Breakdown Investing: Three Money-Making Stories That Will Inspire You to Find the BigIdeas Hidden Inside the Trends

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Book comes from experts Jim Mellon and Al Chalabi, authors of The Top 10 Investments for the Next 10 Years: BigIdeas, MoneyFountains and Your Path to Prosperity.

Do you leave your investing decisions to the "experts"? Or do you rely on your own brainpower to figure out what might be the next big thing? Jim Mellon and Al Chalabi, authors of The Top 10 Investments for the Next 10 Years: BigIdeas, MoneyFountains and Your Path to Prosperity (Wiley, February 2008, ISBN: 978-1-84112-802-3, $29.95), say that if you let professionals do your thinking for you, you might find yourself joining the masses in chasing after the obvious trends. To see where the real money is hiding, you need to look deep inside the trends.
"Break down a trend to its most basic parts," advises Mellon. "Somewhere inside that chain of basics is the key to riches."

He offers three examples from his book that show how a little focused thinking can make you a lot of money:

BigIdea #1: The Sources of Solar. Solar power is sure to be a big deal as citizens and governments become more and more determined to move away from harmful and quickly depleting fossil fuels. The solar cells on their own won't make for a good investment for several reasons: There will be too many players, it is hard to judge which are the better of them, and technological change will obsolete capacity almost as fast as it comes. You have to take the idea a step further and think about what the very basics of creating solar power are--metals! Gallium, indium, germanium, and other materials are now being used in thin film PV technologies as semiconductors. And investing in companies with deposits of these metals, or those that are mining for these metals, is the way to go.

BigIdea #2: The Levi Strategy. Mining for gold may not produce riches upon riches for you these days, but the Gold Rush days do provide important insight into how we should all think about our investments. Sometimes the easiest way to success means thinking outside the box, and it's the people with that mindset who made all of the money during the Gold Rushes of the 1800s--not the miners themselves. A great example of this is Levi Strauss & Company. When Levi came to San Francisco during the Gold Rush, he knew the mines weren't the best place to make a lot of money. At the time, there was a high demand for more durable clothing for miners that could withstand the wear and tear that comes with their profession. Levi Strauss recognized this need and worked with a partner to develop pants made from a stronger material than the cotton that was used to make the clothing of the day--inventing what we know today as blue jeans. The jeans were a big hit with miners and the funds made from their success helped build the foundation of what is still a popular and thriving company today.

"To apply Levi's thinking to today's market, you might want to consider some outside-the-box thinking with regards to green investments," says Mellon. "For example, you might invest in a company that makes and sells mining equipment--the equipment being used to excavate the metals used in PV cells and the uranium used in nuclear power, for example--rather than the one that is doing the actual mining."

BigIdea #3: Fueling Up. One of the things Mellon and Chalabi discussed in their last book, Wake Up!--and get into in more detail in this book--was how, at least in the interim, nuclear power remains the cleanest, quickest, and most practicable option for the world to pursue. But nuclear power depends on a fuel that two years ago was little talked about, hadn't been aggressively explored for a long period of time, and whose price was languishing at very low levels. That fuel was uranium.

"A little later, I invested in a uranium company along with someone with a great understanding of the industry," says Mellon. "Our initial investments amounted to less than $150,000, but we were on to something. Not only was uranium going to be needed in greater quantity--as more nuclear power plants were being built, particularly in China--but Russian supplies of uranium, largely from the decommissioning of old nuclear weapons, were drying up. The price of uranium was low and the opportunity high, the perfect confluence for a great investment idea. My business partner knew the people to make it happen and he catalyzed a company, which, after several rounds of finance and listing on the London and Toronto Stock Exchanges, was sold after only two years for $2.5 billion."

"Get just one of your own BigIdeas right, and you will end up with what we call a MoneyFountain," says Mellon. "That's exactly what it sounds like, and it's great for your bank account. That's why just thinking of your own list of big ideas and waiting for, or even better, searching for the investment opportunity to match them, makes such good sense. See? A little creative thinking can go a long, long way."

About the Authors:

Jim Mellon is an investor with interests in companies in several industries. Jim spends most of his time working on startup ideas and on investing.

Al Chalabi is a business consultant, entrepreneur, and author who has been based in Asia for eleven years and has extensive experience of developing economies. He helps corporations establish and grow their operations in Asia, particularly in emerging economies like China.

About the Book:

The Top 10 Investments for the Next 10 Years: BigIdeas, MoneyFountains and Your Path to Prosperity (Wiley, February 2008, ISBN: 978-1-84112-802-3, $29.95) is available at bookstores nationwide, from major online booksellers, and direct from the publisher by calling 800-225-5945. In Canada, call 800-567-4797.

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