French/Belgian Bank Dexia collapsed--Bail out needed--by Shan Saeed

My prediction has come true in 2011 as well. First major European bank Dexia is looking for bail out. It has collapsed. The giant bank is looking for funds to remain floating on the sea otherwise it would sink.

First major European bank bailout of 2011 has now happened. French/Belgian banking giant Dexia has failed and both governments have pledged to participate in a rescue plan. But Dexia will not be the last major European bank to fail as I said earlier. There are many more banks to be balied out and this would destory tazx payers money. Its a big moral hazard. Let them fail and go bust.

Even now, governments all over Europe are feverishly developing plans to bail out major national banks in the event that the current financial crisis goes from bad to worse. Instead of learning the lessons of 2008, most major European banks have continued to pile up huge mountains of debt, leverage and risk. Now the bill for that stupidity is about to be passed on to the taxpayers of those nations. But with most nations in Europe already drowning in debt, are bank bailouts really the right course of action? What is it going to happen to Europe if dozens of major banks start failing and trillions of euros are needed to bail them all out?

Dexia is the first victim of the new credit crunch. It got to the point where Dexia simply could not get access to the funding that it needed in the credit markets.

It is starting to see this all over Europe. Nobody wants to loan much money to European banks right now because it is unclear what is going to happen next in Europe and it is uncertain which banks are stable and which are on the verge of collapse.

This is so similar to what happened back in 2008.

But Dexia is not going to be "the next Lehman Brothers" because the governments of France and Belgium are stepping in to save Dexia from collapse.

A recent article in the Financial Post described how the rescue of Dexia is likely to proceed....

Dexia will effectively be broken up, with the sale of healthier operations while toxic assets, including Greek and other peripheral euro zone government bonds, will be placed in a state-supported “bad bank.”

The details of the plan will be negotiated over the coming days, but authorities are making it clear that Dexia is not going to be allowed to collapse. Bank of France Governor Christian Noyer is assuring everyone that Dexia is going to have access to plenty of liquidity....

"We will loan Dexia as much as it needs"

It appears that the "too big to fail" doctrine is alive and well in Europe.

Sadly, this is not the first time that Dexia has been bailed out. France and Belgium also bailed out Dexia back in 2008. People tend to forget about financial and economic history.

But this was not supposed to happen.

Just three months ago, Dexia received "a clean bill of health" from regulators during European Union bank stress testing. Stress test was an illusion.

It just shows how credible those "stress tests" really are.

So are more European bank bailouts coming?

It certainly looks that way as I have predicted at the start of this year in 2011. I see lot of blood in the global financial markets and bail out of banks at various level of bankruptcies.....

An article in the Financial Post on Tuesday i.e. 4th October stated the following....

European finance ministers agreed on Tuesday to prepare action to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.

Of course when they talk about the need "to safeguard their banks" they are talking about those that are deemed "too big to fail". Just like in the United States, banks that are "too small" don't get bailed out at all.

But western governments are very protective of the big banks. The big banks are allowed to take gigantic risks, and if they succeed they make tons of money and if they fail then the taxpayers bail them out. Bailing out is not the solution to the current mess of the global markets and financial institutions.

With big trouble on the horizon in Europe, authorities are already getting ready to bail out the major banks. A Bloomberg article from last monthacknowledged that the German government has been very busy getting ready to bail out their major banks in the event that a Greek default becomes a reality....

Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

The fundamental problems that Europe is facing are not being solved and the financial crisis is getting progressively worse. With each passing day, more bad financial news comes pouring in.

For example, Moody’s slashed Italy’s bond ratings by three levels on Tuesday and Spain on Friday as well.

A reduction of just one level is very serious business. For Moody's to hit Italy that hard is a really big deal.

Italian banks have also been targeted by the credit rating agencies. The other day, S&P slashed the credit ratings of seven different Italian banks and more to come for Spain and Portugal.

If Italy goes down, it is going to be an absolute nightmare. The Italian economy absolutely dwarfs the Greek economy. The EU has been really struggling to bail out Greece, and there is no way in the world that they would be able to bail out Italy.

So if nations such as Italy or Spain start collapsing, will the U.S. Federal Reserve step in to help bail them out?

You never know.

The sad truth is that the Federal Reserve can do pretty much whatever it wants and nobody can stop them.

As I wrote about the other day, the Federal Reserve has agreed to join with other major central banks to lend hundreds of billions of dollars to major European banks in October, November and December. Quantitative Easing is going global and getting the recognition for its failure to stimulate the economy.

As the past few years have shown, wherever big, global banks are in trouble, the Federal Reserve is sure to step in and help.

And many big banks in Europe are definitely headed for trouble. Right now, European banks are holding more than $4 trillion in European sovereign debt.

A lot of that debt is bad debt. Today, troubled European nations Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3.7 trillion euros combined.

That is a whole lot of debt out there, and many big banks are so leveraged that just a 5 percent reduction in the value of their holdings could wipe them out.

Hold on to your hats folks. So what should we be witnessing in the next 3-months?

Well, Greece continues to be a huge problem.

The IMF, the European Central Bank and the European Union are very frustrated with Greece right now.

On Monday, it was revealed that Greece is not going to hit the deficit reduction targets set for it by the "troika" either this year or next year.

European officials have been particularly displeased that Greece has been getting all of this aid money and yet has not been strictly adhering to the austerity measures that they agreed to. Austerity is contractionary, leading to recession for the economy and abysmally low confidence in the market.

However, the reality is that the austerity measures that Greece has actually bothered to implement have hit the Greek economy really hard. The more Greece reduces government spending the more the Greek economy seems to slow down.

Greek Finance Minister Evangelos Venizelos recently announced that the Greek economy is projected to shrink by 5.3% in 2011, and Greek debt continues to spiral out of control.

Meanwhile, severe economic pain continues to spark huge protests all over Greece. Scenes of riot police firing tear gas and protesters throwing stones at police have become so common in Greece that most of us don't even pay much attention anymore. Social cost would be huge for the economy. Its all about economics. When people dont have jobs, dont have food, dont have sense of purpose to their lives, its an excruciating agony.

But all of us should pay attention to what is happening in Greece.

Eventually these kinds of economic riots will spread throughout the rest of the western world as well.

And every day Greece just seems to get closer and closer to default.

At this point, global financial markets seem to consider a Greek default to be inevitable. The yield on 2 year Greek bonds is now over 65 percent. The yield on 1 year Greek bonds is now over 135 percent.

Greece is toast without more bailout money.

But now major politicians all over Germany are declaring that Germany is done contributing money to the European bailout fund.

And without Germany, the rest of the eurozone is not going to be able to continue the bailouts.

So the clock is ticking.

Once the current bailout fund has dried up, the bailout game will be over.

What will happen then?

Will that be what sets off a massive financial collapse in Europe?

Could we actually see the end of the euro?

For a long time there was speculation that it would be weak nations such as Greece that would leave the euro.

But now it appears increasingly likely that if someone is going to leave the euro it might be Germany.

Most German citizens would be in favor of such a move. One recent poll conducted for Stern magazine actually found that 54 percent of all Germans would favor leaving the euro.

But if Germany left the euro it would absolutely implode. German economic strength is the primary thing holding the euro up at this point. Germany is driving the United Europe.

In any event, it is going to be very interesting to watch what will happen to Europe over the coming months.

Greece, Italy, Portugal and Spain are all steadily marching toward collapse.

Germany says that it is done bailing out other members of the eurozone.

Dozens of major European banks are teetering on the brink of disaster.

People get ready - a storm is coming. Time is running out for Europe and there is no help in sight going forward.

Discalimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

Worst is yet to come---By Shan Saeed

US economy is in complete disarray. But it’s been that way since the recession began. I have already predicted the repeat of 1930's and this time it would be very long and Americans would feel the pain very badly...Financial wealth will be wiped off the market soon.

Unfortunately, the worst may be about to hit Americans soon. And I can feel the panic beginning to sweep through the US economy. Last week the global world witnessed both the stock market and gold prices plummet. And this week has brought additional volatility that has left average Americans uncertain of what’s to come. But the experts are starting to come to a consensus. And it’s not good.

According to famed economist Robert Shiller from YALE now warns that the stock market is "still high by historic standards," and that it has to be seen the dramatic correction yet that occurred during the Great Depression.

Dallas Fed President Richard Fisher says that Bernanke’s Operation Twist will be “working against job creation." And probably the most shocking prediction comes from various economists including Roubini.

My prediction for USA economy.

Unemployment going up by 45%

Stock Market to plummet by 75%

Housing market to go down further by 20%

Bail out for Big banks are very much on the cards.

Inflation would be in double digit.

There are few economists who have made similar predictions for the US economy. I am bearish as I can see lot of blood bath in the global financial markets for the next 2-years. Tough times ahead.


Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.

Watch out for next banks to default soon--By Shan Saeed

Morgan Stanley is in a free fall. Goldman Sachs at multi-year lows. Citigroup looking ugly. Bank of America off 50% from recent highs.

You may be wondering what is going on with the major firms in the financial sector. While each of these firms have different problems —vampire squids to countrywide acquisitions — they all have something in common: Their balance sheets are opaque. Filled with Toxic assets and exotic products.

This is no accident. Indeed, it was by design that execs in the banking sector, and their outside accountants, hatched a scheme in 2008 to hide their balance sheets from public view. The bankers had been lobbying the Financial Accounting Standards Board to change the rules that governed “Fair Value Measurements” also known as FAS157 (September 2006).

You may recall during 2008 this was referred to as “Mark-to-market” accounting. Banks loved m2m during a boom period. M2M made the more unusual balance sheet holdings — derivatives, the mortgage-backed securities (MBS), exotic liabilities, and other assets — look fantastic. The fair value measurements of these items — essentially, yesterday’s closing price — allowed the accounts to show enormous profits. Those were the underlying basis for huge bonuses, stock option grants and of course, company share prices.

The reality was quite a bit different. These were not equities or treasuries or corporate bonds — they were thinly traded items whose prices were ramping upwards on a sea of delusional optimism. As soon as the credit bubble ended and housing began to retreat, these assets would free fall like an acme anvil in a roadrunner cartoon — and the bankers were the Coyote.

Uh-oh, this was got to be a problem. So the bankers began to lobby FASB to change the rules governing Fair Value Accounting. Sure, it was hugely helpful on the way up, but now, reporting actual holdings —previously marked at all time highs — was becoming problematic.

To their credit, the accounting board resisted. What Bankers were proposing — marking to their models — was patently absurd. These were the models that told them these purchases were good ideas in the first place. Changing Mark-to-Market to Mark-to-Model was a free pass to
practically allowed banks to NEVER have to write down their liabilities. Some people began calling the proposed accounting changes “Mark-to-Make-Believe.”

In the midst of the 2008-09 collapse, however, Congress was in a panic. They mandated that FASB accept Mark-to-Make-Believe accounting in the Emergency Economic Stabilization Act of 2008. It gave the Securities and Exchange Commission the authority to “Suspend Mark-to-Market Accounting.” In March and April of 2009, that is precisely what occurred. It was yet another example of an industry lobbying Washington, D.C. to get precisely what they want — and then having that legislation blow up in their faces.

The bottom line is this: Investors do not really have a clear idea of how healthy any of these banks truly are. I do know the state of their balance sheets. Its filled in with toxic assets and have huge exposures to mortgages, to Europe, to Greece, etc. They could all be technically insolvent, as far as any investor can tell. And that is exactly how the bankers wanted it.

But given the trouble in Europe, and the likely problems in housing if the US goes into a recession, Investors have decided they cannot take the risk of a holding an opaque, possibly under-capitalized probably over-leveraged financial firm blindly. They are telling the banks no
thanks, we are not interested, we are going to be prudent and we have to assume the worst. Hence, for the second half of 2011, they have been selling off their holdings in these opaque, potentially insolvent too big to succeed entities. Tough times ahead.....

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.

Forget Gold: I am bullish on Zinc-----By Shan Saeed

Its on the verge of a new bull market. Zinc is taking a bullish turn.

It sure doesn’t feel like it. But the facts show its in the early stages of a massive supply-crunch commodity boom for a metal that’s so out of favor, companies mining it are shutting down.

The smartest and biggest money in the world is quietly getting behind it all. And for good reason: The last time this situation came together, early investors had the chance to walk away with 970% gains in just two years.

The New “Money” Metal

The best part is, any economic/market downturn will make this boom even bigger and more profitable.

This boom has all the essential elements of fortune-making metals story.

It has all of my five indicators that a commodity is about to go on a major bull run:

1. Stockpiles are at multi-year highs.

2. Prices have been depressed for decades.

3. Supply is in decline.

4. Demand is steadily growing and is about to overwhelm supply.

5. Prices are so low, they must go up — way up.

Sound familiar? It should. This has happened it over the last few years in copper, gold, silver, oil, rare earths, and on and on.

Now it’s happening all over again in a metal that has largely missed out on the decade-long commodity rally altogether: zinc.

Zinc is on the verge of catching up to the rest of the metals — and deliver handsome gains to investors willing and able to look beyond the crisis du jour.

30-Year Bear into Mega-Bull

Now, I know what investors are thinking... “Come on, Zinc? Really? That’s the best investors got?”

And you’re right. Zinc’s in a tough spot.

Zinc — used primarily as a weather-resistant coating when galvanizing steel — is highly sensitive to general economic activity levels. Stockpiles are the highest they’ve been since 1995. Zinc prices are low and falling.

In the 2009 to 2011 "rally in everything," zinc actually was one of the worst-performing metals. The credit crunch was a disaster for the zinc industry, too. Zinc mines in Ireland, Portugal, Australia, and elsewhere were shut down awaiting better times...

Price Increased

Zinc prices soared in 2006.

Price Decreased

It started collapsing long before the 2007-2008 recession even began.

Since then gold, silver, and copper were doubling, tripling, or more, and setting new all-time highs. At the same time, zinc prices rebounded to half of their 2007 highs.

Zinc has been out of favor for a long, long time. In the commodity world, however, that’s a good thing...

This is How Bull Markets are Born

The great John Templeton summed up bull market life cycles precisely when he said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

Right now, zinc is mired in pessimism.

The economy is falling apart... Metals prices across the spectrum are all falling... Gold, silver, and copper have fallen fast and hard.

But on the bright side, gold’s still $1,600 an ounce. Silver’s hanging around $30 an ounce. Copper’s still $3.20 a pound, about five times higher than its turn-of-the-century lows.

Zinc prices, meanwhile, have fallen back to levels last seen in March 2009 (in other words, rock-bottom).

There’s a lot to be pessimistic about when it comes to zinc. Fundamentally, though, there are a lot of reasons to expect a significant price increase in the near future.

The main reason is simple supply and demand. Frankly, the situation quickly coming together in zinc cannot last.

The [Zinc] demand story could be the strongest of any commodity.” And its back up its claim with strong zinc demand and its steady and rapid rise:

Demand growing steadily is good. But it’s only half the equation.

The supply side of the zinc market is what will make it a top performer in the months and years ahead.

Next year zinc supplies are expected to peak, after which they’ll fall year after year.

Zinc supply isn’t just growing too slowly; it’s downright declining:

We’re starting to see the first stages of this now. Global zinc consumption is on pace to rise 5.5% this year. Supply is on pace to rise a mere 2.2%. As time progresses, supply and demand should only fall more out of balance.

Something will have to give. That something will be price. And when the sharp price increases come, they will create exponential gains for zinc miners.

I'm not the only one who sees an imminent zinc boom. The smartest money in the metals industry have spent billions to ensure they control at least some zinc production

Big Money Bet Big on Zinc

Major miners have aggressively (though quietly) expanded into or added to their zinc assets. In the past couple of years, I have watched major miners swallow smaller zinc companies whole, buy large development projects for cash, or take significant stakes in the very few emerging zinc producers.

Companies know what’s coming to the zinc market and want to get their big position early. And the deep pockets of China have led the way.

See if you can spot the trend:

• China Minmetals bought OZ Minerals, the world’s second largest zinc producer, for $1.4 billion in June 2009.
  
  
• Resources and China Minmetals were caught in a bidding war over the zinc assets of AngloAmerican PLC; Vedanta won out at the price of $1.3 billion.
  
  
• Qiao Xing Universal Resources paid $107 million for a zinc mine in Inner Mongolia. The project was not even mining yet, but Qiao Xing still cut a 9-figure check — and will have to spend a few hundred million more just to get it up and running.
  
  
• Shenzhen Zhongjin Lingnan Nonfemet bought a 50.1% stake in Perilya Limited, which operates a zinc mine the China Mining Federation calls “one of the world's largest and most renowned.”
  
  
• China Investor Corp, China’s sovereign wealth fund, recently attempted takeover of one of the world’s premier zinc mining companies.
  
  
• Zebra Holdings and Investments (an investment company tied to the natural resource-savvy Lundin family), bought a 19.9% stake in promising zinc development company Zazu Metals (TSX: ZAZ).
  
  
• Jinchuan Group, Equinox Minerals, and Inmet Mining have also attempted or successfully taken over zinc mining companies.

Sources: Research, mining industry, Zinc magazinr, Commodities Inc, Shanghai Daily

The list goes on, but you get the point: The smart money and the big money like zinc.

The reason: There’s a fortune to be made in this diamagnetic metal.

The Last Time this Happened, Investors Gained 970%

The best example of how troubled the zinc market is are the massive stockpiles of the metal sitting in the London Metals Exchange warehouse.

There is much zinc in storage; no one wants anything to do with it.

This is bad news for zinc miners — and great news for investors.

If this trend holds true, zinc stockpiles will be drawn down significantly, zinc prices will have a good run, and zinc mining stocks will do exceptionally well.

Never a Better Time to Be a Contrarian

As you can see, there’s not much to like about zinc today.

Large stockpiles and falling prices have pushed zinc completely out of favor. Aside from the mining companies that see what’s really going on in the metals market — and what’s coming up in the future on the supply side — no one wants zinc.

The market downturn in general and commodity slide specifically have added to the bearishness surrounding the metal.

Commodities have fallen out of favor. Copper, silver, gold, and oil have all taken quick and painful hits. Zinc, which was never too popular to begin with, has been lumped together with the rest of them.

But for real contrarian investors willing to buy great assets at depressed prices, you’ve got to love zinc right now.

The name of the game is buy low, sell high.

Zinc is at a multi-year low right now... Will you buy?

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

European leaders are making a BIG mistake---By Shan Saeed

If you try to read the latest piece of the leading English paper, it reflects a clear picture of Euro crisis.

The latest piece by Ambrose Evants-Pritchard of the Telegraph highlights a disturbing error this deep into the crisis. Angela Merkel is still referring to this crisis as a debt crisis:

Angela Merkel told German industry today that we are not facing ”a euro crisis, but a debt crisis.”

But this is not the actual facts and why this is wrong:

“She is wrong. Total levels of private and sovereign debt in the eurozone are lower than in the UK, the US, and far lower than in Japan.

…Not because of debt, except in the most superficial sense.

The reason this crisis keeps grinding ever deeper is because the euro itself is a machine for perpetual destruction. The currency is fundamentally warped and misaligned.

It spans a 30pc gap in competitiveness between North and South. Intra-EMU current account deficits have become vast, chronic, and corrosive. Monetary Union is inherently poisonous.”

4 Major issues of euro single currency crisis

1. Gap in competitiveness between Northern and Southern Europe is growing . Productivity is down among euro zone members

2. Intra-EMU current account deficit have big huge, chronic and dangerously to a level which requires correction

3. Monetary Integration is poisonous from the start.

4. Euro currency is mis-aligned with various countries in Euro zone strategically.

Now is it really making progress? Europe is in messy situation and its because of Euro single currency since its historically a flawed currency. Different countries with different culture/ monetary division can't survive this issue. You can’t resolve a disease if you don’t even understand what’s causing it. Merkel’s comments are eerily similar to what everyone's heard from Ben Bernanke and Hank Paulson in 2008 when they misdiagnosed a household debt crisis as a banking crisis. Europe must understand that this is a currency crisis and that there is only one true fix – the creation of an autonomous Europe. I think that can best be done via a split in the Euro (which would still require a central Treasury) or dissolution. I have said there is a third option – a United States of Europe. But I can’t expect them to move in the right direction if they still think this is a banking and debt crisis. That will simply lead to bank bailouts and the American disease of bailing out banks without fixing the actual cause of the economic problem….

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

Fed leaves economy in the wind---By Shan Saeed

The Federal Reserve has announced “Operation Twist,” which saw the U.S. central bank shift from the short end of the curve into the long end. The idea is that short-term rates are so low that more Fed purchases can’t do anything more. This is the idea of 1961.
Most mortgage and consumer-credit rates are based on long-term rates. The 10-year bond drop to below 2 percent and the 30-year drop to near 3 percent. The Fed’s idea is too keep longer-term rates lower for people to refinance or get mortgages at low levels. Fed also wants to flatten the yield curve. What is happening now with short-term rates near zero is that banks can rebuild their balance sheets by borrowing at zero then buying long-term bonds at higher rates. The Fed wants to force banks to lend that money or speculate by ending that trade. However, I think these Fed actions won’t work for the following 3 reasons:

• You can’t just use cheap money to refuel an economy. You need confidence. Confidence will come from cutting the deficit and getting the U.S. fiscal house in order. With no real plan on either side of the aisle to solve the deficit problem, there is no confidence. Without long-term clarity on the fiscal issue, the economy will bump along.

• The economy is in deleveraging mood. Even if the banks are more open to loaning money, I don’t think the loan demand will be there. Many people were wiped out in the real-estate bust or just don’t have jobs or income to take on loans. Therefore, it won’t see a big bump in loans. Right now, private debt to GDP is over 250 percent. That was the level it was at in Japan in 1997 and in Japan it is now 113 percent. I expect a similar decline in the U.S. in the next 10 years.

• Another argument is that the Fed wants to recreate the wealth effect. However, one must look at the facts. In the early 2000s at the height of the dotcom bubble, 67 percent of Americans owned stocks. This number reportedly has fallen to 54 percent. Therefore, fewer people are in the market. In addition, with nearly 17 percent of Americans underemployed, many who do own stocks have had to sell to raise capital just to pay bills and live day to day. In the huge stock-market rally from 2009 to 2011, there were net outflows from mutual funds! As long as unemployment stays high, most people can’t afford to invest. In addition, the top 10 percent of income earners own nearly 85 percent of stock market wealth, so the wealth effect isn’t really helping the middle class.
Therefore, I can see that the so called twist is just a waste of time. It is just reallocating printed money, which already didn’t help the economy. All I see this doing is causing a major bubble in the long-term bond market as the Fed is now buying all the long-term bonds. It will do nothing to help the economy because the pretenses it is based on are false.

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

Recession is great for technology stocks by Shan Saeed

All the big players are getting behind it: Google, Apple, IBM, Microsoft, AT&T — name a big technology company, and chances are they’ve already invested billions of dollars. The next big tech boom is here.

It has all the benefits service providers and their customers want and use...

More efficiency, lower energy cost, better service, and more capability are all part of it.

And the rest of the world is just starting to see the potential of this tech boom and how it’s going to improve customers' lives and increase the bottom line.

Best of all, any further economic slide will accelerate this boom.

Sounds perfect, right?

Well, it's about as close as you can get — especially in a market like this one.

Here’s what I mean...

Recessions are Great for Technology

Technology has been one of the few life rafts in a sea of general economic destruction.

Technological innovation is moving at a steadily accelerating clip. And it’s delivering faster and larger gains for those who move in early...

The mainframe computer took 40 years to mature. The personal computer took about 20 years. The Internet really grew up in about a decade’s time.

Google went from garage to IPO in six years. Facebook went from dorm room to $50 billion market value in four years.

Cloud computing — the latest major tech evolution — has been exploding for only a few years.

Known as “the cloud,” it simply moves data storage, management, and other activities to large, centralized, off-site locations. It has been a seamless transition for users of the cloud like you and me...

In many cases, users simply log on to a common database and pull up documents or whatever they need remotely instead of accessing files from their desktops. No one knows whether that database is housed in New Jersey or Bangalore. Thanks to the cloud, it doesn’t matter.

But here’s the thing: Even though the cloud has come relatively quickly and easily, it has delivered tremendous gains for early investors.

The recent cloud computing mini-bubble shows how profitable a new tech wave can — and will continue — to be:

Cloud computing stocks have significantly outpaced the rally since March 2009. The hottest of these stocks, Riverbed Technology (NASDAQ: RVBD), has beat the major indices more than eight-fold.

But the cloud computing mini-bubble has burst.

And this is opening the door as the next step in computing evolution.

Storm Computing: Beyond the Cloud

George Gilder, was the first person — correctly predicted the emergence of cloud computing decades before it became reality when he said, “When networks became faster than computers, the only logical solution was to switch to offsite cloud-computing data centers.”

That was twenty years ago. Since then, much has been made of “the cloud.”

But once you start seeing ads for the cloud on TV and consistently see it pop up in mainstream media, the real opportunity for investors has passed.

Enter what Gilder sees as the next big step in this evolution: “storm computing.”

On the surface, storm computing seems very similar to cloud computing. (Believe me, I’ve spent quite a bit of time looking at this, and I owe more than a couple of dinners to some associates in the technology field.)

Storm computing allows the user to directly access computing power remotely in addition to software, databases, and everything else.

Imagine: You open up your iPad and you can run some of the most powerful software in the world right from your small, relatively underpowered device.

You don’t need a massive processor or a loud fan to keep it cool because it’s all remote; the days of overheating laptops and those little computer fans working overtime will be a thing of the past with storm computing.

In essence, the main advantage to storm computing is the ability of software developers to advance their technology beyond what simple personal computers, laptops, iPads, and other devices can handle... and unlock a massive new wave of software innovation and improvement most of us can barely imagine right now.

The advanced technology can and will be more powerful, have greater capability, be smarter (better at predicting what you want), and be much easier to use.

To be perfectly honest, I’m not making a “big” prediction about the future...

Storm computing is already here.

The “Dark Fiber” Boom Comes into Focus

Google has spent the last few years quietly laying the groundwork for storm computing.

The tech giant started off by buying up “dark fiber” about five years ago. The entire tech community wondered why Google was buying up fiber optic lines, which were never or no longer being used and were regarded as completely useless.

Now its known. It was all for storm computing.

Google has been working on building a massive test of between 50,000 and 500,000 homes in Kansas City, Missouri. It’s running fiber optic lines directly into people’s houses and providing the first iteration of storm computing to a few lucky guinea pigs.

The speed of these networks is 100 times faster than current broadband networks like cable and DSL.

The massive data highway is necessary to enable storm computing for businesses, personal users, and everywhere in between.

And the timing for all this couldn’t be better...

The Upside of a Down Economy

Historically, economic downturns have accelerated technological innovation.

Gilder, the same man who predicted the emergence of cloud computing, is also the first to really speak out about storm computing. He maintains, “A recession is the mother of invention.” I have been advocating about this for many years now.

The Great Depression was actually a period of accelerating innovation. Many millionaires were made during that otherwise economically disastrous period.

People naturally want a better quality of life. It’s human nature. An economic recession created by government policy, Federal Reserve, excessive debt, and economic dislocation aren’t going to be able to stop it.

If the last few weeks are any indicator, there’s a lot of invention and innovation on the horizon.

Of course, most investors are looking at what they can sell now — or thinking of giving up completely. It’s a totally natural feeling to sell everything now and give up.

Technological innovation combined with the recession is certainly not the common focus right now. However, there will be tremendous rewards for watching emerging tech trends closely right now...

There is another Opportunity that has been all over the growth of real4G (not the stuff phone companies are marketing as '4G') and other major technology trends. After all, when it comes to new technology, if Google, Microsoft, Apple, and others are pumping billions into something... you know it’s not going to be long before it becomes reality. Now you can add storm computing to the list of big and highly lucrative innovations on the verge of hitting the mainstream market. Good investing

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK