Don’t just Roll Back – Roll Forward!

This week Apple announced its commitment to the Titan Project. 

The technology company plans to offer an electric vehicle by 2019. It seems as though more and more companies are exploring this opportunity.

This is one of the reasons it surprised me when August reports from Walmart showed that the company has reached a plateau. With the North American market fairy saturated with stores and superstores and other markets not far behind, there are concerns about the company’s future growth potential.

I believe that the potential and opportunities for Walmart’s growth should be evaluated otherwise than how many stores it has left to open in the world. I believe this plateau is a good time for Walmart to consider its future.

I would like to see Walmart do what it does best. The way the company took $200 designer blue jeans and made them available and accessible for $14.99, I would like to see it expand into the automobile market.

I am not saying Walmart should place used or even new car lots out beside the gardening supplies!

Walmart shoud implement its best practices to the automotive industry.

Walmart is great at sourcing goods at the best prices and buying in bulk for even deeper discounts. The economy of scale is a wonderous principle. Its distribution systems are also legendary. Using the business acumen it already has, I would like to see Walmart create its own brand of automobiles. The George Car.

What I think would have a huge impact on the world is if Walmart were to embark into the electric vehicle industry. Walmart could make this form of transportation a viable option for the masses.

By contrast, the relative scarcity –even EXCLUSIVITY -of Teslas, Leafs, Sparks and other brands demands a premium price in addition to the cost of the research and development and the technology itself.  They are certainly desirable, but not necessarily accessible.

Why should Walmart do it? Oil is at a historic low!

Sure, right now oil is trading at about $45 a barrel and a gallon of gas is under $3 in most states. But anyone who does not foresee the return of the $150 barrel better remove their sleeping mask!

EV is the future... Now.

Walmart should do it because it is a new frontier for them and will ensure continued expansion into new markets.

Designing and developing an EV isn’t like deciding on next year’s kitchen tableware collection. Even if Walmart started this year, it would be several years before their EV became available. No doubt oil will be trading higher by then. Demand for EV will increase.

Now that EVs have gained acceptance and charging stations are expanding across the nation, there is a great opportunity here. Competing with the lower priced Spark may give Walmart the impetus it needs. 

Taking on the mission of delivering a well designed EV for under $15,00 would be good for Walmart – and good for the world. 

It would ensure Walmart's expansion, create jobs, offer sustainable transportation to the masses and be good for the environment.

So take a break on that plateau and move onward and upward, Walmart! Roll Forward!

As Walmart stock prices drop due to reports of saturation, I have realized that my own smart money has been safe and secure, growing and giving steady returns…elsewhere.

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Sources:

Lynda at Sonoran Sun | Private Equity Investments 

Walmart Reports Slow Revenue Growth, Reduces EarningsGuidance

Electric Car Price Guide: Every 2015-2016 Plug-In Car, WithSpecs: UPDATED

RIP: GEM Peapod, NEV apparently a victim of Chryslerbankruptcy

Interested In Walmart? What Investors Need To Know 

Diamonds aren’t forever?

DeBeers is legendary for taking diamonds to superstar status.

Marketing crystallized carbon, as common as sand on some ocean shores, as though it was as rare as an intact star falling from the heavens.

What isn’t forever is the demand for these stones. 

In the past five years the demand for diamonds has dropped by 12%. Not surprisingly, some analysts blame the Chinese economy for the latest decline. De Beers disclosed a 23% collapse in profits to $360 million this summer. At the end of August, DeBeers reportedly dropped the price of its diamonds by 9%. Anglo American plc did as well, some anonymous source suggested.

It was quite news worthy and I remember the presenter I was viewing seemed quite shocked under her professional composure.

The report reminded me of an old television program called Barney Miller. A sitcom based in a New York City police station from the 1980’s. There was one episode in particular that has stayed with me to this day.  It certainly made a lasting impression.

One of the officers was having a conversation at the station about buying diamonds with a elderly victim who had been robbed. The officer was planning to invest some money in the gemstone and was seeking another opinion.

The old man was encouraging the officer to buy land instead, but the young officer was sure he was making the right choice.

“Land” the old man kept suggesting. You can live on it; you can grow food on it.

The young officer continued to make the case for the gem.

Finally the old man said something to the effect of: 

Yes, it will hold its value – until people just don’t want them anymore. People will always need land.

So here we are 30 years later and it seems as though the demand for ice is becoming luke warm.

I am glad I was never partial to the gem. As an investment – or otherwise.

As diamond prices drop these past weeks, I have realized that my own smart money has been safe and secure, growing and giving steady returns…elsewhere.

_________________________________________
Sources:

Lynda at Sonoran Sun | Private Equity Investments 

De Beers cuts diamond prices by up to 9pct

De Beers Said to Cut Diamond Prices asMuch as 9%

The price of diamonds is collapsing

The Yuan-Mart

A lot of people are saying that the devaluation of the Yuan is good news for Wal-Mart. 

Certainly it will help the retail giant negotiate even lower prices for its future inventory. 

That definitely is good news for Wal-Mart’s customers around the world.

But what is good for Wal-Mart may not be good for the rest of the world when viewed from a different perspective.

Devaluing the Yuan is a great strategy for China in that it will help bring international currency into the country when it desperately needs it during this financial crisis. However China is already super competitive with a lot of the world’s consumer goods originating there.  The effect this will have on other countries remains to be seen.

India, Korea and other Asian countries all produce consumer goods as well. Will they have to lower the prices of their manufactured –for-export goods to remain competitive with the devalued products originating from China?

With some economies struggling to remove themselves from Third World Nation status through international trade, the devalued Yuan could mean that industrial crime may be on the rise. If they can no longer compete with the currency, they will need to find more “creative” ways to stay competitive.

Apart from relying on the notorious sweat shops in regions that produce cheap clothing in despicable conditions to maintain an edge, other industries may resort to additional extremes. Countries focusing on industries such as electronic consumer goods, automobiles and other methods of transportation, food products, and natural resources may need to find ways to cut costs to stay in the game.

One likely method is to lower quality. Another would be wage freezes, cuts, or layoffs to hire new workers for less. Increasing production to maximize existing equipment can often compromise human safety. Perhaps the worst method is to resort to the improper handling of waste, including toxic waste to avoid the cost of proper disposal.

As challenging as it is to get these countries to conform to our manufacturing ideology, if not our personal standards of decency, as this factory collapse in Bangladesh illustrates, the devaluation of the Yuan may have the most impact for human/workers rights and the protection of the environment in these countries.

Today the Yuan strengthened to 6.3936 per dollar as of 12:51 p.m. in New York. I for one, hope that the Chinese economy stabilizes sooner rather than later.

As currency fluctuated these past weeks, I have realized that my own smart money has been safe and secure, growing and giving steady returns…elsewhere.

_________________________________________
Sources:

Lynda at Sonoran Sun | Private Equity Investments 

Walmart Is Looking For Growth In InternationalMarkets

China Said toTake Rare Step of Bolstering Yuan's Offshore Value

Frack You

THIS week we saw oil prices soar from $39 to near $50 per barrel because OPEC announced that it is considering cutting world oil supplies...again.

These days most people are just happy to fill up their vehicles with inexpensive gas without caring why the price of oil – and gas – is so low.

As a little kid, I remember the gas shortage of the early 1970’s. 

I thought that there was a shortage because there was no more oil. 

I didn’t know about OPEC (Organization of the Petroleum Exporting Countries) didn’t get the concept of an embargo. 

Media coverage certainly wasn’t as all encompassing as it is now.

In fact, I just Googled “OPEC” and got this from the OPEC website:

OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.

I marveled when prices stabilized, and then just as I became a driver, I watched the price hike happen again in the late 70’s. This time oil production had decreased due to the Iraq-Iran conflict.

Central and South American nations evolved into top producers along with the Soviet Union. Alaska blossomed into a producer as well. There was great incentive to produce oil when the prices were high. Profit outweighed R&D and risk.

Back to today’s pumps….

Everyone knows that there is a finite amount of this resource on the planet. It may not all have been found, but there is only so much. It boggles the mind to see it selling relatively inexpensively in the past year.

Some analysts are saying it’s the Chinese economy. “They are experiencing a downturn…” and “They aren’t using as much oil and gas…” 

OK, that’s probably true. But let me ask you this:

If OPEC secures “fair and stable prices for petroleum producers” why hasn’t it cut or slowed production to increase prices –and profits – for OPEC members?

That would make sense, wouldn’t it?

Hmmmm…..

Fracking has been around since the 1940’s. However in the 1980s, Mitchell Energy & Development Corp. (now part of Devon Energy) began experimenting with hydraulic fracturing (fracking) in horizontal wells in Texas. An economic way extract large amounts of natural gas from the shale formations was found. The potential application to the petroleum industry was quickly recognized for use in Arkansas, Pennsylvania, and North Dakota for shale.

As of 2013, massive hydraulic fracturing is being applied on a commercial scale to shale in the United States, Canada, and China. With oil prices high, a lot of new companies embarked on fracking in the USA and Canada. Oil production rose.

OPEC, realizing that it was losing control over oil production came to an historic understanding in the fall of 2014 , in spite of protests from some member countries, that it would not defend its prices (AKA: manipulate the oil market).

While this was concerning for Venezuela and Algeria – countries who use oil profits to balance their budgets and maintain their governments:

“Venezuelan Foreign Minister Rafael Ramirez said he accepted the decision as a collective one and hoped that lower prices would help drive some of the higher-cost U.S. shale oil production out of the market.” ~Reuters

With oil prices at record lows, the fracking industries couldn’t justify the cost of production versus the price per barrel.

So while the Fed is still debating on whether to increase interest rates and end economic stimulus, American oil producing companies are under a strategic business attack by OPEC. If the fracking industry goes under due to weak oil prices and jobs are lost when these companies close, the economy will certainly take a hit.

Enjoy the prices while they last.

As the oil prices go up and down these past weeks as OPEC nations no doubt bicker as to whether they should raise prices again, I have realized that my own smart money has been safe and secure, growing and giving steady returns…elsewhere.

_________________________________________
Sources:

Lynda at Sonoran Sun | Private Equity Investments 

OPEC: Brief History

Wikipedia 1973 energy crisis

Wikipedia 1979 energy crisis

Shooters – A “Fracking” History

Hydraulic fracturing

Saudis block OPEC output cut,sending oil price plunging