I have to admit … the electric cars Tesla Motors (TSLA)produces are pretty darn cool.

Tesla cars don’t just look fast; they are fast!

The Tesla Model S can go from zero to 60 mph in a stunning 5.9 seconds and travel up to an impressive 319 miles on a single charge.

The basic Tesla Model S isn’t that expensive by luxury car standards with a MSRP of $69,900. However, that price tag can quickly escalate to $100,000 with various add-ons and luxuries.

By penny-pincher “Tony” standards, that is a ridiculously high amount to pay for any car, let alone an electric car … so you won’t see one of these in my driveway anytime soon.

However, there’s some very investable technology in these cars that I’m very eager to take advantage of.

Tesla shares went public in June 2010 at $17. They have since taken off like a rocket — currently trading in the $200-plus range, thanks to the company’s latest quarterly earnings report.

Both the Wall Street and green energy crowd were impressed, not so much because of gains — because there weren’t any — but because of higher-than-expected production numbers.

Tesla reported a 17% increase to 7,579 cars in the second quarter and says it is on track to produce 35,000 Model S cars by the end of the year.

While 7,579 isn’t a lot of cars, Wall Street was impressed because Tesla has struggled to meet demand in the past.

Tesla confirmed that it broke ground for a $5 billion “Gigafactory” in Reno, Nevada. This new factory isn’t to build Tesla cars, but rather to produce the batteries that powers Tesla cars.

Shifting gears (sorry for the pun), perhaps the most profitable way to invest in electric cars is not through Tesla but instead from the industry that makes batteries possible. I’m talking about lithium.

Lithium-Powered Profit Potential

Lithium may be one of the most-valuable natural resources of the new electronic world and has unique and extremely valuable characteristics.

• Lithium has such a low density that it floats on water and can be cut with a butter knife. When mixed with aluminum and magnesium, it can form lightweight alloys that produce some of the highest strength-to-weight ratios of all metals.
• Lithium tolerates heat better than any other solid element and doesn’t melt up to 356 degrees.

• Lithium batteries offer the best weight-to-energy ratio, making lithium batteries ideal for any application where weight is an issue; such as portable electronics.
• That same high energy density and low weight characteristic makes lithium batteries the best choice for electric/hybrid vehicles due to car gas mileage. A car’s biggest enemy is weight.
• Lithium has a very high electrochemical potential, meaning that it has excellent energy storage capacity.

Lithium is a key mineral of the future but there are limited ways to invest in it. 
Unlike other commodities, there is no vehicle to invest in the physical metal.

On top of that, few options exist to invest in it because the market is dominated by only a handful of producers:Chemical & Mining Company of Chile (SQM), FMC Corp. (FMC), privately held Talison Lithium andRockwood Holdings (ROC).

The Chemical & Mining Company of Chile is primarily a potash fertilizer company; FMC Corp. is a diversified chemical producer with a less than 15% of its revenues from lithium, and Talison is a privately held Chinese company.

This leaves Rockwood Holdings as the purest play on lithium by a wide margin with close to 50% market share of the global lithium market. It is the OPEC of lithium. It’s also $80 a share right now … a lot cheaper than Tesla — the car and the stock!

Of course, timing is everything so I’m not suggesting that you rush out and invest in lithium or Rockwood Holdings tomorrow. What I am suggesting is that there are several ways to invest in electric cars other than Tesla that are a lot less volatile than buying TSLA itself.

Best wishes,
Tony Sagami

At 90 years old and still going strong, the Godfather of newsletter writers, Richard Russell, warned about “the great destroyer,” war, and silver.  The 60-year market veteran also discussed major markets, gold, hyperinflation, and what is “dirt cheap” that he believes investors should be buying right now.

….read more HERE

On September 9th, 1965, US Navy pilot James Stockdale was shot down over North Vietnam and seized by a mob.
 
He would spend the next seven years in Hoa Lo Prison, the infamous “Hanoi Hilton”.
 
The physical brutality was unspeakable, and the mental torture never stopped. He would be kept in solitary confinement, in total darkness, for four years.
 
He would be kept in heavy leg-irons for two years and put on a starvation diet.
 
When told he would be paraded in front of foreign journalists, he slashed his own scalp with a razor and beat himself in the face with a wooden stool so that he would be unrecognizable and useless to the enemy’s press.
 
When he discovered that his fellow prisoners were being tortured to death, he slashed his wrists to show his torturers that he would not submit to them.
 
When his guards finally realized that he would die before cooperating, they relented.
The torture of American prisoners ended, and the treatment of all American prisoners of war improved.
 
Jim Collins, author of the influential study of US businesses, ‘Good to Great’, interviewed Stockdale during his research for the book. How had he found the courage to survive those long, dark years ?
 
“I never lost faith in the end of the story,” replied Stockdale.
 
“I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining moment of my life, which in retrospect, I would not trade.”
 
Collins was silent for a few minutes. The two men walked along, Stockdale with a heavy limp, swinging a stiff leg that had never properly recovered from repeated torture.
 
Finally, Collins went on to ask another question. Who didn’t make it out ?
 
“Oh, that’s easy,” replied Stockdale. “The optimists.”
 
Collins was confused.
 
“The optimists. Oh, they were the ones who said, ‘We’re going to be out by Christmas.’
 
And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’
 
And Easter would come, and Easter would go. And then Thanksgiving. And then it would be Christmas again. And they died of a broken heart.”
 
As the two men walked slowly onward, Stockdale turned to Collins.
 
“This is a very important lesson. You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
 
At the risk of stating the blindingly obvious, this is hardly a ‘good news’ market. Ebola. Ukraine. Iraq. Gaza.
 
In a more narrowly financial sphere, the euro zone economy looks to be slowing, with Italy flirting with a triple dip recession, Portugal suffering a renewed banking crisis, and the ECB on the brink of rolling out QE.
 
What are the implications for global stocks?
 
On any fair analysis, the US market in particular is a fly in search of a windscreen.
 
Using Professor Robert Shiller’s cyclically adjusted price / earnings ratio for the broad US stock market, US stocks have only been more expensive than they are today on two occasions in the past 130 years: in 1929, and in 2000.
 
Time will tell just how disappointing (both by scale and by duration) the coming years will be for US equity market bulls.
 
But we’re not interested in markets. We’re interested in value opportunities incorporating a margin of safety.
 
If the geographic allocations within Greg Fisher’s Asian Prosperity Fund are any guide, those value opportunities are currently most numerous in Japan and Vietnam.
 
The Asian Prosperity Fund is practically a poster child for the opportunity inherent in global, unconstrained, Ben Graham-style value investing.
 
Its average price / earnings ratio stands at 9x (versus 17x for the S&P 500); its price / book ratio stands at just one; average dividend yield stands at 4.2%.
 
And this from a region where long-term economic growth seems entirely plausible rather than a delusional fantasy.
 
Vice Admiral Stockdale was unequivocal: while we need to confront the “brutal facts” of the marketplace, we also need to keep faith that we will prevail.
 
To us, that boils down to avoiding conspicuous overvaluation and embracing equally conspicuous value – where poor sentiment is likely to intensify subsequent returns.
 
In this uniquely oppressive financial environment where the skies are darkening with the prospect of a turn in the interest rates, optimism could be fatal.

Until next time,
Tim Price

[Editor’s note: Tim Price, frequent Sovereign Man contributor and Director of Investment at PFP Wealth Management, is filling in while Simon is teaching at his entrepreneurship camp.]

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The end will come – sooner or later – for the big bull market in US stocks… and for the debt bubble. But it didn’t come yesterday. Will it come today or tomorrow? We don’t know. All we know is you want to be prepared. 

Today, we explore the time that land forgot. That phrase doesn’t really make any sense, but we wanted to try it out anyway. We’re talking about the space on the calendar filled by “eventually” and “sooner or later” – that part of the future where things that can’t last forever finally stop. 

Specifically, we wonder about when and how the biggest debt bubble in history finally blows up. Recall that Planet Debt added $30 trillion to its burdens in the last six years – a 40% increase. That can’t continue forever. 

But how does it end? Inflation… deflation… hyperinflation… hyper-deflation? 

To make a long story short, a bubble can’t blow up without a lot of “flation” of some kind. And with a bubble so big, it’s bound to be a humdinger. Most likely, we will see “flation” in all its known forms. And maybe in forms we haven’t heard of yet.

You can argue about what effect QE and ZIRP have had on the economy… and what the effect will be when they are withdrawn. But there is no doubt that microscopic interest rates have done their job. 

People who could borrow at the Fed’s low rates did so. 

Washington borrowed more heavily than ever before – just to cover operating expenses. Corporations borrowed, too – mainly to refinance existing debt at lower interest rates and to buy back shares (raising the price of remaining shares and, coincidentally of course, giving management bigger bonuses). 

The most recent figures we have are from the third quarter of 2013. Those three short months saw $123 billion of buybacks of US shares – up 32% from the same period a year before. 

If that rate were to persist throughout 2014, it would mean nearly half a trillion dollars devoted to boosting corporate stock prices, coming from the same corporations that issued shares in the first place. 

Is management stupid… or just greedy? 

The sage advice of “buy low, sell high” doesn’t seem to have sunk in. At the bottom of the crash in 2008-09, reports Grant’s Interest Rate Observer, hardly any US corporations availed of the opportunity to buy their own shares at a bargain price. Now that prices are high again, almost all of them want to buy. 

Surely, that is also something that must end… especially if rates rise and the cost of carrying new debt to fund new buybacks rises. It doesn’t take a lot of imagination to foresee what will happen when it stops: Stock prices will fall. 

First, credit expands, and asset prices rise. Then credit shrinks, and asset prices fall. Asset prices typically foreshadow consumer prices. 

After so much inflation in credit, we’d expect to see a helluva deflation when the bubble bursts. All of a sudden the Fed’s treasured “wealth effect” would become the “poverty effect” – with consumers cutting back on expenses, investments and luxuries. 

This would be normal, natural and healthy. A debt deflation doesn’t create bad debts or bad investments. It just forces people to own up to their mistakes. 

Businesses go broke because they can no longer borrow nearly unlimited funds at nearly invisible yields. People can once again default… and have plenty of company in doing so. The $5 trillion in paper wealth that came into being – almost magically – as the stock market rose… suddenly disappears from whence it came. 

There is no mystery about the credit cycle. Wealth created “on credit” goes away when the credit is cut off. Then you find out who’s made the most serious mistakes. 

The open questions are: How big can this bubble get before it explodes? And how will central bank meddling affect the outcome? 

The first question gets the obvious reply: Who knows? 

The answer to the second question is more nuanced. Central banks are still at it – led by the US and Japan. The government and corporate sectors are still willing borrowers. 

Governments are borrowing to cover their deficits. Corporations are still borrowing to buy back their shares. Stock prices are still rising. But there are now signs that momentum is leaving the market. Our advice: Get out while you still can. 

Regards, 

Bill

Editor’s Note: Are you ready for the coming collapse Bill sees coming? Do you have an investment plan in place to deal with a demise of the dollar-based monetary system? If not, we recommend you read the free report our senior analyst, Braden Copeland, has put together. It explains in detail the coming collapse… and the simple steps you can take to protect what’s yours. Find out how to protect your savings here.

Let’s begin with a quote in Latin. That will put us in the right mood – reaching for the eternal verities: 

Fere libenter homines id quod volunt credunt. 

That was penned by Julius Caesar in De Bello Gallico, his account of the Roman conquest of Gaul. 

We didn’t know what it meant either, until last night. In case your Latin is a little rusty, we will give you a little WD-40. It means “Men willingly believe what they wish to be true.” 

At least, they believe it as long as they can… 

As long as stocks rise, for example, they believe the economy is recovering nicely… and that they will get richer and richer just by owning little pieces of someone else’s business.

They call it “investing.” But that is mere flattery. Someone else already did the investing when they built the factories and developed the business. 

“Investing” means you are doing something that will result in more or better products and services in the future… something that improves productivity and makes us better off. 

When someone buys shares in a company in an IPO, he is investing his capital to help that company create future production. But when you buy someone else’s shares in the secondary market (on an exchange) all you’re doing is buying out someone else’s position and allocating your savings to some financial instrument. 

Will the price of your shares go up? Or down? Who knows? 

One business grows. Another shrinks. You cannot consistently know, in advance, which will be which. 

And taken together, the shares in a nation’s businesses are unlikely to consistently grow at a faster pace than the economy. 

In the US, for example, over the last six years, real GDP growth has averaged 0.9% a year. But stocks have gone up more than 130% in the US. 

How is that possible? 

Well, first, earnings rose. Businesses ditched expensive labor… halted new projects… trimmed down… and boosted profit margins. They also benefitted from low-cost financing, which reduced their interest expenses. 

Then the liquidity produced by QE and ZIRP needed a place to go. It could not get to the consumer, because households were still cutting back on debt and wages were actually going down. So, it stayed in the financial sector, pushing up asset prices. 

Result: stock prices far in excess of GDP growth. 

But you were probably concerned about our garden party here in France, weren’t you? 

Well, despite the drippy forecasts, the rain held off. What a lucky break! The guests could spread out on the lawn. Otherwise, they would have had to squeeze into the house. 

Among the guests was an attractive French woman in her 70s, an economist… 

“I am so annoyed by Monsieur Piketty. He has become famous. The rest of the world must think we French economists are a bunch of idiots. Imagine… Keynesianism… the class struggle… the envy of the rich… it’s as though these were new ideas that hadn’t been thoroughly discredited. 

“I don’t know why they take Piketty seriously in the US. I thought American economists were smarter than that…” 

We rose to defend our countrymen: 

“Oh… no. American economists are as dumb as the rest of them. They all seem to believe capitalism needs to be carefully controlled. By them, of course. 

“Then they control and pervert the system… it blows up… and they blame it on capitalism. I think there is a catastrophic episode of that coming down the pike.” 

“They distort asset prices with QE and ZIRP. Then people invest their money foolishly – because they are reacting to the distorted asset prices. 

“Just look at the US stock market. It is near an all-time high… even though the economy is barely growing. The prices are based on two things that can’t possibly continue: cost cutting and zero-interest-rate policies. Stock prices could easily be cut in half. 

“But this time, it’s not just a few foolish investors who will lose money. It will be millions of ordinary investors and business people… and households… and governments that depend on tax revenues. 

“We could be looking at a major problem. And it will be blamed on capitalism…” 

“Fere libenter homines id quod volunt credunt,” our guest concluded. 

“Yes, madam, the canapés are very nice,” we replied. 

Regards,

Bill

Further Reading: Bill’s new book, Hormegeddon, explains in detail why US stock prices are headed for a major downturn. The first print run is selling fast. But there’s still time to claim your copy of Hormegeddon before we run out. You’ll also receive some of Bill’s best essays and access to a new project he is working on that is not yet available to the general public. Click here for the details.