A couple years back I bought some JST for about $14/share. Boy did I pay for that decision, as it hit under $5/share last Friday. Then something happened.

For the third time in the last 12 years I got that feeling that a deal is too good to pass up. The company has a decade of growth followed by a bad year, and it's PE is punished down to 4? 4?  That means even if the company has zero growth, I double my money in 4 years just from earnings...  So on Sunday I decided that I would rather buy this and lose my investment if I'm wrong, than not buy this and miss the tremendous gain if I'm right. I'm willing to sit on the shares for 10 years.

So I got in on Monday morning around $4.95, already kicking myself for being 7.5% into the up bounce.

JST is down over the last year for the following reasons: 1. Earnings contractions following China's slowdown 2. Rumors of phony numbers easy to believe in the China market 3. Small company lacks institutional attention.

JST has major customers with quality control who's presence pretty much elimates #2 in my mind. JST makes electric transformers that China uses, and has had a stellar performance for 10 years straight. I don't care how much the economy slows down, China is going to expand and upgrade their electric grid in the coming decades. So poo-poo to #1. And as for #3... well that's the reason I just got what I think is the kind of deal that makes rare returns.

I'm not looking to convince any of you, I'm just telling the interweb because this only happens once every 3-5 years for me. The last two times they were new investments; this will be the first time ever that I buy stock on a dip that I have already lost money in.

Side note on  buying on dips: I saw so many people lose their nest eggs with dollar cost averaging during the tech bubble burst that I could never seriously consider it a strategy. I still not sure if this counts, because I'm not buying it to save the initial investment, I am buying it on its current merits.

The Fed has chosen inflation.  I am happy about this.  Stock investments and Real Estate will appreciate to match the inflation, while corporate cash reserves and individual debt will be devalued.  This isn't the same thing as bailing out debtors after the banking crisis, but it's the next best thing.  Devaluing the dollar will also help our recovering domestic manufacturing base to compete with China and other third world production centers.

And yes, this means I am no longer bearish on gold.  But I'm still not going to buy it; I think stocks are a better inflation hedge.

Gregor.us put out this good piece that somewhat addresses the difference between inflation due to monetary policy, and inflation due to tightening supply (of oil).  It seems like everyone I disagree with on other economic issues does not agree with the significance of the difference between the two causes of price inflation.

Going one step further, I think most opponents of inflation are failing to take into account the large cash reserves held by corporations at the moment.  I think those large reserves change the expected outcome of increasing inflation.  Normally, one could argue whether inflation is regressive or progressive, given that the poor and middle class were typically more cash dependent than the wealthy, who held their savings in non-cash assets that would appreciate with inflation.

But now we have a different scenario:  Much of the middle class has their retirement accounts in stocks, and the same corporations that own American politicians are holding onto record amounts of cash.  Increasing inflation now through monetary policy would be a strong incentive for these companies to invest that money or return it to shareholders.  This would be similar to government stimulus in that it would flood the market with money.   It would be different from government stimulus because the private sector would be deciding how to invest that money.

Profiting From Rising Energy Costs

Rising global energy costs are going to cause major changes in America's future economy.  Gregor McDonald does an excellent job assessing the current situation and speculating future energy trends.  Major changes are equivalent major opportunities for long term investors.  I often like to think about where we can make money as fuel costs rise, natural gas develops, renewable sources progress, and consumption declines.  For now I'm going to assume innovation lags necessity, and our near future is going to involve a massive decrease in energy usage by Americans, due to rising energy costs.  This will be an overall slowdown of the economy, but as usual, some will prosper.  Also, I'm going to consider only cheap solutions that are accessible to most Americans, because that will be the biggest market share.

Cutting Transportation Costs


How do you cut down on transportation costs?  An hour long commute to work in a car will only cost more now that we are 6 years past global peak oil production, and many Americans cannot afford to buy a new hybrid car to cut daily expenses.  The solutions?  Move closer to work.  Take public transportation, walk, or bike.  Car pool with other people privately.  Ride a scooter (Hi China!). Industries to look into:

• Moving and storage companies.  John Doe is going to need a U-Haul to move closer to work.  
• Shoes.  More walking means buying shoes more often.  
• Bicycles.  Especially electric bicycle patent holders and manufactures.  I've seen what happens when sedentary people apply their desire to sit still to  their desire to ride a bike, and it is an electric motor with a battery.  
• Headphones.  Sharing a car with people doesn't mean liking the same music.  I wonder if any public company specializes enough in headphones to get a significant gain from increased sales.

Cutting Home Heating and Cooling Costs

• Smaller homes.  I like stating the obvious.  Smaller homes will be easier to heat and cool.  Maybe that means condos and apartments in high rise buildings, that get to use the heat rising up from the lower units.  This is an especially interesting opportunity to me, given the recent poor performance of real estate in general.  
• Cold weather clothing:  Jackets, hats, blankets, sweaters, and slippers.  If you keep your house at 64 degrees Fahrenheit in the winter, you will have on sweaters and slippers.  No heat at night means more blankets.  No car means more time walking outside even if you use public transportation, which requires better clothing than most people currently use to walk between between their front door and the car.

General Goods

• Plastic Recyclers:  As oil prices rise, so will the cost of producing new plastics.  Previously unprofitable recycled goods might get priced into profitability, creating some nice investment opportunities.

Do you have some ideas about what industries will benefit from rising energy costs?  Let me know!