As most Digest readers know, our End of America thesis is based on what will happen when the U.S. dollar loses its place as the world's reserve currency. One thing's for sure... there won't be as much demand at the Treasury's bond auctions. As Bond King Bill Gross of the investment firm PIMCO pointed out in his March Investment Outlook, the Federal Reserve is purchasing the majority of Treasury bonds:
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… nearly 70% of the annualized issuance since the beginning of QE II has been purchased by the Fed, with the balance absorbed by those old standbys – the Chinese, Japanese and other reserve surplus sovereigns... The Treasury issues bonds and the Fed buys them. What could be simpler, and who's to worry? This Sammy Scheme as I've described it in recent Outlooks is as foolproof as Ponzi and Madoff until... until... well, until it isn't. Because like at the end of a typical chain letter, the legitimate corollary question is – Who will buy Treasurys when the Fed doesn't? |
We would extrapolate Gross' concluding question further... What happens when the Treasury's dealers stop bidding? (The Fed purchases its Treasurys through 20 Treasury-approved dealers, including Goldman Sachs and JPMorgan.) These dealers bid in competition at each Treasury auction. As far as we know, no one gets preferential treatment (though we doubt that). And if the dealer can't find a buyer, it's stuck holding the bag. The U.S. Treasurys market is robust, so it will likely be the last to flame out – like what's already happening in Europe...
Moody's again downgraded Portugal today. (The downgrades at this point are theatrics... everyone knows the country is toast.) More important, Portuguese banks told the government they would no longer buy government bonds. They urged the government to get funds from the International Monetary Fund and European Union.
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Westport Innovations (WPRT) is a tiny, Vancouver-based company with a $600 million market cap. Yet it has alliances with global giants including Weichai Power, a $90 billion engine maker based in Hong Kong. Westport is also teaming up with U.S.-based Cummins ($22 billion) and the European giant Volvo ($35 billion). These three partners represent three of the top four global engine manufacturers. |
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Westport is literally trying to build a new industry of engines that run on natural gas instead of gasoline. The company doesn't own factories. It's the first company to focus solely on designing natural gas engines. Westport already has more than 200 patents issued worldwide, along with more than 120 pending applications. These patents cover processes ranging from the cryogenic storage of natural gas to the special combustion systems needed to handle natural gas as a fuel… |
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Based on risk/reward, shares are a steal at current levels. Westport has partnerships with almost every major truck manufacturer. The company also generates 35% of its sales outside the U.S. That should help alleviate the temporary weakness in U.S. sales. |
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If the U.S. forces large trucks to convert to LNG, shares could skyrocket from these levels. In fact, I wouldn't be surprised if Cummins offers to buy Westport at a huge premium. – Frank Curzio, February 2011, Penny Stock Specialist |
Yesterday, Westport Innovations announced President Obama, U.S. Secretary of Energy Steven Chu, and Transportation Secretary Ray LaHood visited a UPS shipping facility in Landover, Maryland to view alternative fuel vehicles from a consortium of big businesses, including UPS, AT&T, Pepsi-Frito Lay, and Verizon. According to UPS, the consortium, which operates more than 275,000 vehicles, pledged to support the administration's clean-energy efforts and develop new alternative-fuel technologies in partnership with the government. A liquefied natural gas Kenworth T800 truck powered by a Westport engine was showcased at the event.
Westport Innovations jumped as high as 11.2% on the news. Penny Stock Specialist readers are up more than 60% on the trade in less than two months. Frank recommended five natural gas stocks in his February issue, including Westport. They're up an average of 40%. Frank is currently looking for the next small-cap play in the natural gas sector – and, if his track record is any indication, it will make readers a fortune. To learn more about Penny Stock Specialist, click here...
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New 52-week highs (as of 4/4/11): First Trust Dow Jones Select MicroCap (FDM), Cambria Global (GTAA), Westport Innovations (WPRT), Coca-Cola (KO), DirecTV (DTV), Automatic Data Processing (ADP), WD-40 (WDFC), CARBO Ceramics (CRR), HMS Holdings (HMSY), Molina Healthcare (MOH), Cytori Therapeutics (CYTX), iShares Silver (SLV), Dorchester Minerals (DMLP), EnCana (ECA), SandRidge Energy (SD), Tetra Technologies (TTI), Tejon Ranch (TRC), SVB Financial (SIVB).
Maybe Norway isn't so great – at least according to today's mailbag. Send your feedback to feedback@stansberryresearch.com.
"If the fella in today's update is so in love with Norway let him go and live there for good. Bon voyage. As for me, the fight and life for the Capitalist, religious prone USA will never end. My worst criticism of you so far is I have only made profits on the first eleven or so trades, my investment style, no losses so far, from your stock recommendations like PZG in about 3 months. Let's get with it!" – Paid-up subscriber Jim Lowe
"hi porter, been reading you since the oxford club in the late 90's. I'm trying to convince people you aren't a fly by night. Just subscribed. Loved the Iowa farmer who was taking you to task for Norway.
"Listen, I spent nearly 5 months in Norway. Great country. The Saudi Arabia of Scandinavia. When I first was there in 1978 it was like a free Yugoslavia. Dark. Little nightlife. A pizza cost $14. The people were nice (but so are people from Delaware) and the women are nice (but the women of Chicago are far more gorgeous). About all they had to eat was Shrimp. And good beer.
"Norway works as a socialist paradise because it is small. End of story. Go from 4 million norwegians to 150 million and they'll be as corrupt as Mexico in a month. Same as New Zealand where I spent 3 weeks evaluating it as an expat escape from Obamamania. Wonderful people. Good values. etc. etc. Living the good life. Great wine. Great beer. Great beef. Ugly women. Won't allow nuclear subs to dock, won't allow nuclear medicine prostate needles in their country. That'll all fall apart as soon as the Iranian navy appears on the shores. Likewise, it'll work as long as it stays small and isolated.
"No one realizes that socialism has a very small tipping point and requires a general level of background intelligence, infrastructure, and stability to appear to work. Any stress and it cracks." – Paid-up subscriber Joe Ullman
"Mr Mosbo says that he '... spent a year of my (mostly younger) life living – studying and working – in Norway, so I have felt the love. Norwegians understand and appreciate the value of the individual...'
"Considering Mr Mosbo's age, he must have been in Norway when I was, but in contrast to Mr. Mosbo's experience, I & my wife were assaulted on the public street in Oslo and when I asked the hotel desk to call the police they refused because 'I was not a guest at the hotel.' Ever since I have had nothing but contempt for Norway and Norwegians." – Anonymous
Regards,
Sean Goldsmith
Baltimore, Maryland
April 5, 2011
Who will buy Treasurys when the Fed doesn't?... Portuguese banks boycott government debt... Three End of America updates... Curzio's natural gas victory... 'The most predictable economic crisis in history'... Norway, not so great...