels and just bought more of them, I would have saved a few thousand bucks. That’s fine if you have the roof space.

One other frill I ordered was a top-of-the-line SunPower SPR-6000m inverter, which includes two 110-volt AC outlets. Many solar systems won’t work without access to the grid to run the inverter and software.

This will enable me to operate independent of the grid in case it is knocked out by an earthquake or storm, and power a few select appliances, such as my refrigerator, cells phones, laptop, and, of course, my car.

Once you get your connection notice from your utility, you enter electricity Nirvana, selling power at a premium during the day and buying it back at a discount at night.

You are, in effect, using the grid as a giant storage device or battery.

You can then log into your account online and measure how much your solar panels are generating in San Francisco even from places as remote as Africa as I did last summer.

My statement is posted below showing my roof is happily generating about 38 kW a day or one full Tesla 100kW battery recharge every 2 1/2 days.

Since my system is in California, it also expresses the solar energy produced in terms of gallons of gasoline equivalent, tree seedlings grown over 10 years, an average home’s power consumption for one year, or number of tons of waste sent to a landfill.

Call this “feel good” with a turbocharger.

At the end of every 12 months, the utility will then perform a “gross up” calculation. If you produced more power than you used, the utility owes you a check.

Buzzkill warning!

PG&E has to pay me only its lowest marginal cost of power, or 4 cents/kWh. That is why is pays to under build your system, which for me cost $2.49/kWh to install, net of the tax credit.

This was the quid pro quo that enabled PG&E to agree to the whole plan in the first place. So, you won’t get rich off your solar system.

I am now protected against any price increase for electricity for the next 25 years!

PG&E has already notified me of back-to-back 7.5% annual rate increases for the next two years to pay for replacement of their aging, dilapidated infrastructure, a problem that is occurring nationally.

Oh, and my $32,000 investment has increased the value of my home by $64,000, according to my real estate friend.

Now for the lease or buy question. If you don’t have $32,000 for a solar installation, (or $16,000 for a normal size house with no Teslas), or you want to preserve your capital for your trading account, you may want to lease from a company such as Solar City.

The company will design and install an entire system for you for no money down and lease it to you for 20 years. But after your monthly lease payment, Solar City will end up keeping half the benefit, and raise your cost of electricity annually.

In my case, my monthly power bill will have dropped from $450 to $250. And you don’t get any 30% investment tax credit. However, this is still cheaper than continuing to buy conventional power.

So if you can possibly afford it, buy, don’t rent.

This being Silicon Valley, niche custom financing firms have emerged to let you have your cake and eat it, too.

Dividend Solar (click here for their site) will lend you the money to buy your entire system yourself, thus qualifying you for the investment tax credit.

As long as you use the tax credit to repay 30% of your loan principal within 15 months, the interest rate stays at 6.49% for the 20-year life of the loan. Otherwise, the interest rate then rises to a credit card like 9.99%. A FICO score of only 690 gets you in the door.

There are a few provisos to add.

You can’t install solar panels on clay or mission tile roofs popular in the U.S. Southwest (where the sun is), or tar and gravel roofs, as the breakage or fire risk is too great. The racks that hold the panels down in hurricane force winds simply won’t fit.

If you want to maintain your aesthetics, you can take the mission tiles off, install a simple composite shingle roof, bolt your solar panels on top, then put back the clay tiles back around the edges. That way it still looks like you have a mission tile roof.

Also, it is best to install your system in the run-up to the summer solstice when the days are longest and the sunshine brightest. Solar systems produce 400% more power on the longest day of the year compared to the shortest because of the lower angle of the sun’s rays hitting the Northern Hemisphere.

Tesla (TSLA) has added a whole new chapter to the solar story.

It announced the launch of the Power Wall, a 7 or 10 kW home storage battery that will cost up to $5,000 (click here for “The Solar Missing Link is Here!”)

The development is made possible by the enormous economies of scale for battery manufacturing made possible by the new Gigafactory now coming on line near Reno, Nevada.

The Gigafactory will double world’s lithium ion battery capacity in one shot. Plans for a second Gigafactory are already in the works.

This will permit homeowners to use their solar panels to charge batteries during the day, and then run off them at night making them fully energy-independent.

Yes, a total American solar energy supply in 24 years sounds outrageous, insane, and even ludicrous (to use some of Elon Musk’s favorite words).

But, so did the idea of a 3-gigahertz laptop microprocessor for a mere $1,000 24 years ago where Moore’s law first applied.

Sounds like the investment opportunity of the century to me. And you don’t have to rush. In a rare compromise with Congress, the 30% alternative energy tax subsidy has been extended to 2021.

The graphics for my own solar power supply are below:

 

 

 

 

 

SunPower SPR-6000m

 

August 6, 2019

Global Market Comments
August 6, 2019
Fiat Lux

Featured Trade:
(I HAVE AN OPENING FOR THE MAD HEDGE FUND TRADER CONCIERGE SERVICE),

(DON’T MISS THE AUGUST 7 GLOBAL STRATEGY WEBINAR),
(HAVE WE SEEN “PEAK AUTO SALES”),
(GM), (TM), (F), (HMC), (TSLA), (NSANY), 

Have We Seen “Peak Auto Sales”?

There is no limit to my desire to get an early and accurate read on the US economy, which at the end of the day is what dictates the future returns on our investments.

I flew over one of my favorite leading economic indicators only last week.

Honda (HMC) and Nissan (NSANY) import millions of cars each year through their Benicia, California facilities where they are loaded on to hundreds of rail cars for shipment to points inland as far as Chicago.

In 2009, when the US car market shrank to an annualized 8.5 million units, I flew over the site and it was choked with thousands of cars parked bumper to bumper in their white plastic wrappings, rusting in the blazing sun and bereft of buyers.

Then, “cash for clunkers” hit (remember that?). The lots were emptied in a matter of weeks, with mile-long trains lumbering inland, only stopping to add extra engines to get over the High Sierras at Donner Pass. The stock market took off like a rocket, with the auto companies leading.

I flew over the site last weekend, and guess what? The lots are full again. Not only that, the trains lined up to take them away are gone. US Auto Sales peaked in October 2017 when they fell just short of a 19 million annualized rate. As of the end of June this year, they had fallen to a 15.1 million annualized rate. July is looking worse still.

And this is what I’m worried about. Auto Sales may not only be peaking for this economic cycle. They may be peaking for all time.

This is my logic.

As they slowly age, Millennials are about to become the principal buyers of automobiles. The problem is that Millennials are purchasing cars at a far slower rate than previous generations.

This is because they have a much higher concentration in urban areas where the cost of car ownership is the most expensive in history. $40 for parking for an evening? Give me a break. But good luck finding free on-street parking, and if you do, your windows will probably get smashed.

In cities like San Francisco, public transportation, bicycles, and electric scooters are the preferred mode of transportation.

It doesn’t help that this generation is shouldering the burden of the bulk of $1.5 trillion in student loan debt. When you owe $2,000 a month in interest, there is little room for a car payment, and you probably don’t have the credit rating to buy a car anyway.

When they do buy cars, all-electric is their first choice, if they can get access to overnight charging. A lot of companies are making this easy by offering free charging for electric commuters in corporate parking lots. This explains why Tesla (TSLA) has taken deposits from 400,000 for their low-end Tesla 3, which has a two-year waiting list for new buyers.

When Millennials do drive, such as on business, for weekend trips or summer vacations, they either rent or “share.” Driving around the city, you see cars parked everywhere with bizarre names like Upshift, Getaround, Zipcar, Turo, and Casual Carpool.

Indeed, Detroit takes the car-sharing threat so seriously that the Big Three have all bought into the technology, with General Motors taking a stake in Maven. (GM) plans to start its own peer-to-peer car-sharing service this summer.

This is all a mystery for my generation, which grew up tearing apart old cars and putting them back together. I spent a year trying to put the engine on my 1955 Volkswagen back together. When I gave up, I towed the car and a big box full of greasy parts to a local mechanic, a German Army veteran. When he finished, even he had four parts left over.

Do you know who believes my rash, possible MAD theory? Investors in auto stocks, one of the worst-performing sectors of the stock market this year. Shares like those of General Motors (GM) keep breaking new valuation lows.

What was (GM)’s price earnings multiple today? Try a miserable zero since the company loses money, one of the lowest of all S&P 500 stocks. Hapless portfolio managers keep getting sucked into the shares, which have become one of the ultimate value traps.

It is all further evidence that my cautious view on the US economy is correct, that multiple crises overseas are ahead of us, and that the stock market could drop 5%-10% at any time. The auto industry should lead the charge to the downside, especially General Motors (GM) and Ford (F).

As for Tesla (TSLA), better to buy the car than the stock.

Sorry, the photo is a little crooked, but it’s tough holding a camera in one hand and a plane’s stick with the other while flying through the turbulence of the San Francisco Bay’s Carquinez Straight.

Air traffic control at nearby Travis Air Force base usually has a heart attack when I conduct my research in this way, with a few joyriding C-130s having more than one near miss.

 

 

 

 

 

 

July 30, 2019

Global Market Comments
July 30, 2019
Fiat Lux

Featured Trade:

(THE IDIOT’S GUIDE TO INVESTING),
(TSLA), (BYND), (JPM)
(THE SECRET FED PLAN TO BUY GOLD),
(GLD), (GDX), (PALL), (PPLT),

The Idiot’s Guide to Investing

My usual method of coping with nine hours of jet lag from Zermatt, Switzerland to San Francisco is to sit back, watch some golden oldies on the screen, and contemplate the state of the financial markets.

I just finished watching Von Ryan’s Express (1965), and Frank Sinatra got shot in the back. It was a timely movie for me to revisit because I rode the exact Italian Alpine rail lines used in the film only two days ago and recognized some of the precise scenery and rail junctions used by the filmmakers.

What would you do if I recommended an investment strategy that would cause your accountant to disown you, your inheritance-anticipating children to sue you, and your wife to file for divorce?

Chances are you would designate all my future mailings as SPAM, unfriend me on Facebook, and tear my card out of your Rolodex.

Well, here it is anyway. I’ll call it my “Ignore All Risk” portfolio. It’s really quite simple. This is all you have to do:

1) Buy stocks that have already gone up the most, boast the highest year-to-date performance, and have momentum overwhelmingly on their side. Only do what everyone else is doing. Go for the easy trade.

2) Buy stocks with the highest price earnings multiples. I’m talking mid-to-high double digits.

3) Lean towards stocks with the highest short interest, such as Tesla (TSLA) at 30% and Beyond Meat (BYND) at 20%.

4) Avoid all cryptocurrency bets, like Bitcoin. In fact, avoid all financials, period.

5) Ignore all valuations and fundamentals. Don’t waste a minute reading a single page of research, especially from an old-line legacy broker. Seeking Alpha, where none of the information is independently verified, is a far better source of information than JP Morgan (JPM).

6) Big institutions should allocate all of their assets only to their youngest traders and portfolio managers. Old farts, or anyone with any memory or experience whatsoever, should be completely ignored. A person who’s never seen a stock go down is now your best friend.

7) Oh, and there is one more thing. Go hugely overweight bonds over equities in the face of unprecedented and massive government borrowing at all-time low-interest rates.

Any professional manager pursuing an approach like this would surely get fired, lose all of their securities registrations and licenses, and get banned from the industry for life.

But there is one big offset to these career-ending consequences. They would also be the top-performing money manager of the year, beating the pants off of all competitors. Every investment they made this year worked.

They would be regarded as a trading genius on par with Paul Tudor Jones and Appaloosa’s David Tepper. If they invested their own money using this strategy, they would be so filthy rich they wouldn’t care what happened to themselves.

We are now in an environment where EVERY trade is crowded, the they in equities, fixed income, or foreign exchange. The metaphors coming to mind are legion. There are too many passengers on one side of the canoe. The lemmings are mindlessly stampeding towards a giant cliff. I could go on.

Of course, incredible excess liquidity is to blame. That is the only time both stocks AND bonds go up at the same time. The world’s central banks have been flooding the globe with cash for over a decade now. The end result has been to undervalue all assets classes, be they paper or hard. Cash is trash, especially in Japan and Europe where you have to PAY banks to take your money.

The fact is that shares with the fastest price appreciation over the past 12 months are trading at valuations that are almost 25% higher than normal.

I have traded and invested through all of this before; the Nifty Fifty of the early 1970s, the Great Japan Bubble of the 1980s, the Dotcom Bubble of the 1990s, and of course the 2007 bubble top. And there is one thing all of these market apexes have in common. They inflated a lot longer than anyone expected, sometime FOR YEARS!

You could be conservative, go into 100% cash, and just stay on the sidelines until mass group thinks, hysteria, and insanity leave the market. But that could be a very long time.

And after more than a half century in this business, there is one thing I know for sure. Traders who don’t trade, investors who don’t invest, and newsletters that don’t recommend all have one thing in common. THEY GET FIRED. Just because investing gets hard is no reason to quit the market.

The Japanese have a great expression for this: “When the fool is dancing, the greater fool is watching.” So, I’m going to start dancing away. What will it be? The cha cha, the limbo, or the Watusi?

Hmmmm. Let me see. Let me Google what everyone else is doing. While I’m at it, I think I’ll try to score some ticket to the 2020 Tokyo Olympic opening ceremony.