September 28, 2006: Crooks and Banks

If you are a crook, and plan on running gang members or drugs from Central America up the coast to California, you have a BIG problem. This picture,taken yesterday from one of several brand new high speed and well armed Coast Guard sub-vessels of their newly refurbished "mother ship" off the Pacific Coast of Central America confirms highly trained boots on the water. Rumour has it that they can spot a rowboat five hundred miles away.

If you are looking for an investment bank:

Here are three investment banks that are diligent in requiring appropraite assurances before approving real estate deals, in my opinion.Don't expect to hit home runs with banks at this stage of the cycle. Then again, competent companies have a way of beating some far-off analyst living (and dying) by a plethora of corporate/industry prediction schemes.Tuck these names into your financial prospects folder for future reference.

ABN Amro (ABN) through its LaSalle Bank division is extremely thorough and demanding. This bank has its act together.Holland-based ABN trades at 29.15 and pays at present a dividend of over 5%.

US Bancorp (USB) requested documents that sends project planners scurrying. Their finance team is well prepared and comps properties realistically. Rates and terms are fair. The stock trades at 33.18 (a bit rich for me at this time)and yields 3.98%.

Bank of America (BAC) expects the most refined package presentations. They are detail-oriented and tough inquisitors. Like USB, they were very well versed with appropriate comps and projections (quite conservative).The stock (also a bit rich at this time) trades at 53.24 and yields 4.21%.

I presently have two banks as long term holdings in my portfolio - Bank of Nova Scotia (BNS) and First Horizon (FHN). I do not own the three banks presented above.

September 27, 2006: Real estate impressions

I returned a few hours ago from what was a very interesting and productive trip to Chicago to visit a few friends.

Here is my take on real estate in that corner of the world. First, I was surprised at the intense level of activity in apartment conversion to condo and new construction in neighborhoods that have been literally torn down by the City of Chicago to make way for expanded middle and upper middle class condo, single family home and business construction. The expansion of the Roosevelt Road (12th Street) corridor from Michigan Ave. west has been remarkable. No more crack houses,closed, graffiti-covered rows of shops and 1960s-built and trashed government housing. New construction and - prairie (yes, prairie)land ripe with subsidies to be developed. I invested in a new condo complex that will be built near Ashland, on the fringe of the corridor. This 128-unit, six-story complex will have businesses on the first floor and 2/3 bedroom condos overhead, priced in the 250-575g range when completed in 2008.

Second, rehabilitation development is occurring on the Burlington/Santa Fe route west of Chicago beginning in Berwyn (an old, near west suburb) and continuing at train station (local stop) gate intersections towards Aurora. Commuter trains are thriving, and communities are using train stops to develop shops, restaurants and housing along the track street areas. Old buildings are being leveled on intersections and other adjacent plots with non-subsidized development commencing.I advised an investor group to proceed with a restaurant/business/apartment scheme in Berwyn and Riverside (another suburb that is known for its plethora of Frank Lloyd Wright homes...$$$). Third, the apartment to condo conversions that made Oak Park, IL. a mecca for urban comfort living is continuing there and in similar mature suburbs - even in some where deterioration in the quality of life was deemed irreversible a few years ago. The benefit is threefold - apartment owners that have been ineffective landlords make a nice profit selling out to condo converters, who make a killing rehabbing and then re-selling as excellent condos near main transportation, entertainment and shopping hubs, then the condo buyers who are thrilled to be near the action of the Chicago area and closer to their jobs in the loop, etc.My stake is on the rehabilitation side in one apartment conversion.

Bottom line: Although the coasts are definitely experiencing a real estate downturn, Chicago and desirable mid-west locales (I have been told by "one who knows")have plateaued a bit, but remain vibrant real estate centers of activity, at least in the three areas of real estate I have mentioned above.

I do not recommend REITs in this environment, as they tend to not do well with these three types of rehabilitation development. I do recommend that you look at investment banks, as they appear to be much more selective with their approved projects and are keeping LTV (loan to value) ratios conservative.

It is always nice having unexpected pleasures occur on a relaxed jaunt to Chicago. I am blessed to have good friends there, going back over forty years.

September 25. 2006: Stats and Stocks

Thanks to all who have visited this blog over the past month, and to those financial bloggers whom have written kindly of this site. To date, over 5,200 visitors have clicked here to be informed, amused - or both. Before I feel too smug, the following stats are the August comScores for search engines:

Google 2,810,802,000 44.1%
Yahoo 1,897,328,000 28.7%
MSN/Msft 811,671,000 12.1%
AOL 359,627,000 5.6%
ASK 358,247,000 5.5%

Now, stocks.

Days ago, I spent space detailing successes of AeroDefense companies securing military contracts, and resultant stock picks. For the record, I do have access to military purchases prior to reaching some analyst desks. Since Defense stocks should do well in any political environment considering the state of world affairs, I look on these as good long term investments so long as the investor remains on top of who is doing what, and to whom.

Boeing (BA) is an excellent pick at this time, along with its major subcontractors such as Goodrich (GR), LLL and DRS.General Electric(GE) will profit handsomely as well, but since it is in so many other businesses, I defer purchase of the stock.Poor Airbus!I do NOT recommend that any ETF's or mutual funds using defense sector investing be purchased as there are too many companies that will do poorly. Only a few will succeed.

One reason Boeing and its minions will do well is the current age of the world commercial fleet:

0-5 years 17%
6-10 years 20%
11-15years 25%
16-20years 19%
21-25years 7%
25+ years 12%

According to a respected analyst out of the mainstream: Between replacement requirements and expected long-term traffic growth of approximately 5% annually, the view is that demand environment for commercial aircraft will be robust, especially given the fuel efficiencies of new aircraft. Military aircraft spectrums will grow faster, not counting overhauls and upgrades.

This past week, Boeing won a 2.5 billion/5 year contract for the DHS SBI-Net program, and the Boeing/LMT ULA-JV deal as said to be nearing government approval, terms to be reckoned shortly. This could be a mid-multi-billion dollar deal.

The purchase of Avial (AVL) by Boeing secures that company a first-rate commercial and military aircraft repair base for years to come. I think it was a superb acquisition, especially since I owned AVL stock which appreciated 53% in three months.The other aircraft maintenance company is Swire-Pacific out of Hong Kong. I recommend this stock for a variety of reasons, not just aircraft maintenance.

This past week, amidst the insanity at the United Nations, respected columnist Robert Novak predicted that the Republicans will retain control of both House and Senate, by thin margins. This is subject to change on a weekly basis.It is a significant pronouncement which is 180 degrees different than predicted a few weeks ago. I think this is a good thing.

September 22,2006: NEW ETF CVY EEB

Roger Nusbaum, through his first-rate blog, Random Roger's Big Picture, brought to my attention several new ETF's which appear to fill gaps in portfolio's looking for a bit of a punch in their ETF swing.

One I especially like is the Claymore/Zacks Dividend Hog ETF which uses Zacks proprietary methodology to determine corporations with a superior return profile. Encompassing at present 147 global securities and trading at 24.90 (very close to net asset value), this fund is conservative, as dividends will serve as a shock absorber for the expected jolts markets receive-usually when we least expect it.The interesting aspect of the selection is that the fund uses other funds, such as the Zweig Fund and the Morgan Stanley Em Dbt in concert with stocks such as Wells Fargo, Rohm and Hass and Banco Colombia to create diversity with a modest expense rate of .60%. Reviewing the complete roster of securities in this portfolio was an eye opener for me in a positive way. Not your vanilla ETF or your sector specific ETF. No. Much more.Ticker symbol:CVY


The other fund I like is the Claymore/BNY BRIC ETF. Trading at 24.40 (again, very close to net asset value),this fund is a proportion inspired by the BNY index and assets in four countries: Brazil, China, India and Russia. Percentage-wise as of today,48% of assets were in Brazil, 31% in China, 14% in India and 7% in Russia.
Although I think Brazil is a bit heavy and India a bit light, I won't quarrel with the fund manager for now. Their are 75 securities in the fund, including stalwarts such as China Mobile, CIA Vale Do Rio Doce,Icici Bank,Petro China, Vimpel and Infosys.No monopoly of sectors in this fund,which is very smart,indeed.The expense ration is .60% - cheap for this type of investment spectrum. The ticker symbol is EEB.

I am considering adding both ETF's to my portfolio.

For additional information,go to the Claymore website(it's slick),www.claymore.com



There is a boycott of sorts forming against CITGO, the Venezuelan State Oil Company after the outrageous remarks and local pandering Hugo Chavez (El Presidente)treated us to the past few days during his stay in New York City. I am not a big fan of boycotts, but am passing this along for your information. I use BP when I can get it.

September 21, 2006:Nova and Agrium...chemistry?

Two chemical stocks that I have looked at a few months ago appear to be good candidates for potential purchase. They are Agrium,Inc.(AGU) and Nova Chemicals(NCX).

Agrium management has stated in the past few days that nitrogen prices have held up well, in large part due to increased demand internationally (especially India).The nitrogen fertilizer market should be excellent due to the demand for more yield and acreage for corn as ethanol becomes a more important portion of the U.S (and other) nation's drive to secure safe and predictable fuel supplies. Agrium has also added an additional 310,00 tons of potash capacity, bringing its total capacity to 2.1 MM tons. An additional 350,00 tons will be available annually beginning next year. The Royster Clark acquisition was an accretive success. Agrium is also focusing on higher margin fertilizer combinations and, perhaps, looking at further acquisitions to more fully penetrate international markets. Their web address is www.agrium.com.
The stock trades around 25.00.

Nova Chemicals may have more upside than Agrium. Trading at around 32.50, this stock may well reach into the mid-40s over the next several months. The company has a big cost advantage in ethane being produced in Alberta. Also, ethylene fundamentals will improve given limited capacity expansions in Iran and other MidEast countries.
Companies that had been stockpiling ethylene have depleted their reserves. Nova has very good management and is technically in a good buying position for the investor.
Their web address is www.novachem.com.

September 19, 2006: Analyst estimates and pigs

In October, 1999, about three months before the start of an ugly bear market (actually, the worst in a quarter century), 69 percent of analyst recommendations reported in Thomson Financial's database advised investors to buy stocks. Another 30 percent of the recommendations were to hold. Less than 1 percent of the recommendations advised selling (the correct call,in hindsight).

The dismal cumulative record has improved substantially since. At the end of July, 2006, only 6.6 percent of analyst recommendations were sells. We all know there is is no way 94 percent of stocks are going up, or should be held.

Not suprisingly, a good many risk-averse investors think analyst estimates provide, at best, flawed guidance. I believe that the situation has improved to a degree. Since the disclosure requirenents went into a few years ago, investors can be more confident that the analyst is not being a shill for the company, and the numbers crunched are more accurate a presentation than previously.Still, analysts under-estimate actual earnings by about 3 percent a quarter, which adds up over the course of a year. This brings us to the "whisper number" which received widespread use (abuse) on CNBC and like stations in the latter 1990s during the tech era. Although the so-called whisper numbers became an absurdity then, the whisper numbers being bantered about now, which generally run 2 percent or more higher than analyst published forecasts. are actually quite right.

Of course, one needs to look at more than earnings. A stock with steady positive earnings revisions may still be too expensive from the perspective of its price-to-earnings ratio. And never ignore negative trends in earnings estimates (or the resignation of the CFO). Analysts do know enough to lead to in the correct general direction most of the time.

Speaking of the correct general direction, I am pounding the table literally and figuratively for the great acquisition of Premiun Standard Farms (PORK) made by Smithfield Foods (SFD) yesterday. This was a superb deal for Smithfield Foods. SFD will control approximately 30 percent of the pork market. With the difficulty getting permits to build new hog farms, Smithfield gets them in this deal on the cheap. Plus, with the exceptional processing of hogs from the snoot to the tail by Smithfield, extra value added contents of the hogs will add immediately to Smithfield's bottom line. In a conference call to shareholders yesterday, the CEO of Smithfield Foods expressed his view that the acquisition frenzy will now cease and Smithfield will now assimilate the companies and brands into a seamless goliath of meat products and by-products. I believe him, and recommend the shares for immediate purchase (trading at 28.22). Go whole hog.

September 16, 2006: Oil

You are invited to read my post of August 31, 2006.

I would not change a word in it.

T

September 15, 2006: Military logic...yes

Military intelligence:an oxymoron.Or so some think. I believe that investors who do not pay attention to what the military is doing through the public record of the official acquisition departments of our military are making a moronic mistake.

Believe it or not, many of the best and brightest do indeed reside in the military. Acquisitions forecast lower oil months ago (when some genius analysts were predicting $100.oil). Acquisitions forecast stable prices months ago for equipment and supplies (so much for inflation). Acquisitions provided a roadmap for our nation's international intentions months ago. Acquisitions provided the knowledge of the successfull anti-missile program months ago (so much for North Korea driving up oil with a wayward nuke on Los Angeles). Acquisitions provided knowledge of commodity prices months ago through bidded contracts with suppliers.

I am not claiming that individual investors pitch a tent in front of the Pentagon hoping that wayward classified requisitions fall from the windows. I am recommending that the military, through public records to be found with due diligence, is an invaluable resource that is overlooked. And the companies that do business with the military publish most contracts, especially when bids are awarded. Follow the paper trail. If you did, you likely could have discovered some outstanding investment ideas. And you would have also discovered that the military is not about $500.00 toilet seats, but dedicated professionals nailing down costs through extensive national and international intelligence that you don't get watching CNBC.

In a future post,I will name a few defense agencies and companies that have been spot on with predictions, acquisition pricing and execution of contracts over the past several years. We are not giving away secrets here.The information is public.The confidence to trust this ignored research tool will allow the investor
to have an edge. And that is what we all strive to have.

The above picture was taken in the Persian Gulf and shows a beautiful example of the assets the United States Coast Guard deployed there.The middle ship is a relatively new "black hull" multipurpose ship that can do everything from 10,000 lb. bouy lifting to oil spill containment to coastal interdiction. All three ships have the lastest in classified equipment to do their missions successfully. These and other craft of the Coast Guard protect our shores and enforce immigration and drug interdiction. We owe the Coast Guard a great ovation for their superb service locally, nationally and internationally.Semper Peratus.

September 10/11, 2006: Little known 9/11 tidbit

I think you may find this interesting. The source for this information is unimpeachable and was at the scene at the time executing his duty.

On September 11, 2001, all of us were shocked at the vicious attack on the United States mainland by terrorists. After several months of non-partisanship, the anti-Bush "he stole the election" crowd fronted by far left activists became active and vocal, driving stakes into the Presidency at every turn. One of the hoaxes was the Michael Moore movie that depicted the President as unable to act and a lapdog at the feet of Cheney and Rumsfeld as the day of September 11, 2001 unfolded.

Here is the reality...
When President Bush was told of the attacks, he chose to continue reading to children as depicted. During this time the highest levels of the military were preparing for his arrival at Offutt AFB, Nebraska. After boarding AF One, the plane took a predetermined scatter route to avoid any potential missile attack. The President was in constant touch with all military and national security contacts. He was given total knowledge of the facts as they were unfolding. AF One roared onto the AFB at treetop level. Prior to his arrival, almost all elements of the central military command were gathered at this safe hq facility on the base and others around the world.Upon Bush's entry, the room was full of loud talk and some chaos, playing scenarios out for specific counter measures against further attacks and mayhem.

As soon as Bush walked into the room, it was obvious by his body language and demeanor that he was completely in control as he took command of the operation(s). Donald Rumsfeld was very verbal, tossing about the f-bombs until President Bush, pointedly, told Rumsfeld to stop it. He did so in a voice that was heard throughout much of the operations area. This had a dramatic impact upon everyone. They knew that Bush meant business and was not influenced by anyone except the growing series of facts about the attack. He gave orders, asked specific questions and was, in every respect, Presidential. He inspired confidence.

During that day of uncertainty, Bush was the man of resolve and solid temperament. This was how 9/11 was viewed from ground zero of military operations.

I hope no investor forgets that investing as we know it will collapse if we fail to have democracies who stand up to foes that wish to trample our core beliefs. No charts, analyses, theories or safe haven investments can take the place of the ultimate protector of our investments and society - a strong national defense used appropriately to protect us.

September 9, 2006:Health and Fillups

The picture at left is the brand new F-22 star wars fighter on a test flight somewhere in California. A very lethal machine that will serve to defend our country and our country's interests well into the 21st century.
With mid-term elections coming soon, not a day goes by in media world without our being overdosed with political hit pieces, Republican or Democratic. Of course, the most vile of the hit pieces come from move-on.org or their wannabes who are accountable to no one. So much for campaign finance reform."Truth be stretched or damned" could be a suitable motto. Health care is getting plenty of attention.

If I were a senior citizen trying to find or retain the best health care policies for my life, I'd be confused and afraid. We are caregivers for my mother, aged 97 and in very good mental and physical health. Daily in the mail, she is bombarded with attractively designed solicitations for financial planning, health care insurance, health care insurance options (save $15./month in premiums and get 50% less coverage), and Part D prescription drug care. I make sure to wade through each correspondence she receives and we share opinions. One opinion she repeats often is "I could never do this on my own, I'd be lost". I suspect that many "seasoned" citizens feel this way. Worse, how many seasoned citizens make horrific choices without appropriate advice from a trusted family member or professional? How to choose? For seasoned citizen medicare/medicaide/ prescription drug insurance, I recommend the government site:www.medicare.gov or directly to www.medicare.gov/pdphome.asp. For specific insurance, I recommend one company to start, United Health Group at www.unitedhealthgroup.com and click on products and services. Yes, this company is in trouble with stock options, but in my opinion it generally has the best combination of rates and coverage in the industry. If you are a caregiver, or want to look ahead yourself, it is never too early to peruse senior citizen subjects that you will need to know about at some point in time. In the future, I will address tax advantaged accounts and gifting.

Gas prices are down substantially and oil securities should have been reduced to a bare minimum in your portfolio (see my post regarding oil last week). This also impacts the alternative fuel stocks.

Bunge (BG) is a world leader in grains and just about anything regarding grains.This is one company that I recommend to stay with and add to your position on weakness. Bunge (www.bunge.com) remains the top choice for ethanol, signing a pact today with Carlyle/Riverstone to build even more plants in the US. They are on the cutting edge of technology to bring down the cost of biofuels. Grains, milling and value added grain products
galore present a wide array of consumer products over and above fuel.The blessing of environmental groups and government bodies worldwide keeps litigation to a minimum.

Bunge is trading at 55.44 which is a bit rich. I would enter around 51. Management has been spotty at times, but appears to be hitting on all cylinders now with some fresh faces on board.

September 4, 2006: as per request

Here are two more pictures and a repost of the third picture from the Coast Guard interdiction posted yesterday, as per request.