Today, I might have something even better for you. This one isn’t based on one specific commodity. Although, it does have that element too. Instead, it’s based on a unique situation in our English-speaking relatives across the pond.

Before I get into this specific circumstance, and why it’s about to make you a boatload of money, I have to detail what a semimonopoly is.

As you know, monopolies are one company, or organization, that dominates an industry – free from competition. In the first few years of the 20th Century, the U.S. made these illegal. The story, however, doesn’t stop there…

As you might have guessed, a one-size-fits-all law doesn’t usually work. There are always exceptions to the rule.

I could spend hours listing many of these exceptions. But the main ones (at least, the ones that you can profit from) are utilities. The only time there’s competition in the major utilities – water, gas, electric – is when a region opens up. Mergers and acquisitions are common in these industries. But having two competing interests in the same region is nearly unheard of.

Since these utility companies don’t own the entire industry, however, they aren’t considered monopolies. Even the few that are large enough – like the one I’m about to share with you – are given basically a free pass by the government. And that’s not just in the U.S. Most of the Western world shares similar rules and exceptions to the rules.

I recently found a company that has natural gas and electricity operations in both the U.S. and Great Britain. It is a true semimonopoly. In fact, one could argue it is a true monopoly in the U.K.

It’s the largest supplier of natural gas in the Northeast U.S. A quarter of every watt of electricity in Manhattan comes from this international player. Over one million Long Island residents get their electricity from the company. The list goes on and on. But the real story is its U.K operations…

You see, there’s a significant difference between the U.S. electricity grid and the one in Great Britain. The United States is a huge land mass. There are over 300 million people – some separated by more than 3,000 miles – in the continental U.S. The U.K. is about the size of Kansas, but it has 22 times more people. This creates a significantly different playing field.

The U.S. has a series of grids. There’s no such thing as a national electric grid. The U.K. does. Regulating a grid the carries electricity to over 60 million people is a difficult thing to do. While regulations are in place, the government of Great Britain handed operational control over to one company. This company also happens to be a major player in the industry.

This sets up a situation where control of the industry, as well as, profits generated within the industry is handle by one company. It has the power to accept or deny new competition. In return for this status, it also has the responsibility to make sure the grid doesn’t go down. If it does, the entire U.K. nation goes down – including Scotland and Wales.

Obviously, this unique situation is working well for the company. In the fiscal year ending March 31, 2009, the company brought in over GB£15.7 billion. That’s up from GB£11.5 billion the year before that. It’s almost like this company didn’t realize there was a recession going on.

There’s so much more to this story I can’t go into because of space. But, I am planning on giving my Lifetime Income Report readers the full scoop early next week. If you’re not already signed-up, head over to www.lifetimeincomereport.agorafinancial.com for the full details…

Sincerely,
Jim Nelson

June 9, 2009

Own a Piece of the U.K. Grid was originally featured in the Penny Sleuth.

One bit of news that grabbed me was that China officially passed Germany as the third largest economy in the world, behind the U.S. and Japan. (Although by another measure, it is No. 2, and has been for some time.) Most folks probably shrugged. It was inevitable, after all.

But it shows that China’s role in the global economy is bigger than ever. Even amid a global depression, China’s potential is mind-bogglingly vast. What follows are some thoughts on China’s potential…

China Will Be No. 1 When?

If China’s economy continues to grow at its current rate, it will pass the U.S. as the world’s largest economy in 18 years. Of course, it won’t grow at its current rate for 18 years — not continuously, anyway. It will grow somewhat slower in spots and sometimes faster. What growth rate comes out in the end is anybody’s guess, but the 18-year guess will probably be off.

Then again, the guess also assumes the U.S. stays where it is. And that is also unlikely. The U.S. economy shrank last year and looks to shrink again in 2009. Meanwhile, China is one of the few big economies still growing, though at a slower pace. The result is that China will actually make up ground faster in 2009. As Ting Lu, a Merrill Lynch economist based in Hong Kong, notes: “In 2007, the gap between the growth rates of China and other big countries was huge. Actually, in 2009, the gap between will be even bigger.”

As the Great Depression II continues to lay siege to the world’s economies, China remains a coiled spring of growth. Even though China is now the world’s second- or third-largest economy, it still is a relatively poor country. And its resources are barely tapped.

The vast potential of China is hard to grapple with. Already, China has built the world’s largest building (Beijing’s airport terminal) and its longest transoceanic bridge. It has the world’s fastest train and the biggest dam. As John Pomfret, former bureau chief for The Washington Post in Beijing, observes: “It is a nation of builders, of grand schemes, of gigantism.” He calls China’s engineers “some of the world’s biggest risk-takers.”

The Key in Unlocking Resource Treasures

The Qinghai-Tibet railway was another engineering feat. Chinese engineers, already considered the best railway builders in the world, built a railway on the complex and shifting permafrost linking Llasa with Golmud in China’s western hinterlands. The railway stretches hundreds of miles across a treacherous plateau.

Author Abrahm Lustgarten in China’s Great Train describes the area as one of “intermittently frozen marshes, lakes and soggy permafrost that heave and shift more actively than almost any other geologic environment on Earth.” In places, the quicksand is deep enough to swallow a tank. It is also higher than any other railway on Earth — at its peak, more than 16,600 feet above sea level. The cars of the train are pressurized as in an airplane, with oxygen pumped in.

After this stretch of the Qinghai-Tibet railway opened in 2006, the riches of Tibet started to come to light. The Ministry of Land and Resources disclosed huge resource finds — big veins of copper, zinc, lead, iron, gold, silver and other minerals.

“The new reserves make Tibet one of the richest regions in China’s territory,” Lustgarten writes, “and could shift the country’s reliance on imports of copper and iron altogether.” Tibet could hold 40 million pounds of copper — one-third of China’s total. There is more than a billion tons of high-grade iron ore.

More than just minerals, there is also an abundance of oil. Sinopec estimates some 65 billion barrels of oil will become accessible in Tibet. “A find, that if proven,” Lustgarten writes, “would make the region one of the next great petroleum envies in the world.”

What makes these projects economic now is the Qinghai-Tibet railway. Many Canadian and Australian companies already have joint ventures in place to mine the plateau.

Booming Lhasa… And China’s Electricity Use Grows Again

The economy boomed in Llasa, too, thanks to the railway. The number of restaurants and bars in Llasa increased over 20% within a year of the railroad’s completion. More than a million tourists took the train west to Llasa. Where it was once hard to find a hotel room in Llasa, over 660 hotels sprouted up after the railway. One, the Brahmaputra Grand, is a luxurious hotel with crystal chandeliers the size of Volkswagens and 50-foot tall plastic palm trees. A night here set you back $1,100.

Tibet industry up to that time was mostly in trading yak tails, fur and salt. And now, it looks as if Tibet will play the role of China’s great western frontier, much like America west of the Mississippi in the 19th century.

There will be and is an ugly side to all of this that I’ve not talked about — the suppression of ethnic Tibetans and the weakening of a very old culture. China, though, continues to build and build. As Lustgarten notes: “The western outposts are linked by an expanding transportation infrastructure — roads, power transmission lines, pipelines and railways — built at a rate that makes Dwight Eisenhower look lazy.”

But as with the rest of world, the pace has cooled. The fingers of depression wander all over the globe. No one can say how long it will take to work out of this mess.

However, some hopeful signs emerged recently. The China Electricity Council reports that electricity consumption rose nearly 7% in December, year over year. (More on that below.) If no one has doctored up those numbers, that would be the first such increase since July. And there is some anecdotal evidence that housing prices in China are on the rise again.

Nonetheless, over the long term, China has lots of room and resources to grow. We got a glimpse of the implications of that growth in the last several years — the huge pull on resources such as oil, for instance. At the moment, economic depression has set in most everywhere. But longer term, it seems foolish to bet against the great dragon in the East.

Sincerely,

Chris Mayer

January 29, 2009

A Coiled Spring of Growth was originally featured in the Penny Sleuth.