Wednesday, June 02, 2010

BAGAKOAA June 2, 2010 One Barrel, Two Barrel, Three Barrel, Four


June 2, 2010 One Barrel, Two Barrel, Three Barrel, Four

We got a house and a car today. There was good news on the pending home sales number which was up 6% after being up 7% the month earlier. Auto sales were strong as well. This was enough, strangely enough to kick all the market up about 2%. Of the 14 equities in the portfolio, all were up today except our new position in ACN. Accenture was down a few cents today because of their heavy weighted European business base. Cramer even sent out a special alert today saying not too worry and I agree. Gold and silver, which we hold was down, but again that was more due to the strength of the dollar than true demand issues. In fact we might pick up more gold in the GLD etf in pre market trading tomorrow if the opening shows more weakness.

The leak in the gulf is a huge wake up call. Without pontificating, I feel it may be the wake up call we all need to reevaluate where our next abundant supply of energy will come from. Think about it. Norway, Saudi, North America, parts of South America and parts of Asia are implementing or considering implementing moratoriums on deep water drilling. That means (the possible end or TransOcean as we know it), but also the last round of easy money oil is off limits for a while. The next abundant oil source is shale oil, but that is really messy business. As the current supply of oil gets used up, we as a country and I would expect the world will migrate towards the next most abundant, relatively clean, relatively safe energy source, Natural Gas.  Take a look at nat gas ETFs.

If you agree, how do you make money on that premise. Yesterday’s WSJ had a great article about fuel storage companies. In essence the article by Lananh Nguyen explains that commodity traders have been hoarding oil for months now and there is a premium for storage production facilities. This trend should continue a while longer as oil should stay below 75 bucks a barrel. As the commodity creeps up these traders will start unloading the black stuff. The two elements of this scheme is that construction costs are low for building the storage facilities and the price of oil will increase at some time in the future. Now the giant in the industry is Vopak out of Amsterdam. Unfortunately there are no US ADR available to trade because if you do the homework on Reuters’ or FT, their fundies look real pretty. Another possible play is Noble Energy NE.

It has an attractive value at 5.9 times earnings, but has some drilling and exploration exposure besides its storage capacity. Another interesting play is NuStar energy which is a stronger storage play, but its financials are not quite as pretty. At 16 times earning it is more expensive, BUT its throwing a nice dividend at 7+%. Keep in mind both of this were up big today on the market advance. Do your homework and wait a day or two to see if there is a correction down a bit. We own neither but a looking very close at them.

Let the four winds blow BUT, we have our first tropical storm of the season. So far more than 180 people have perished as a result of this beast hitting the Central American coast between Guatemala and Mexico. I only share this info as I am sure we won’t hear about it here in the states until the wind blows down a tree atop of someone’s Lexus.

I was asked recently if I have a hobby. I like to play golf, but I don’t call it a hobby. In thinking about the question, the stock and portfolio homework I do every night is like a hobby to me, except it helps pay some of the bills. I don’t know of many hobbies that fall into that category. Stamp and coin collecting, I guess might qualify, but even after you do all the homework of findi the right coin at the right price, you have to find a market it for it. The same effort could be put into finding a good stock or bond, making the investment, and then with a couple of clicks, you tell a bunch a million people that you want to sell at a price you determine. Some friends of mine have favorites sporting teams they follow and it takes them hours a week to know all the players and the stats, but you can’t make money on that info. (Trust me I know as I spent 13 years in Las Vegas one night.) So yes I have a hobby that let’s me keep abreast of the market, keeps me up to speed on relevant news, keeps me informed of the macroeconomic information I need to be a good boss, and so far has made me some decent returns. It’s a good hobby. Now get out there and make some money.

Salve Lucrum

Labels: , , , , , , , , ,


Post a Comment

<< Home