The Car Is(n't) Dead

Plenty of supposed smart-money players have ignored China’s instructive trends.

General Motors (NYSE: GM) once again reported death-spiral-confirming numbers July 15, following up its dreadful first quarter earnings report with the announcement of a plan to cut costs by $10 billion, suspend its common stock dividend and sell up to $4 billion in assets in a bid to shore up cash and survive.

There are some things that can’t be dismissed other than as the result of basic incompetence, such as terrible design and production decisions. Other difficulties, such as legacy costs, are easier to understand, allowing for the impact of years-in-the-making external forces. America’s post-WWII dominance, the rapidity with which it developed beyond other nations and the concomitant rise of a curious, aggressive and highly mobile middle class spawned the United Auto Workers, and those guys bargained for a big piece of what was thought to be an ever-expanding pie.

We’ll set the mid- to late-20th century ground won by labor aside for purposes of this particular argument, but even that oversimplification of GM’s labor issues establishes a stark contrast with China’s labor situation. The 21st century Chinese economy is much the child of its command-oriented forebear of the last century. What fruits of the communist workers’ paradise: The prevailing wage environment in China is a remnant of government control of, well, everything. Bottom line: China-based manufacturers don’t have to deal with such burdens as legacy costs.

GM’s tragic miss in recent years was something it made itself, the most depressing of all conclusions.

About 80 percent of the growth in oil consumption over the past several years has come from countries other than the US. China alone accounted for about a third of all consumption growth between 2003 and 2006. At the same time, production has remained fairly flat over this period. And barring some major change in the world’s political and economic situation, demand will continue to grow.

One U.S. global player has more energy reserves than Saudi Arabia and will give you profits of 40-70% in coal this year.

My readers have already seen average profits of 60% from my picks, and the best is still ahead of us, but you must act now…

Go here and I’ll give you all the details plus you’ll see my other 10 moneymakers.

If China continues to grow its consumption at current rates, it will consume two times as much oil as the US by 2030. This is entirely plausible, as it would still only use about as much oil per capita as Mexico does today. Basically, as the world moves 1 billion or more people through the development pipeline, it will create large increases in the demand for oil.

GM has long experience producing cars with the fuel-cost-conscious driver in mind; after all, it moved into Europe in 1911, three years after the company was formed, and the Europeans have taxed motor fuel to dear levels for decades. But GM sells a ton of cars across the pond.

GM also boasts an eight-decades-long presence in China, although the Asian giant really emerged as a significant growth market in the mid-1990s. But the guys who make the decisions in Detroit have produced vehicles for purchase and use in the world’s most-populous country for decades. It had to understand what it meant to penetrate a market of that-many-billion potential drivers.

First, it would make a ton of money. Second, that many more drivers meant that much more fuel was consumed. Naturally, the US SUV era would succumb under the pressure of inevitably higher prices at the pump.

But in 2005, GM’s CEO recommitted the company to the then-profitable large vehicles. Although the speed of the rise in oil prices has been surprising, it wasn’t impossible to foresee; oil company execs were already talking quietly about peak oil in 2005.

The rapid, steep rise in the per-barrel price of oil would have been a difficult prediction to make. But even looking backward, it doesn’t seem an impossible task, particularly for high-paid decision makers as well placed to gather such intelligence as those at GM. Indeed, it seems auto executives should have known what was coming, that shareholders would right expect them, on the basis of minimum competence, to understand the relevance of such metrics.

Some companies did see the future. In the early '90s, Toyota (NYSE: TM) set out to build a car for the 21st century, focusing on “environment” as the organizing concept for the project. Here’s how far-seeing the work that led to the creation of the Prius: Oil was trading below $20 a barrel when it began.

In 1998, China’s total vehicles sales were under 2 million units a year. By 2007, GM itself sold more than a million. And the overall Chinese auto market grew by 19 percent from January to May 2008.

My readers have already enjoyed profits of 61% in just two months from this government-protected monopoly that guarantees they will not have any competition until the year 2035!

But here’s the real kicker… this stock’s price should double in the next 6 months giving you 100% profit if you invest now.

Follow this link to get the details.

Where are you looking for signs about how to deploy your hard-earned capital? How will you interpret those signals? GM knew how to build fuel-efficient cars; it was benefiting from the rise of a potentially great consuming power; it had intelligence that should have enabled it to understand the present fuel crunch.

There are lessons here for individual investors interested in profiting from the transition to a 21st century economy. No. 1: Don’t ignore Asia. No. 2: It can’t hurt to have informed, consistent guidance on what’s transpiring on a daily basis as China, in particular, but India and the rest of Asia as well emerge collectively as the growth engine for the global economy.   

We invite you to tune in as KCI’s LIVE Webcast events air from the 30th annual Money Show San Francisco. My colleagues Roger Conrad, Neil George, Elliott Gue and Gregg Early will be presenting their latest insights and recommendations surrounding this year’s central theme "Tech and Biotech Investing."

Registration is FREE and can be completed at MoneyShow.com, so please check out KCI Communications’ events and tune in Aug. 7-10, 2008.

I also have a special invitation for readers to join my colleagues Elliott Gue, Gregg Early, Roger Conrad and Neil George aboard an exciting 11-day investment cruise Dec. 1-12 through the Caribbean and Panama Canal.

This will be a unique opportunity to step away from your daily routines, relax in one of the most beautiful parts of the world and share analysts’ knowledge and passion for the markets. During the sail, you’ll not only explore the cerulean splendor of the Caribbean, but you’ll also delve deep into current markets in search of the most profitable opportunities for your portfolios. You’ll also have the rare chance to sail through one of the world’s engineering marvels, the Panama Canal.

It’s always a special treat to meet and talk with subscribers in person, and we couldn’t have picked a better setting than aboard the six-star Crystal Serenity. This is sure to be an especially memorable experience. We hope you’ll join us.

For more information, please click here or call 877-238-1270.