Sunday, March 06, 2011

6 March 2011 And The Life Ahead

BAGAKOAA;

6 March 2011 And The Life Ahead

Wow! Heavy, what could he mean by that? Well we took a couple nights off because we were on a secret mission. Devin, Jack, and I snuck up to San Francisco under the auspices of surprising our daughter on her 30th Birthday (Actually March 20th). Here boyfriend, Ryan handled everything. He arranged to have his Dad and step mom there and we went out on a 34 foot sail boat. When the sailboat came in to pick us up, the bay raised about an inch with her tears of surprise and happiness. She thought we were all there for her birthday. The good Lord blessed us with a break in some really nasty weather as about 5:00 PM after sailing about 100 yards off of Alcatraz Island, we turned and headed back to the city. Upon nearly reaching the Pier 39 area Ryan asked Kristin to come to the bow of the boat and take some pictures of him and his brother. Then Ryan suggested his brother take pictures of he and Kristin with the city in the background. As she waited Ryan removed a ring from his pocket and asked her to marry him. The tide rose again another inch or two with more tears of happiness. The secret was out. They look to be wed this September, details to follow. That was how we spent our Saturday. The big event was followed by a nice dinner at an Italian restaurant.

We arrived on Friday night and the three of us Jack, Devin, and I visited Morton’s for a fabulous meal.

We enjoyed a bottle of 2007 Paul Jaboulet Aine Cotes du Rhone Parallele 45. This old world syrah driven Cotes du Rhone was deep purple in color. We got some peppers and cherries and earthy minerally spikes in it. In reading about the Jaboulet’s efforts, they have not had a decent vintage since 1995. This was a very special treat and we will be looking for a few for the wine room once it is rebuilt. Look for it in the 45 dollar range, we paid 120 at Morton’s but they are aggressive with their pricing. We retired to our well appointed room at the Mark Hopkins. Devin joined me for a night cap at The Top of The Mark. The special weekend was off to a great start. Then to my surprise, Saturday morning I was delighted to find the hotel pulled a major coup and found me a Barron’s and IBD. Let’s just say the weekend was a smashing success.

The Week Ahead

Barron’s had some great stuff in this week as usual. You might want to grab this week’s issue just for the supplement. It is one of their PENTA supplements. It highlights how families with assets exceeding $5 million protect their assets and invest their money. This insert talks about the best place to have you second home, big money is big on blue chips, meager metropolises are creating muni opportunities, and dynasty trusts keep going and going and going.

In the normal sections some great stuff too. Booms Away by Randal W. Forsyth is an incredible article and really opened my eyes, but we will come back to it shortly as it deserves some special attention. If you have 130 grand lying around, you might grab a share of BRKA. Berkshire Hathawy is positively pimped in a great piece. What they say makes a lot of sense and we would be hard to argue the $160,000 target price discussed. Michael Santoli has the formidable task of explaining the bull market while warning there are bear lurking in the darkness. He is one of my favorites writers in the magazine. He closes with a paragraph pimping TGT Target and he makes sense. It goes back on the watch list. Grace Williams write an great article for you dividend addicts. (Sorry you gots to buy it if you want to see it.) Tiernan Rayu does a great job of telling us why AAPL can’t be beat, though many are trying. The iPad 2 will completely outsell iPad 1, which is an impressive recognition since the iPad 1 is the most successful selling technological device of all tile.

(Heads up Simon-one of our occasional readers-tells me they are not using the Corning Gorilla Glass on the new iPad. Let’s see if anybody notices.) We don’t pay much attention to the MFs section of the paper other than to see what they are buying, but this fund Technology TollKeeper GITAX is very interesting. It is the la creme la creme of tech stocks. The fund performance is very impressive. We have provided the Morningstar link so you can do your won homework. Steven Sear, the option specialist writer pimps VXX as a way to paly the inevitable correction. Mmmm perhaps we have heard this somewhere else, LIKE HERE. We continue to gather January 2012 VXX options because there will be a correction.

Nice segway Brian. The article, “Booms Away” has to do with sailing vernacular.

Forsyth is explaining that when a sailboat “comes about” the long horizontal bar on the boat holding the bottom of the sail, called the boom can be a deadly weapon as it sweeps toward the boat taking anybody and anything its way away. Ask Danny, one of PADI’s Managers in Sydney who we had the pleasure of sailing with the year of the Sydney Olympics. I was at the helm and missed a tail wind coming up from behind and I did not have time to yell “Prepare to Jibe” and he was truck by the boom with a sickening sound that convinced me there would be blood and brains spewed all of the cockpit of our 36 foot Hunter Sailboat. Fortunately after years of Australian League Football, Danny just shook it off and we watched as his eyes kept spinning around in his head. But I digress.

Forsyth points out the obvious that the various stimuli have helped puff up the economy, and there may be a day of reckoning coming. Dah! However he brings up a new one that maybe sleeping under the radar. While QE II got all the headlines last August-October, simultaneously Congress passed a tax change that allows companies to fully expense capitol improvements in 2010 and 2011 100% versus the normal 20% a year as allowed by the IRS. This would explain the impressive improvements in factory utilization, production schedules, durable goods orders and other regional manufacturing indexes. (And last week it seems to have had positive impact on employment.) Forsyth proposes that when QEII wraps up (June 2011) the impact of the fully expensed capital goods allowance will keep the market running on empty through the 3rd quarter then. . . . . “Prepare to Come About”. The boom will be swinging furiously back to the 20-45% correction many have been expecting. This was a great great economic study and very informative. Give it a read.

Ok, I said the week ahead, but I am pooped so here is the day ahead followed by a POTD. Fortunately tomorrow has little in the way of economic data points. Last week we suggested the S & P would fall off about 2.1% to 1,291. Not it finished about flat of the week moving only slightly down (Got the direction right) to 1,319 from 1,321. We will give you this week’s guess tomorrow. Tomorrow we will see a consumer credit report not as robust as last months 6.1 billion. Estimates have it pegged at 2.5 billion, but we think it will come in a little better than that at 2.8 billion. J Crew and Urban Outfitter report tomorrow, but we don’t see them a movers so we won’t venture a guess.

Pick of The Day

We must give credit where credit is due and we backed into this find as a result of an IBD article about metallurgical coal. It was that article and the Barron’s article about BRKA that made us look at RAIL FreightCar America, Inc., through its subsidiaries, manufactures, rebuilds, repairs, sells, and leases freight cars used for hauling coal, other bulk commodities, steel and other metals, forest products, and automobiles primarily in North America. The company designs and manufactures aluminum-bodied and steel-bodied railcars for use in various industries. It also refurbishes and rebuilds railcars, and sells forged, cast, and fabricated parts for all of the railcars it produces, as well as those manufactured by others. Its customers primarily include financial institutions, shippers, and railroads. The company was founded in 1901 and is headquartered in Chicago, Illinois.

WARNING, we are looking a little forward with this pick as its current financials leave a lot to be desired. A mid February comment by the CEO got our attention: “CEO Ed Whalen said in a statement it was difficult to determine when sustained demand for coal cars will return. But he said the company was encouraged by the fact that it has received orders for more than 3,000 new railcars to be made and delivered during 2011 and 2012.” Our thinking is the world demand is growing. Nobody likes this stock. IBD gives it a composite of 32 and very few of their key metrics gain good ratings from IBD. We are just looking at the linkage. Steel demand is growing, rail lines are seeing more traffic. Most rail companies have not had the need or interest to get new cars. My thinking is we are way upstream on this play.


Here is my thinking on this stock. On December 13th this stock hit an interesting buy point at $27.71. It closed Friday at 28.69. We are going to ease into this stock buying 20% of our position over the next 5 weeks. We will look for our fist batch tomorrow at 28 or better and start there. Our stops on the position will be 26.75 if we can get in. We are thinking 40.00 a share by this time next year. We looked for some interesting option plays, but it is so lightly traded, we have to call it a roach hotel. We might be able to get in the trade but can’t get out so let’s ease into a long position.


From The Locked Out Of The White House Again Gallery:
Where The Hell Did I Put That Hide A Key?

Salve Lucrum

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