Sam Hopkins - Angel Publishing

Japanese Solar Power Investments

Japan's renewable energy market is at a crossroads.

Japanese installed wind power capacity actually dropped from March 2008 through the same month this year, after an underwhelming increase in 2007.

New regulations are partly to blame, since the government now requires wind turbines to meet the same safety standards as tall buildings — despite wholly different surroundings.

Overall, the world's #2 economy ranks a woeful #20 in the latest Ernst & Young Renewable Energy Attractiveness Index. For wind power specifically, it's even lower down the ladder, despite being the world's fourth-heaviest greenhouse gas (GHG) emitter and home of the Kyoto Protocol.

But in solar power, Japan ranks third in the world for installed capacity, behind only Germany and Spain. . .

And those countries adopted Japan's feed-in tariff model for stimulating their own homegrown solar sectors!

Now, with silicon prices cratering and government support for the sector increasing, we're seeing Japan become a magnet for foreign solar power investment.

Taiwan's AUO Makes a Big Bet on Japanese Solar

The government's pumping $9 billion worth of stimulus into the market, pushing demand for solar panels in Japan up for the first time since 2006.

Prime Minister Taro Aso said on June 9 that solar power and electric cars will play a key role in lifting Japan out of the economic muck and into robust growth. The PM foresees a cleantech industry worth 50 trillion yen (about $510 billion) by 2020.

He wants solar power generators installed at roughly 37,000 public schools in the next three years, a move which would keep PV production lines humming along steadily through 2012 and beyond. The total increase would boost Japanese solar production twentyfold by 2020.

Yet, Aso knows that such a rich future for Japanese solar won't be fueled solely by domestic money. . .

President Obama just forked over $350 million to the geothermal industry.

But which geothermal company will get the lion's share of this massive subsidy?

Perhaps the only one that just got $84 million from the DOE to build its next power plant!

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Taiwanese technology company AU Optronics (NYSE:AUO), a maker of LCD flat-screen televisions, just announced it would take a 51% stake in M. Setek, a Japanese solar material supplier that's been around since 1978. That move is both opportunistic and optimistic, given today's silicon market conditions.

Raw material providers like M. Setek are hurting from silicon prices that have dropped sharply in the past year, from nearly $1.50 per pound to just above 50 cents today. Though current levels are closer to the 5-year baseline, the boom-bust cycle we've seen in the global economy and energy investment over the past two years has had a severely destabilizing effect on upstream firms.

In the current environment, other Asian solar material providers are issuing shares — China's ReneSola (NYSE:SOL) is selling $100 million of new stock — and tapping fresh lines of credit.

But M. Setek found a buyer in AU Optronics, and investors like it. AUO shares have gained since the $125 million private-placement deal was announced.

And AUO isn't alone — other internationally listed companies are also pouncing on Japan's stimulus-fed solar consumer surge and could expect a market premium for their efforts.

Canadian Solar to Sell Chinese-made Cells in Japan

Canadian Solar (NASDAQ:CSIQ) announced just this week that it will target 12,000 kilowatts of yearly solar cell sales in Japan from its Chinese production base.

With the government paying up to $785 per kilowatt for rooftop photovoltaic (PV) installations as part of its $9 billion rooftop solar stimulus package, CSIQ is smart to turn towards the Land of the Rising Sun.

As Nick Hodge has pointed out in recent reports from Wall Street's Renewable Energy Finance Forum, clean energy financing flows are shifting fast and furious these days.

Low silicon prices, though they hurt producers' balance sheets, are enabling governments to get more bang for their stimulus bucks (or yen), which in turn will boost sales at vertically-integrated solar power companies.

Regards,

Sam Hopkins

P.S. Nick and I work hard to keep Green Chip International readers ahead of the curve when it comes to how much money is going where, and when. As I've shown you today, many of the best plays on global green projects like Japan's massive solar stimulus are actually found on Wall Street. It couldn't be easier, or more necessary, to take advantage of a world's worth of opportunities in clean energy. GCI subscribers are sitting on current gains of 186% and 29%, with plenty of other winners already closed out for profits. Don't miss the next moneymaking opportunity. . . check out GCI today.

Marine Energy Companies

While it's true that alternative energy has developed in fits and starts over the past several decades, marine energy seems to have been especially susceptible to the ebb and flo of opinion and policy.

But the United Kingdom—a world leader in offshore water-driven power—just signalled that the tide is back in for marine energy companies.

At the beginning of July the UK government authorized the issuance of the first Renewable Obligation Certificates (ROC) for marine energy to Marine Current Turbines, a British firm.

Marine Current Turbines focuses on harnessing the power of tides around the UK, and its SeaGen generation system was deemed worthy of ROCs after a 1.2 megawatt axial flow turbine system was successfully installed and operated in Northern Ireland.

That project at Strangford Lough has served around 1,000 nearby homes with power through grid connections, but the effectiveness of tidal energy does not necessarily lead to a bottom-up demand and supply cycle as we have seen with rooftop solar installations, for example.

"There is effectively no market to pull marine energy forward," MCT managing director Martin Wright said in a statement. "It will be vital that the government. . . takes urgent action."

Now reinforced by London support, MCT will transform into a larger company that can bring SeaGen to larger, commercial-scale applications.

VeriFone Stock

The Middle Kingdom doesn't have its own Karl Malden yet.

In TV ads that ran for years, a trenchcoat-clad Malden, who passed away last week at age 97, admonished U.S. consumers not to leave home without American Express traveler's cheques.

"Don't leave home without it" became the slogan for Amex cards, too. And over the decades, Americans took it to heart — credit cards are now second only to the housekey in joggers' shoes, they're the first option for paying for birthday gifts, and they'll get you out of a jam if you need to book an expensive flight, quickly.

And while China may lack a pop-culture touchstone for credit cards, Olympic hero Liu Xiang is helping to push them:

And consumers among the 1.3 billion-strong population are making more and more use of the powerful plastic they can put in their pockets. . .

There are more than 150 million credit cards now in use in Communist China.

Now, consider the fact that the raw number is only one aspect of a powerful electronic spending trend. . .

One that investors in international electronic payment companies like VeriFone (NYSE:PAY) can take advantage of.

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The other side is that Chinese credit card holders are also increasingly testing the thin ice of credit card payment delinquency, as the central bank reported in late June.

The latest figures from the People's Bank of China (China's central bank) show credit card debt that's at least half a year overdue increased by 133% from the same period in 2008.

Moreover, the potential for defaults is still far greater than what has been realized to date. Even with a triple-digit jump already worrying central bankers, the percentage of six-month shirkers is still a mere 3% of total outstanding credit card debt.

Officials have reason to be concerned.

CC Debt: It's Everywhere You Don't Want to Be

China's current economic power in the world is largely owed to the Beijing government's stockpiles of cash and dollar-denominated assets (i.e. Treasuries). And the status of top-level coffers reflects a cultural predisposition toward saving — rice and millet were the only food on millions of tables for decades in China, and only essentials were purchased with meager earnings.

The average household savings rate in China sat at 40% as recently as 2005, while Americans were simultaneously dipping into negative territory.

Chinese consumers and investors then witnessed an extraordinary boom-bust cycle, and first-time shareholders and cardholders all got knocked for a loop inside a quick few years.

The Shanghai Composite Index dropped by 70% from peak to trough in just about 13 months.

Today, economic disorientation is still a factor, as the Chinese stock market is recovering more quickly than most western exchanges. Morgan Stanley's China A-Share Fund ETF (NYSE:CAF) is up 56% since January 1, compared to an almost dead even return for the S&P during the same period.

The World Bank revised its 2009 China growth forecast upwards in mid-June, despite knocking its global projection down further into negative territory.

Loans are up, and deposit growth is down. UBS analyst Victor Wang says more investment options are drawing consumers away from bank vaults and into brokerage accounts.

"In the medium term, the banking sector's growth is set to come down as three drivers for strong deposit growth have all cooled off," Wang told Reuters, referring to previous double-digit yearly GDP growth, a huge trade surplus, and household savings patterns.

While growth is still in the black, the danger now is that overeager consumers could end up underwater if they don't play their cards right.

Don't fret, though. . . You can make money off of increasing credit card usage in China without worrying about individual or bank balance sheets.

Playing China with NYSE:PAY

China's card usage rates are growing fast — the same PBOC report logged a 43% year-on-year jump — but Americans still have 39 times as many. The gap is narrowing, and industry organization China UnionPay has led the charge for more Chinese to charge their purchases.

China UnionPay has agreements with VeriFone (NYSE:PAY), a California-based electronic commerce company, to bring Chinese credit card terminals in line with international standards and to make sure Chinese credit card users can easily wield their purchasing power abroad.

Regards,

Sam Hopkins

International Editor

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Norway Wind Power Law

Norway's last Oil and Energy Minister said her country could become "Europe's battery."

Now, Norway's new power chief is joining with the country's parliament to make the non-EU country a key component in continental renewable energy goals.

"Offshore wind energy may become the next adventure for the Norwegian industry and energy sector," Terje Riis-Johansen observed. As the world's #6 oil exporter and a key source of western European natural gas, Norwegians could play possum when it comes to overhauling the Scandinavian country's energy infrastructure.

Instead, officials in Oslo are aiming to make the country a hub of northern European offshore wind power activity.

Between Denmark's Vestas Wind Systems to the south, Scotland's joint wind farm projects led by Talisman Energy (NYSE:TLM) and ScottishPower to the west, and shipbuilding companies like Finland's Rautarukki now coming from the east with the goal of shifting shipbuilding operations into wind turbine tower production, Norway is at the heart of a transformational cold-water economy.

And the clean energy initiatives are coming from all over...

Norwegian oil and gas champion StatoilHydro (NYSE:STO) has teamed up with German infrastructure giant Siemens (NYSE:SI) to build the first floating wind turbines for deepwater use.

With centers of gravity deep below the surface and moorings tied to the seabed, these rigs would go farther offshore than any pylon-based wind turbine could. The first application for such a far-flung power generation system would actually be to help power oil and gas rigs that sit atop the North Sea's dwindling petroleum reserves.

And with Norway straddling the line between old North Sea energy and the new wave, legislators want to codify goals for getting a new industry off the ground and into the water.

With about $45 billion dollars in investment, Norway could build enough 5000-8000 megawatt wind power arrays to equal the output of 8 nuclear power plants.

The European Union, of which Norway is not a member, has set the goal of achieving a 20% renewable energy contribution to the EU's electricity generation by 2020. If Norway can harness its significant wind energy resources to deliver up to 40 terrawatt hours per year, it will also generate significant revenue from European customers to offset declining fossil fuel revenue.

Companies like Siemens and ABB (NYSE:ABB) are already hard at work addressing questions of transmission from offshore wind farms to onshore utilities, which of course presents a challenge of both minimizing loss and providing storage systems for off-peak generation times.

But the political will—for decades the missing component in Norwegian wind power—is now prominent.

Now let's see what the Norwegians do for themselves and the worldwide viability of offshore wind power when they put the money where their mouths are.

-Sam Hopkins

Desertec Solar Project

With unlimited natural resources and growing interest from Europe's biggest businesses, the Desertec plan for cultivating African and Middle Eastern solar power is gaining steam.

Steam's the thing, as it turns out, that will bring concentrating solar power from desert-based trough-shaped collectors that heat water, which turns turbines, which then feed to long high-voltage direct current (HVDC) lines across the Mediterranean.

The goal is to bring a major energy option to top European energy consumers while stimulating economic growth in the Middle East and North Africa (MENA) region.

MENA solar resources could, according to the European Commission, fulfill all of Europe's electricity needs with just 0.3% of the sunny region's annual solar radiation.

And by focusing on concentrating solar power (CSP), which is already in use in U.S. states like California and Nevada, Desertec would not be reinventing the wheel, or the panel.

The question of utmost importance, with the world of renewable energy finance still reeling from the credit crunch, is where the money will come from to finance such a massive project...

To that end, international commercial mammoths like Siemens (NYSE:SI) and E.ON (OTC:EONGY) are leading a German consortium that can make Desertec a reality.

For them it's a matter of business sense, getting the jump on other European and global power players while pleasing European governments and the European Commission, all of which are eager for an alternative to Russian natural gas. Not only solar but wind, biomass, and geothermal will all be part of Desertec's Trans-Mediterranean energy mix.

In July, we'll see the first concrete steps by 20 top German companies to get the 400 billion-euro ($561 billion) project up and running. A meeting is set for July 13 in Munich.

You can read more about Desertec's geographic and political basis here on our sister site, Energy and Capital.

Sam Hopkins

An Investment in U.S. Railroads

They gathered last week in Washington, far from their homes on the left coast. . .

They are responsible for over 70% of the Asian wares that come to the U.S. market. . .

"They" are the port directors of Seattle, Tacoma, Portland, Oakland, Los Angeles, and Long Beach... and what brought them together on Capitol Hill for the first time ever may surprise you.

You see, goods coming from across the ocean are taking far too long to move across America, so American port operators are pushing for major rail improvements to keep their international edge.

U.S. Shippers Try to Weather the Perfect Storm

Shipping rates around the world have fallen hard alongside the global economy.

Take a glance at this chart of the Claymore/Delta Global Shipping ETF (NYSE:SEA), which has swung as high as $26 and as low as $7 per share in the past year (it now sits just above $12).

While this ETF is comprised of companies like Tsakos Energy Navigation (NYSE:TNP), not port operators, you can see seafaring tankers and freight carriers have been hit twice as hard as the S&P by international economic weakness.

Credit is harder to come by, transocean orders are down, and competition is up. . .

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It's a perfect storm that threatens the livelihood of key import hubs, and what's coming from the seas is only part of the problem.

Tim Farrell, executive director of the Port of Tacoma, says, "West Coast ports generate more jobs than the Big Three automakers." Farrell and his five peers are swinging that weight around in D.C. to ensure billions of dollars are put into a "well-thought-out, strategic freight policy" that bolsters their competitiveness against import hubs in Mexico, Canada, the Panama Canal, and even the Suez Canal in Egypt.

Mexico already has plans in the works for a new Baja Peninsula port to service the southwestern U.S.

From there, trains could zoom freight from the Pacific into major cities like Houston more quickly than California ports are currently capable of doing.

The competition's coming from north of the border, too. Canada has similar plans for a port 900 miles north of Vancouver at Prince Rupert, British Columbia.

So you can see, the U.S. is behind the curve even among our NAFTA partners... at least when it comes to moving goods from west to east. And importers will continue to choose the Canadian and Mexican freight options over the U.S... in terms of both time and cost.

As such, the head honchos at West Coast U.S. ports are asking for a lifeline in pending multi-billion-dollar spending plans.

Tens of Billions of New Money for Rail

Congressman Jim Oberstar is the conductor of federal transportation funding these days. The Democrat from Minnesota wants $500 billion in new highway, high-speed rail, and public transit funding for the Surface Transportation Authorization Act.

That's on top of billions in stimulus money already allocated for infrastructure.

Oberstar balked on saying whether the fresh spending would require a gas tax increase, but the bill suggests a hike may be in the offing.

Port heads don't mind. They convened last week to ask Oberstar and others for their chunk, and they'll probably get it.

That's because port operators are only the latest voices in a growing chorus calling for rail infrastructure improvements.

The fact is the U.S. railroad system — the cutting-edge way to move products and people in the mid-1800s — is being seen as a potential locomotive for economic growth and vitality again.

In Wealth Daily's sister publication, Green Chip Review, we've prepared a special report detailing how money is moving back into rail in a big way.

You can access the report free by clicking here: Getting Back on Track

Look for more on the half-trillion-dollar transportation bill to come, as we track the money from D.C. all the way to the NYSE.

Regards,

Sam Hopkins

International Editor

Rail Infrastructure Crisis

On June 22, America and the world saw a tragic reminder of just how esssential infrastructure maintenance is. When two Red Line DC Metro trains collided on June 22, killing nine passengers and severely injuring many others, the response was an understandable, "How could this happen?"

(On a more personal note, a friend who commutes to work via the Red Line shared the following insight):

"Thank God the accident involved two trains heading into town that were sparsely populated. If it had been two rush hour direction trains, fatalities would have easily exceeded 100."

While investigations into the incident itself are continuing, Maryland Congressman and House Majority Leader Steny Hoyer knows that moving millions of people a day on outdated infrastructure is an ongoing gamble with stakes far too high to fudge.

So Hoyer has just proposed an additional $3 billion in Metro transit improvements.

That's a positive move, but it's too much of a response to problems that have been allowed to develop. Forward-thinking investment is what systems like DC's need, before disaster strikes.

$13 billion are set to pour into America's high-speed and commuter rail systems before 2014, including $8 billion in 2009 alone.

That money will be put to best use by investing in companies that make efficiency and safety their top priority. And since the U.S. is playing catch-up to countries like France and Japan that already have high-speed rail, there's a world's worth of examples and listed firms to choose from.

In our new report, High-Speed Rail: Getting Back on Track, we detail the potential economic benefits of advanced nationwide rail infrastructure as well as highlighting the very real costs of underinvestment and inaction.

The only international companies that deserve our public dollars are ones who will get the job done right.

And when it comes to where you should invest, the same tough standards apply.

You can check out the report here.

Until next time,

Sam

BRIC ETF Investments

Today I want to share what could soon be an extremely profitable short:

The BRIC Claymore/BNY Mellon BRIC ETF (NYSE:EEB).

That's because the world is now waking up from the BRIC dream.

Six years after Goldman Sachs researchers coined the acronym for Brazil, Russia, India, and China in a report titled Dreaming with BRICs: The Path to 2050, long investors could end up sleepwalking off a cliff.

You see, the World Bank just revised its global growth forecast for 2009 from -1.7% to -2.9%, and BRIC nations are finding it hard to fight the international market downtrend now forming.

The first BRIC summit took place last week in the consummate Eurasian location of Ekaterinburg, Russia, just east of the Ural Mountains that divide the two continents. Where the four countries called for a "stable, predictable, more diversified monetary system" and greater power in the World Bank and International Monetary Fund, the Claymore/BNY Mellon BRIC ETF (NYSE:EEB) plummeted the first chance it got.

EEB gapped down on Monday, June 22 to a quick 4% loss, after 50% YTD gains through June 11.

Commodity and savings-driven optimism put BRIC cheerleaders high on the astral plain over the past few years. But strong pricing and demand for oil, gas, sugar, iron and even debt—i.e. China's massive stockpiles of dollars and U.S. bonds—depend on healthy bank-fed credit flows.

Investors and consumers all have to keep their expectations up as well, in order to justify rising costs in raw materials, consumer goods, and government bonds alike, and sagging confidence ripples far and fast.

State-level action is where BRIC matters most now—and the political echelon is also where BRIC could crumble. For example, China has launched a $585 billion stimulus package, but one-party rule casts a long shadow.

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Running Down a Dream... Going Wherever it Leads?

Is the BRIC dream a profound vision to be interpreted, like when Joseph turned the Pharaoh's dream into history's first stock forecast? (seven years of plenty followed by seven years of famine... the ultimate bull-bear play!)

Or is BRIC more of an interrupted fantasy, like squaring up to kick the winning goal in the World Cup—right before your morning alarm goes off?

It's a bit of both.

Asia Times Online, columnist Chan Akya called the inaugural BRIC conclave a farce, but also a "much-needed first step in a journey that could well overhaul global economic architecture in decades to come."

The BRIC summit, and the very idea of BRIC as an independent, self-sustaining unit, both reflect the past decade or so of economic growth trends and foreshadow a possible scenario for new economic leadership.

As with "decoupling," though, BRIC oversimplifies a complicated and continuous process of global economic expansion and shifts in power.

Political and business leaders in Brazil, Russia, India, and China would be wise to concentrate on smart growth that fits their needs, rather than conforming to a slick buzzword.

But when it comes to investors like us, it's easy to profit from the falling fortunes of BRIC ETF components.

Shorting the EEB BRIC ETF

EEB is chock-a-block full of vulnerable mega-cap stocks from the four countries in question. Here's what I mean...

Top holding China Mobile stands to lose from migrant workers returning home and cutting cell phone service.

Earnings at Petroleo Brasileiro, Brazil's national oil company, are of course subject to oil price flux, and future earnings will be hurt by near-term underinvestment should crude fall to far.

And even though national governments have become primary lenders across all continents and even in BRIC nations, EEB doesn't register the stimulus-era shift in financing—financials comprise 16% of the base index.

Instead of dreaming with long positions in that BRIC ETF, look at the reality of what's going on.

Right now, heads of state around the developing world are looking first and foremost at ways to shore up domestic demand. "Buy American" or "Buy Chinese" provisions dot the $5 trillion in stimulus spending governments have promised. For India, China's insular buying of its own goods adds to Indian entrepreneurs' frustration over cheap Chinese goods. That's right, even in India, Chinese imports are a major concern.

No wonder... Manufactured goods from the Middle Kindgom come in at between 10% and 70% less than Indian-made equivalents!

Corruption and Quarrels Hold BRIC Back

Corruption is also a major stumbling block on the path to BRIC dominance or even parity. Consulting group Kroll just issued its Global Fraud Report, which focuses on stimulus spending. Using data from anti-corruption watchdog Transparency International, Kroll estimates that a full 10% of total global stimulus funds—$500 billion—will end up in the hands of profiteers and dishonest officials.

Russia's petroleum-heavy resource economy will suffer with dropping oil prices, India's infrastructure problems still have that country pinned, and China aims its economic efforts not only toward boosting domestic demand but also to prevent social unrest that could easily arise from prolonged joblessness.

The World Bank did recently revise its China growth forecast upwards from 7.2% from 6.5%, but the Bank's projections are notoriously fudgy.

Brazil, the only BRIC member in the Western Hemisphere, is still struggling to fight corruption. President Luiz Inacio Lula da Silva is steadily opening the country to more foreign investment and cleaning up national finances, but U.S. weakness will create drag from the north.

And of course, just because it would be more convenient for those countries to play nice, don't expect aggressive growth strategies to coincide. The aforementioned China-India trade battle is just one snapshot of how bitter bilateral relations can get when the going gets tough.

Through the rest of 2009, be nimble and ready to short emerging markets and related ETFs when uptrends show signs of reversal.

There's no better time than now to wake up and beat the markets to the punch.

Regards,

Sam Hopkins

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Global Biofuel Outlook

Biofuels have taken some big hits on both practical and public relations points in the past year, but new research says the longer-term outlook for biodiesel and non-ethanol fuels is healthy.

While a major biofuels conference, the Fuel Ethanol Workshop and Expo, took place down the road in Denver this week, Colorado's Pike Research issued its new assessment of how food, waste, and farmable feedstocks can become an integral part of the world's transportation fuel mix.

From an estimated $76 billion market size in 2010, Pike projects $247 billion in biofuel sales by 2020.

And the progression towards that point includes 3 major market-oriented research watersheds:

Waste grease conversion into fuel (i.e. vegetable oil to biodiesel) will advance to a commercial level in 2010.
Jatropha, an energy-rich plant that grows wild in warm countries like India and Mexico, will have a "significant impact" in 2014.
Finally, biodiesel derived from algae will become commercially viable in 2012 and strengthen further through 2016.

As Pike Research affirms, Brazil is squarely in the international biofuel leadership, and other countries will need to stimulate home-grown biofuels in order for a competitive international industry to truly flower.

And in the U.S., the scenario includes much more than corn ethanol.

You can read more about Biofuels Markets and Technologies, here.

-Sam Hopkins

Maglev Rail Infrastructure

To paraphrase legendary investor Peter Lynch, "Invest in what you know people need."

You know trains well, as shown in a slew of reader comments from last week's article on high-speed rail.

In only one week, you presented so many common-sense reasons to stimulate fast rail transit in the U.S., it is truly mind-boggling that nothing has been done to date.

Readers Give Their Reasons for High-Speed Rail

Hey Washington, need a business reason? How about electrical outlets by the seats and access to ground-based Internet? Reader Brek remarked that he has even "looked for real estate near a station" while taking the train in the Los Angeles region. But, Brek laments, land "probably doesn't carry any premium for being near a station."

Aren't we trying to raise home values in this country? Commuters want easy access to fast transportation, and they'll pay for proximity. Simple as that.

Philip S. highlights the pain-in-the-neck factor that would lure millions of drivers nationwide to an advanced train system. In Chicagoland specifically, "a monorail from Joliet to Chicago would save considerable commute time, avoid traffic delays, save fuel, and save lives." Yet, Philip's glasses aren't rose-colored. He points out the fact that many rail riders in the middle of the U.S. need a way to get to and from train hubs. . . Well, a park-and-ride system paired with smaller regional shuttles could go a long way.

Joe J. thinks high-speed rail is "long overdue in the U.S." And if there's one chord your responses struck over and over, it was frustration.

"Learn from the success of others," says one reader who wants to electrify and restore the train system, and get away from diesel-powered locomotives.

Stephanie I. learned how transformative a sophisticated rail system could be when she traveled on Japan's shinkansen, the world's busiest high-speed system.

Traveling at 130 miles per hour, Stephanie learned to love high-speed rail while watching the Japanese countryside whiz by.

That was in 1965, just a year after the shinkansen began operation. Fast-forward 44 years and 9 presidents, and Stephanie "can't believe how backward" the U.S. is. You've got plenty of company, Stephanie!

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And it's not just about the need for speed. Stephanie's got a bad back and can't travel by plane. "Hence, I never travel. But I'd love to. Tourism would get a huge boost from older people. We'd go everywhere."

So, there we see a clear benefit to Americans with a variety of physical conditions (not to mention fear of flying), as well as an influx of new money into sightseeing and such.

Comfort is a major component of the rail travel experience. Listen to your iPod, read the paper, or nod off. It's up to you. (I usually try for the first and end up doing the last.)

In much of the world, train service includes the same kind of aisle service flight attendants provide. Believe it or not, the air industry got that idea from the choo-choo!

Which brings us to a strange pivot point between the status quo and the simmering potential. . . maglev (magnetic levitation) rail between airports and city centers.

Maglev Moves Faster

I rode the maglev line from Shanghai's international airport right to Longyang Road in the city and watched the digits tick up, up, and way past any speedometer I'd ever seen before.

The Shanghai maglev goes from 0 to 220 mph in just 2 minutes! Expect to rocket over 280 — cruising speed — and complete the 19-mile trip in 7 or 8 minutes.

With millions of new drivers hitting the road every year, the Shanghai maglev helps prevent congestion on the way to China's 3rd busiest airport.

Is maglev viable here in the U.S.? Many of you voiced your support, including WB's suggestion for a "maglev incorporating superconductor technology" as a means of transmitting electricity while running rail lines.

Smart grid meets smart rail. . . now there's an idea!

A maglev line from Anaheim, California to Las Vegas, Nevada has been on the drawing board for decades, as an attempt to pull traffic off the I-15 highway corridor.

But just since the beginning of June, Nevada senator and Senate Majority Leader Harry Reid seems to have given up on maglev in favor of a conventional (probably diesel) high-speed train called the DesertXPress. Instead of running on a cushion of air like maglev, the latest proposal is back to wheels and aims for around a 150 mph peak speed — just above what the Japanese achieved over a generation ago.

"Maglev is not a priority for me anymore," the Leader said on the subject. "We need to get people moving."

Well, at least we agree on that.

Regards,

Sam Hopkins

P.S. Employing high-speed rail on a large-scale basis will meen numerous new electricity requirements. This is where the synergies of cleantech come into play. Soon, we could have high-speed trains being powered by clean energy. But none of this will happen without the smart grid, the technology that's tying it all together.

Clean Coal Carbon Storage

It's not often that Green Chip Stocks will refer you to Texas energy execs for straight talk...

But when it comes to carbon capture and storage, old oilmen may be the most no-nonsense folks out there.

Kinder Morgan Energy Partners CEO Rich Kinder told the UK's Guardian newspaper recently that carbon capture and storage, the plan on which "clean coal" technology rests, is a bunch of hooey until legal liability gets sorted out.

When it comes to burying CO2 from coal-fired power plants, Kinder Morgan is not "willing to sign up for guaranteeing to the U.S. government or to whomever that it will forever stay in the ground in this salt dome in Louisiana — and if it doesn't — just come back and see ole Kinder Morgan and we'll make you good for it."

We don't think the Obama Administration's FutureGen clean coal initiative is a winner, because it's the result of a last-ditch blitz by the coal industry to keep America at least slightly sooty for a while longer.

Kinder Morgan, the nation's leading CO2 pipeline provider, isn't falling for Obama's pump-fake, and neither are we.

Kinder Morgan runs 1,300 miles of conduit for excess gas between Colorado and Texas, for the purpose of injecting it into the ground for a process called Enhanced Oil Recovery (EOR).

But in EOR, CO2 comes back out with the (ideally) gushing oil it's just pressurized. Kinder Morgan and others have enough doubt about just sticking the stuff in the ground—in underground salt dome formations, especially—that they won't use their CO2 transport expertise to help sock the gas away.

Clean coal isn't even included in the new GOP "All of the above" energy plan which emphasizes expanding oil and gas leases. That approach includes 20 new nuclear plants, which of course brings its own waste storage problems.

Why get bogged down in FutureGen, whose patrons are companies like Southern Company, Peabody Energy (the world's biggest private sector coal company), and China Huaneng Power?

Keep up with Green Chip for the real deal on FutureGen and where America's energy future lies.

Sam Hopkins

Peter Schiff: U.S. Political Risk a Reality

Today we bring you a brand-new guest column from Wealth Daily friend and best-selling author Peter Schiff. In his article below, Peter reflects on how politics directly affects your money and where you choose to put it.

For an international example, voters in the world's biggest democracy — India — sent a pro-growth message by re-electing the Congress party this May.

The Congress party's sweeping victory will allow Prime Minister Manmohan Singh to pass market-oriented reforms. The vote also signaled political stability despite the terrorist attacks in Mumbai last November.

As Singh's supporters danced in the streets, international investors screamed, "Buy, buy, buy!"

The U.S.-traded Wisdom Tree India Earnings Fund ETF (NYSE:EPI) rocketed to a one-day gain of over 23% on the news, piling globalized profits onto an already amazing quarter for the country's Sensex benchmark index. Check out the 3-month chart below to see how the mid-May election spike sticks out:

So, in the eyes of diversified international investors, Indian electoral politics this spring led to tremendous upside gains.

But there is, of course, a dark side to political economics... and that's political risk.

Political risk could be a coup in Thailand, a nationalization program in Venezuela, or a pipeline bombing in Nigeria that drives local markets down and sends foreign money flying.

Iran's current electoral turmoil would be a perfect example, but you are actually insulated from political risk in Iranian investments by the fact that you can't invest there.

Yet, political risk can rear its head anywhere. And as Peter writes today, the most immediate and worrisome case of political risk is unfolding right here in the United States.

Now, word has it that Peter is considering a run for Senate in his home state of Connecticut.

For the time being, though, Peter continues to be a leading voice on the connection between politics and profits, and we're happy to bring you his insights once again.

Regards,

Sam Hopkins
International Editor

20% Wind Energy by 2030

The U.S. Department of Energy has released a report stating that the U.S. could get 20% of its electricity from wind power by 2030.

For that to happen, $20 billion needs to be invested every year for the next 20 years, bringing the two-decade U.S. wind investment total to well over $400 billion.

In Europe, over one third of all new electrical generating capacity will come from wind for the next 10 years. After that, wind's share will grow to 46% of all new generation capacity.

The personal profits made from the wind industry will be more than legendary. Green Chip has composed an extensive report on how you can get your share of the profits.

Be sure to read it today.

Political Risk Hits Property Rights
Peter Schiff

"Crony capitalism" is a term often applied to foreign nations where government interference circumvents market forces. The practice is widely associated with tin-pot dictators and second-rate economies. In such a system, support for the ruling regime is the best and only path to economic success. Who you know supersedes what you know, and favoritism trumps the rule of law.

Unfortunately, last week's events demonstrate that the phrase now more aptly describes our own country.

On Monday, the Supreme Court refused to hear an appeal from Chrysler's secured creditors based on the government's argument that the needs of other stakeholders outweighed those of a few creditors. In this case, the Administration concluded the interests of the United Auto Workers outweighed the interests of the Indiana teachers and firemen whose pension fund sued to block the restructuring. Given the enormous financial support that the UAW poured into the Obama campaign, such partiality is hardly surprising.

When making their investment in Chrysler just a few months ago, the Indiana pension fund agreed to commit capital because of the specific assurances received from the company. In allowing this sham bankruptcy to be crammed through the courts, we have shredded the vital principal of the rule of law, and have become a nation of men, rather than one of laws.

The risk that legal contracts can now be arbitrarily set aside will make investors think twice before committing capital to distressed corporations. Oftentimes enforcing contracts imposes hardships. That's precisely why we have contracts.

Without absolute faith that deals will be honored, it will be extremely difficult for U.S. companies to borrow money. This will be particularly true for those companies already struggling with too much debt. Without the ability to issue secured debt, how will such companies access the necessary capital to turn around? If secured creditors cannot count on the courts to enforce their claims, they will not put their capital at risk. What good is being a secured creditor if courts can allow the assets securing your claim to be sold for the benefit of others?

Another problem with the government imposing losses on secured Chrysler creditors is that in its bailouts of financial companies (like Citigroup and AIG), the government took steps to specifically pay back creditors, even when those creditors should have been wiped out. This inconsistency and lack of equal protection further undermines faith in our economy.

An Uneven Playing Field for Creditors

The message here is clear: loan money to financial entities with friends in Washington and no matter how risky the loan, taxpayers will bail you out if it goes bad. However, loan money to a unionized manufacturer, even if prudently secured by real assets, and you have as much chance of getting your money back as finding Jimmy Hoffa's body.

As if this wasn't bad enough, testimony on Thursday from former Bank of America CEO Ken Lewis revealed a concerted effort on the part of Fed Chairman Ben Bernanke and former Treasury Secretary Henry Paulson to pressure Lewis into hiding relevant financial information regarding Merrill Lynch losses from B of A shareholders. Recently released e-mails make it clear that the government threatened to remove corporate leaders if they failed to go through with the merger and keep quiet about the losses.

Again, the justification for the interference seemed to be the "greater economic good" the merger would serve. The right of B of A shareholders to be informed that their company was about to buy a financial black hole was clearly considered to be an acceptable sacrifice.

More importantly, the fact that two of the highest-ranking government officials can conspire to violate both securities laws and private property rights is abhorrent to everything America supposedly stands for. If they get away with it, which I believe they will, the precedent and the message will be chilling.

As a broker who specializes in foreign investments, I am always wary of political risk. I must consider how the threat of arbitrary government action could undermine the value of my investments. However, recent events show that political risk is now greater here than abroad, and U.S. assets, which have historically traded at premium valuations based on faith in our legal system, will soon trade at discounts to reflect this new threat. The fear of having contracts abrogated or property rights violated when doing so serves some contrived greater good will substantially raise our cost of capital and further reduce our competitiveness.

Invest wisely,

Peter Schiff

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar, read my newest book "The Little Book of Bull Moves in Bear Markets." Click here to order your copy now.

And you can download my free Special Report, "Peter Schiff's Five Favorite Investment Choices for the Next Five Years," at http://www.europac.net/report/index_fivefavorites.asp.

High Speed Rail

As of June 9, 2009, the largest public works project in the U.S. is a railroad tunnel.

$8 billion in federal stimulus funds are pouring into select high-speed rail projects like the Hudson River rail tunnel from New Jersey to New York City. . .

And the bucks disbursed by Washington make up just one part of a multi-billion dollar effort to update the nation's iron highways. The train is just now leaving the station. Are you on board?

Not Just New York

The New Jersey Transit's rail and bus lines take passengers on over 223 million trips a year. Nationally, ridership has been increasing not only on high-frequency commuter lines like NJ-NYC, but also between cities like Raleigh and Charlotte.

North Carolina's main Amtrak route runs you from point A to point B in about the same time it takes to drive. And when gasoline prices skyrocketed in 2008, the 170-mile Raleigh-Charlotte route saw a 28% jump over 2007 ticket sales.

To commuters, rail made more and more sense with every cent unleaded ticked upward.

But what if the same route took half the time by train as it did by car— and cost less?

That's the scenario in the making across the country's "mega-regions."

Mega-region is a term coined by Richard Florida, a transportation researcher who created an economic geography of the U.S. based partially on how lit up different areas are on nighttime satellite images.

The most heavily populated and economically vibrant mega-region is the Boston-Washington DC corridor known to many as the Megalopolis.

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Nationwide, mega-regions like the ones stretching from Chicago to Kansas City and from San Diego up to Sacramento account for 3/4 of American economic activity. Check out this Department of Transportation map to see what I mean:

High-speed rail would lessen commute times between close-together cities like Washington and Baltimore, and it would let business travelers get from Boston's city center to the nation's capital in under 3 hours.

Baseball fans in Baltimore know the bittersweet boost the local economy gets each year from Amtrak, as Red Sox and Yankees fans flood down for games against the Orioles. It turns out that it's cheaper for Boston and New York natives to catch the train down and catch a game than it is to buy a ballpark seat in their hometowns!

Going Back to Cali

Some of the security hassles of air travel may be replicated as rail lines get more packed, but times to and from far-flung airports would be eliminated. What's more, you can book a train ticket for a reasonable price at any train station and often without an attendant. There's no comparison when it comes to the run-around.

There's also a huge savings to be had at the state level, as California makes clear.

California's state government says a statewide high-speed rail network would eliminate the need for 5 runways and 90 boarding gates to be built by 2020, and construction crews alone would employ 160,000 workers.

By 2035, all jobs associated with expanding railway infrastructure in the Golden State could come to 450,000!

That's in addition to saving on traffic congestion, pollution, and health care costs for citizens (3000 lane-miles of freeway would also be cut out by rail), and creating a billion dollars in revenue surplus for Sacramento, where state legislators are perennially locked in budget strife.

You know what, though? It's right to doubt the government's ability to get rail done right.

The 'Big Dig' Bogeyman

As some politicians in Washington push for an "all of the above" approach to energy that includes more oil drilling in the U.S., do they also stand behind giving Americans the best options in efficient intercity travel?

Boston's "Big Dig" highway project became a laughing stock for time and cost overruns in a government-led project. The boondoggle even cost a life when temporary patchwork crushed a vehicle.

NJ Transit doesn't want the ARC (Access to the Region's Core) tunnel to become "Big Dig, Part 2." And in the southern part of the state, we're seeing an example of how rail projects can grow from more than one root.

The Delaware River Port Authority (DRPA) failed to get approval recently for its own diesel-fuel light-rail line towards Philadelphia's New Jersey suburbs.

DRPA couldn't get stimulus funding because the project didn't meet federal criteria on "ridership, cost-effectiveness, and commuter time savings."

"It's extremely difficult to meet the marks they put down," DRPA CEO John Matheussen told the port authority board.

How many proposals like DRPA's from around the country get federal funding, according to the CEO? Only 2 out of every 100 projects. That leaves room for states to act more quickly, he says, which can bring a time and cost advantage as the race for regional high-speed rail heats up.

We're tracking companies like ABB (NYSE:ABB), which has played a major role in creating light-rail systems around the world.

Next week, a look at what other countries are already doing with high-speed.

What's your experience with rail travel, and how do you think the U.S. should move forward on the issue?

Let us know in the comments below.

Regards,

Sam Hopkins

Brazil's Small Cap ETFs

My friend Frank couldn't believe I missed Rio's most famous symbol.

"You didn't see Christ the Redeemer?," Frank challenged after I got back to Baltimore. His face twisted in disbelief.

"I saw it from a distance plenty of times," I told him calmly, since I had indeed beheld the 100-foot tall statue while trucking around town.

But what Frank didn't get was that the small things matter most to me. I prefer the feeling of the streetside stalls, hearing old men shout to sell their wares.

The most obvious destinations are often a distraction...

And the same goes for the most obvious investments.

Which is what brings me to a brand-new Brazilian small-cap stock ETF available to U.S.-based investors.

It's full of just the kind of high-powered consumer plays that I found down on the ground in Rio. Here's what I mean...

The Market Vectors Brazil Small-Cap ETF

On May 12, 2009, Market Vectors added to its growing assortment of international ETFs by launching its Brazil Small-Cap ETF (NYSE:BRF).

There are other Brazil ETFs, including the gigantic iShares MSCI Brazil Fund (AMEX:EWZ).

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EWZ enjoys average volume of over 22 million shares per day. And its main constituents are heavy-duty Brazilian companies like Petrobras (NYSE:PBR) and Vale (NYSE:RIO) that can be found as ADR shares on U.S. exchanges.

BRF, for comparison, holds companies with a base market cap of $150 million—they're not micro-caps, but BRF's holdings are far from household names on a global scale.

You know what, though? Sometimes you don't want to trade a country's 100-foot stock statue. It may stand strong over the years, but a national emblem like Petrobras can also take a beating on bad news if it's the first local stock in foreign investors' minds.

Those Brazilian behemoths are also far more subject to the whims of global commodities markets than are small caps.

So instead of EWZ's allocation of over 62% to energy and materials stocks, BRF managers have formed a fund that's heavy on consumer discretionary shares and domestic trends in the Brazilian market.

We find industries like health care and IT in BRF that are totally absent from mega-ETFs like EWZ.

And those low-profile, consumer-driven industries cannot be ignored in a top developing country like Brazil.

Though consumer confidence, i.e. willingness to spend, has dropped in South America's leading emerging market, Brazilians have largely weathered the storm better than Russia, China, and India—the other members of the BRIC club coined by Goldman Sachs back in 2003.

As investors grow more accustomed to seeing ADRs and international ETFs as top performers, they're up for a little more risk... for a lot more reward.

A Growing Taste for Global Small Caps

Overall, the fact that a top ETF provider is delving deeper into the Brazilian stock pool says a lot about the safety of investing there.

And to show you the potential returns from this international approach, look at the Claymore/AlphaShares China Small Cap ETF (NYSE:HAO).

HAO, which means "good" in Chinese, is actually the best in China since December, gaining 71% against an impressive 32% average for leading large-cap Chinese ETFs NYSE:CAF and NYSE:EWH!

Time will tell how HAO's Brazilian counterpart performs against its mega-index counterpart EWZ.

The track record for S&P's Emerging Markets Small Cap ETF (NYSE:EWX) reflects positively on BRF too.

EWX is up by more than 59% since December, compared to just 2% for the S&P 500!

Whatever the case may be in the early going, expect big things from this small-cap ETF.

Regards,

Sam Hopkins

P.S. - Small-cap funds and stocks are known for their volatility as much as for their enormous potential returns. But that volatility can be controlled with top-notch research and trading expertise like Ian Cooper brings to his Small Cap Trading Pit readers. SC Trading Pit is mostly U.S.-based, but Ian is well aware of the growing access and advantage of international small-cap ETFs like NYSE:BRF. To learn more about the individual stock angle as well as fund-based small-cap investing, check out SC Trading Pit today: http://www.angelnexus.com/o/op/12786

Oil Price Outlook

With oil prices down because of economic gloom, oil majors aren't investing as much in finding new supplies.

The Economist recently highlighted the IEA estimate that overall investment in exploration and production will drop by 15-20%.

Here we see in an Economist chart just what that trend looks like on a year-to-year basis, with a staggering plunge taking place from 2006-2007:

Your first thought might be, "Why did investment drop so hard in 2007, when the recession hadn't taken hold yet?"

But a better question is, "What will the oil price do once demand is restored and exploration has left us scraping the barrel bottoms?"

Read Chris Nelder's updated oil price outlook for the answer.

-Sam Hopkins

Hydropower Energy Companies

The #1 threat to energy supply security that we face today is underinvestment, bar none.

New stats from Goldman Sachs show that the number of oil & gas projects approved in 2008 barely equaled the total for 2002.

In 2009, exploration by the world's petroleum powers will drop even more to just 1/6 of the 2006 peak.

But there are bountiful energy resources out there that you don't need to drill for. . .

And water is the first and best of these.

Hydropower is making a comeback, and it's hardly the same old "dam" story we've been told for generations.

Last week in Wealth Daily's sister publication Green Chip Review, we gave readers access to a full report on the top water-to-energy technology we're tracking, including the names of no fewer than 5 companies in on the uptrend.

It's called run-of-river hydropower, and it will soon power hundreds of thousands of homes worldwide.

Here's an excerpt, with a link to the full report below:

===

Run-of-River Scores a Win in Canada

In the province of British Columbia, run-of-river power has been run through the political mill lately.

The New Democratic Party stumped for a 6-month moratorium on private power projects that encompassed several clean energy technologies. Hydro was included on the forced dormancy list, so were wind and biomass (the local solar resource is negligible).

But the Liberal Party won, and Canadian clean energy investors didn't just breathe a sigh of relief — they also propelled shares of companies like Plutonic Power (TSX:PCC) to new highs.

Vancouver-based Plutonic Power's stock jumped by more than 20% on the heels of the May 12 vote.

From March 3 to June 3, PCC shot up by 83%!

That one company has at least 17 small-scale hydroelectricity generation sites planned for the hilly headwaters of Bute Inlet, a fjord just north of Vancouver and Vancouver Island.

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Below, you see the layout of how run-of-river generation works in Plutonic Power's proposals:

This run-of-river design diverts some water into a pipe called a penstock, which channels the river water into turbines for generation. Then, the water goes back into the stream with little or no net effect on downstream water levels.

That's perhaps the most salient difference between dams and ROR projects in terms of environmental impact and the regulatory hoops specialty firms have to jump through.

Hoover Dam, that national landmark and symbol of how long hydro has given power to the American Southwest, has a generating capacity of just over 2000 MW.

If approved, Plutonic's modular Bute Inlet array will be optimized to generate more than 1000 MW!

===

You can access the whole report at absolutely no cost right here:

http://www.greenchipstocks.com/report/run-of-river-hydropower/439

And to make sure you get the first crack at our next energy briefing, check out Green Chip Review today.

Regards,

Sam Hopkins

International Editor

The Future of Hydropower

Innovation and competition go hand-in-hand in clean energy, and the field of potential winners in next-generation hydropower production is growing thinner by the day.

Run-of-river (mini) hydropower is ahead in the race. You've already read in GCR about how publicly-traded companies like Plutonic Power have established essential ties to utilities, while they continue to study the potential generating capacity and environmental effects of their small-scale hydropower technology.

Now, we're happy to present a full report that gives you more than 5 stock plays on run-of-river hydropower's push to prominence.

You'll also find details on a market we haven't discussed yet—India—where a booming population and energy deficits are paired with a mini hydropower developer's dream resource... A landscape full of rivers, large and small.

The rainy season is coming soon, and after this company's projects start churning out electricity to thousands of homes, it will be flooded with profits and new projects.

Be sure to check out the new free report.

Regards,

Sam Hopkins

Green Chip International

Plutonic Wind Energy

A couple of weeks back, I wrote about the changing investment landscape for run-of-river hydropower stocks in Energy and Capital's sister publication, Green Chip Review.

One of the companies highlighted in the GCR original was Plutonic Power (TSX:PCC), an independent Vancouver-based energy group listed on the Toronto Stock Exchange.

Plutonic had already risen by 66% from $2.10 to $3.50 per share in the period from May 1 through May 13, and as I wrote the stock was just beginning to settle back down towards the $3 mark.

Then on June 1, Plutonic shot up by over 16% in one day's Toronto trading!

That share boost came after news that GE and Plutonic may be teaming up to acquire British Columbia's biggest wind farm.

While Plutonic Power jockeys for prime position in BC's developing private hydropower market, it's already gaining share momentum from its other segments.

Plutonic is just the kind of diversified clean energy producer we like to highlight in the free Green Chip Review e-letter, in addition to pure plays on clean energy sectors like solar, wind, and geothermal.

In this Thursday's Green Chip Review, we'll make a full report on run-of-river hydropower available for the first time.

You don't want to miss it.

Sign up for GCR today and get your first free report, Investing in Next-Generation Solar Power Technologies, right away.

-Sam Hopkins

China ETF Trading

The second half of 2009 promises to be profitable for ETF investors who play China.

Following an 8-month break in new stock issues — the sixth such pause since 1994 — 33 IPOs will hit the mainland exchanges in Shanghai and Shenzhen between now and August.

That's over 1.86 billion fresh shares about to get dumped on top of a rallying market. Understandably, some local investors fear the IPO flood may "short circuit" the run up.

But the move to re-introduce new share sales looks like a net positive for the health of China's equity markets, stoking new participation and easier access to liquidity for deserving companies.

So, let's ride the IPO shock downtrend with a combination of emerging market shorts, inverse ETFs, and options. . .

Then buy back into the upswing after the new issues settle and local investors get roaring again!

Here's the angle.

"A Welcome Development"

Instead of giving priority to institutions like banks and pension funds, regulators have decided to offer retail investors first crack at the Summer '09 crop of IPOs.

There will be some growing pains in the process of introducing such a huge change, of course. . .

Above all worries, an IPO onslaught could dial back the nearly 50% upswing in A-shares (as opposed to Hong Kong-traded H-shares) we've seen so far in 2009 for Morgan Stanley's China ETF (NYSE: CAF).

Those fears have led to a moderate sell off in A-shares, even with a half-trillion dollar stimulus package buttressing optimism about 2009-2010 earnings.

Are sellers way off base? Not necessarily.

Stake Your Claim in the Stimulus Goldmine

With $787 billion in pork now sloshing around Washington D.C., one industry in particular stands to grab the lion's share.

And for the investors that get there first, this moneymaking opportunity is one that may just turn out to be the mother lode.

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The local head of JP Morgan's equity strategy unit Jing Ulrich says, "Concerns that the new offerings will divert funds from the secondary market are legitimate."

But Ulrich also called the IPO resumption "a welcome development, considering the attention paid to market-oriented pricing and small investor participation."

The short-term shock should lead to medium- and long-term benefits.

Why not exploit both trends as they unfold?

Playing the Downside and the Upside Too

The Morgan Stanley China A Share Fund (NYSE:CAF) has gained more than 54% in the past six months. Even though the Dow has pulled up since early March, CAF has doubled the blue chip index's success.

A-shares also outperformed H-shares over that same period, as we see when we look at NYSE:FXI, the iShares FTSE/Xinhua China 25 ETF, in the same chart above.

The difference in China-based share varieties is important: H-shares can be bought directly by foreigners, A-shares can't.

So, on one hand, FXI didn't enjoy the same upward momentum as CAF did from February through April. But on the other hand, FXI isn't being hurt by mainland uncertainty ahead of the IPO deluge.

CAF is the one to short, while the FXI's inverse ETF — FXP — offers an easy option for going against the less-volatile H-share index.

As the IPOs soak in, you'll want to reverse those positions and go long again.

By September, it will be time to buy FXI again as Chinese shares tick back up.

Regards,

Sam Hopkins

P.S. Knowing when to switch gears between long and short positions isn't easy, but traders who can play downtrends and uptrends alike have the whole world in their hands. My colleague Ian Cooper studies average price movements and a slew of technical indicators to pinpoint those times when the market turns on a dime, passing only the juiciest trades along to his Options Trading Pit subscribers — right when it's time. Ian's average hold time is only 11 days per trade. . . with an average gain of 55%! Learn more about OTP today to get the scoop on his China strategy and a slew of other winning plays.

Brazil Gold Production

Gold is changing the face of Brazil once again.

Amid a mining investment surge the country hasn't seen in three centuries, Brazil's leadership is using new economic strength to turn away from the U.S. dollar.

We'll look at these twin trends here, and what investors stand to gain.

Following the discovery of glittering riverbed resources in the 1690s, hundreds of thousands of wildcatters poured into the then-Portuguese colony, and the influx of men and money into the Sao Francisco Valley helped the colonial power base from the northeastern city of Bahia, southwest to Rio de Janeiro.

It was a hundred years before the limits of contemporary surveying and mining technology brought Brazilian gold production to a virtual halt.

Today, there are again hordes of prospectors sweeping into new parts of the country's interior. As was the case in the gold craze 300 years back—the biggest mining frenzy the world would see until the 1849 California Gold Rush—rumor spreads quicker than fortune.

But unlike in colonial times, Brazil is now an independent and rapidly rising country, free to set its own terms for investment and exploration.

The Sao Paulo Geological Institute's Helio Shimada says Brazil's gold production potential is up to 200 tons per year, and foreign firms like Barrick Gold [NYSE: ABX] and Anglo American [NASDAQ: AAUK] are working to ramp up output.

The government wants those companies to work with the Ministry of Mines and Energy to keep the nearly 400,000 wildcatters thought to be scattered throughout the Amazon region from doing major environmental damage and scarring the landscape with crude exploration pits.

Informal gold exploration activity steadily declined during the secular gold bear market of 1988-2000, but government-sanctioned mining and alluvial deposit collection led formal output to increase through most of that time.

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Since expenses for wildcatters are more difficult to defer without massive credit lines large companies have, so is the risk, and so small-scale speculators fold up their tents more quickly when prices drop.

As prices rose again recently, knee-jerk wildcatters headed into the hinterlands again. The government wants them out.

So international miners are pumping money into Brazil. Already the top emerging market in Latin America, brazil just logged a 30% jump in foreign direct investment (FDI) over the previous record from 2007.

And as the leadership brings in more and more money inflows, there's another bullish gold trend in the works down there.

Brazil's new Gold Century is also contributing to the dollar's decline.

That's because President Luiz Inacio Lula da Silva is pushing for Brazil to settle more of its international business in the local currency.

Brazil Leads De-Dollarization of Global Trade

Lula has railed against "blue-eyed bankers" for causing the worldwide recession, even while he managed to keep Brazil in good shape. The latest figures show that Brazil turned in a current-account surplus in April, and the country was raised last year to investment-grade status by S&P.

Brazil is in a position of strength, and Lula knows it. Now, instead of doing deals in dollars, Lula wants transactions between Brazilian and Chinese firms to dodge the greenback.

Steven Barrow of South Africa's Standard Bank says such a move could start the "creeping de-dollarization" of international trade. And as the U.S. currency sheds its arbitrary value, gold stands to gain.

Brazil is positioned to benefit both from the local currency boost, and from a surge in gold exploration and FDI.

Make sure the mining stocks in your portfolio have exposure to Brazil. Also, check out NYSE:EWZ, the iShares MSCI Brazil Index ETF. That exchange-traded fund is heavy on materials, with a 26% allocation to companies like mining giant Rio (NYSE:RIO).

We'll keep you up to date with the latest developments in Brazil's gold production progress.

Regards,

Sam Hopkins

P.S. Wherever the resource lies, gold investors need to know the dynamics of the international gold market. My colleague Greg McCoach has uncovered a little-known phenomenon that can lead to compounded profits, and he's written a full report about it. You can learn more about Gold's Doubling Effect right here: http://www.angelnexus.com/o/web/12671