BizAnalyst Network

The Greatest Water Stock Today

The Greatest Water Stock Today

* A Tale of Two Countries
* Is History Repeating Itself?
* Walking the Economic Tightrope
* Running on Borrowed Brains?
* A New Chinese Century

"Black cat or white cat: If it can catch mice, it's a good cat."

- Deng Xiaoping

_____

Dear Wealth Daily reader:

As you probably know, the Phantom Trader is not only my colleague, in
many respects he's my right hand man. And not because he lives in the
neighboring state of Montana.

No, the Phantom Trader is very well connected in the investment world. I
rely on him to bring me many of the deals I invest in. His latest deal,
MRU Holdings (MHOI - OTCBB) I think is an absolute blockbuster.

But that's not why I'm writing to you today.

You see, I first met PT when we were both at Agora Financial Publishing.
My old letter, Outstanding Investments, was purchased by Agora back in
the late 1990s. Outstanding Investments was one the nation's premier
resource letters available to the individual investor at the time.

Once I joined the Agora staff, I was added to their long and distinguish
stable of contrarian thinkers, gold bugs and resource gurus. Men like
Doug Casey, Adrian Day, and Rick Rule, to name a few.

Truth be told, even though I was in my early-40s, I was considered to be
a Young Turk. The only member of that contrarian team younger than me
was the Phantom Trader, who was barely 30.

After a few conversations with PT, we realized we had a lot in common.
We're both outdoorsmen, hunting and fishing every free second we get. We
also love the quiet, sparsely-populated states we call home. Mine in
Wyoming. His is Montana.

During this period of our young friendship, PT created a letter called
Real Asset Investor. RAI looked at investments in the resource sector.

Before too long, we were exchanging war stories and giving each other
stock tips. By 2000 we were doing business together. talking to each
other nearly every day.

The relationship has been incredibly lucrative.

Phantom Trader, for instance, was instrumental in helping me find Storm
Cat Energy. In fact, I would say he's been responsible for many of the
deals that come across my desk.

Anyway, I was talking to PT this morning. And as you probably know, PT
is the water guy.

For the past 3 weeks, the sectors we follow. energy, metals and water
have pulled back significantly. I've been telling my readers, friends
and family to buy the dips.

And that's exactly what the Phantom Trader is telling his readers too:
Buy the dips in water stocks.

Take a look at a chart of the Dow Jones Water Utility Index:

As you can see by this chart, water stocks have been one of the hottest
sectors in the entire market. And right now the water sector - like the
energies - is consolidating.

Now, here's where it gets interesting.

Last year at about this time, water stocks sold off. But in November,
they started the rally that took it into 2005.

PT thinks the same scenario is unfolding again this year.

His favorite water stock has pulled back after hitting record highs in
August. The stock trades at a market cap of about $190 million, so it's
a true small cap stock.

But the gains this stock has made is nothing but "small."

Take a look at the stock's performance for the past 10 years:

1995: +23%
1996: +20%
1997: -8%
1998: +29%
1999: -7%
2000: +13%
2001: +68%
2002: +29%
2003: +41%
2004: +62%
2005:* +14%
(Growth for 2005 is as of October 24, 2005!)

The stock has lost money in just 2 of the last 10 years!

If that doesn't get you excited, how about the fact that the stock has
paid a cash dividend for the past 18 straight quarters.

That's right. You're getting paid to own a growth stock!

Do yourself a favor: Read more about this stock, and the incredible
growth in the water, by reading the following report: [ # 1 Water Stock
of the 21st Century <http://www.wealthdaily.net/promos/ptpromo2.html> ]

Sincerely,

Michael Schaefer

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_____

A Tale of Two Countries

Listen to Sam Hopkins!

Hear Sam Hopkins latest radio interviews online at the Wealth Daily
Media Center <http://www.wealthdaily.net/media.php> .
Picture a society of factories and filth. On city streets, the black
smog is so thick, it's like sucking on an exhaust pipe.

I'm talking about a place where farm folk swarm cities from their rural
homes, in search of a meager urban existence. The giants of industry
escape to the erstwhile homelands of their workers, to breathe the clean
air they have not yet sullied in their drive towards Progress.

The poor of surrounding countries dream of taking part in the boom, and
at great personal risk they cross deserts and seas to win bread for
their families. The government lends its assent to this whole process,
even as factories catch fire with child laborers trapped inside.

Single firms are authorized to monopolize entire national chains of
production, and competitors are trounced like mice underfoot.

This was the United States circa 1900.

Is History Repeating Itself?

I hope you had a chance to listen to my interview last week with Mike
Norman on the Business Radio Network. If you don't know Mike, he's made
a name as the Economic Contrarian, decrying the hot trends of the
business world with an acrid incredulity that makes fickle investors
think twice.

Mike thinks China is like a child actor, making everyone fall over
themselves with admiration while really there's a parent just off-camera
coaxing the cutie. Mike also worries that, like a child actor, China
will turn out to be a mess, good for nothing but grocery store openings
and VH1 flashback shows.

I think China is the real deal - more Jodie Foster than Tatum O'Neal.

China is making up for a long spell of economic dormancy, and people
seem to forget what a mess we made in our industrial infancy.

China is dirty, and the Chinese know it. A fellow waiguoren (foreigner)
once told me a story of China's seemingly Sisyphean effort to clean up
its act.

The city of Chengdu is shrouded by black smoke. As in many locales in
the Middle Kingdom, pregnant women are compelled by doctors and logic to
wear surgical masks as they go about their day. Those who do not wear
masks are treated to the vision of black snot on their handkerchiefs.

"What will you do about this terrible pollution," my friend asked a
Chengdu native. "Why, we're planting trees!" the Chinese replied
ebulliently and self-assured. Of course, trees produce oxygen which
would make up for the stifling carbon dioxide smoke.

Trees were indeed planted, and they promptly wilted and died as they
were exposed to the same toxic soot as Chengdu's other organisms. This
is, unfortunately, what industrialization looks like.

I Learned by Watching You!

Luckily, the West has already experienced the most horrific aspects of
this process and so we can act as a helpful big brother, advising the
Chinese on what should be done to ensure not only economic growth but
healthy, clean living.

Though we in the States often choose profit over purity, we can put our
two cents in when it comes to China. We can best do that through
investment.

When we invest in China's growth, we are not only helping a rising
power. We are helping the last Socialist giant to understand the
benefits of the global marketplace we have extolled throughout decades
of geopolitical chess.

Whatever you thought about the Cold War ideologically as good vs. evil,
it boiled down to that simplest calculus: What creates a quality life
for the most people?

Unfortunately, no economic system has found a way to spread happiness to
every individual, but it is our basic tenet that mobility rather than
social stagnation is the best way to achieve widespread dignity and
prosperity.

The Chinese economy is moving in the direction of the Western model. Not
because the Chinese suddenly reject Mao as founder and want to remove
the sickle and hammer from their consciousness, but because dogmatic
Marxism just won't work as an economic paradigm for a ten-figure
population.

It is human to compete. It is also human to try to mitigate harm, and we
have to balance those reflexes through consensual government and trade.

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Walking the Economic Tightrope

No nation is exempt from history's vicissitudes. China now finds itself
in a precarious position, balancing one ideology that has fallen short
of its promises with another, currently more popular system which also
might not deliver.

But as Treasury Secretary John Snow said in China this week: "Where we
find our differences, they are largely on the questions of the sequence
and pace of reforms, not the direction."

So China is moving with us.

I once translated a Soviet banner from Russian to English. The red satin
bore Lenin's face, a quotation, and the following admonition to the
workers of an anonymous factory somewhere in the U.S.S.R.:

"Be victorious through Socialist competition!"

Huh? Socialist competition? Isn't competition a Capitalist ideal?

Well, it turns out that unless you want people to sit around and play
backgammon all day while eating government cheese, they need a kick in
the pants.

The Chinese Model Worker Can Dunk!

The Chinese Communist Party has named Model Workers every year since
1950. Usually, the CCP would name plumbers, cement mixers, workers on
collective farms and their ilk to this distinguished list.

This year, Houston Rockets center Yao Ming, a Chinese expatriate earning
US $17.8 million a year, is a Chinese Model Worker.

So it seems that the Party's founding principles are on shakier ground
than we thought, and by its own volition.

The Chinese like their -isms. Legalism, Confucianism, Taoism,
Communism... They have all promoted a sense of national ethics, which is
comforting and (with the exception of Taoism) conducive to the
maintenance of power. Why not Capitalism?

Right now, Capitalism is still a dirty word. Just like invoking
Communism will draw cockeyed stares and furrowed brows here in the U.S.,
China is still somewhat piqued for the Cold War. But history is a
process of balancing ideologies, with the added bonus that ideological
shifts have gotten less and less drastic over the ages.

Some sea changes have been astounding in their calmness, like the
dissolution of the Soviet Union. The Evil Empire didn't go out with a
bang, it just fizzled. And today, as in pre-Soviet Russia, they still
have plenty of corruption and state control.

So Communism is not the cause of all that is bad, and Communism does not
preclude all that is good.

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Running on Borrowed Brains?

I have heard plenty of pessimism about the Chinese political system and
how it stifles innovation. I have even been told firmly by the likes of
Mike Norman that Chinese companies are forced to hire foreign
technicians simply because the one-party system chokes the society
intellectually.

Well, tell that to the 750,000 engineering students graduating yearly
from China's universities. The U.S., by the way, graduates close to
60,000 engineers per year.

High-tech business at Phoenix Laboratories, the world's leading
developer of BIOS software (which allows computer software to
communicate with hardware.pretty important stuff), is conducted in
Mandarin.

Abundant in numbers and highly qualified in technical skill while
super-cheap by American standards, Chinese engineers are the norm and
not the exception for foreign firms operating in China.

A New Chinese Century

I said it before and I'll say it again: You have to ditch your old
concept of China. There are still plenty of things you might not like
about the government's policies, but I think all of us could say
negative things about the way our own country is run.

The current foreign attraction to Chinese markets is not a fad. This is
not the Internet bubble, inflated with ephemeral promises bought by
prophecy's fools. This is history in the making, and it will happen with
or without you.

I understand hesitancy to put your money in an unknown commodity. But
then again, if you're unwilling to take financial risks you should
probably just stick your Benjamins under the mattress and hope no one
finds them.

You don't have to send your money to Shanghai to invest in China. New
York and Toronto present many opportunities to get involved by proxy. I
guarantee you that a company you trust is doing business in China, and
there are many Chinese firms that will prove themselves trustworthy to
your great benefit.

You will prove yourself smarter than the short-term players by doing
research, developing a strategy, and of course by reading Waking Dragon.
Show your skills by getting in the game, not by scoffing from the
sidelines.

- Sam Hopkins

posted by Victor Lloyd Smith @ 3:42 PM