Thursday, August 26, 2010

August 26, 2010 "Stocks slip as caution about the economy returns."

BAGAKOAA; August 26, 2010 "Stocks slip as caution about the economy returns."

Ok that was not my headline, that was from Associated Press this afternoon about 4 O’clock EST. What we would like to know is, when did the concern about the economy go away? We have been playing Bloomberg on the radio in the car almost 24/7. We read the Journal and Barron’s everyday in at least three formats. When did we not have concern about the economy?

Perhaps it was that brief moment when the jobless report was released early this morning and the report should the first decrease in initial jobless claims in three weeks. That moment soon passed.

Thanks to one of our readers (Tim) I am armed with about 34 research reports compliments of the fine people at UBS. While I would not presumptive to plagiarize these articles, I do wordsmith some of this great research when relevant.

Today I ran across a report about gold and silver and as most of you know, we hold the ETF GLD and SLV as our attempt to enjoy some of the gains in the metals sector. Dr. Edel Tulley wrote the interesting piece for the UBS publication. He brings a unique point of view supporting a claim that silver could be playing an important role in the most recent Gold Rally. He explains the volatility of gold with some wild mid day swings this year sends people towards gold over silver when seeking safe havens from many of the questionable sovereign debt in the market place. His explanation implies that big money managers such as people in the central banks of other countries looking to buy foreign debt have been scared of so their options are US debt and metals. When looking at metal, gold appears to be steadier than silver so monies (Up till about three weeks ago) have been headed to more gold than silver. That appears to changing of late and the article suggests near future silver values around 20 dollars. This shift should not tarnish gold much. Food for thought. If you have access to the UBS reports, I suggest giving the 8 page report a read. In the article, Dr. Tulley reveals one of his sources of basic data. Mining weekly is a gold mine (couldn’t resist the pun) of metals reporting. From miners trapped below the surface of the earth to flooded shafts to social unrest in South Africa, this on line magazine is full of valuable information about the mining industry. It’s all about the linkage.

Changes in the SL Portfolio

We did little with the portfolio today. All of our natural gas plays are getting clobbered as the Natural Gas inventory report came out today and was about 14 % higher than anticipated at 40 billion cubic feet. As a result, we placed a limit order for PNG, PAA Natural Gas Storage, LLC which develops and operates underground natural gas storage facilities. PAA Natural Gas Storage, LLC is based in Stamford, Connecticut. It has operations in Michigan and Louisiana. As of September 15, 2005, PAA Natural Gas Storage, LLC is a subsidiary of PAA/Vulcan Gas Storage, LLC. This was an addition to an established position and our limit was at 24 a share so we should catch it in the morning. The thinking is, there is more gas to be stored, PNG stores Gas. Sales should be up. When demand is revived, PNG get paid to stream the gas to utilities. That is what you call a win win. Oh yea, they pay a 5.1% dividend at the current price.

Talking about Linakge

Back in June we published a significant article in the Journal explaining the amazing correlation between railroad carload statistics and the general economy. If you recall the post, it was identified that the correlation of waste carrying rail car loads and the general economy was one of the most relevant of ANY economic indicators. The June report (Covering March, April, May) indicated that waste filled railroad cargo car numbers were on the rise. The correlation factor in the Journal Article was some 80% and we had some decent economic news.

Well, we have continued to follow the AAR.GOV website and the traffic report. The latest set of numbers does not bode well for the economy.

                                         Difference                  % Change

Commodity     July '10        July '09       July '08 '10-'09 '10-'08 '10-'09 '10-'08

Waste  (8)          29,043 31,672  42,842 -2,629 -13,799 -8.3% -32.2%

If that paginated properly, you can see the trend is not pretty. This is strong conformation that the recovery could be in trouble.  To further illustrate this, here are the actual general traffic graphs from ARR.GOV.

For those who missed the original post, the thinking is that an economy that is thriving generates a lot of trash that must be hauled away. It makes sense.

And this from the Secret White House Photo Archives:

"So with 100 of these robots I could replace the entire Senate?"

Salve Lucrum


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