The Big Picture for the Week of February 27, 2011

One of the building blocks for successful country selection over the last few years has been to pick places where a middle class is ascending where there previously had been no middle class. I believe this theme will have legs for many years to come and is powering much of the spending that must be done (improved infrastructure and improved services) which will result in consumer spending that will be done (improved diet, other staple items and maybe even aspirational discretionary purchases). If it is true that destinations where a middle class is ascending makes for an attractive investment or at the very least creates a tailwind then it stands to reason that countries where the middle class is shrinking are at the very least facing substantial headwinds. This link from Mother Jones which comes via Zen Trader has all sorts of grim statistics about the wealth gap in the US. One hot topic here has been the extent to which higher prices at the pump have offset stimulus action and then this most recent leg up creating a new “tax” on consumers with economists trying to quantify the impact. Deutsche Bank’s analysis has been making the rounds, I found it at Pragmatic Capitalism, which says that a $10 increase in the price of crude leads to $0.25 per gallon and that every penny per gallon collectively costs consumers $1 billion. While I do not believe tab A can fit into slot A so neatly as implied in Deutsche’s analysis it certainly creates a framework for beginning to understand the magnitude of the problem. If filling the tank for...

The Big Picture for the Week of February 27, 2011

One of the building blocks for successful country selection over the last few years has been to pick places where a middle class is ascending where there previously had been no middle class. I believe this theme will have legs for many years to come and is powering much of the spending that must be done (improved infrastructure and improved services) which will result in consumer spending that will be done (improved diet, other staple items and maybe even aspirational discretionary purchases). If it is true that destinations where a middle class is ascending makes for an attractive investment or at the very least creates a tailwind then it stands to reason that countries where the middle class is shrinking are at the very least facing substantial headwinds. This link from Mother Jones which comes via Zen Trader has all sorts of grim statistics about the wealth gap in the US. One hot topic here has been the extent to which higher prices at the pump have offset stimulus action and then this most recent leg up creating a new “tax” on consumers with economists trying to quantify the impact. Deutsche Bank’s analysis has been making the rounds, I found it at Pragmatic Capitalism, which says that a $10 increase in the price of crude leads to $0.25 per gallon and that every penny per gallon collectively costs consumers $1 billion. While I do not believe tab A can fit into slot A so neatly as implied in Deutsche’s analysis it certainly creates a framework for beginning to understand the magnitude of the problem. If filling the tank for...

Tuesday Tidbits

A little while back I mentioned a large filing from GlobalX of resource oriented niche ETFs and it looks like the first one might be coming as soon as this week. The WSJ reported that the GlobalX Lithium ETF could list as soon as this week. Also in that filing were uranium and fishing ETFs among others. In that post I joked about the lithium fund only holding Sociedad Quimica y Minera (SQM) so we could know as soon as this week what it actually will hold. The largest lithium deposits are in south and central America, specifically Bolivia, although a big one apparently exists in Afghanistan as well. You may have heard that China now consumes more oil than the United States. This is something I have been writing about for years. I first heard this from Puru Saxena on CNBC Asia. Back then, maybe 2003 or 2004, the US was using 25 barrels of oil per capita compared to a little over one barrel for China and about 0.75 barrels in India. It was obvious that those numbers, while unlikely to ever get close to the US number were going to move up and it wouldn’t take much for increased demand to impact oil prices. This played out for a while on the way up to $147 WTI but obviously at some point that run stopped being about the fundamentals. Oil is something China needs and is going to use more of. While we do not currently have exposure to China or Chinese oil stocks this continues, IMO, to be one of the better way to access...

Tuesday Tidbits

A little while back I mentioned a large filing from GlobalX of resource oriented niche ETFs and it looks like the first one might be coming as soon as this week. The WSJ reported that the GlobalX Lithium ETF could list as soon as this week. Also in that filing were uranium and fishing ETFs among others. In that post I joked about the lithium fund only holding Sociedad Quimica y Minera (SQM) so we could know as soon as this week what it actually will hold. The largest lithium deposits are in south and central America, specifically Bolivia, although a big one apparently exists in Afghanistan as well. You may have heard that China now consumes more oil than the United States. This is something I have been writing about for years. I first heard this from Puru Saxena on CNBC Asia. Back then, maybe 2003 or 2004, the US was using 25 barrels of oil per capita compared to a little over one barrel for China and about 0.75 barrels in India. It was obvious that those numbers, while unlikely to ever get close to the US number were going to move up and it wouldn’t take much for increased demand to impact oil prices. This played out for a while on the way up to $147 WTI but obviously at some point that run stopped being about the fundamentals. Oil is something China needs and is going to use more of. While we do not currently have exposure to China or Chinese oil stocks this continues, IMO, to be one of the better way to access...

GlobalX Energy ETF

GlobalX launched its fifth out of six planned China sector funds, the most recent being the Energy Fund (CHIE). The only remaining fund from the original filing is the materials fund but it appears as though they may wait a little while for that one. Before a look under the hood was available I had wondered how heavy it would be in the NYSE traded mega cap energy stocks, Petrochina (PTR), Sinopec (SNP) and CNOOC (CEO), and what my reaction would be. Some of the other funds in the line limit exposure for one stock to 4.75% but the financial fund (CHIX) allows some holdings to be 10% and apparently so does the energy fund. CHIE allocates 10% each to the three mega caps listed above, though not the NYSE listings, and also China Shenhua Energy a coal company which appears to have an ADR with the designator CSUAY. For clarity the weightings of these four may actually be in the nines at the moment. Included in the 4.75% tier are names that might be somewhat familiar like Huaneng Power (HNP) which is more of a utility company and a couple of the solar stocks like Suntech Power and Trina Solar. Alternative energy comprises 18% of the fund. This is unusual in that solar companies tend to be equipment makers and so better thought of as industrial companies. I’m not sure if any of the alternative stocks are wind oriented or not but I know there are a few wind companies in China and I would generally find those to be a little more interesting. My first exposure to...

GlobalX Energy ETF

GlobalX launched its fifth out of six planned China sector funds, the most recent being the Energy Fund (CHIE). The only remaining fund from the original filing is the materials fund but it appears as though they may wait a little while for that one. Before a look under the hood was available I had wondered how heavy it would be in the NYSE traded mega cap energy stocks, Petrochina (PTR), Sinopec (SNP) and CNOOC (CEO), and what my reaction would be. Some of the other funds in the line limit exposure for one stock to 4.75% but the financial fund (CHIX) allows some holdings to be 10% and apparently so does the energy fund. CHIE allocates 10% each to the three mega caps listed above, though not the NYSE listings, and also China Shenhua Energy a coal company which appears to have an ADR with the designator CSUAY. For clarity the weightings of these four may actually be in the nines at the moment. Included in the 4.75% tier are names that might be somewhat familiar like Huaneng Power (HNP) which is more of a utility company and a couple of the solar stocks like Suntech Power and Trina Solar. Alternative energy comprises 18% of the fund. This is unusual in that solar companies tend to be equipment makers and so better thought of as industrial companies. I’m not sure if any of the alternative stocks are wind oriented or not but I know there are a few wind companies in China and I would generally find those to be a little more interesting. My first exposure to...