Month: April 2012

By MoneyMorning.com.au

To do serious business in America requires vast campaign contributions to several layers of elected politicians, an army of lobbyists in Washington, retired government employees on your board and public devotion to the American civic religion. It goes on every year and restarts every election cycle.

Even then, it is hard to know if you are going to get what you pay for.

It’s easier and more efficient in Mexico. You pay bribes directly. The decision maker gets the money. He or she clears the path for you to do the thing. The facilitator takes a slice. People mostly keep their promises. The deal is done.

Apparently, bribe paying in the United States is a sign of a healthy, functioning democracy; doing the same thing in Mexico in a more streamlined way is a criminal violation of the standards of good corporate governance.

Not Quite Getting It

Here we have The New York Times “exposing” the shocking and presumably ghastly fact that over several years, Wal-Mart paid out some $24 million in payoffs to politicians, bureaucrats and petty gatekeepers in Mexico, all in the hope of employing people who need jobs and bringing goods and services to those who need them.

The breathless and bloviating Times expose is written as if these intrepid reporters were exposing a violent mob engaging in killings to get its way. You never quite get that Wal-Mart would much rather have used the money to expand its business, hire more employees or beef up its inventory. Money used for bribes is a loss to any company, a terrible price of doing business under the state.

In any case, the trove of information was shovelled on the paper by disgruntled employees. And it is hardly unusual. It’s how business is done. Regardless, the Times is out for blood — not from the extortionists who run the system, but the victim, Wal-Mart.

At last count, there were 1,200 news stories about this on the wire. Forbes reports:

“Wal-Mart Stores will likely face the wrath of the U.S. Department of Justice for reining in an internal investigation into bribery allegations at its Mexican subsidiary.”

I’m sure that congressional investigations are around the corner, with all the named executives hauled before committees and harassed by regulators.

The bitter irony is that it will transfer more of the Mexican system to the U.S. To survive, Wal-Mart will be forced to spend more than the $12 million-plus it already spends every year on campaign contributions and lobbying.

All that enforcement of the Foreign Corrupt Practices Act (FCPA) does is increase the amount of domestic corrupt practices. Indeed, that is the way the system is supposed to work. Truly, if the FCPA were actually enforced as written, business around the world would come to a grinding halt.

Eliminate Barriers to Enterprise

Under the well-known Mexican system, people called “gestores” specialize in interfacing between business and bureaucracy. They deal with inspectors, permit issuers, environmental bureaucrats, labour officials and zoning regulators.

If the gestores can make the deal, they keep 6% as a matter of convention. Even average citizens use these people to stand in line for them — all in an effort to find nonviolent means around the bureaucrats.

Given the ridiculous barriers in place, it’s not a terrible system. Corrupt government that you can buy your way around is far better than “good government” that blocks all progress.

The rap on Wal-Mart is that it did far worse. When the company discovered this was going on, it buried it, rather than go public. No kidding. Maybe the company imagined that it would be smeared and attacked?

Bribing officials is illegal in Mexico, just as it is in the United States. But of course, that is just the gloss. Anywhere there is government, there is corruption. That’s the purpose of barriers to enterprise, to extract wealth from those who want to get past them.

Is it worth it? It is either pay or don’t do business, which means lasting poverty. Today, Wal-Mart Mexico employs 209,000 people and is the country’s largest employer. It has provided a fabulous example of the merit of private enterprise in this country, which is finally getting on its feet economically.

It has brought food, goods and services to millions of people who otherwise would not have them. It has done more in 10 years for Mexico than all the government bureaucrats have done in one hundred or a thousand years.

For its crime of bringing economic development to this country, it must be smeared, beaten and forced to pay obeisance to the American political class. Why should Mexico enjoy such largess when there are millions of American bureaucrats who need to be part of this gravy train?

You can read thousands of academic papers on the problem of “corruption” in countries around the world and completely miss the central point. The way to eliminate the corruption is to eliminate the barriers to enterprise.

Why is this not obvious? Because many people imagine a utopian ideal that does not now and never has existed: good government. They imagine that government rules can be enforced impartially based on science or the public good.

It’s Sheer Nonsense

As Ludwig von Mises writes in Human Action:

“Unfortunately, the officeholders and their staffs are not angelic. They learn very soon that their decisions mean for the businessmen either considerable losses or — sometimes — considerable gains. Certainly, there are also bureaucrats who do not take bribes, but there are others who are anxious to take advantage of any ‘safe’ opportunity of ‘sharing’ with those whom their decisions favor… Corruption is a regular effect of interventionism.”

But here’s the part that upsets me so much. Somehow, private enterprise is always and everywhere blamed for perpetuating corruption, when the truth is obviously that the blame rests with government. It’s like watching a mugging and blaming the mugged for carrying too much money. It’s like telling anyone who faces the demand “Your money or your life” should always choose to give up his life.

The background here is nothing short of anti-capitalist resentment. The elites loathe Wal-Mart for its achievement in putting on display the incredible reality about capitalism that you never hear about in school: It is a system that is maniacally focused on the well-being of society in service of the common man.

Go to Wal-Mart and you see the workers and peasants not rebelling against the system, but buying stuff that makes their lives better. It looks rather mundane. It’s how civilization is built: one economic exchange at a time. The people who stand in the way don’t deserve a dime, but private enterprise is kind enough to cough it up, anyway. Wal-Mart deserves sympathy, not condemnation.

Jeffrey Tucker
Contributing Writer, Money Morning

Publisher’s Note: This article originally appeared in Laissez Faire Books

From the Archives…

Small Caps – A Way to Bet on Developing Markets…Without Investing Overseas
2012-04-013 – Kris Sayce

All Transactions to be Conducted in the Presence of a Tax Collector
2012-04-12 – Simon Black

How You Can Use Government Intervention to Profit on the Stock Market
2012-04-11 – Kris Sayce

Australia – The Pacific Pawn in USA Versus China
2012-04-10 – Dr. Alex Cowie

If Ron Paul Were US President…
2012-04-09 – Mark Tier

Why Walmart is the Real Victim of the $24 Million Pay-off in Mexico

The White House announced it was getting into the commodities game in an effort to protect consumers from some of the geopolitical factors spilling over into the retail gasoline market. OPEC and the IEA both said in their monthly reports that market perceptions were behind higher energy prices, not physical shortages. With most U.S. consumers still economically gun shy, gasoline consumption is down amid high retail prices. But on the business side, protection against potential oil shocks in the long-term could help push a reinvigorated U.S. economy over the recessionary hump. Apart from the murky waters of economic nuance, however, President Obama said that, no matter what, American commuters need gasoline. Speculation aside, maybe that’s the problem.

High gasoline prices make for angry constituents. That means politicians, especially politicians fighting to keep their paychecks, start pointing their legislative guns at Wall Street almost as soon as the gavel strikes. Market indices don’t particularly care one way or the other if consumers and lawmakers are frustrated, but they are concerned nonetheless. U.S. lawmakers in March complained to the Commodity Futures Trading Commission that nobody was watching energy markets closely because perceptions are trumping real-world scenarios. Demand is down and supplies are up, which typically means prices drop. But not so fast, the critics say. Someone must be cheating.

Energy wonks note, correctly, that hedging your energy bets is a good way to protect against future shocks. Imagine how much plane tickets would cost if the airline industry practiced a just-in-time policy for its fuel needs. The same would likely hold for refineries and oil producers. But that doesn’t mean much for the average consumer when gasoline prices can increase as much as 10 percent overnight because Iran’s Press TV ran a false report about a Saudi pipeline explosion, or U.S. refineries closed for maintenance or the weather suddenly turned colder or any of the other reasons cited for volatility in consumer gasoline prices.

It’s getting close to the so-called driving season in the United States when Americans take to the road for their summer vacations. But gasoline demand is down more than 3 percent compared with the same period last year. That may be because of improved fuel economy, a lack of general consumer spending or because of sluggish employment numbers means nobody has a job or vacation to drive to anyhow. Yet, the government said gasoline prices are starting to come down. But no matter. U.S. lawmakers, including the president, made a big show of their rhetoric on gasoline, jobs, energy security, American families and the like.

“Obviously rising gas prices means a rough ride for a lot of families,” said Obama. “Whether you’re trying to get to school, trying to get to work, do some grocery shopping, you have to be able to fill up that gas tank.”

And therein lies the problem. Most commuters go to school, get to work and run errands using a vehicle that runs on gasoline. Gasoline is a necessity and that’s in part why the debate ensues. Without massive subsidies, gasoline is going to get more expensive no matter what the politicians say. And until commuters move beyond the carbon mindset, that ride to work will continue to be a rough one.

Source: http://oilprice.com/Energy/Gas-Prices/Gasoline-is-Expensive-Deal-with-it.html

By. Daniel J. Graeber of OilPrice.com

Article by Investment U

In focus today: Canada’s oil is bypassing the U.S., underestimated industries, a tech play other than Apple (Nasdaq: AAPL), and the SITFA (in fact we have several quick SITFAs today)

Seagate Technology (Nasdaq: STX) is undervalued, shareholder-friendly, dominant, and boasts a big dividend. Could it be the best tech play outside of Apple (Nasdaq: AAPL)?

Almost all of Canada’s crude oil is exported to the U.S., for now anyway, but that’s going to change as soon as 2017.

In 2011, just 1.65% of Canada’s crude was exported to countries other than the U.S., but Kinder Morgan has initiated a $5-billion pipeline project that’ll redirect Canadian oil to the West Coast for export to Asia.

According to the Journal, this decision was accelerated by Obama’s decision to shelf the Keystone pipeline project that would have sent the crude south to the U.S.

This new pipeline will increase the amount of oil piped to the West Coast of Canada from 300,000 barrels per day to almost 850,000 per day, and since, according to the Journal article, the expanded pipeline will follow the route of an existing line, they expect little if any objections from native people or environmentalists.

Obama has stated that he will reconsider the Keystone pipeline project if the Canadians will reapply for a new permit, but not until after the election. But Canadian officials were quoted in the Journal as saying they are looking to expand their exports outside of the U.S.

If Canada shifts its export emphasis away from the U.S. markets, we here at home will have to rely on the less stable parts of the world for more of our oil imports. That will add a volatility factor to the price of our imports and that’s not good news.

Canada is our single largest oil supplier and having them focus on Asia instead of the U.S. could have a significant affect on the U.S.

Watch this one!

Underestimated Industries

Next up, analysts are underestimating the oil and natural gas industry.

According to Barron’s, the estimates for the first quarter for oil companies don’t include the increased prices we have seen for the past few months and they expect earnings and revenue to come in ahead of estimates.

The names Barron’s likes the best in the first quarter that will benefit most from the low estimates: Pioneer Natural Resources, Rosetta Resources and Oasis Petroleum.

Barron’s also thinks these three have the best asset bases and are top takeover candidates.

They also expect the oil names to beat expectations and natural gas to fall short in the first quarter.

But do not expect much of a drop in natural gas names from their current prices. They see expectations as being at the bottom of the range.

Julian Jessop, the Chief Global Economist at Capital Economics, said in a recent MarketWatch interview that he sees natural gas prices suffering from an unusually warm winter and expects them to run up to the $3 range by the end of the summer, and as high as $4 by the end of 2012. He attributed the move to more fundamental supply and demand by the end of the year.

Both look to have real upside potential.

A Tech Play Other Than Apple (Nasdaq: AAPL)

Seagate Technology (Nasdaq: STX), the drive manufacturer, is one of the dominant players in that industry, but trades for a ridiculous P/E of four times this year’s estimates and only three times 2013’s expectations.

And, according to the Journal, besides the super low valuation, it’s shareholder friendly, has a strong market position, a 3.8% dividend, plans to cut it shares by 25% this year, and it’s estimated to generate over $20 billion of the whole industry’s total of $30 billion a year.

Richard Kuegle of Needham has a strong buy rating on the stock and a target of $45. He thinks the current valuations are absurd!

There has also been a huge consolidation in the disc industry in the last few years, which has resulted in just two names, Seagate and Western Digital, holding 86% of the business. That bodes very well for pricing and margins going forward.

This is an industry in transition. The advent of tablets and mobile devices have altered for ever how the drive business does business, and that usually means it is undervalued. Kugele called it the best tech play outside Apple (Nasdaq: AAPL).

This one definitely needs to be on your screen.

Finally, the SITFA

This week, three quickies!

First up Buffett, yes the so-called sage of Omaha, gets the slap. I’m really tired of Buffett stories, but this one is funny.

It seems an Omaha charity auctioned off a dinner at his childhood home and there were no bidders. Really?

A chance to have dinner where he ate as a kid and no one bid. But you got to see a video of him, too. Still no takers, no stock tips either.

Gee, I’m stunned.

What are these folks thinking of?

Next, an update on the presidential election in France gets the nod, again!

As I mentioned a few months ago, a person named Hollande is running for the office and now it looks like he will in fact win, beating Sarkozy.

Here’s the funny part, he is a staunch socialist whose only real experience in politics was as mayor of a town of about 35,000 people.

He promises to increase government employment, lower the retirement age, and spend their way out of the Euro mess. Oh, and rewrite the agreement Sarkozy has with the Germans, which is essentially keeping the whole Euro thing together.

This one could be real mess.

And finally, Thailand has to get a cheek smacker. The Thais think they have found the solution for drunk driving and a way to reduce the injuries and fatalities associated with excessive drinking.

Dancing police women; I’m not making this up!

Here’s a little bit of the video.

That looks really effective. I’m sure Budweiser is shaking in their boots. Can you imagine your local or state police dancing to stop drunk driving?

Stay close, it’s getting crazier out there.

See you next week.

Article by Investment U

Source: ForexYard

The price of gold has weakened to a two-week low after a boost in the U.S dollar had made the metal less appealing as an alternative investment during Monday’s trading. Silver experienced even greater losses than that of gold after falling to a three-month low.

The greenback made gains of 0.5 percent versus a number of its currency counterparts due to concerns over the French presidential elections. There is fresh concern that the result of the presidential elections in France will interfere with efforts to aid the nation’s debt crisis.

Gold prices for June Contract dropped 0.8 percent to $1,629.60 an ounce during the early New York session. Prior to hitting that level, the yellow metal fell to $1,623.60, the lowest level since April 5. Before  today’s drop in gold prices, the metal has fallen 1.7 percent for the month of April so far.

Elsewhere, Silver prices sharply dipped to trade below the $30.74 level, after previously declining to $30.63, the lowest silver price since January 20.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By TraderVox.com

Tradervox (Dublin) – The eurozone PMI readings came worse than the market’s expectation raising the demand for safe haven currencies. The Pan-European flash manufacturing and services PMI have unexpectedly gone downward. The manufacturing PMI came at 46.0 in April from 48.1 while the services PMI came down to 47.9 in April from 49.4 registered previously.

The readings indicate a contraction in the region’s economy and have caused a selloff of the euro. The EUR/USD pair has accelerated to the downside as traders seek safe haven currencies. Another hit has also come from the Italian consumer confidence indicator which came in lower than expected. The reading came in at 89.0 against an expectation of 96.2.

The pair lost 0.45 percent to trade at 1.3142 with the next support expected at a 10 day moving average of 1.3136 which is just above an April 20 low of 1.3129. The pair might accelerate downwards to 1.3058 an April 18 low and then to April 16 low of 1.2995.

Chris Williamson, a Chief Economist at Markit said that the preliminary PMI indicate a higher rate of economic contraction in the 17 nation trading bloc. He added that the data seems to extend a double-dip recession for the third quarter respectively. These sentiments are supported by the report as it showed deterioration across the region. In France, the uncertain presidential elections have resulted to a worrying downturn of the economy while Germany’s growth was near stagnation in the first quarter of the year. Analysts have also noted that the rate of decline have gained momentum in the periphery raising concerns about the effectiveness of the deficit fighting measures.

Concerns about the euro zone crisis was discussed in the IMF G-20 meeting where the IMF was able to secure more than $430 billion to increase its firewall. The IMF intends to safeguard global economy from the threat of the EU crisis. EU leaders have insisted that they have done what is possible and more effort and help is needed internationally.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
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Article by Investment U

In technical analysis, candlestick charting is used to measure market emotions surrounding a company or commodity.

In the eighteenth century, a man in Japan named Munehisa Homma discovered that, although there was a link between price and the supply and demand of rice, the markets were heavily influenced by the emotions of those rice traders. What he came to understand was that when emotions came into play, a vast difference between the value and the price of rice occurred.

This difference between the value and the price can be applied to all the things we trade today as it was to rice in Japan nearly 300 years ago. We saw what happens to the market when affected by the herd mentality. Recently, we observed the market when there was an overwhelming feeling of doom.

The principles established by Homma are the basis for the candlestick chart analysis, which is used to measure market emotions surrounding a company or commodity. A little over two decades ago, the West was introduced to candlestick charting and it grew in popularity and use ever since.

What Do Candlesticks Look Like?

We need to get the basics down first. As in a standard bar chart, there are four elements necessary to construct a candlestick chart, the open, high, low and closing price for a given time period. Below are examples of candlesticks and a definition for each candlestick component:

A candlestick is a visual representation of price movement during a given period. A candlestick chart is a group of candlesticks in chronological order. A candlestick has two parts, the “body” and the “tails.” If the body is filled in, the stock price has gone down during that time period, whereby the top of the body is the open price and the bottom of the body is the close.

If the body is not filled in, the stock price has gone up during that time period, whereby the bottom of the body is the open and the top of the body is the close. If the stock price did not change, a horizontal line will represent the body. The “tails,” or vertical lines, extending from the body indicate the high and low prices during that time period.

Comparing Candlestick to Bar Charts

A big difference between the bar charts we have commonly used in the West and the Japanese candlestick line is the relationship between opening and closing prices. Like in a line chart, we place more emphasis on the progression of today’s closing price from yesterday’s close. In Japan, chartists are more interested in the relationship between the closing price and the opening price of same trading day.

In both charts you can see the overall trend of the stock price; however, you can see how much easier looking at the change in body color of the candlestick chart is for interpreting the day-to-day sentiment.

(3a)

(3b)

The long, dark, filled-in real bodies represent a bearish close (3a), while a long open, light-colored real body represents a bullish close (3b).

Take note that candlestick analysts historically view the open and closing prices as the most important of the day. Look at how much easier it is with candlesticks to determine if the closing price was higher or lower than the opening price.

FYI – Take Notice of Spinning Top Bodies

Here is a phenomenon to look out for because it may help decide where exactly a security is trading. Spinning tops are very small bodies and can be either black or white. This pattern shows a very tight trading range between the open and the close.

If you see this spinning top after a prolonged uptrend, it may suggest that the uptrend is losing steam and a drop may be coming soon. On the other hand, if you find it after a prolonged downtrend, it may represent a price bottom.

I think we all knew, but were kind of unaware of how to track emotions in graph. Investors’ emotions can have a major impact on an asset’s pricing. Candlesticks give us a greater insight and help investors and traders gauge the emotions surrounding equities and thus make better predictions about where those equities are going.

Good Investing,

Jason Jenkins

Article by Investment U

Article by Investment U

It’s hard to feel sorry for Warren Sapp… Yet bankruptcy documents show Sapp had a propensity to make poor investments. Don't make the same mistakes!

It’s hard to feel sorry for Warren Sapp…

As a defensive tackle at the University of Miami, he was a consensus All-American who won multiple awards. He was an NFL first-round draft pick in 1995. And during his professional career, he earned seven trips to the Pro Bowl and a Super Bowl ring in 2002.

These accomplishments brought financial rewards, as well. Sapp reportedly grossed $60 million playing football. And today he earns nearly $116,000 a month as a sports broadcaster for the NFL network. That’s why some were taken aback at his recent bankruptcy filing.

Yet bankruptcy documents show Sapp had a propensity to make poor investments – including an 18,000-square-foot Florida mansion – and spend liberally, including more than 240 pairs of athletic shoes (still in the boxes).

His situation is hardly unique, of course. Baltimore Colts quarterback Johnny Unitas filed for bankruptcy protection in 1991. In more recent years, so did NFL veteran quarterback Mark Brunell and New Orleans Saints running back Deuce McAllister.

Football players are hardly alone. Other celebrity bankruptcies include Willie Nelson, Mike Tyson, MC Hammer, Toni Braxton, Cyndi Lauper, Tom Petty, Kim Basinger, and Ed McMahon.

How could all these famous people – with all those millions – find themselves financially upside down, owing more than they own? The two culprits are almost always the same: overspending and poor investments. They can strike anyone, regardless of net worth… unless you take these basic precautions.

Let’s cover overspending first. Most people imagine that if they just had more money they could save a lot. But expenses have a strong propensity to rise to meet the income available. Today you’re probably earning much more than you did 10 or 20 years ago. But your expenses have probably risen faster than inflation and perhaps faster than your income.

Thomas Stanley, author of The Millionaire Next Door, has studied this phenomenon intensively. He found that the overwhelming majority of successful, high-net-worth individuals follow the same basic formula. They maximize their income, minimize their outgo, and religiously save and invest the difference.

No matter how high your income, it’s still possible – as Warren Sapp and others discovered – to overspend. If you can avoid their overconfidence or lack of self-control, you have won the primary battle.

Still, one major hurdle remains: managing your investments sensibly. This is a topic we discuss five days a week here at Investment U. But I can boil the fundamentals down to just three basic rules:

1. Diversify – Not just to reduce your risk but to maximize your chance of holding big winners.
2. Stick to quality – Buy high-quality stocks and bonds and forget about penny stocks, options and futures.
3. Gird yourself to take the long-term view – To avoid abandoning your strategy when the market gets bumpy, as it always does from time to time.

Can it really be this simple? Yes and no. You’ll notice that successful dieting is equally straightforward. Every day of your life, you either take in more calories than you burn or burn more calories than you take in. (Glance in the direction of your belt buckle to see your running total.)

Investing and dieting are not rocket science. But sticking to core principles – at the dinner table or in the market – is not always easy.

However, the rewards are great if you do. Because no one wants to be a “Sapp.”

Good Investing,

Alexander Green

Article by Investment U

Divorce yourself from the crowd. Independence is good.

By Elliott Wave International

In the play “The Secret to Freedom,” Pulitzer prize writer Archibald MacLeish had a character say this:

The only thing about a man that is a man is his mind. Everything else you can find in a pig or a horse.

MacLeish knew how to state the truth plainly.

And the truth is, you can use your mind in any way you wish.

When it comes to financial markets, most allow others to do their thinking for them. You’ve heard the phrase “the blind following the blind.” Yes, they both fall into the ditch.

At Elliott Wave International, our mission is to keep our subscribers out of the ditch. To do so, we must first do our own financial thinking before offering our conclusions to subscribers.

Robert Prechter found it easier to think independently by being physically removed from Wall Street. In this excerpt from the book Prechter’s Perspective, Prechter was responding to an interviewer who asked about Prechter living 60 miles north of Atlanta:

It’s an advantage in my opinion to be away from the storm of mass psychology that exists in the financial centers. I have purposely distanced myself from New York to avoid the overload of superfluous information that you are exposed to there. I am an observer of crowd behavior. I think it is extremely difficult to shield yourself from the crowd’s influence when you are part of it.

Now, we don’t advocate contrarianism for its own sake. That would be just as big a mistake as letting the Wall Street crowd do your thinking for you.

That said, our financial analysis is born of deliberate independence.

Granted, the crowd might be right for a time, but generally not for long, and never at important turning points.

Learn to Think IndependentlyBeing an independent investor never goes out of style — whether the markets are bullish or bearish. Learn to challenge conventional notions about investing and explain market behaviors that most people consider “inexplicable” with the FREE 50-page Independent Investor eBook. You’ll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International’s 30-year history; you’ll also get analysis, forecasts and commentary to help you think independently in today’s tumultuous market. Download the free 50-page Independent Investor eBook now >>

Article by Investment U

There are still plenty of opportunities to invest in the developing smart grid or "Enernet" – such as First Trust's GRID ETF.

Remember a couple of years ago when you couldn’t get away from reading about the smart grid or what some others refer to as the Enernet?

Today in the news it’s almost as if production on the first great infrastructure project of the twenty-first century has all but stopped.

But don’t be fooled…

• Spending on the smart grid is still growing at a compound annual rate of 17.4%.
• According to London research firm, Visiongain, the global smart grid market will total $33.91 billion this year. In the next three years, MarketWatch reports that number is projected to exceed $46.5 billion.

There are still plenty of opportunities to take advantage of this enormous energy initiative. You just have to know where to look.

And one of the easiest ways possible is through the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (NASDAQ: GRID).

GRID at a Glance

First Trust’s NASDAQ Smart Grid ETF is designed to seek investment results that correspond with the First Trust NASDAQ Clean Edge Green Energy Index (NYSE: QCLN).

Although similar at first glance, GRID is more specific than QCLN in that it’s designed to track the performance of common stocks in the grid and electric energy infrastructure sector.

Among the fund’s top 10 holdings are:

In all, GRID has 36 holdings. Eighty percent of these are pure plays on the smart grid. Meanwhile, the other 20% are more diversified companies such as ABB. The pure-play components must derive 50% or more of revenue from smart grid, electric infrastructure and other grid-related activities.

But no matter what, all companies must meet a certain criteria in order to be considered for this index. This includes…

• Being classified as a smart grid, electric infrastructure and/or other grid-related activity company according to Clean Edge.
• Have a minimum worldwide market capitalization of $100 million.
• Have a minimum free float of 20%.
• And have a minimum three-month average daily dollar trading volume of $500,000.

So how has the fund performed?

2011 was a rough year for smart grid companies in general. But so far this year, GRID has seen a bit of a rebound, up 13%. And as the smart grid rolls out, GRID has the potential to become a very rewarding high growth fund.

It does have an expense ratio of 0.70%, which is higher than most ETFs, but it still beats the heck out of the average annual fees for mutual funds. Not to mention, trading volume is also fairly thin for the fund, so you may want to consider a limit order when making your purchase.

The Bottom Line

The main advantage of an ETF like GRID is that it can be a pain in the neck trying to handpick smart grid plays that fit and benefit your portfolio. That’s why GRID may be the easiest way possible to diversify and capitalize on the smart grid/Enernet initiative.

Good Investing,

Mike Kapsch

P.S. Investment U’s Energy and Infrastructure Expert, David Fessler, had a few words with NIST’s Deputy Director of Technology Services, George Arnold. Here is the interview:

David Fessler: Dr. Arnold, can you start by telling me a little more about NIST’s role in the development of the Smart Grid standards here in the United States – and why it’s so important?

Dr. Arnold: The Energy Independence and Security Act of 2007 (EISA) has the development of the Smart Grid as a national policy goal. It appointed NIST and gave us the primary responsibility to coordinate standards development. The ultimate goal is to achieve inter-operability of Smart Grid devices and systems across the country.

David Fessler: You mentioned in your opening remarks yesterday that 30 years from now, the Smart Grid will be viewed as the “first great infrastructure project of the 21st century.” How so?

Dr. Arnold: The Smart Grid will fundamentally change how energy is priced, and how we think about and use energy, both at work and at home, and even while we’re driving.

Electricity movement will be more of a dynamic two-way flow as opposed to the static one-way flow we are used to today.

There are currently 130 major Smart Grid projects underway in 45 states. Over 18 million Smart Meters will be installed over the next few years in the United States alone. And that’s just a small part of what the Smart Grid will be.

David Fessler: NIST just announced the release of Version 1.0 of the “Framework and Roadmap for Smart Grid Interoperability Standards.” Can you explain this in layman’s terms?

Dr. Arnold: National and international standards are a critical enabler for the Smart Grid. Without them, you’d have essentially what we have today: 3,100 electric utilities operating alone.

Version 1.0 is the first release of a Smart Grid inter-operability framework, and it contains a roadmap for its further development.

David Fessler: What do you see as the biggest challenge in rolling out the Smart Grid here in the United States?

Dr. Arnold: An educated consumer. In the end, it’s the consumer who’s going to have to pay for the Smart Grid. Unless they see the benefits, they’re not going to spend money on it, or things to connect to it.

Article by Investment U

By TraderVox.com

Tradervox (Dublin) -The euro has registered the first decline in five days as concerns about the French election outcome rose. Traders are wary of the effect the elections will have of the regions ability to fight debt crisis. According to Junichi Ishikawa of IG Markets Securities LTD in Tokyo, the French election hold a lot of risk as an opposition win would hamper efforts on debt crisis. Many analysts are of the view that the Sarkozy and Angela Merkel cooperation in the debt crisis efforts have been instrumental and this might change if the opposition wins.

Pressure is mounting on Sarkozy as his party lost marginally in the yesterday’s vote affecting the euro in the forex market. The second and final round of election will be held on May 5 when the country will know its next leader. If Sarkozy is defeated, France would join the likes of Portugal, Ireland, Italy, Greece, Slovakia, Spain, and Slovenia governments that have been ousted since the commencement of the 17-nation currency.

The euro has weakened by 1.1 percent against the yen to trade at 106.57 while it dropped by 0.6 percent against the US dollar to trade at $1.3140. The yen was up against the greenback by 0.5 percent to exchange at 81.90 yen per dollar. The Australian dollar also registered some loses after the PPI dropped; however, positive report in Chinese PMI has boosted the currency.

Another political factor that may affect the euro is the Netherlands’ cabinet meeting to discuss strategy to pass a budget that meets EU targets. Prime Minister Mark Rutte may face an early election after Freedom Party withdrew support for the minority government on Saturday April 21.

The political scenarios in the region and resurgence of the debt crisis are set to push the euro down against most currencies. However, such effects may be canceled by positive economic reports from the region especially reports from Germany.

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