Here in the United States, at a cost of a mere $3 billion, the “Cash-for-Clunkers” program appears to have given new hope to the U.S. auto industry.

But that new hope is destined to be short-lived.

It’s true that – in terms of value delivered for the money invested – “Cash for Clunkers” has eclipsed every other stimulus program that has been tried. But the program has a projected lifespan of only three months, meaning it can’t reverse the powerful global forces that are destined to turn the U.S. auto market from leader to laggard on the global stage.

Financial Crisis Fallout Reshapes Sector

Thanks to the financial crisis whose impact continues to be felt, worldwide automobile demand had dropped on an overall basis since 2008.

But regional differences are already emerging.

In the United States, for instance, the benchmark seasonally adjusted annual sales rate (SAAR) finally jumped up past the 11-million mark in July after failing to eclipse the “breakeven point” of 10 million vehicles in any prior month this year. But the actual year-to-date sales of 5.81 million vehicles through July was still 33% below the 8.55 million that had been sold by that point in 2008, and is 67% below the all-time annual record of 17.4 million achieved in 2000 and 65% below the decade average of 16.4 million.

(Prior to the global financial crisis and accompanying recession – which prompted the U.S. auto industry to restructure and shift its breakeven point down to 10 million vehicles – the breakeven point was actually 16 million vehicle sales in a year. Below that point, several or all of the U.S. “Big Three” would be spinning their wheels in red ink.)

It’s a much different story abroad, however, where several markets are in a long-term growth mode. In India, for example, sales were up 31% on a year-over-year basis, while auto sales in China were an astonishing 70% above those of a year ago. Even if U.S. auto sales continue to improve, China’s automobile market may outsell its U.S. counterpart for a full year for the first time ever.

Granted, India’s auto market – around 2.5 million cars and light trucks a year – is still much smaller than either China or the United States. However, its growth makes it comparable to the Japanese or German markets, the next largest automobile markets after its U.S. and China counterparts.

Thus, global automobile sales are undergoing a major reorientation towards Asia and away from the United States and Europe. This will inevitably have a huge effect on the structure of the sector.

That’s why Asia will become the new Detroit – the future center of the automaking world.

Gone For Good?

In the United States, General Motors Corp. and Chrysler Group LLC have lost market share because of the government takeover. They are unlikely to get it back in spite of the debt costs they have relinquished through bankruptcy.

For Chrysler, the partnership with Fiat SpA (OTC ADR: FIATY) is unlikely to help much. Fiat is among the weakest of the European companies, and has not been competitive in the United States since the 1980s. The U.S. market is undoubtedly moving toward smaller automobiles. That trend is being “fueled” by the new Corporate Average Fuel Economy (CAFE) standards for 2015 and probably by higher fuel taxes for environmental and budget reasons. Nevertheless, it seems unlikely that the Chrysler/Fiat partnership will have the models to compete.

General Motors has the model range to compete in the United States. However, GM is doing much better in China, thanks largely to its joint venture with Shanghai Automotive Industry Corp., which expects to sell 1.4 million vehicles in 2009. Since GM is also selling Opel, its European operation, GM (NYSE:GRM) will find itself driven primarily by the demands of the Chinese market. Given the growth of that market, it will probably make the most economic sense for GM to become Chinese-owned. Politics may delay this, but probably only for a few years.

The United States’ One “Better Idea”

Ford Motor Co. (NYSE: F) has picked up market share in the United States from GM and Chrysler’s problems. It should benefit both from “Cash for Clunkers,” and from the early stages of the U.S. market recovery. If GM and Chrysler continue to have difficulties, Ford may be in a good position here in the large U.S. market – as the most-effective manufacturer of the large automobiles that Americans continue to prefer – no matter what the government tells Ford to do.

Nor is that Ford’s only competitive advantage going forward. Ford Europe is big and viable enough to allow Ford to remain credible as a producer of smaller cars, primarily in the higher price brackets.

Outside the United States, European manufacturers will find themselves increasingly confined to the luxury end of the market. However, as global incomes rise and the newly wealthy become brand-conscious – particularly in the emerging economies of Asia – that upscale portion of the auto market should continue to be strong.

Japanese and Korean manufacturers will continue to dominate their domestic markets. And such companies as Honda Motor Co. Ltd. (NYSE ADR: HMC), Toyota Motor Corp. (NYSE ADR: TM) and Kia Motors Corp., will also do well in the United States and Europe, and in countries where they have been able to establish viable local manufacturing operations, and lower labor costs.

But it will be the players from China and India who are destined to be the big market-share gainers on a global basis.

The New Leaders

For U.S. investors, India’s Tata Motors Ltd. (NYSE ADR: TTM) is the best known of the newly emerging global auto elite. Tata’s $2,500 for-the-masses “Nano” car has been well received. Over the long term, the Nano may expand the entry-level portion of the worldwide auto market, forcing other manufacturers to produce equivalent low-price models.

Indeed, the introduction of $2,500 cars may greatly expand the market’s size in India and other emerging markets, much as Ford’s Model T did after its introduction in 1908, or the Volkswagen AG (OTC ADR: VLKAY) VW Beetle did in the 1950s and 1960s.

Tata looked to be in financial difficulty after it bought the loss-making Jaguar and Land Rover brands in 2008 at the top of the market. However, the $300 million loan for its Jaguar Land Rover Unit announced on Aug. 10 gives Tata the room it needed to maneuver. Market growth in India, combined with the strength of its Tata Group parent now suggest that Tata Motors has the strength to survive without dismemberment.

The bottom line: Tata and its India-based competitors – Maruti Suzuki India Ltd. (Mumbai: MSIL) and Mahindra and Mahindra Ltd. (London: MHID) – as well as such top China carmakers as Chery Automobile Co. Ltd. (still publicly owned), Geely Automobile Holdings Ltd. (OTC: GELYF) and Great Wall Motor Co. (OTC: GWLLF), are thus the companies that will see most growth in the automotive market of the decade to come.

By 2020, the global auto sector will look nothing like it does today. Given that most of the muscle will be in Asia, investors shouldn’t be surprised.

Source: Why Asia Will Supplant Detroit as the Global Center of the Auto Industry

I suspect that these defensive recommendations are worthwhile. They may, in fact, protect investors from the worst of this downturn. I don’t believe, however, that they are in any way trades “of the decade.”

First, we happen to be living through a radical acceleration of the medical sciences. This acceleration has not only left laypeople in the dust. Scientists are unable to keep up with research outside their own areas. As a result, the companies that own these breakthrough technologies are not widely understood or properly valued.

It is also true that health care stocks are traditionally countercyclical. This isn’t surprising since consumers tend to cut back on everything else before sacrificing medical care. It’s no accident that biotechs in our portfolio have done well.

There is, however, another aspect of companies that control these new medical technologies that makes them immune to downturns. Their initial customers include extremely wealthy early adopters.

One of the most notable economic developments of the last decades is the remarkable growth of “high net worth individuals” (HNWI). As defined by the U.S. Securities and Exchange Commission, HNWIs are people with at least $750,000 managed by the reporting investment adviser or whose net worth the investment adviser reasonably believes exceeds $1,500,000. Others define HNWIs as people controlling at least $1 million in assets excluding primary residence.

Regardless, the number of these people has been growing dramatically for decades, far outpacing inflation. If you pay attention to politics, you know how upset this makes people who worry about the big increases in income or wealth “disparity.” While the biggest concentrations of HNWIs are still in North America and Europe, the fastest growth, by far, is in China and India.

This category of people controls so much wealth that, even after the financial meltdown, they remain relatively unscathed. If you loose a third of a portfolio worth $2 million, which is below the average for many HNWIs, you still have lots of options.

The total wealth at the disposal of HNWIs is immense. Though it is difficult to know exactly, it is probably around US$40 trillion, along with the associated annual income it generates. Today, according to Merrill Lynch and Capgemini, there are more than 8.5 million of these people in the world. They and their immediate families comprise a population that may exceed 25 million people. Spending on luxury items by HNWIs and family members remains strong.

According to Bertrand Lavayssière, managing director of global financial services Capgemini, “Even as financial market turmoil impacted the United States during the second half of the year, luxury goods makers, high-end services providers and auction houses all found ready clients in the emerging markets of the world — most notably, China, India, Russia and the Middle East — thereby sustaining their own growth.”

Nothing better describes the market for emerging breakthrough health care. The market segment that continues to buy Ferraris, yachts and private jets will also buy regenerative therapies for themselves and their loved ones. I don’t doubt that certain metals will do OK in the years to come. Even they, however, are subject to the vagaries of the overall economy. HNWIs, however, are largely immune to the big economic fluctuations. When stem cell therapies bestow the power to rejuvenate hearts, livers, skin and cartilage, even at sky-high prices, there will be millions and millions of happy buyers.

I mention stem cell therapies specifically, by the way, because most of the important patents are concentrated in a few companies. We own, I am convinced, the key companies now. I will, however, be adding more in the future as new enterprises spin off and develop alternative approaches.

Incidentally, two major news magazines have had prominent stem cell-related stories in the last week or so. Both of these stories, in Newsweek and U.S. News & World Report, were marked by bias and error. That, however, is not the point. Nor is it new.

They do reflect the growing public awareness of stem cell technologies. One of the most interesting aspects of these articles is their limited, even insular, perspective. Both focus on the U.S. market.

HNWIs, however, are an international group, and they are used to traveling to get the best health care. As I’ve been saying since I started with Breakthrough Technology Alert, the U.S. market is overregulated and overtaxed. We are, unfortunately going to see these technologies come online elsewhere first.

Regardless, I believe regenerative medicine is the play of the decade. No, I take it back. It’s the play of the century. Go ahead and invest in resources. I believe in a diversified portfolio. However, I remain convinced that the surest way to join the ranks of HNWIs yourself is to bet on the willingness of the very rich to buy the ultimate resource: longer, healthier lives, i.e. “time.”

For transformational profits,
Patrick Cox

Source: Regenerative Medicine Is the ‘Play of the Century’

It was a real mind blower for both of us to fathom the profound meaning of these disappearing earnings. Mr. Gordon (he is a tiny bit older than I am) subsequently e-mailed a confirming chart my way:

Turn Away if You Suffer from Vertigo

Please grab a sickness bag. While many investors follow the Dow, the S&P 500 provides the most accurate measure of the status of the overall US market. As Andy reported, S&P earnings have “nosedived from $80 to $7 – the biggest drop ever recorded.” Both Andy and I are putting an exclamation point on this pathetic event.

You, also, should be extremely wary. This chart indicates that the earnings on one of the world’s most important stock indices are pitiful and plummeting. Little wonder corporate insiders are selling their company stock en masse.

Without earnings stock prices are temporarily levitating. Earnings have gone up in smoke! Isn’t that the life you’ve personally experienced over the last year as budgets are reigned in and unemployment has become pervasive? The S&P index has traded sideways within a range for the past few weeks, but it is still extremely overbought.

Personally, I have been shorting the S&P, but it’s hard to glean any satisfaction from making money from this catastrophe. There is no reason to hold stocks without sufficient earnings. I continually claim we’ve long been in depression mode and this ugly chart screams the truth. A picture (chart) can be worth a thousand words.

What should you do about it? I’m afraid you’re going to have to escape the CNBC, Wall Street and nightly news cheerleaders. These are all inside the box players and you will never regain your lost wealth or become rich following these puppets.

It’s a major stretch to believe you can randomly buy the general market and make 10% per year, though that is a common misconception. Factor inflation into the equation and you clearly see the folly. Most investors will never regain their lost wealth from the 2008 historic carnage. Only those of you wise enough to seek unique and highly profitable investment earnings will become whole again. The opportunity for enviable riches is also present.

Your IDE pundits are, to a person outside the box, offering commentary and services designed to protect and enhance your wealth. You cannot buy general stocks with miniscule earnings and expect to do anything but lose more money. No earnings directly equates to no capital gains.

Nor can your portfolio sit idle as it will end up looking like the nasty graph you just inspected. Ninety nine percent of us must have income or capital gains especially in a hyperinflationary environment.

As you may know, I’m primarily a resource stock investor. I’m also utilizing the incredible IDE brain trust in all of my financial decision making processes. You should be as well. I like and have confidence in each of these experts. We offer a very diverse range of worthy services that are designed to enhance your profits and assist you in escaping the failing financial matrix.

Check them out and see which of us best fits your investment temperament. We cover the total investment spectrum from bonds, blue chip stocks, options and natural resource speculations. The S&P index is down approximately 4% year to date but the last 14 picks I recommended in my Resource Windfall Speculator are up an average of 44%. All of your IDE editors are dead serious about bringing heady profits your way.

You simply must find the right escape hatch out of this historic mess.

Invest Resourcefully,

Rusty

Source: Neither You or the Economy Can Survive Without Earnings