investingfromtheright

I am retired and take educated guesses on all things financial.

December 10, 2006

December 10, 2006: Stock notes/Kyoto chuckles

Random thoughts after reading several research reports and thumbing through the latest Financial Times and Forbes publications.

Bank of Nova Scotia has had its earnings revised upward due primarily to excellent international operations. As regular readers know, I recommend BNS as a long term core holding. In my estimation, his international financial institution holds key ingredients for long term steady growth: North American base of operations,a dose of foreign currency exposure, international operations in swiftly developing countries, high quality loan portfolios, good research specialists and an excellent management team. Share volume remains low, keeping BNS a well-kept secret from non-Canadian investment institutions, hedge funds and speculators.

An interesting article in the current Forbes Investment Guide 2007 issue challenges the pollution credit exchanges set up under the Kyoto agreement. It seems as though it is cheaper for countries like India and China to produce pollutants such as HFC22 (refrigerant), sell the credits for "cleaning it" to Europe and the U.S. and then take the profits and make HFC23."Depending upon carbon prices, the plants would actually generate more money from carbon credits than production costs. (Thus)"the perverse would be complete". Another example of environmental outrage that will actually produce more pollutants than less...the law of unintended consequences. The article is written by Daniel Fisher and entitled "When Pigs Fly". Michael Dorsey, professor of environmental studies at Dartmouth and the coauthor of the book CARBON TRADING, says that while pollution trading programs work in the US to control pollutants like sulfur dioxide, it will be hard to track such schemes in developing nations. He states:"When you don't have the rule of law, when you don't have established agencies that can root out fraud, kickbacks and dirty dealing - which is basically two thirds of the planet- then the (pollution credit exchange) doesn't work."

Goodrich (GR) is mentioned favorably because it is in the thick of great air and aerodefense products, has a very good profit margin, sells at one time revenue and 12x earnings. It is reportedly has no defense against a takeover bid, either friendly or hostile. It may be a takeover candidate. I have long held GR and increased my position a short month or two ago.

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