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The Daily Reckoning | Monday, April 16, 2012 Follow the growth! Stupidly obvious investments that nobody seems to notice, Readers weigh in on the fate of the dollar, prices at the pump and green energy alternatives, Plus, an even better reason to make your reckonings heard, and plenty more... ------------------------------------------------------ External Advertisement Collect a $1,638 “Rent” Check Every Month Some investors have found a way to collect huge “rent” checks every month by partnering with one of the world’s biggest “landlords.” One man from Ontario gets $1,638/month. Another in Arizona gets an amazing $5,969/month. One Texas man’s checks have grown to $23,220/month! And they’re receiving these checks without owning any real estate! To learn how you can join them, click here. Monday Mailbag Readers Weigh In on the Value of the US Dollar and the Viability of Solar Energy Joel Bowman Checking the mail today from Buenos Aires, Argentina... A little announcement before we get stuck into today’s edition of our Monday Mailbag. This time next week, we’re going to give away a free trial to one of our research newsletters. It could be Chris Mayer’s Capital & Crisis, Byron’s Outstanding Investments, Addison’s Apogee Advisory, Patrick Cox and Ray Blanco’s Technology Profits Confidential...or something else entirely. We’re not exactly sure which one yet. Nor are we sure what the details will be. But we’re telling you in advance anyway, just so you’re on board. Ready, Fire, Aim...right? Basically, we’ll be selecting an “editor’s choice” from the emails submitted throughout the week from our Fellow Reckoners. We’ll run the featured email, along with a handful of others, on Monday and offer to comp the winner on a trial subscription to one of Agora Financial’s fine suite of investment newsletters. Well...something like that, anyway... So have your keyboard at the ready, Fellow Reckoners, and feel free to send in your thoughts on any of the topics we touch on during the week. Then, keep an eye out for next week’s mailbag to learn if you’ve won the to-be-determined prize. In the meantime, let’s dive into today’s reader mail... First up, Fellow Reckoner Werner S. takes us to task for something we never thought we’d be accused of...defending the US dollar. See for yourself... [In response to the article, The Unsolved Euro Crisis.] Your issue makes for good reading [and], as usual, [contains] plenty of sensible information. Whilst I am entirely with you on the dangers we have got to brace for as far as the euro is concerned (may I add that I am not an EU resident, nor euro holder), I miss an important point in all your analysis: the fate of the dollar. Whilst I agree with you that the euro has got two very important hurdles ahead, i.e. elections in France and Greece, the dollar’s situation is by no means much more enviable. Weren’t it for Bernanke’s (and Greenspan’s) unending fiat currency printing, the US should have gone broke quite a few years ago already. The present situation is simply a race to the bottom and I am not quite sure that the dollar will come out as a winner, though the chances for the USD are slightly better now than the chances for the euro. What bothers me, of course, is the SNB’s promise to mop up all euros at CHF 1.20 which bodes pretty badly for my savings! I must confess that I do not share O’Neill’s advice to short CHF. The country still got a balance of payments and commercial surplus, calling for CHF buying, not to speak of the still open carry trades in Eastern Europe whereby francs were borrowed for mortgages, still not re-converted into CHF. Theoretically the EUR/CHF rates is undervalued, true compared to Germany, but not so against the PIIGS. You might be safe advising your readers that the euro is bad, but that others are in no better position than Europeans who at least are trying to correct the situation. I am a lot less enthusiastic for the USD in 2013 after your elections! But that is still far out. Meanwhile carry on making for good reading. DR: Werner, you seem like a man after our own heart...and your points find a welcome audience in these here pages. But when we say we don’t like punches in the face, that doesn’t necessarily mean we DO enjoy kicks to the groin. Just because we chose not (in this particular issue) to bash the dollar and the printing press shenanigans underpinning its egregious population growth, that doesn’t mean we’re all of a sudden questionless greenback admirers. Our entire back catalogue of Daily Reckonings ought to testify to that...as well as Addison and Bill’s bestselling books on the subject, variously title “Empire of Debt,” “Financial Reckoning Day” and, not to put too fine a point on it, “Demise of the Dollar.” As Reckoner Chuck M. writes, the cost of a falling dollar is painfully measured in everyday items...but not, he reckons, at the pump... [In response to the article, The Rising Price of a Falling Dollar.] Gasoline is high priced? No. Gasoline is cheap! In 1960 dollars prices were: Gas — $0.50 to 0.60 Oil — $10 to 12 Silver — $1 Gold — $1.40 to 2.00 (after Nixon) Butterfinger Candy Bar — $0.10 Wheat Thin Crackers — $0.35 Due to inflation (Federal Reserve and government spending), my Butterfinger costs $1.00, my Wheat Thins $3.50 and the 2012 dollar buys about $.08 of what a 1960 dollar would. At that rate Gasoline should be $6 to $7 easy. We are complaining about the wrong thing and the wrong industry. Enjoy your articles. DR: And with government out of both the energy producing AND fiat money producing businesses, who knows how cheap gasoline would be...or whether we wouldn’t have found a better alternative? Alas, the state is forever meddling in sectors to which it cannot possibly be of service. Take, for example, news just in that the Argentine state has seized control of the nation’s largest crude producer, YPF, ousting Spanish owner, Repsol. YPF American Depository Receipts collapsed 21% on the news. Thanks, Christina! Really, with “thinkers” like these, who needs idiots? And finally, while we’re on the topic of energy, here’s a submission from Fellow Reckoner, V. Forbes, who writes in from our old home state of Queensland, Australia. This one ought to inspire a few responses. Writes Mr. Forbes... Generating electricity from solar panels in cold, cloudy Northern Europe is like growing pawpaws in Iceland — it can be done, but who would be so silly as to try? Germany was silly enough to try. Germany gets about an hour of useful sunshine per day in winter — solar power is weakest just when they need it most. But they have installed about half of the world’s solar panels. Germany’s Q-Cells, once the world’s biggest manufacturer of solar panels, just went broke. So did four other German solar companies. Sunny California also tried, but despite a half billion dollar loan from US tax payers, solar panel manufacturer Solyndra went broke. Solar Trust of America, recently offered $2 billion in loan guarantees by US tax payers, has also filed for bankruptcy. All the European PIIGS have tried — and the waste of taxpayer funds on failing green energy schemes is a major reason for their parlous financial state. The only sensible participant in the solar industry is China — they make panels very cheaply using coal or nuclear power and sell them to green dreamers. The reason green energy creates so much red ink is pretty obvious — it just needs one day’s observation of the sun. Full strength solar energy is available around midday for maybe 8 hours each day, providing the skies are clear, and there is no dust on the panels, and you are in a tropical zone. For the other 16 hours of the day, most electricity must come from reliable energy sources like gas, hydro, coal or nuclear. This about doubles capital and operating costs for no increase in output. With all this compelling evidence of the failures of solar electricity, why is the Australian government frittering $1.5 billion on green toys like the Moree and Chinchilla Solar farms? Green gambling is for private speculators not for captive taxpayers. And there you have it. Another episode of the Monday Mailbag. If you’d like to take any of your Fellow Reckoners to task, write us at the address below. And remember to check back in next Monday when we select the first ever Daily Reckoning Editor’s Choice readermail. Next up, here’s long-time DR favorite, Chris Mayer with some observations from Santiago, Chile... Will You Have the Courage to Make 500% in 6 Months? If you accept this challenge, you’re guaranteed to see 500% gains in just 6 months. Yep, guaranteed. There’s a huge catch, though. Here’s the full scoop on this unheard-of proposition. The Daily Reckoning Presents Thoughts While Sitting in Chilean Traffic Chris Mayer Sometimes good investment ideas are stupidly obvious. I recently read about Mark Lightbown, who used to run the Genesis Chile Fund. Author John Train described him as a quirky and well- mannered Englishman who traveled with a shopping bag full of his effects, on the theory that no airline would ever make him check it. Anyway, in 1990 after Pinochet stepped down, Lightbown moved to Santiago to launch the fund and take advantage of a potential Chilean recovery. As he settled in, he noticed the number of trucks delivering Coca-Cola to restaurants in Santiago. Digging a little deeper, he found that Coke consumption in Chile was widespread. So he thought, as incomes improved and Chile rebounded, Coke ought to do pretty well. As it turns out, the local Coca-Cola bottler, Andina, was a publicly traded company. He read the annual report and visited the company. The office was on the ground floor of the bottling plant. It was functional, not an ostentatious Greek temple — a good sign. The general manager, a man named Eulogio Pérez-Cotapos, was pleased to see him. He didn’t get many investor visits. Pérez-Cotapos told him about what Andina was trying to do and that he expected volumes to grow 10% per year and profit margins to improve as more volume improved the efficiencies of the plant. Sounds like a great story, right? Yet Andina was trading for four times earnings. And it had 60% of the soft drink market in Chile. Lightbown bought a million dollars’ worth of stock. Ten years later — having not sold a single share — his stake in Andina was worth $70 million. That’s a 70-bagger in a decade. It worked out even better than he hoped because Andina created new products (such as fruit juices) that it didn’t have when Lightbown made his first investment. The fruit juice business actually grew even faster than the soft drinks. It all sounds so easy now. Of course, buying a Coca-Cola bottler was a good idea! Yet Andina lingered at four times earnings when Lightbown bought it. Nobody wanted Andina. He recalls a local broker who tried to talk him out of buying it. Why? First, the company had not grown for years. As is typical for many investors, the broker looked backward, instead of forward. And second, Pepsi was moving into the market and an advertising war ensued. This made locals worry about sleepy Andina holding up its profit margins in the face of such an onslaught. This brings us to a counterintuitive point Lightbown makes. “Very few people think in the same terms as a foreign investor.” Which means, curiously, that locals sometimes overlook a great idea because it is in their backyard and they hold certain prejudices that are slow to adjust to a new reality. I don’t know what happened to Lightbown or the Chile Fund since. It doesn’t matter. The story serves as an example of the power of a firsthand observation — and a simple one, at that. Today, I doubt such an easy opportunity exists in Chile. It is a fairly developed market these days. But you never know, so I am here to explore a little and see what’s what. One easy firsthand observation struck me as I drove around Santiago. There are an awful lot of cars. Traffic is thick. Wherever I go in my travels, I can’t help but notice how many cars are on the road. In the last 12 months, I’ve been to South Africa, Colombia, Vietnam, Thailand, Cambodia and now Chile. Buying a car is one of those basic things nearly everyone does when they can afford it. This leads to an obvious conclusion: The number of cars on the world’s roads will continue to rise as the emerging markets close the gap with the Western world. This brings us to the auto parts suppliers. Mario Gabelli, the famed investor behind Gamco, is one who gets it. I like the way Gabelli thinks, and I count him among my favorite investors. In the latest Barron’s Roundtable, Gabelli hit on this theme: On a global basis, about 74 million cars will be sold in 2012, including 13.8 million in the US, reflecting a significant cyclical recovery. There are approximately a billion cars on the road around the world, including 240 million in the US. But the big growth will come from China, which had 8 million car sales in 2007 and will have 20 million in 2013. How can I make money on this? Well, all those cars need parts. Gabelli likes a trio of plays: Genuine Parts, Navistar and Dana Holding. He didn’t mention Federal- Mogul (NASDAQ:FDML) this time around, but his firm is the third- largest institutional holder of the stock. Clearly, the old wizard likes the makers of parts for cars and trucks. I see a lot of value here, too. Generally, investors like to go where the growth is. You have that in the automotive world. Growth of production just based on the platforms in place and current expansion plans should be strong out to 2015 in emerging markets. But it’s not like North America is a slouch here, either. North American production should grow nearly 7% per year. Only Europe is really sluggish, at 3.3%. The problem with growth is that you usually have to pay for it. Not so among the auto parts suppliers. They are all pretty cheap on earnings and cash flow. And these companies will be sitting in a really sweet spot in the global economy over the next several years. Regards, Chris Mayer,  for The Daily Reckoning Joel’s Note: Chris sat down last week with Laissez-Faire Books executive editor, Jeffrey Tucker, to chat about exactly this topic: Finding investment opportunities in places around the world where few others are inclined to look. Chris shared some of his own thoughts and stories from having traveled to and invested across six continents...including a handful of specific stocks (with tickers) he has on his radar right now. If you didn’t get the chance to take a look, you can still do so here. (In doing so, you will automatically be signed up to receive our new Laissez Faire Today newsletter and have exclusive access to a very special offer.) But you’ll want to be nimble. The interview goes offline at midnight tonight. Click the image below and follow the instructions on the page to view this insightful interview. --------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com