Ask a millionaire what they look for in a business investment opportunity and inevitably they will tell you low risk, high reward. That’s pretty obvious and certainly what I look for when Im ready to take on a new project.
By low risk, we inevitably mean low entry cost. A small outlay for the highest possible yield is always desired from an investment perspective. Sitting on some money, the last thing we want to do is squander it rather then make it work for us so it grows. So we look for places to invest it for a return.
The stock market may offer 5%-10% and in a really good year you can expect no more than 30% in fact that would be such a good year that you should definitely consider selling soon simply because its such an aberration that it is bound to return a negative number next year.
Of course the stock market is not a low risk, high reward investment. The outlay is 100% of the money we have to invest. We can invest in options or warrants which only require a premium to be paid against the value of the stock parcel however this is best left to highly skilled stock players as the premium is generally and often lost buy the investor.
A business investment on the other hand is quite a different proposition from the perspective of the stock market. In the stock market you have absolutely no control over the company or its share price and where it goes…north or south. A business investment means you are the commander and chief of the ship. You have maximum 100% control of the future consequences and outcome of the businesses fate.
Neither of these investment mediums are particularly attractive to me but it doesn’t mean they won’t work for you. A low risk business investment that does attract me is creating money from very little. Irrespective of how much money my bank account bulges with, I always pursue the low investment/high value purchase that gives me access to excess intrinsic value.
I don’t mind whether its a sea going vessel or a house or a used circus tent. To me its irrelevant. Its the numbers that matter and the intrinsic excess value. These “levers” are the structure of the deals I create.
Making money from thin air is not only possible, but with good capital gains- deal after deal you can only start making big money within 12 months.
To your health and rapid success
Martin Thomas is a Successful Investor and CEO of http://www.opportunity-investor.com
For some amazing information about your first million thats on its way to you right now, follow the link above.
With coal bed methane, the gas content per unit volume of coal increases with depth. Pressure is what holds it in the coal. Often, companies drill deeper looking for more gas per unit volume of coal. However, according to Marchioni, “The deeper you go, permeability decreases. And it decreases exponentially, not linearly.” There’s always a trade-off in any coal basin. Geologists will try to find the depth where they will find optimal gas content and optimal permeability. Of course, the more shallow the depth, where you can find an economic gas deposit, the better for the company and its shareholders.
What do you need to know about risks when investing in coal bed methane gas exploration companies? The risk is permeability and the ability to produce the gas from the coal. Permeability, as Marchioni explained, is the ability for the gas to flow from the coal into the well bore. “Coal typically has a set of fractures, a natural set of fractures, in it,” he clarified. “They can be better or less well developed. It can have minerals in them, for instance. A mineral can be deposited there that can plug between the fractures. Coal, as a substance, has very low permeability. But because it is fractured, it can have good permeability.”
We asked Dr. Marchioni point blank about the project Pacific Asia China Energy (TSX: PCE)will soon be drilling on its massive Guizhou project in China, “We don’t feel there’s much risk on the coal being there. We have abundant evidence for that. I don’t feel there’s very much risk about gas content. There’s a lot of Chinese testing, and even if it is not fully accurate, within the margins of error, you’d still have a lot of gas in the ground. We have good control geologically. Much of the place has already been explored for coal. I don’t feel much geological risk in that respect.”
He cautioned, “The risks in any CBM play are: ‘Can you get out of the ground at the right price?’ What influences that is the permeability of the coal and also the amount of water that is there. We’re looking for permeability. That’s what we are trying to measure: If there’s water there, can we pump out the water fast enough to reduce the head of water so that we drop the pressure on the coal? That’s basically what we have to do. You have to drop the pressure and allow the gas to bleed off.”
And that is what makes this exploration. “Everything we’ve got in terms of water, permeability, and that kind of stuff is coming from coal mines that are very shallow.” The slim-hole drilling, over the next several months, should answer many of Dr. Marchioni’s questions.
Coal Bed Methane Development May Alleviate Pollution & Mine Fatality Problems in China
China’s the world’s largest producer and consumer of coal. The country also holds 13 percent of the world’s recoverable reserves. Last week, China’s National Development and Reform Commission (NDRC) reported the country’s coal output jumped by 8 percent to 2.11 billion tons in 2005. The U.S. Energy Information Administration Outlook 2005 projected China’s coal consumption would grow to 1.81 billion tons by 2015, about one-quarter of the world’s total consumption of coal. Nearly half the coal expected to be consumed in Asia over the next decade will be burned in China. In 2002, the industrial sector consumed about 47 of that coal. As the world’s leading producer of both steel and pig iron, China needs fuel to meet the world’s eager appetite. Together with India, these two countries will represent 71 percent of the forecasted growth in coal consumption over the next decade.
China’s dependence upon coal comes at a price. The NDRC reported nearly 6,000 died in coal mining accidents in 2005. The World Bank estimates about 400,000 Chinese die each year from air pollution-related illnesses, mainly heart and lung diseases. Not only does China export 24 percent of its coal to other Asian countries, it is exporting its pollution from coal emissions. “As much as 40 percent of air pollution in Japan and South Korea originates from China,” said Dan Millison, an environment and energy specialist for the Asian Development Bank. Boo Kyung-Jin of the Korea Energy Economics Institute said, “South Koreans are increasingly concerned. In spring, everybody is coughing. It is getting worse in recent years.” A report in Channel NewsAsia suggested, “There is also growing evidence that the pollution has reached North America.
James Finch contributes to StockInterview.com and other publications. His archived articles can be read at http://www.stockinterview.com Feedback is welcome and encouraged and all emails are answered. Please contact James Finch at jfinch@stockinterview.com
Pacific Asia China Energy was featured in this article. Information can be reviewed here:
Pacific Asia China Energy (TSX: PCE; Other OTC: PCEEF)
http://www.pace-energy.com/s/Home.asp
In November of 2000 when the NASDAQ was trading at 3000 I wrote in this column that the NASDAQ Index would fall to 1500 and I got lots of heat for saying it. Microsoft had fallen from $129 to $60 per share. You know where they are today.
The talking heads on CNBC-TV and many of the radio stock experts are convinced we are headed back up as soon as this small “correction” is over - and they could be right, but I seem to remember their former predictions just before the major stock indexes went over the edge of Financial Niagara Falls. Can it happen again since the market has fallen so far?
For a year the DOW has been creeping higher. The NASDAQ has gained back about 40%, but please remember the NASDAQ Index is not composed of the same stocks as it was 3 years ago and neither is the DOW. Many companies went bankrupt and others have been delisted because they do not meet the criteria to remain on the board.
Too many investors have not done their homework. Most of them only know the great bull market of 1982 to 2000. The same goes for brokers. Almost none have ever seen a bear market. I call the mutual fund managers ‘children’ because most of them were in diapers during the last bear of l972-74 and they discount the sudden break of 1987 as an aberration. What it amounts to is they have no idea of what to do when the brown stuff hits the fan.
It is a shame that brokers are not taught the basics of how to protect customers’ money and same goes for mutual fund managers. Scores of mutual funds went out of business during the last break and others were absorbed by their big brothers in large fund families.
The market rarely crashes as it did in 1987 and usually erodes away as it did in 1972-74. Current investors have never been told about secular bull and secular bear markets that last about 16 to 18 years in each direction. During those down or at best sideways periods investors are happy to break even. This is a historical fact that you can check back for a hundred years.
If we are in this 16 years down that started in 2000 do you have a plan as to what to do to protect your financial well being? Most people don’t and they refuse to accept the idea that anything like another loss of 80% can occur. Brokers don’t have a plan. Fund managers don’t have a plan. Do you have a plan? If you don’t it is time to start thinking how you can protect what you have now. The most important thing about any investment is not to lose money.
The market today has the potential for another 2000 break. Now is the time to protect your investments. Get your stocks and mutual funds out and if you have any that have lost more than 10 or even 20% from their highest price it would be wise to sell them and remain in cash.
NASDAQ 800 may not be far away.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.
Copyright 2005
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