Sunday, October 04, 2009

BAGAKOAA September 10, 2009



Well lots to mention here, so let’s start with my favorite subject, me and my portfolios.
Solar has intrigued me and I have been looking for an entry point, (admittedly late), and I did not like the obvious play First Solar (Not impressed with their fundies). TSL looks like a speculative entry point so I initiated and added to it this week. (Thanks Sharon). Well see. While they figure out what to call the Energy Bill in the U.S. Senate, (we have international readers now), you can be assured it will have solar, nuclear, and clean coal (an oxymoron). Keep your eye open for LNG as well. More on that later.
As a back up to my Allscripts (MDRX) position, last week I ran across MRGE which enjoys a lot of growth in the vet industry as well as medical industry. I mentioned I initiated that last week and added to it this week.
I took some more profits to my original position on BAC and UBS. Rumors of increased capital requirement for banks and caps on bonuses in the industry in light of the up and coming G-20 meeting is and should put pressure on the bank sector so I am taking some money off the table.
MED, is one of my best performers in the last 5 months. I was in in April, got out in June got back in after their correction in mid June and just took some off the table. I just checked the fundies and I have it rated about a 76 on my scale. So this weight loss stock let me take some profits, went to Hannah’s and had a nice dinner. Works for me. Great meal Dave, and a great bottle of 2005 Rubicon.

Speaking of food, my YUM took a little hit as McDonalds is selling more coffee than burgers and the fast food sector is taking a little breather. YUM is a better play for fast food in China. I bring it up only because I mentioned my limit buy for MCD at 52.50, its getting closer. MCD is a great channeling stock 52-60 very consistently. Be ready.

If you caught the article this week about Pertobas, Brazil’s huge oil concern, you’ll note the Brazilian government is pouring big bucks into the company to support some deep water drilling contracts. 7,000 meters deep, about 4 miles deep. Think deepwater oil rigs think Transocean, Think RIG. Yeah I bought some more of it. I’m enjoying a nice three percent gain in the last week. Half of it’s due to the dollar dropping the other half is due to news like this.
Which brings me to Natural Gas. I was watching Mad Money earlier this week when Cramer had Bob Simpson, CEO of XTO Energy company. While we all know LNG prices are in the toilet, and XTO might look attractive on a price to book or PE basis, what I took away from the segment was that the natural gas industry got out politiced. Coal has a huge lobbying machine in Washington, DC and several key coal mining states. Oil has several US Senator and Congressman on their payroll, (Was that my outside voice?), I mean oil has a really strong lobbying machine. Natural gas, being the most abundant, easily accessible, clean, adaptable fuel source the US had assumed it would have been included in the Energy Bill under development. Well guess what. NOT.
Simpson explained that the LNG (Liquid Natural Gas) industry has just launch an association and has funded 80 million dollars US for 2009 in lobbying efforts to get the obvious fuel choice obvious to the blockheads in DC. Now the little I know about lobbying, 80 million is not a lot of money, but spent in the last 4 months of the year with the Energy Bill under development, I think the bill will include LNG, before its put to bed. I initiated a position in XTO and the UNG ETF. Save this edition of BAGAKOAA as I predict LNG will be above US$6.50 a CFT by this time next year. That should be a double for XTO and UNG. Sorry, I looked for a similar play in the UK, but I can’t find it. Still looking.
Let’s talk China. I bring this up because as you know I have been awaiting a correction in most markets. It hasn’t come and I thought maybe the Commercial RE market might be the catalyst to bring everything back down a notch. (I’m thinking 8500 on the Dow and 820 in the S & P, a close impact on the FTSE 100 would make it about 4500.)
However, there was an article this week about the CIC, the China Investment Corp. That is a branch of the Chinese government that oversees their foreign exchange investments. They are now on a Global 300 billion US dollar commercial real estate shopping spree. But like any good investor, why use your money when you can use OPM (Other People Money). They have found a banker here in the United States that will match their investment in depressed (toxic) commercial real estate, offer extraordinary interests rate, 75 basis points, that .75% to us lay people, and tell them where the best deals are. I want a bank like that. It’s the First Bank of Obama. Technically it’s the US Department of the Treasury. The Treasury’s Public Private Investment Program has 30 Billion in funding and is using a couple of private hedge fund groups to handle the mechanics of the transactions, but China could end of bailing out the Comm RE market taking a serious sweat factor out of play. Of course 30 Billion is only a start. With a little imagination I could see the US and China co-owning millions of square feet of commercial real estate together. What a nice thought. Until the treasury wakes up and remembers China already owns 600 billion in US treasuries. Think about it.

Gee, no GE. I was reminded last week I got out of GE and recommended a few of you do the same way back when. I had to go back and review that decision. (A good trader and investor should never look back.) I discovered why I bought GE in the first place. I had read Snowball (Buffets Bio), bought the timeless spellbinding “Intelligent Investor”, and even plodded my way through Security Analysis. Then I read that in April 2008, Buffet had bought 3 Billion worth of GE. In November GE was selling at 18 and change and I thought, “If its good enough for Warren, baby its good enough for me. Buy buy buy!” I bought at 18, 16, 15, 12, 11, 9, and on March 5th doubled down at 6.86. I had accumulated 7600 shares and was sweating bullets. Then I actually used all of those good books and determine I had bought the biggest bag of Crap on the market. The fundies stunk like dirty undies. How could the wealthiest man in the world buy such a stinky equity? He didn’t. He arrange the issuance and purchase of 3 Billion of preferred stock at a guarantee of a 10% dividend. As soon as I could take a profit, I did. I got out in June with a 3% gain and some nice dividends.

I mention all of this as I see GE is at 14.80 today. The fundamentals still look ugly as can be and this week I found out what might be supporting the price cause it ain’t earnings or estimated future earnings. There it was in a small article in last weeks WSJ. G.E. and Abu Dhabi Fund Form Financial Partnership.
Hoping to tap into higher returns overseas, General Electric said Tuesday that it would team up with a sovereign wealth fund in Abu Dhabi to create an $8 billion commercial finance fund based in the Middle East.
The Abu Dhabi fund, Mubadala Development Company, and G.E. said Tuesday that they had agreed to each invest $4 billion in equity in the fund over the next three years. Mubadala is owned by the government of Abu Dhabi, part of the United Arab Emirates.
The Equity seems to be more Preferred stock. Warren Buffet has a Prince to share dividends. Life is good. I still wouldn’t buy the common stock. But I am not a prince.



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