Financial, Economic and Social Mood Update (September 1, 2017)
The US stock market continues to be profoundly robust – the Dow Jones 30 Industrials Index reached a new record high of 22,179 on August 8, 2017. But the breadth of this advance is narrow – large cap stocks continue to reach new records whereas the broader market does not do so. Eventually the bubble will burst, and the entire world will experience a crash like never before – regardless of political allegiance.
52 days ago I finally purchased a stake in the “Bitcoin Investment Trust” (GBTC). Online companies proved too frustrating to deal with, so I went the more traditional route – I contacted my good friend and fellow College of William and Mary Mason School of Business MBA Edward George “Ted” Kaufman. Ted is a Vice President and Financial Advisor with Scott & Stringfellow, a wholly-owned stock brokerage subsidiary of Branch Banking & Trust Company (BB&T). BB&T is ranked as high as the number 8 commercial bank in the USA with more than 2,100 offices in 15 states and the District of Columbia. Ted has been their top performing broker for more than 20 years. He is a prominent and active member of the business scene in Hampton Roads, Virginia especially in charitable and in Jewish organizations. He and his business partner Joseph Feldman (Senior VP with Scott & Stringfellow) manage the “Shalom Trust,” an investment portfolio for companies based in Israel or which have a strong link to Israel. Ted can be reached toll free at 1-800-515-0294.
“Bitcoin” is of course the best known of the so-called electronic crypto-currencies, having been launched in 2010. GBTC has gained 109 percent in the last 52 days, which translates into an annualized return of 765 percent.
Due to the current strength of the nominal stock market, my own “short fund” based upon the Dow Jones 30 Industrials Index is up by a just 25 percent since 2010. The increase since the most recent nadir of the modern bull market in 2009 is a much healthier 80 percent. We who manage this fund stick with it because we remain firmly convinced that the market will eventually collapse. The fund was up by as much as 414 percent in January 2015 compared to December 2010, and we continue to believe that our patience will eventually be rewarded even more than this.
The Global Automotive Market (2019-2041)
Manufacturing has been the core industry on earth since the days of the industrial revolution which commenced around the year 1760. The automotive industry has been the core of global manufacturing for about 130 years, but it is now upon the cusp of massive changes which will eventually eliminate the traditional internal combustion engine based solely upon gasoline and diesel fuel. The final outcome by the year 2050 will likely be plentiful electricity powered by nuclear fusion – not to be confused with dangerous nuclear fission. And how are these changes starting to take place?
Much of Latin America (most noticeably in Brazil) has already switched to “flex fuel” technology based upon ethanol, methanol and sugar cane-based alcohol fuel. This type of fuel is far cleaner than either petroleum gasoline or diesel fuel, but it requires a large amount of water to produce. The engines running on this fuel are somewhat less fuel efficient compared to petroleum gasoline, but they produce slightly more horsepower.
Volvo Cars of Sweden (entirely owned by Geely of China) will only manufacture either electric or hybrid electric automotive engines starting in 2019. Geely purchased a 51 percent equity stake in Lotus Cars effective September 1, 2017, with the remainder of Lotus still owned by Proton of Malaysia.
Rapidly rising legal standards for fuel economy will likewise necessitate the elimination of brand new traditional internal combustion engines. The People’s Republic of China requires an average fuel economy rating of 47 miles per gallon (MPG) starting in 2020. The European Union (EU) requires an average fuel economy rating of 57 miles per gallon (MPG) starting in 2021, and the standard for the USA will rise to 54.4 miles per gallon (MPG) starting in 2025.
Volkswagen AG of Germany (the largest automotive group in the world with annual unit sales of 10,300,000 cars and trucks) is committed to 33% electric vehicles by 2025 and 100% by the year 2041.
Norway (a member of the European Free Trade Association) will only allow brand new electric automobiles starting in 2025 – no more brand new internal combustion engines. India mandates the same thing starting in 2030, and both the UK and France mandate the same requirement starting in 2040.
All of these changes will likely mean that individual car ownership will become more expensive and thus rarer as time goes on. For those of us enthusiasts in the collector car hobby, it means that keeping our classic and antique cars alive will become ever more pricey.
So-called “environmental” concerns
The driving force behind the massive changes coming upon the automotive industry is the concern over supposed “climate change.” Not everyone agrees on this verdict (nor should they be forced to do so), but perhaps more people will agree concerning the issue of air pollution (something we have all experienced firsthand). One argument says that pollution levels will decrease as the use of fossil fuels goes down. We can see validity in this argument by looking at examples such as Brazil (where sugar cane-based alcohol ethanol has replaced both petroleum gasoline and diesel to a very large degree) or in the American state of Texas, where a cleaner fossil fuel (natural methane gas) has largely replace a dirtier fossil fuel (coal). Electric and hybrid motor vehicles require much more battery power compared to other motor vehicles, and much of the unique water necessary to power these large batteries comes from flamingo habitat in Latin America. The cars will get their power, but the birds will lose their habitat and die – not a good thing! The promise of the future does not lie here, but in the development of nuclear fusion power (NOT to be confused with the nuclear fission power we have known since 1945). Nuclear fusion power is akin to the power found in the sun and the stars, and its primary “fuel” is water. Nuclear fission power requires the mineral of uranium, which is highly unstable, toxic, cancerous and dangerous to the health. Nuclear fusion power is now being developed in the south of France, in a small community comparable to Los Alamos in northern New Mexico (where nuclear fission power has been developed since the 1940s). Nuclear fusion power will be safe, plentiful and inexpensive. The power plants will also be relatively small in size. Nuclear fusion power will likely become experimental by 2040 and fully commercial by 2050.
