Saturday, May 12, 2012

Intelligent Investing Means Not Buying the Facebook

Wednesday, August 19, 2009

State of the Housing Markets

Although sales in the housing market may be leveling off, home prices are continuing to fall. Based on research done by the Federal Reserve, the drop in home prices may signal that there is more tough times to come for the mortgage industry and the market in general.

Does New Data Really Suggest a Housing Market Bottom

Natural Gas Outlook

Natural Gas Outlook - July 2009 now live! is now up and running.

The majority of our stories will be posted here as well, so you are able to share your thoughts and opinions.

The site will get many updates over the next couple of weeks, so bear with us if you are running into any problems.

Friday, June 19, 2009

Nanotechnology at the Air Force Research Laboratory

A tough aspect of finding emerging technology companies is not always just finding companies that have good ideas, but also companies that are supported financially as well. In today's economy, emerging companies are having a tougher time finding the financing they need. It takes quite a commitment from Private Equity/Venture Capitalists to support something that, at best, returns investments many years down the road. Knowing this, where better to turn than (once again) looking at companies supported, whether through sales or research dollars, by our very own government.

Looking through a document from the Air Force Research Laboratory, several innovations are highlighted and it even talks of further commercialization for specific technologies.

The document can be viewed here:

So lets get started. The section of the document that discusses new and emerging technology is split into three parts; 1) Applications, 2) Transitions (as opposed to the typo on the cover..."transistions") and 3) Innovations. With 1) being technology that has been around for a while, and is fairly commercialized, 2) meaning less commercialized but fairly well developed and 3) being the newest emerging technologies.

The document lists 24 specific technologies. Because this is a document from the military, some may not be that applicable to the 'every day investor', while others will. I will quickly touch on some of the 24 listed, however only focus on a few that Hylland Market Research deems most worthy of investment(indicated with an * asterisk below).

-Nano-Layer Midwave Infrared Detectors and Cameras:
This technology has been used since the late 80's on planes and other military aircraft. It allows for much easier locating of things like landmines through infrared detectors. The document does not list any specific companies involved in the production, however it does say that: "Fabrication was transferred to commercial production at US silicon wafer manufacturers". Silicon manufacturers probably have better things going for them at this point, and this specific technology does not justify any additional investments in the silicon wafer manufacturers.

*-Nano particles enable superconducting wire for compact power systems:
This technology has tremendous uses that go beyond any Air Force applications. This technology allows for higher current, better efficiency and smaller size for power systems. The document specifies a 40% reductions in size and mass of generators utilizing this technology.
Where this technology still has room to grow, substantially at that, is in areas such as applications in utility companies, the transportation industry and in general electronics. The document cites 2 companies that have lead in the commercialization of this technology, first is SuperPower Inc, a subsidiary of Royal Philips Electronics [NYSE: PHG]. Obviously an investment in Phillips gets you much more than just an investment in this technology. The document also cites a much smaller company, American Superconductor [NYSE: AMSC].

AMSC sells its products in multiple sectors; Wind energy, Utilities and Transportation to name a few. We all know wind energy is being funded more than ever, but where I think this company stands the most to gain is the integration of its productions in our energy grid. Using AMSC's technology all power lines could be underground and more efficient. With the stimulus and the bet of the government paying to improve our energy grid, it is not too much of a leap to guess that they will use this type of technology. Though wind and the hunch of an overhaul of our electrical grid may be too speculative, AMSC also sells its products to the United States Navy and has partnerships with commercial ship builders that help serve as a "backbone" to the company's finances.

The future of super conduction is very promising, and AMSC stands in line ready to benefit.

-Nickel Nano-Strands for Aircraft Lightning Strike Protection and Electro-Magnetic Shielding:

Research has shown that nickel nano fibers can offer significant protection to airplanes from lightning strikes. The technology saves about 150 pounds in weight compared to conventional protection, and has potential use in most aircraft. However investment opportunities in this are hard to find, and may not be the best bet regardless. If the technology does take off, these fibers are fairly easy to "grow", and would not be that profitable anyway.

-Dualband Quantum Well Infrared Camera for Target Identification:
This technology has lead to the latest night vision, and is also used to detect missile launches. Flir systems [NYSE: FLIR] is highlighted in the document. The company would probably be a "safer" bet, but not into as much 'emerging' technology that stands to change the world. Sometimes there is nothing wrong investing in a company with government contracts. That said, other companies mentioned will have much better growth prospects.

*-The rest of the innovations listed in the document can be included under the broad classification of "applications of nanoparticles".
Several of the interesting applications of the nanoparticles are as "nano catalysts". The Airforce cites the use of metal nanoparticles in their jet fuels that allows the fuel to be heated to higher temperatures. However, uses for nano particles extends far beyond just as jet fuel additives.

Companies such as Headwaters Incorporated [NYSE: HW] use nanoparticles for many uses, such as; adding Mg(OH)2 particles to plastics to make them more fire resistant, Carbon nano-shells to add to structural integrity or conductivity, Titanium Oxide that is used in many cosmetics such as sunscreens and bimetallic particles such as Platinum-Tin that can be added into fuels to reduce pollutants and improve efficiency. It should be noted that Headwaters seems to be in exceptionally hard times right now, and is losing a lot of money. Maybe just a company to keep on the radar if they can turn around.

Another company specifically involved in these nano particles is NanoPhase [NYSE: NANX]. They specialize in many different nano particles for many different uses in many different sectors, such as automotive, electronics, plastics and textiles.

This Airforce research document also talks of the rise in nano-lubricants, which we have discussed in a previous article, but if you needed another reason to believe they will play a pivotal role in the it is.

Hopefully this can give you a few more investment ideas to help diversify your portfolio and be prepared for the incredible growth the nanotechnology sector will undoubtedly see.

Tuesday, June 16, 2009

Is this really an inflationary environment?

You can't catch an hour on CNBC, read any online message board or even talk to your friend or neighbor without the topic of future inflation coming up. With the Fed's quantitative easing, oil prices flying above 70 and treasuries selling off, it seems initially that the inflation argument is proving to be correct. But Hylland Market Research believes that there is a strong case against inflation in the near future, and that even DEFLATION may be a bigger threat.

To start the discussion I want to show a chart that includes economic data released this morning, and that is the core PPI (m/m) data. The chart is from
First, for those unaware of what the PPI (Producer Price Index) is, take a glance at a couple of definitions from

"What Does Producer Price Index - PPI Mean?
A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller. "
"The core PPI figure is the main attraction, which is the finished goods index minus the food and energy components, which are removed because of their volatility. The PPI percentage change from the prior period and annual projected rate will be the most printed figure of the release."

Why is today's PPI numbers important? Several reasons...

First, today's reading was -.1%, not a real earth shattering number by itself, but in a time where the word "hyperinflation" is thrown around daily (and has been for the last several months), it shows that inflation may, at the least, not be coming as soon as many think. It is also worth noting the downtrend in PPI. The Fed's policies have been in effect now for quite some time. ..should we not be seeing a tick up in prices if something as bad as "hyperinflation" is so certain in the near future?

But, possibly the best use for the PPI may be using it just as a way to predict the upcoming CPI (Consumer Price Index) numbers which are released tomorrow (Wednesday). If producers are not experiencing increases in prices, it seems consumers will not either. Although that may not always be the case with specific industries and companies, on the whole, it remains true. The consensus forecast by the 'experts' for today's PPI number was .1%, as mentioned before, the actual reported number was -.1%. The forcasted number for tomorrow's CPI is .1% as well....will we see a negative CPI number (even if it is only a fraction of a percent), in this time where people are calling for hyperinflation?

Maybe this is putting too much focus on this month's economic numbers. One could argue that PPI and CPI are too much of a lagging indicator to use. But bottom line is that PPI is in a downtrend (and CPI is projected to be), and hyperinflation does not occur in a downtrend of prices.

Another reason I believe so many are talking up inflation is because of a lack of understanding of exactly what the Federal Reserve is doing. Many call it "printing money", but is that really the case?
An interesting read if you have the time is "More Money: Understanding Recent Changes
in the Monetary Base" by Glavin. It is posted below, and I will discuss what I think is significant within it below as well:

Stlousfed Inflation Gavin

The most important chart in the document:
Maybe it is an assumption to think that people believe the Fed has literally been printing money. But how many jokes have we heard about the Fed "running out of ink" or "running the printing presses full tilt"? The truth is, the increase in the money supply has been solely an increase in bank reserves. Where this gets really interesting is when considering why banks are keeping this tremendous amount of money in reserves instead of loaning it out.

First, one has to know that the Federal Reserve actually pays banks to keep money in reserve at a rate relative to the Federal Funds Rate, which today is basically 0%. Today, the federal reserve is paying banks .25% interest to keep that money in reserve. Banks are free to loan out this money, except for keeping a reserve balance of 10% of its deposits. (That may have changed under one of the TARP laws...)

The big question is 'why are banks content with a .25% return on their money when they could be lending it out for much higher rates?'

It seems clear that banks feel that a .25% return on their money is the best strategy right now. This means that the monetary base available for you and I is not expanding, because banks are not lending out this increase of reserves.

This introduces concerns on a more macro level about the health of our economy...but that is for another discussion.

We will not see inflation when banks are hoarding money and not increasing the monetary base.
Where this gets interesting is guessing the Federal Reserve's actions to the Federal Funds Rate as our economy recovers. There is no doubt that if rates are kept at 0% in the time of strong economic recovery (fundamental recovery....not necessarily any market rally like we have seen since March) we will see inflation. But, if the Fed times rate increases correctly, and manages the size of its balance sheet correctly...It seems technically possible to pull this off without entering "hyperinflation". Keep in mind, the Fed "targets" 3% inflation or so...

In case that was not clear, here is a quote from the document:

In theory, the banking
system reduces excess reserves—but only by
expanding loans and the money supply in a way
that increases required reserves by an equivalent
amount. The key is that the Fed will have to drain
reserves when the economy begins to recover if
it is to prevent a rapid acceleration of inflation.
That necessity drives the current discussion of
exit strategies.

It is also necessary to consider the wealth our last stock market crash destroyed, and how much is still being destroyed every month. Taking into account the dramatic drop in the market cap of nearly every company (and the leverage that people were invested at), estimates for the total amount of wealth destroyed in the last year are around 40 trillion dollars....a tremendous amount of money. Gavin's paper shows a 1 trillion dollar increase in bank reserves since the start of the crisis. Even if those reserves are lent out...there is still a net destruction of wealth out there.

Even though the market has rallied of late...this wealth destruction is continuing:
1st quarter wiped out $1.3 trillion for Americans
First 3 months of 2009 wiped out $1.3 trillion, driving Americans' net worth to '04 levels

WASHINGTON (AP) -- The brute force of the recession earlier this year turned back the clock on Americans' personal wealth to 2004 and wiped out a staggering $1.3 trillion as home values shrank and investments withered.

Net worth, or the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards, declined 2.6 percent in the first three months of the year, the Federal Reserve said Thursday.

Bottom line for this point, until banks start lending we will not see any hyper inflationary environment. Realistically, the Fed will start raising rates and cutting back on their balance sheet as they deem inflation becoming a risk. Look for that before you start buying into inflation plays.

To introduce the final point against inflation, I would like to quote Zero Hedge ( a truly amazing resource for those of you who have not heard of it and do not read it daily.

But what about all the excess cash flooding the system? As has been discussed on numerous occasions, even with the Quantitative Easing cash factored in, we are now in a much worse place from a mortgage interest perspective, and with every incremental increase in far maturity yields, consumers lose additional household value in the form of home equity (if you couldn't sell your half a million dollar house when mortgages were 4.5%, good luck trying to do so at the same price at 5.5%). On the other hand, the stimulus spending focus on infrastructure projects (and an ungodly amount of pork spending) has little hope of creating absolute inflation pressures: rebuilding highways and bridges by retaining minimum wage contractors does nothing to facilitate wage increases, and the unemployment number rising ever higher simply indicates that anyone harboring thought of a raise in this employment-supply glutted environment will be sorely disappointed for a long, long time.

Zero Hedge brings up several great points. The most significant in our opinion being unemployment numbers. Can we technically see hyperinflation in a period of high unemployment? Certainly. However, taking into account current macroeconomic factors, some of which discussed previously here, it does not seem likely.
Currently, we are only seeing unemployment rising.

When we start to see a confirmed (i.e not one single month) downtrend in unemployment, that is when we need to then consider what the Federal Reserve is doing to then justify a new outlook on upcoming inflation (or deflation).

In addition to the economic data highlight above. We have seen the price of gold (once again) creep up towards 1000 an ounce only to fall back to the mid to low 900 area. Although the price of gold is not purely based on inflation... Certainly we would need to see gold break well into the $1000 range before we consider hyperinflation.

Inflation will once again show its head in our economy, that is certain. However Hylland Market Research feels that deflationary pressure is currently much stronger, and will prevail before inflation does.

Update: Bringing Solterra Public

A quick update from our last article which discussed quantum dot solar cells and one company in particular, Hague Corporation, the Parent of Solterra Renewable Technologies Incorporated announced today that it plans to spin off Solterra as a publicly traded company.

From the PR newswire:

"Hague Corp., the Parent of Its Operating Subsidiary, Solterra Renewable Technologies, Inc., Announces Its Intention to Restructure Hague and Solterra for the Purpose of Completing a Plan of Financing and Bringing Solterra Public
Wednesday 06/10/2009 8:00 AM ET - Pr Newswire

Related Companies
Symbol Last %Chg
HGUE 0.09 12.50%
As of 3:23 PM ET 6/16/09

Hague Corp. (OTC Bulletin Board: HGUE), a quantum dot manufacturing company with a focus on Quantum dots targeted towards the medical sciences, ultra efficient lighting solutions and the burgeoning solar cell industry, today announced that it has entered into an agreement with its Noteholders for a 120-day standstill period pursuant to which the Noteholders will not pursue any of their rights under their debt securities and related transaction documents, to permit its subsidiary, Solterra, time to complete its plan of financing (currently up to $6,000,000) and to restructure and reorganize Hague and Solterra, as described in Hague's current report on Form 8-K filed today. Pursuant to the plan of financing, it is the intention of Hague's wholly owned subsidiary, Solterra to become a publicly reporting and trading company.

Phoenix Alliance Corp. has been retained by Solterra to act as its fiscal advisor and to assist Solterra Renewable Technologies in the development of a market analysis, competitive analysis and competitive strategy, as well as a complete business plan for the manufacture and sale of what is expected to be the most important breakthrough in Solar Cell technology to date. Phoenix has also been retained to recruit a top management team as well as an independent board of directors for Solterra Renewable Technologies.

Stephen Squires, CEO and majority shareholder of Hague Corp., stated: "To attain our goal of profitability, we need to raise additional financing and to have set a clear path to accelerate our commercialization and marketing activities through an expansion of revenue base and market share for our Industry leading Quantum Dots."

One of the key drivers of our plan is the establishment of a dynamic new platform for our operational success consisting of two strong business segments -- Hague Corp. and Solterra Renewable Technologies.

-- Solterra Renewable Technologies manufactures and sells solar modules
based on our proprietary thin-film Quantum Dot technology. Our solar
panels are flexible, lightweight and rugged and generate up to 20
percent more electricity than conventional crystalline products at
significantly lower costs. This is a Game Changer in the Solar Cell
manufacturing industry and in fact we expect to be one of the first
Solar companies to close in on Grid Parity pricing which of course is
the objective of every Solar Cell manufacturer in the world.
-- Hague Corp. includes our Quantum Dot manufacturing business, and our
R&D programs with near-term commercial opportunities. We are
presently able to offer select clients a superior Quantum Dot for use in
the medical Sciences Industry as well as the LED and lighting
industries. What is most exciting is the price structure we can offer to
these clients. Imagine a Quantum Dot of Superior Quality at a price that
reflects up to a 50% discount to presently existing supply
opportunities. We are receiving inquiries and requests on a weekly basis
and expect to begin shipping within 90 days.

Mr. Squires stated, "Throughout the last six months our research efforts led by Dr. Jabbour and Dr. Michael Wong with the support of Arizona State University and Rice University have confirmed that our Quantum Dot technology and our printed Solar Cell technology are indeed two separate and exciting business opportunities. In order to ensure that our wholly owned subsidiary has access to capital markets, we intend to complete a private financing sufficient to provide for the early commercialization of Solar Cell technology.

As described in our Form 8-K, Mr. Squires will act as chief executive officer of either Hague or Solterra and as interim chief executive officer of the other company until an experienced executive replaces Mr. Squires in one of the two companies. Phoenix Alliance will assist Solterra in obtaining independent board members and a new chief executive officer to succeed Mr. Squires in running one of the two companies. It is expected that both companies will continue to have significant input from Dr. Jabbour and Dr. Wong.

It is anticipated that upon the closing of this private financing Hague will retain a substantial equity interest in Solterra. Management believes that by executing this plan and funding the solar production subsidiary, Hague will not have the burden of funding Solterra Renewable Technologies thereby freeing up additional resources for the further development of other uses for Quantum Dots and generating additional revenues and potential profits for Hague. Hague will be the sole supplier of Quantum Dots to Solterra thereby creating a profitable captured market for Quantum Dots used in the manufacture of solar cells without creating any adverse constraints on Hague's resources.

Hague can provide no assurance that the plans outlined which includes the creating two operating companies, raising up to $6,000,000 in financing for Solterra and to retiring Hague's existing debt will be successfully completed on satisfactory terms, if at all, or that Rice University will consent to necessary changes in Solterra's license agreement to accomplish the foregoing plans. Accordingly, the above plans outlined by management are subject to change at any time.

The securities to be offered in any financing described above have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.

About Hague Corp. /Solterra Renewable Technologies, Inc.

Solterra is singularly positioned to lead the development of truly sustainable and cost-effective solar technology as the first company to introduce a new dimension of cost reduction by replacing silicon wafer-based solar cells with low-cost, highly efficient Quantum Dot-based solar cells.

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995

The statements in this release relating to completion of the restructuring and financing of the companies are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some or all of the results anticipated by these forward-looking statements may not occur. Factors that could cause or contribute to such differences include, but are not limited to, contractual difficulties which may arise, the failure to obtain necessary approvals, the future market price of Hague common stock and/or the ability to obtain the necessary financing."

There is no doubt, that I am sure Hague is having a hard time find as much venture capital money that they need. And getting as much as 6 million dollars from a Solterra spin off can give them money that is much needed, and could possibly attract even more money from private means.

Keep this on your radar, hopefully we will know more within 120 days....