Special Report: Supersonic In Coach Class: Mass Transit 2.0

Did you know that in major European and Asian cities, seeing above-ground power and communications wires is a rarity?

It may be one of the striking, albeit ultimately minor tell-tale signs that the United States is falling behind the rest of the world when it comes to infrastructure.

From coast to coast, the aging of our once impressive national civil engineering framework is impossible to ignore.

Decaying bridges, congested, over-burdened roads... A power grid whose design dates back to the 19th century.

It's all in need of a massive makeover, but perhaps the single biggest clue to our nation's state of infrastructural decline comes when we look at out railway network.

When it first connected East and West in 1869, the American railway network was a modern wonder, and a model for all industrialized nations to follow.

It allowed for a rapid taming of the enormous frontier, and helped turn this country into the unified, integrated industrial powerhouse that it was through the 20th century.

Today, however, it's old news.

And frankly, we're way behind the competition.

Our Report Card: Straight Fs

Right now, the U.S. has just over 200 miles of high-speed rail in service. That's just 200 miles, for all 50 states, of rail lines that can handle trains moving at 120 mph (for upgraded track) or 160 mph (for newly built track).

Compare that with 800 miles of high-speed track in Germany, 1,200 miles in France, and over 1,600 miles in Japan.

Just for the sake of comparison, the U.S. has more people than all three put together and accounts for about seven times the trio's total landmass.

Even Russia has more than 400 miles of high-speed track already in service, with another 500 due by 2026.

The U.S., even in view of this huge disparity, is currently only working on about 300 miles of new track.

Starkest of all is that the world leader, by a huge margin, is our own economic rival China, boasting more than 23,000 miles already in service and another 12,000 under construction.

And it doesn't end there. Where as the fastest trains in China average about 200-250 miles per hour, the fastest train in service in the U.S. has a top speed of just 150 mph — and a typical service speed of less than 100 mph.

chinabullettrain

Dare I say that it doesn't take a PhD in aerodynamics to see the stark contrast between their cutting-edge trains, and our own best offering.

acela

The same comparison, unfortunately, repeats itself with modern European and Japanese high-speed trains.

Anyway you look at it, we're behind, the gap is widening, and little is being done.

Well, that was the case, anyway.

Right now, more than ever before, both government and industry are setting their sights on the single biggest mass transit market in the world — the American consumer.

The proposals to end this disparity range from conventional to experimental — with the most dramatic, and potentially balance-shifting idea coming from one of today's most iconic entrepreneurial minds.

No matter where we go, however, two things are clear:

  • A massive overhaul is imminent, within the next presidential cycle
  • It will involve hundreds of billions in investment

Here are just a couple projects on the table at the moment:

In Texas, developers are promising a link between Dallas-Fort Worth and Houston with a top speed capability of 205 mph.

Texas Central High-Speed Railway CEO and Chairman Richard Lawless firmly believes that high speeds will correspond with profits.

"Once the system is up and operating, people will appreciate its efficiency, its safety and its dependability, and that's what we have to do here; we have to demonstrate that this system can work in the United States," Lawless said.

La high speed railway

There is also a partnership currently in the works between privately held California High-Speed Rail Authority and WSP Global (OTCMKTS: WSPOF), a Canadian company leading in creating high-speed rail networks. 

It will include 24 stations, providing service between San Diego and Sacramento and a line that splits in two at the northern half of California for inland and coastal access.

The 200+ mph-capable line could be considered the single biggest commitment to bringing U.S. railways into the 21st century. The $100 million in seed capital granted to get the project rolling is a reflection of this commitment. 

However, WSP Global was not the first choice to construct the railway. Initially, China Railway Group Ltd. had joined forces with California High-Speed Rail Authority to build a bullet train line between Los Angeles and Las Vegas, and the prospective groundbreaking date was set nearly five years ago in September 2016.

China Railway was thrown off the project the same year the train was to debut due to “difficulties associated with timely performance.” 

In all seriousness, what caused China Railway to drop was that the lack of funding on a federal scale caused the attempts to modernize the campaign to be slow and sporadic. 2016 came and went with no advancement toward the 14-year 800-mile plan. 

Total project cost was estimated to be more than $68 billion — with less than half of it accounted for by public funds.

WSP still faces the same hurdles previous contractors on the project have faced; environmental clearances and seismic areas are major factors on why the testing date alone is almost four years away in 2025. 

Thankfully, on the WSP website, federal and state funds that include state cap and trade auction proceeds are going toward the project.

Remember, in Asia and in Europe, they've been running trains that can easily exceed the speeds of this proposed network for more than a decade.

Which is why the biggest idea to surface is also the most important.

When It's Too Late to Imitate... Innovate

And appropriately, it comes from a mind that's made a career of challenging and defeating the establishment.

ei-lithium-textad-dec-2015-elonmuskThe man I'm talking about is Elon Musk — the same industrialist billionaire who gave us Tesla Motors, SpaceX, Paypal, and, most recently, the world's biggest battery production facility, the 'Gigafactory'.

His most recent idea is more than a product, however. It's an entire system of transportation — with a trans-continental line capable of delivering passengers from coast to coast at the speed of sound, or about 760 miles per hour.

That speed is roughly three times the current standard in Asia and Europe, not to mention about 160 miles per hour faster than the standard airliner at cruising altitude.

hyperlooppic

Called the 'Hyperloop', Musk's initial plan calls for a line between Los Angeles and San Francisco — much like the proposed bullet train railway scheduled for completion 14 years from now.

That's where the similarities end, however.

The Hyperloop may travel along the ground, but it resembles a railroad about as much as a modern jet fighter resembles the Wright Brothers' first prototype.

The most evident difference is that unlike conventional and maglev (magnetic levitation) trains, Hyperloop 'capusules' or 'pods', don't interact with the natural atmosphere.

Instead, they move through pressure-sealed tubes, on pillows of air much like a puck on an air-hockey table, propelled by air compressors which suck in oncoming air to create a vacuum ahead of the capsule.

Always protected from the outside environment, spans of Hyperloop could travel alongside existing bridges and roadways, and when necessary, pass under water or through mountain tunnels just like a modern commuter train would.

hyperloopgoldengate

The system is elegantly simple, highly efficient, and by far the fastest form of mass transportation — proposed or realized — to ever be seriously considered.

The company Musk set up to turn this idea into reality, Virgin Hyperloop, recently reached a groundbreaking milestone in late 2020 — the first human passenger test.

The testing was held on the 500-meter-long DevLoop track outside of Las Vegas, Nevada.

Speed isn't the only benefit Musk predicts for his newest invention.

While high-speed conventional and maglev lines cost $60 million per mile on the low end (Shanghai) and $250 million per mile on the high end (Japan), Virgin Hyperloop estimates an all-in cost of just $84–$121 million per mile — bringing the total cost of an LA-to-San Francisco line to just $6 billion.

Cost savings of this magnitude will make an LA-to-San Fran ticket as cheap as $30 — the typical price of a 20-minute cab ride.

And city-to-city transportation isn't the only element here.

Ultimately, Musk plans an entire system of transportation, starting at the traveler's own home curbside, and culminating in curbside delivery in another city, either across the state, across the country, or across the continent.

Everything from driverless cars (Teslas of course) to automated luggage check and retrieval, to the actual Hyperloop itself, will operate as one single mechanism to provide the most complete, seamless travel experience ever.

The idea, and specifically the massive cost advantage over standard high-speed rail or maglev, has proven so compelling, even at this early stage, that 10 national governments have shown interest in funding their own networks.

India, the UK, and yes, even key rival China, all hope to build a Hyperloop by 2020.

Hyperloop transportation Technologies isn't alone in the quest for partnerships, either.

Its main rival, the similarly named Hyperloop Technologies, is currently in talks with a Russian investor to create a line spanning the world's biggest single national landmass — with a target time horizon of just 10 years.

The Investment

Elon Musk himself estimated that more than 100 different companies will have to come together, on some level, to make this project work.

And generally speaking, any conventional or maglev high-speed train projects will carry enormous costs — as the California project has already illustrated — coupled with a high level of cooperation and synergy between tech startups and large corporations alike.

However, when it comes to the companies we'll most see benefiting from this renewed interest in mass transit, the targeting is fairly predictable.

All of these concepts, regardless of the final form or magnitude, will require many of the same ingredients.

From electric motors to superconductors, to lithium itself — which will provide power storage capacity — the industries looking to reap some benefit from the drive to modernize are already in the midst of a golden era.

One of the main constants in this industry is the semiconductor.

semicond

In 2020 alone, global sales of semiconductors reached $449.8 billion — giving us just a glimpse of the trend.

Still, it was only a glimpse. The greatest is yet to come, and some of the best known brands around are already getting positioned.

At a $253.57 billion market capitalization, Intel (NASDAQ: INTC) is the world's biggest semiconductor supplier.

However, with that much market share already, it's hardly the most efficient way to play this.

Renesas Electronics Corporation (OTC: RNECY) is less than 1/14 the size of Intel, and controls just 1/7 of that company's market share.

Moreover, with talks of an acquisition now in the works, it's a nice big bump possible even without the market forces acting as they are.

STMicroelectronics (NYSE: STM), smaller than Renesas by 50% but controlling a slightly larger total market share, (2.2% vs 2.1%), might be the best way to ride an already established stock to quick trend-driven profits.

Semiconductors, however, are just the beginning.

Electric motors are another big deal — and there is a whole lineup of potential players available to meet that demand.

electricmotor

ABB Ltd (NYSE: ABB) provides power and automation technologies for utility and industrial customers worldwide, making it a potentially major partner in high-speed transit projects worldwide.

Again, big can be a liability if you want to get the most bang for your buck. At $27.98 billion for revenue, ABB has arguably less room to grow than some others in the field.

Of course, Tesla (NASDAQ: TSLA) itself stands to benefit greatly if Musk's vision of the Hyperloop is realized.

The company has demonstrated the ability to mass produce powerful, efficient electric motors, in house, for its cars — meaning that it's within Musk's capability, and repertoire, to repeat the feat with the Hyperloop.

Yes, Tesla isn't exactly a small company at $619 billion, but its focus — not to mention its familial bias with anything Musk-related — makes the world's most beloved electric car company an obvious synergistic choice for Hyperloop as well.

Tesla’s gigafactories are not only committed to producing newer vehicle models, but the company's involvement with Musk's other endeavors such as SpaceX shows it’s not just limited to motors.

Indeed, the Los Angeles City Council just granted approval to Musk’s SpaceX facility to develop a new operations facility. 

Getting down to the real nitty-gritty, none of the above would work if it wasn't for two vital, basic components: magnets and lithium.

For magnet companies, I prefer to go straight to the source.

Great Western Minerals Group (OTCPK: GWMGF) is an integrated rare earth processor.

Its specialty alloys are used in the battery, magnet, and aerospace industries.

Produced at the company's wholly-owned subsidiaries Less Common Metals Limited in Birkenhead, UK and Great Western Technologies Inc. in Troy, Michigan, these alloys contain aluminum, nickel, cobalt, and Rare Earth Elements.

As part of the company's vertical integration strategy, GWMG also holds 100% equity ownership in Rare Earth Extraction Co., which owns a 74% equity interest in the Steenkampskraal Mine.

Small mining plays like this are definitely not for the risk averse, but owning stock like this would be a ground-floor investment in a core material — so for the risk insensitive and far-seeing, it could be the right choice.

Lithium is in the same ballpark.

Right now, lithium production in North America is definitely lagging behind demand.

lithiumbattery

There are a few ways to focus the lithium demand wave into some specialized stock positions.

Sociedad Quimica y Minera (NYSE: SQM):

Chile is home to Sociedad Quimica y Minera, (Chemical & Mining Co. of Chile Inc.), the largest lithium mining company in the world.

It produces lithium carbonate for use in batteries, frits for the ceramic and enamel industries, heat-resistant glass, primary aluminum, lithium bromine for use in air conditioner equipment, and continuous casting powder for steel extrusion, pharmaceuticals, and lithium derivatives.

At a $6.33 billion market capitalization, SQM is big enough to be insulated from momentary market downturns and the periodic setbacks that are common in the mining industry.

It also helps that its key property holdings are located smack-dab in the middle of the “lithium triangle” — the richest lithium region currently known.

Lithium Americas Corp. (NYSE: LAC)

Thanks to a new technique in extracting lithium from clay mines involving sulfuric acid, Nevada’s lithium mining decline may face a turnaround. 

After the mid-2015 merger with Western Lithium, LAC is now known as one of North America’s most important and successful lithium companies. 

LAC is scheduled for a mid-2022 development of a lithium production site in Argentina. On top of that, the United States Bureau of Land Management issued the record of decision for Lithium Americas’ Thacker Pass mine project. 

The project is the largest resource of lithium in the U.S. and is now 100% owned by Lithium Americas. The $400 million raised in a brokered private placement will be used to develop Thacker Pass. 

“The interest in a North America [lithium] asset already is high, and then it’s going to get even more so, in that the supply chains are all integrated and we all want to have a local source” said Lithium Americas CEO Jon Evans in an interview.

Conclusion:

New pushes in the U.S., and abroad, to build, expand, and improve the reach of high-speed rail, maglev, and Hyperloop projects may go down as one of the biggest global industrial movements of the 21st century — not unlike the building of the global air travel network, with its airports, integrated communications, and standardized administration, in the 20th century.

However, as the means of locomotion switches from fossil fuel-based to electric, the benefactors of this inevitable burst of demand will be a whole new breed, and generation of tech companies.

The only way to lose for certain is not to play at all.


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