Structural Change in Fuel Economics | Glad Tidings
Sometimes a single line/statement is more important, an Epiphany ! rather than weeks of research and days of drudgery. After reading that sentence essentially you can bet a million bucks on the idea.
In the past few days NZD fell 11% against USD. These kind of currency moves are black swan, unlike a common occurrence in equity markets. New Zealand has had a trade surplus in past 10 out of 11 years. NZD has appreciated against all currencies of the world from 2008 – 2014 over a long term trend series.
Reason for long term uptrend of NZD ?
Strong economy of New Zealand based on real goods and resources instead of virtual resources. Exports of agricultural goods.
If you listen to Jim Rogers, commodities are the bees knees, farmers are expected to be 21st century’s investment bankers. Nobody is manufacturing more land, but world is making more babies !
Reason for fall in the past one fortnight for NZD?
Biggest export commodity for New Zealand is butter, milk and cheese. Being a commodity, price is cyclical. Dairy prices are more than 40% off peak since February 2014.
So what is the good news?
I am a proud New Zealand citizen (not withstanding I am majorly invested overseas rather than in New Zealand), with most of investment overseas, this 10% currency move does not personally affect me. It does affect the farmers. Also, I am not enouraging a currency trade, although I strong feel NZD/USD, NZD/GBP trade would do very well for the next one to two years as milk prices rebound.
I looked for biggest imports for New Zealand. They are quite similar for India, with Petrol Oil and Lubricants taking up most of forex.
Huh? so what, I know that already
New Zealand already runs trade surplus despite importing oil. India runs trade deficit because of oil.
Now what can change the game ? Not importing oil.
I feel the time for idea is closing in. I would be a worried person if my main business is exporting oil. Export would continue as margins are 2500%. 5$ cost and 100$ sale price, so selling at 25$ also would result in profit in export of oil.
Answer is (plug in at home) Electric Car
While researching recently for the next disruptive technology (It may not translate to serious money over long term, but one could surf for short time), electric cars are top on the list.
Petrol costs 2.2$ roughly here (110 INR) in New Zealand
New Zealand produces 74% of electricity through renewable energy.
Did you read that, 2.2$ per litre petrol vs 26cents per litre petrol ? History does not repeat but rhymes. If this is not value migration, what is it?
India or other countries may not generate much renewable energy but do import oil.
Two strong themes then emerge:
Currency Trade ( Countries importing Oil would gain currency over next 10 years)
Which Electric Car company would gain ?
Not a dream anymore
Plug in Electric cars are no longer a perpetually 20 year distant dream of visiting extra stellar space.
United States sells 10,000 plus in electric cars per month ( month ! not year)
Critical mass is already in place.
Nissan’s Leaf, Chevy Volt and Tesla Motors (in premium segment) look three well placed companies.
“The fleet of plug-in electric vehicles in Norway is the largest per capita in the world, with Oslo recognized as the EV capital of the world. In March 2014, Norway became the first country where over 1 in every 100 passenger cars on the roads is a plug-in electric,out of a registered fleet of over 2.52 million passenger cars. Norway’s fleet of electric cars is one of the cleanest in the world because almost 100% of the electricity generated in the country comes from hydropower.”
Many ways to make many millions. Agri, Currency, Equities. I am laser focussed on equities, automatically playing on agriculture, looking for an even headier cocktail that amalgamates the duet! NZD and equity play on agricultural goods. There are some interesting names in Africa but do not offer great growth rates.
As Munger advises, avoid the mistakes, remember the obvious, shun the esoteric. Don’t short NZ Dollar, Norwegian Krone and Electric Cars. There may be some serious winners in electric cars. Most important part of ecosystem of electric car is battery. No wonder BYD bet in 2010 is in the right direction. I am taking note after 5 years after the two rising young men at Berkshire! Saw this in 2009 but did not pay much heed.
Tesla stock is up 8 times in the past two years
Tesla investing 5 Billion USD in a battery plant.