Monday, June 30, 2008

An Interesting Way to Play Global Warming - Carbon Credits? iPath Global Carbon ETN (GRN)

There has been a literal avalanche of new ETFs and ETNs the past year, and even the past quarter - especially of the commodity kind. Most of which are uninteresting to me, but a few that have piqued my interest - I am probably missing others simply because so many seem to be coming out by the week/month. I have a few I am trying to write longer pieces on but have not had the time to devote to do them justice, but one ETN I wanted to point out is iPath Global Carbon ETN (GRN). And instead of recreating the wheel, I'll lean on a nice summary by Roger Nusbaum who specializes in ETFs/ETNs over at Myself? I have no idea how these will trade so I wouldn't touch them with a 10 foot pole, but maybe in a year from now if we see how the market develops and the ETN trades it might be something to revisit.
  • The most interesting might be the iPath Global Carbon ETN(GRN ), a way to access the carbon trading market. GRN tracks something called the Barclays Capital Global Carbon Index Total Return. It will have a 0.75% annual fee and will not pay out any interest.
  • Barclays provides a report on the iPath Web site -- and even if you have no interest in GRN for an investment, learning about the greenhouse gas issue is important.
  • There is an increase in greenhouse gas emissions stemming from greater use of fuels like oil and coal in the running of businesses and other entities around the world. One solution to this problem is to tax (sort of) companies that exceed pollution allowances and reward companies that do not.
  • The rules for this stem from the Kyoto Protocol. Companies must buy carbon credits in the open market to "pay" for the excess pollution, which is pollution beyond specified allowances. Carbon credits can be bought from companies that do not exceed their pollution limits, or from speculators in the open market.
  • GRN strikes me as the first of its kind. As opposed to providing access to a stock market or a commodity, it instead offers exposure to a real world cost of doing business globally. As such, it seems like a real candidate for having a very low correlation to equities.
  • GRN should be expected to be very volatile. Because this is a first-to-market type of product, it makes sense to give GRN some time to let it prove that it can in fact be a proxy for the carbon market.
  • Now to bring in a little politics, people who do believe global warming is a problem might be inclined to view GRN as a one-way trade. The folks who are not concerned about global warming would view this is a poor investment.
  • Even if the skeptics are right about the importance, it would seem that news flow and awareness will only increase, which provides a tailwind -- but not a one-way trade -- for all carbon indices.
  • One last thing: GRN is a debt obligation of Barclays PLC (BCS), the same Barclays whose stock price is down 40% year to date. I think a failure of Barclays is extremely unlikely, but anyone considering one of the iPath ETNs needs to follow the story.
No position

Who Says Indexes are Not Performance Chasers?

This really is beginning to remind me of the late 90s and technology when every index was in a hurry to stuff itself with tech stocks. Fresh off two of our holdings (natural gas and coal) being added to the S&P 500 [Jun 13: Cabot Oil & Gas (COG) and Massey Energy (MEE) Added to S&P 500] the Russell 1000 added "net" 8 energy companies, including 3 of our holdings - Alpha Natural Resources (ANR), Atwood Oceanics (ATW), and newly minted position Encore Acquisition (EAC). Another company Petrohawk Energy (HK) is one of the hottest stocks in the market as well. The Russell 1000, due to median size of companies we own, is what we mostly measure ourself against.
  • Ten companies in the "other energy" sector, which encompasses energy companies not considered integrated oil companies, are being to be added to the Russell 1000 in this year's reconstitution of the large-stock index, while 2 in the sector are being removed.
  • Alpha Natural Resources., Atwood Oceanics Inc., Encore Acquisition Co., Exterran Holdings Inc., Hercules Offshore Inc., Mariner Energy Inc., Oil States International Inc., Petrohawk Energy Corp. and Whiting Petroleum Corp. were added to the Russell 1000, all moving up from the small-stock Russell 2000.
  • Cheniere Energy Inc. and Western Refining Inc. were removed from the large-cap index and moved to the Russell 2000.
  • Tacoma, Wash.-based Russell Investments realigns the Russell 3000 index once per year, tracking what it maintains is 99 percent of the U.S. equity market. That index is then broken down to 26 smaller indexes, including the widely watched Russell 1000 index of large capitalization stocks.
Long Alpha Natural Resources, Atwood Oceanics, Encore Acquisition, Massey Energy, Cabot Oil & Gas in fund; long Alpha Natural Resources in personal account

Listen to the Companies; not the Government Reports - Brunswick Corp (BC) & Smithfield Foods (SFD)

I have no idea what the market will be doing today, this week, this month, or this year. I have been saying the real economy is in serious trouble, and that was stated under an impression oil would be at $90-$110 or so. What we have now is ever more frightful. The market has been and continues to be in denial; I have pointed this out repeatedly even in the face of conventional wisdom as the market raced to new highs in fall 2007. I continue to stress most traders on Wall Street have been conditioned to corporate led recessions - not consumer led. This is the first consumer led recession since the late 70s/early 80s and it appears most market participants are not students of history. We still live in denial - only now in inflation. Inflation is a tax on all things - consumers and producers.

I outlined in mid April a theme I've been repeating since blog inception - avoid the (bottom 80%) U.S. consumer and his discretionary income stream; it is disappearing. Stock tied to said consumer, will sometimes bounce around earnings reports because instead of "putrid" earnings, they report "horrid" numbers. And since horrid is "better than expected" versus putrid - a bunch of shorts get squeezed and the stock rises 20% instantly. And bulls clap gleefully that the American consumer is back, and the "sign of strength" of the stock is a clear signal that the "market knows more than we do". Ignore these pundits. They live in a fantasy world. Once the shorts are chased out of a stock, the spike is (in 95% of cases) over, and the stocks begin a drift down. This will continue. For a long time. Consumer discretionary is going to be the new financials. In fact it has been nearly as bad as financials - but it's being under reported.

I used to write this early in the blog but I should start repeating it: regardless of income strata most surveys show 70% of Americans live paycheck to paycheck. That's at $30K, $60K or $120K. They've lived in a relatively low inflationary environment for much of the latter 80s to early 00s. When that changed they had their house ATM as their piggy bank to supplement their paycheck. Now we live in a high inflation world and we're running out of ATMs. That doesn't spell months of pain and then recovery - nor quarters. It's going to be years. It is worth repeating those points for newer readers, and I will post the growing evidence (which is almost contradictory by 180 degrees to the spin in government reports) in the bottom of this post.

I cannot continue to stress enough how wrong analysts are on 2008 estimates and any company with focus on the US consumer is simply going to be blown apart in due time - if not this earnings season - then in the future. We are told daily how "cheap" these stocks are; this is based on the fictional body of work called "analysts 2008 estimates". Don't believe the hype. The subprime nation (us) is in trouble. Consumers make 70% of GDP. Its a consumption culture where the consumer is being drowned in negative wealth effect from housing, inflation from the Federal Reserve/global forces, and underemployment if not outright unemployment. [Apr 2: The Underemployment Rate is Rising] It is bad out there in the bottom 60% and it's creeping up to the formerly immune 20-40 percentile as well. So now it "matters" because that starts cutting into the bottom part of CNBC's audience. It is the perfect storm and I will utter the most dangerous words a financial commentator can ever utter - it *IS* different this time. Or at least it's certainly not like it's been in a long time...

People were asking me for individual names for shorts - I continue to stress the same themes I've stated since last summer - anything consumer related or based on American conspicuous consumption - it will all go. I was looking at a chart of Whole Foods (WFMI) and that's a perfect candidate - its held up "ok" because it relies on the upper middle class who can afford to pay $7.00 for organic milk. Well, when economics start to hit, people are going to have to stop being so "healthy" and buy what they can afford. That's just reality. Hence this looks like the prototypical short. As is Harley Davidson (HOG) [Jan 25: I Can't Believe this Pig...err HOG was up Today] [Sep 7: More Retail Tells? Harley Davidson and Office Depot], as is just about every restaurant in America [Sep 19: Tough Times Ahead? Restaurants] - even magical Chipotle Mexican Grill (CMG), as if just about every retailer in America ex-Walmart (WMT), etc. These stocks bounce every time the bulls pass their... well bull... that the consumer will be back any moment now and just "trust us" because in 6 months they'll be back in the malls spending like mad. Just. Plain. Wrong. These are going to be shorts for a long time. It won't be so easy as when I first called it out in early fall because we were still in the "no recession at all" camp, and the stocks had just began to weaken from much much higher levels. Now you have to short in smaller time frames, realizing dead cat bounces occur every 3-5 weeks as a "hopeful rally" will ensue. At which point, once it tuckers itself out - you short again. Keep repeating until CNBC finally tells us "we're heading into a deep, long recession" - and then you'll probably want to go long since the bottom will be in.

Simple as that. Next to go on the food chain will be entertainment - think casinos - Wynn (WYNN), Las Vegas Sands (LVS), MGM (MGM) - it is all going to suffer [Nov 1: A Top in Casino Names? Wynn and Las Vegas Sands] - that's an "extra" you don't "need". Disney (DIS) will hold up ok due to our cheap US peso bringing in foreigners but regional amusement parks without that international name recognition are going to suffer the same fate. Sorry to sound alarmist but this is the coming reality of a strapped, indebted US consumer whose real wages have been pummeled for years (this has not suddenly happened 18 months ago; it's just now catching up to us without the house ATM to hide the pain), and now is taking it on the chin with the Fed policy to devalue their currency to the tune of 1:5 ratio. Each dollar they now own becomes even more worthless.

So when you ask for specific names from me - its simple - what can you do without? What would you give up first, second, and third as your budget closes in on you? What will you sacrifice to pay for food, gasoline, heating, and air conditioning? Whatever you will skip on - short that stock each time the "early cycle" proponents run them up for a 5-7 day cycle, on wishful thinking. Even cheap holey shoes that cost half a ticket to a professional ballgame are seeing the pullback. The only people immune and the only products immune are those catering to the top 1% - Porsche yes - Ford (F) no. 60' yacht - yes. 22' Sea Ray powerboat - no. Avoid the "no's" which frankly is almost everything facing the domestic consumer. We're heading into a long, drawn out recession... I've said it since last summer and as each month/week/quarter passes more denial will turn into acceptance and more earning cuts will have to happen across the board. The people in denial rely on government reports, which are for the most part another pile of fiction work.

So in the last paragraph of my April entry, I talked about boats as one example (the smaller ones, not the yachts that the upper 1% enjoy). I stumbled upon Brunswick Corp (BC) which ironically one of our holdings, Cabot Oil & Gas (COG) just replaced in the S&P 500. This is a perfect "pooring of America" play as it hits a 17 year low (that's nothing, General Motors (GM) is at a 53 year low). But just as we had a positive multiplier effect from spending over our heads in a consumer driven economy, so will the opposite happen - as shops/plants close, people are let go, as they are let go, they cannot spend, which leads to more shops/plants closing - it is vicious. Just as it was virtuous on the way up - but much of it the past decade has been based on a fantasy of cheap dollars (printed by the bushel) and "if you have a pulse, you deserve credit". That's changing. Quick. Toss in this "we're in denial that there is no" inflation, and it's even more devastating. Let's see this cycle play out in just this one press release.
  • Brunswick Corporation (NYSE: BC - News) announced today a set of comprehensive actions to resize the company to improve profitability during the current downturn in the U.S. marine market, including actions to reduce its fixed-cost structure by $300 million versus 2007 spending levels.
  • "Retail unit sales of power boats in the United States have been in decline since late 2005; however, the rate of decline has been accelerating," McCoy added. "Industry retail unit sales were down 13 percent in the fourth quarter of 2007 and down 21 percent in the first quarter of 2008 compared with the respective year-ago quarters. Further, these reductions were recorded off of an already low base. Total unit sales of power boats in the United States in 2007 were at their lowest in more than 40 years."
  • "An uncertain economy, high fuel and food prices, slumping home sales and values, rising unemployment and other factors continue to erode U.S. consumers' confidence and are reducing their ability and desire to purchase discretionary items such as boats, and billiards tables and fitness equipment for their homes.
  • Brunswick stated that its $300 million cost savings target will be achieved in part by further shrinking its North American manufacturing footprint. The company plans to have 17 or fewer boat plants by the end of 2009, compared with the 29 it had in 2007. (read: job losses) This will require the closure of four plants in addition to eight plant closures already completed or announced.
  • A reduction in production rates also results, unfortunately, in the need for fewer workers." The company said that it had notified employees today that it would be reducing its hourly and salaried work force at certain of its marine plants by 1,000. Further work force reductions of approximately 1,000 hourly and 700 salaried employees across the company's marine business units and staff functions are contemplated as additional plant closures and consolidations and other cost-cutting measures are completed. (that's 1000 newly minted Walmart/Costco/Big Lots workers, with another 1700 coming)
So in our government reports these people will magically appear in new healthcare jobs, new government jobs, and new "we cannot measure it, but we will create a new category called birth/death model" jobs. And we'll smile at our mid 5% (up from 5%) unemployment rate, and ask what all the fuss is about - this is still low by historical rates. Listen to the companies, not the government reports.

On we go to completely unrelated Smithfield Foods (SFD), a company (and sector) I've followed since fund inception since its an agriculture tell. They produce a lot of hogs - that require feed. Feed that is skyrocketing. [Feb 28: Smithfield Foods Continues to Struggle with Input Costs] Friday? Down 20%. Inflation - tax on all things producer and consumer. Keep repeating it to yourself while Uncle Ben tells you that inflation will dissipate as the economy slows. He has been browbeating that into us for 9 months now. He is going to be right eventually - after a full scale global slowdown.
  • Shares of Smithfield Foods Inc. hit a five-year low on Friday, as an analyst downgraded the company and Standard & Poor's cut its ratings amid a difficult environment. Shares fell $4.34, or 17.6 percent, to $20.31, during late-day trading, after earlier reaching a low of $20.12. The last time the stock traded that low was January 2003.
  • D.A. Davidson analyst Tim Ramey wrote in a note to investors that record-high corn prices make it difficult to predict when Smithfield's hog farming losses will end.
  • Grain prices have soared in the past year, driven by world demand for wheat, corn, oats and soybeans to feed people and livestock. Furthermore, crops have also been battered by bad weather around the globe.
  • "The combination of reduced earnings, deteriorating credit quality, surging working capital and no foreseeable peak in corn prices points to share price risk to the $14 level," Ramey wrote. (but other than that, things are going well)
  • Meanwhile, S&P lowered its ratings on the Smithfield, Va.-based company, including lowering its corporate credit rating two notches to 'BB-' from 'BB+'. S&P said it expects the company will face a "challenging" operating environment in its hog production segment through most of fiscal 2009 due to higher feed costs and soft hog prices.
Or we can check on near peer Sanderson Farms (SAFM), another company we like to watch for the same reasons as Smithfield. Nothing major here except a planned plant will not be going into operation because of same inflationary costs. That's 1500 future jobs NOT created (hey perhaps they could of used the former boat employees) Tyson Foods (TSN)? Same problem.
  • Sanderson Farms Inc. late Thursday indefinitely delayed construction of a new chicken-processing plant, underscoring the repercussions of skyrocketing corn and soybean costs on the chicken and meat industries. Sanderson had planned to break ground on the $126.5 million plant this summer. When running at full capacity, the plant was expected to boost the company's current supply of chickens to the retail market by 1.25 million birds per week, or 6.7 million pounds.
  • Sanderson's decision comes a day after Tyson Foods Inc. pulled the plug on its meat-processing business in Canada.
  • The Kinston, N.C. site is also to include a feed mill and hatchery, employing 1,500 workers and contract deals with 130 regional chicken growers.
  • Sanderson, which doesn't hedge its feed grain costs, will likely being paying more for corn to feed its chicken flocks. It bought 90% of its corn for prices between $5.50 and $6 a bushel; those supplies run out at end of July. Corn for July delivery is trading around $7.54.
So you see, when the inflation reports, already massively incorrect, go another step forward and say, exclude food and energy as well... because really what effect do those have on the real economy... you can see why their "predictions" have been so completely wrong, time after time. When you live in the Twilight Zone - your predictions are just as zany.

This is just the consumer story - the next layer will be the local government story - those zany high prices in steel and petrol... combined with sagging government revenues from both real estate price deflation and lowered sales tax receipts are going to mean a lot of very bad things for state budgets. And cutbacks. Lots of cutbacks (forced) by legislatures that did not save for a rainy day. Because that is so unAmerican. Because as 70% of Americans live paycheck to paycheck, I could guess 98% of governments do. And a new fiscal year begins in 24 hours. But that story that won't be hitting the mainstream until later in the year... probably by the time public schools start panicking.

It's going to be a very tough economy, and a stock pickers market for years to come. The days of throwing a dart and making money (I miss you 80s and 90s) are off to hibernation. Unfortunately the bubble allowed to form by Uncle Al in the housing market is going to make the NASDAQ tech bubble look like child's play. The reaches of this bubble are so much more pervasive.

If you want to know what is happening in the "real economy", listen to the companies; ignore the wizardry coming from behind the velvet curtain in Washington D.C.

Long iPath DJ Livestock ETN in fund, no personal position

Sunday, June 29, 2008

NYTimes: Hording Nations Drive Food Costs Ever Higher

The NYTimes to its credit is one of the few media outlets where the food crisis is even mentioned. They are doing a quality series on the subject dating back to the beginning of the year - if you are interested the articles can all be found here. As with all things (most) media has conveniently forgotten the crisis to move onto new subjects - after all, much like Iraq (which is barely mentioned on nightly news anymore - I mean all it is, is a war) - and New Orleans (hello, still a broken town once you leave the tourist areas), Americans cannot be bothered with the same old news and need new and exciting stimuli. We'll keep it on the front burner - so when the mainstream media find it interesting again you won't be surprised... we've been among the first on this beat [Jan 18: One Lonely Voice Agrees with me on Food Inflation]

Remember our long term thesis here - especially related to food: agflation, food protectionism (countries hording their own supplies to feed their own people), and then social unrest. The latest in the NYTimes series demonstrates the 2nd part of this chain is now playing out. I cannot stress enough how in many parts of the world, the % of income devoted to food is akin to your mortgage (rent) + car payment + energy costs... all combined into 1. Now imagine if those payments doubled/tripled. And then imagine how desperate you become since it's not about fueling your car but about feeding yourself and family. This is the reality for many on the globe. While we worry about "hording of Asian rice" at Costco. It's all relative.

What does a rational human do when said rational human believes higher prices (inflation) are ahead? One hordes.
  • At least 29 countries have sharply curbed food exports in recent months, to ensure that their own people have enough to eat, at affordable prices.
  • When it comes to rice, India, Vietnam, China and 11 other countries have limited or banned exports.
  • Fifteen countries, including Pakistan and Bolivia, have capped or halted wheat exports.
  • More than a dozen have limited corn exports.
  • The restrictions are making it harder for impoverished importing countries to afford the food they need. The export limits are forcing some of the most vulnerable people, those who rely on relief agencies, to go hungry.
  • And by increasing perceptions of shortages, the restrictions have led to hoarding around the world, by farmers, traders and consumers.
  • People are in a panic, so they are buying more and more — at least, those who have money are buying,” said Conching Vasquez, a 56-year-old rice vendor who sat one recent morning among piles of rice at her large stall in Los BaƱos, in the Philippines, the world’s largest rice importer.
  • Now, with Australia’s farm sector crippled by drought and Argentina suffering a series of strikes and other disruptions, the world is increasingly dependent on a handful of countries like Thailand, Brazil, Canada and the United States that are still exporting large quantities of food.
  • Powerful lobbies in affluent countries across the northern hemisphere, from Japan to Western Europe to the United States, have long protected farmers in ways factory workers in Detroit could only dream of.
  • Raises age old questions - Is it best to specialize in whatever food grows best in a country’s soil, and trade it for all other food needs — or even, perhaps, specialize in services or manufacturing, and trade those for food?
  • Or is it best to seek self-sufficiency in every type of food that will, weather permitting, grow within a country’s borders?
  • “If every country in the world decided it wanted to produce its own food for consumption,” Ms. Schwab said, “there would be less food in the world, and more people would be hungry.”
  • From Indonesia to West Africa to the Caribbean and Central America, have frequently cut farm assistance programs and lowered tariffs to balance budgets and avoid charging high prices to urban consumers. But they poor countrieshave found that their farmers cannot compete with imports from rich countries — imports that are heavily subsidized.
  • As a result, steps that could have taken place decades ago, resulting in more food for the world today, were abandoned. These included changes like irrigation schemes and new crop varieties.
  • India and other countries, as well as some nonprofit groups, are quick to point out that economic arguments — that countries specialize in the production of whatever they can make most efficiently — are unconvincing, as long as rich countries heavily subsidize their farmers.
[Apr 14: WSJ - Food Inflation, Riots Spark Worries for World Leaders]
[Mar 31: Reuters - Tensions Rise as World Faces Short Rations]
[Apr 21: The Economist - The New Face of Hunger]

Bookkeeping: Weekly Changes to Fund Positions Week 47

Week 47 Major Position Changes

Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight weekly the larger position changes.

Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs. I cannot short individual equities.

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 20.2% (vs 24.0% last week)
53 long bias: 64.6% (vs 54.7% last week)
9 short bias: 15.2% (vs 21.3% last week)

62 positions (vs 60 last week)
Additions: Encore Acquisition (EAC), A-Power Energy Generation Systems (APWR)
Removals: N/A

Top 10 positions = 23.7% of fund (vs 28.3% last week)
42 of the 62 positions are at least 1% of the fund's overall holdings (67%)

Major changes and weekly thoughts
It's been a very rough 2 weeks and a very rough June for the markets. Directionally, we stand at a make or break point, with the major indexes at January/March 2008 lows. We've now had 5 substantial selloffs since summer 2007, and the question is, will this selloff mimic the more conventional selloffs, or be more of a January 2008 event where huge drops were simply followed by further losses. No one has the answer, so we'll assess as we go - but January 2008 was a bit of an outlier event in the severity of the selloff without any bounce so probability says we go with a more typical sell off which would indicate some near term bounce in the offing. I've increased long exposure to the largest in quite a few weeks with that in mind. However, if these support levels from earlier in the year fail, we have to throw that thinking out the door and be flexible and ready to increase short exposure, and try to limit the damage.

Even if we do bounce the question is who bounces the most? Will be we get a rotational/short covering type of rally where the 'worst of breed' jumps the most? Or will people simply keep clinging to the same (tired) groups who are unrelenting in their move up. I don't have any idea and this is a tricky period so instead of guessing I've spread out my dollars into many different positions in various parts of the market (sectors) not knowing what the hedge fund computers will decide are the flavor of the day - old favorites or beaten down sludge. I could make a case for either. With that said, I've moved our short exposure from the typical "junk sectors" (retail/financial/real estate) more into favored sons and general indexes. If oil continues it's relentless move up, all bets are off. One mainstream indicator I do like to see and makes me a bit bullish is a lot of stock market news on the national evening news programs - by the time things hit Main Street we are generally ready for a bounce. That said, these are not normal times, and we have to be open for anything. People ask about a crash... well these do happen but it is hard to build a model around them since they are so infrequent - and it seems doubtful one could happen when so many people are now talking about it. Generally things (positive or negative) happen when the least amount of people are expecting it.

We have a short week ahead of us, with a lot of real money heading to the Hamptons early so we could have some volatile sessions ahead. Key above all else for market mood will be Thursday's unemployment report, which we ignore since it is so useless, but the market clings to like a blankie as incredibly important. Just walk around and see parking lots emptying, retail outlets struggling, auto/airline pummeled, housing in multi year depression and tell me in the face of that unemployment has risen by a measly half a percent. All based on the "export economy" (most of which we've outsourced the past 20 years), government jobs and healthcare jobs? Right. But since there is religious like zealotry to the government's numbers by the NYC traders we have to realize it moves markets. Since last month was such a big jump upward (5.0% to 5.5%) in the unemployment rate I would not be surprised to see if fall backwards to a lower rate as "adjustments" are made for "seasonal workers" and then we can clap like seals and drive the market back up as we head into our BBQ weekend. Last week was extremely tiring, at least on this end, so the short week will be appreciated to recharge from what has been a miserable month where every ounce of energy is expanded to try to lose "less" than average - and consider that a victory.

Below are the fund changes this week - the specific rationale for each of these major moves is explained in the weekly posts which can be accessed in the left margin of the blog under archives.

Some of the larger changes (chronologically) to the fund below:
  1. Monday we did little waiting for more fear to encroach on the market.
  2. Tuesday, we added a touch of (BIDU) as it fell to $305; the stock immediately bounces but faltered as the week wore on and the market degraded. One look at the Google (GOOG) chart and I feel very ominous about tech in general. I'd like to buy in scale at lower prices as indicated in the post.
  3. Also bought some Apple (AAPL) ahead of Research in Motion (RIMM) earnings as the safer way to play an earnings bounce - of course that bounce never came. Much like I'd like to add Apple in scale lower. This was a relatively incremental buy to replace some shares I had let go higher.
  4. Wednesday (and Tuesday) I was cutting WuXi Pharmatech (WX) after a huge 2 day spike. But the chart is holding up very well and if this market holds up this one could run and I might need to rebuy my stake. $19.50 is the 50 day moving average which it appears to be holding and a move to the mid $23s would seem in order if the general markets firm. We like to see such strength in the face of a horrid market.
  5. We added a 4th natural gas stake in Encore Acquisition (EAC) - aside from the kicker of a management willing to sell itself out, the stock is cheaper than the other 3 we have owned in this space. Our purchase was in the $70s and the stock was up nearly 10% from that point for the week.
  6. After I cut back some of our "global growth" stories, I was horrified to find homebuilder DR Horton (DHI) as the top long holding - thankfully the stock got some "rotational" love and we had a nice 2 day spike, into which I sold a portion as the stock ran into resistance - within 24 hours the stock had dropped 10%, so lo and behold we got those shares back.
  7. After our favorite uncle Ben refused to give the middle class a break by even making a cursory attempt to stop inflation (that does not exist in the US) and defend the dollar - we had to reverse our earlier call for a rotational move and get a bit more constructive on the same old commodity groups that continue to levitate. We lowered our exposure to the Ultrashorts in Oil-Gas and Basic Materials and lightened up some metals stocks that were approaching resistance, while adding a bit to agriculture commodities, fertilizer, and oil. By Friday this looked like a good move at least in the near term. I guess if there is no inflation, there is no reason to attempt to fight it. Thanks again Ben.
  8. Thursday morning, Perfect World (PWRD) was showing inordinate strength in a terrible market - holding up key resistance levels - I bought some but voiced doubts it could retain it's standing in such a bad market since nowhere in Perfect or World are the terms natural, gas, oil, coal, or fertilizer. This did show to be the case later in the day and we quickly reversed course. I'll be happy to add exposure on either strength ( a move over $26) or weakness (a move to lower $20s). We are in no man's land in the $25.
  9. Into the thick of Thursday's tremendous sell off I did begin layering in some buys, mostly in stocks I've cut back severely (0.5% or smaller stakes) on previous run ups.
  10. I did cut Ultrashort Financial (SKF) back to almost nil Thursday - we've had tremendous gains in this name and at some point this trade will reverse, if for nothing else than short covering and we'll want to steer clear of it. Financials have years of rough patch ahead of them (think technology in fall/winter 2000 - it was just getting started into its nuclear winter), but there will be vicious rallies along the way. If we do get an "Armageddon" sell off I am sure this instrument will appreciate but frankly so will just about any short instrument so we moved short exposure from this name to others.
  11. We did a few smaller transactions Friday morning. Almost added 2 solar names, but just am very antsy about this sector in which retail investors panic and drive the names 10% down in a heartbeat. But might be missing some quick upside as these stocks reverse on a dime and scream upward as well.
  12. We did add to the Atwood Oceanics (ATW) Friday on strength, after mentioning it earlier in the week.
  13. Last, we started a new position in Chinese energy play A-Power Energy Generation Systems (APWR), after a sizeable pullback in the past week, along with adding a bit to American Superconductor (AMSC). Much like the solar stocks I expect tremendous volatility in these names, as they are mostly the playground of the retail investor.
The above do not include the majority of my trades in my Ultrashorts which I am trading quite often as the market ebbs and flows.

CNBC: Merrill Lynch (MER) May Unload Blackrock (BLK) Stake to Raise Capital

Blackrock (BLK) broke down badly this week, with closes below its 200 day moving average for the first time since the worst of the March 08 selloff. I thought it was simply getting caught up in the "all things financial are evil" thinking, but with the huge volume spike Friday it appears the culprit is the fact Merrill Lynch (MER) is so desperate for cash it could be forced to sell off its Blackrock stake for capital. Keep in mind Merrill Lynch has been denying for months it needs anymore capital. (thanks to a reader for alerting me to this story)

Frankly this is going to create (is creating) one heck of a buying opportunity in a great franchise; and to boot Blackrock has first dibs at buying the portion Merrill will choose (if they do) to sell off. This is not something that signals a change in operations or opportunity for Blackrock, simply a unique exogenous event.
  • With his options limited, and time running out, Merrill Lynch CEO John Thain is now seriously considering selling all or part of the firm's 49 percent stake in money-management powerhouse BlackRock as a way to raise new capital, CNBC has learned.
  • People close to both say that Thain’s decision is just weeks away and is prompted, at least in part, by a recent chilly reception he received from another firm that Merrill holds a stake in, Bloomberg LP.
  • Like Bloomberg, Blackrock has first dibs on any sale of Merrill’s stake in the firm. As of now, Blackrock has received no formal offer by Thain to sell, nor is there a board meeting scheduled for a deal, according to people close to the firms.
  • But executives close to both firms say people at Blackrock believe Thain is inching closer to a sale of all or part of its stake, currently valued at around $10.5 billion, if Thain decides he needs to raise added capital. These same executives say the situation is fluid, and Thain’s plan could change.
  • Although no final decision has been made by Thain, he has told senior executives inside Merrill that if the company needs capital, he will try to sell assets like its Bloomberg and BlackRock stakes first, before selling shares and diluting stockholders even more.
  • Sources close to Merrill say Thain may not sell the entire chunk and even if he does, the two firms may still do business. Blackrock manages Merrill’s asset management business, and that relationship may stay in tact through some sort of partnership.
Long Blackrock in fund; no personal position

Saturday, June 28, 2008

How are the Dow Components Doing this Year?

The Dow Jones Industrial Index (DJIA) is the most widely followed index, holding our 30 most dear and near corporations - the names everyone knows. It actually has a very convoluted methodology which gives weight to the stocks within the indix by PRICE instead of market capitalization like most indexes. Hence the higher the stock price (which is quite an arbitrary thing, since if a stock splits 2:1 it should not matter to its "importance" in an index) the more it affects the DJIA. If you are interested in the morbid details (you engineering types) you can read here. Essentially most of us who are around a while use more broad indexes such as the S&P 500, or Russell 2000.

More interesting to look at is how they are doing for the year, courtesy of BeSpoke Blog. Let's couch it this way - thank god for Walmart (WMT). Even the large oil integrated stocks (which I don't like) are not really helping much.

(click to enlarge)

Weekend Stuff for Political Junkies

For any of you political junkies out there - here is an interesting site with analysis and compilations of all the polling - Some good stuff.

Back when the blog started, and everyone was still talking about Iraq as "the issue" last summer and recession / inflation were laughable concepts in the mainstream, I predicted whomever came out of the Democratic side (at the time it was looking like a Hillary Clinton / Rudy Giuliani contest) would win in a landslide because by the time we got "here" to today, the economy would be degrading badly, and move to be the first, second, and third top issues. So it has become - Republicans, aside from Mike Huckabee, were not even addressing the economic "issues" of the middle class / lower class in the primaries until the last few debates.

With that said, John McCain is the least like the other Republicans so just from his "maverick" stance, if any Republican would have a chance - it would be him (ironic considering the "base" tried everything in their power to make sure he was not the candidate). I think if the Republicans threw out their typical candidate it would of been a 65-35% type of election. But since anyone within 10,000 yards of George W is affected by the association, short of a terrorist attack on US soil in the summer/fall - I just don't think McCain has a chance because this country is so desperate to try anything, something, to change directions (they seem to forget Democrats have been running the Congress the past 2 years, accomplishing nothing - just like their predecesors). Not that change for change sake helps much - and the main problem is the structure of politics which won't be changing. But what else can people try - if door #1 fails them, they will go to door #2. Then 8 years later that will fail them, and away we go.. :) By the time we get to November, the economy will be in worse shape than it is now - only helping Obama further.

According to the site Barack Obama is one pace to win 310 of the electoral vote to John McCain's 228. (the electoral college is so outdated) The popular vote is projected at 49.8% to 46.2% for Obama. In my view, and this site there are the 4 key swing states - Michigan, Florida, Ohio, and Pennsylvania. Three of those states are suffering from a major recession either through manufacturing or housing or a combination of the two. At least PA has the natural gas exposure, but it is not exactly surging through an expansion ;) According to this site, they give FL to McCain and the other 3 to Obama. I think Obama could win all 4 as things degrade - although I would not be surprised to see McCain take on Florida Governor Charlie Crist as VP, and that would swing the state to him. On the website, they give Florida to McCain but recent polls show a very close race.

I will be very interested to see what way Obama goes with his VP - I think the safest choice but it won't win him a state is an ex general, since that eliminates the #1 criticism that Republicans can bring against him - national defense. That's one reason Jim Webb from Virginia (while not an ex general) is very much in the VP conversation. But conventional wisdowm is to take someone who will win a state for you. All 3 of the remaining 4 swing states have Democratic governors - although Michigan's is ineligible since she could not take over the Presidency being a non US born. (along with helping to run our state into the ground) Interestingly both the OH governor Strickland and the PA governor Rendell are big Hillary supporters so that would be quite the scenario if he took one of them on.

Total wildcards for Obama would be a Mike Bloomberg (who in theory could solve McCain's "lack of economic knowledge" weakness as well), and then the guy who I wish was running for President - Chuck Hagel. To reach across the aisle to tab a Republican would create scowls from Democrats but by gosh could there be any other better sign of trying to truly cooperate to solve our growing by the day problems? Well I can dream - but Hagel *is* lavishing praise on Obama.

"If you engage a world power or a rival, it doesn't mean you agree with them or subscribe with what they believe or you support them in any way," he said. "What it does tell you is that you've got a problem you need to resolve. And you've got to understand the other side and the other side has got to understand you." - Chuck Hagel

Note 1 - I'm for neither side and in fact believe there should be a lot more than '2 sides'. Government is by and large completely broken and far too big - I just hope for pragmatic worldy leaders who I could care less if I'd like to have a beer with, but who can actually solve problems. But I'm not holding my breath. Whoever gets elected has quite possibly the biggest mess ever - quite like our friend Uncle Ben inhereted from Uncle Alan G.

Note 2 - I get all my politicial information from The Daily Show ;)

35 Stocks Returning 7%+ this Week

Another small list of names, and a familiar lineup of stocks. The big change was the flight into precious metals - gold and silver which we outlined in last week's list as the potential new group of strength, and our old gold holding was the 2nd best stock in the market (in the criteria group we use) [Gold. Back from the Dead?]

Criteria as always
  1. Market capitalization $2B+
  2. Average trading volume 100K+
  3. Stock price $10+
  4. Returns 7%+
Green we own, blue we have owned or discuss in the blog. Goodrich is a natural gas play which has been attracting attention due to its Haynesville exposure - what a chart. But any market being led by gold is one we want to remain fearful of. We discussed Atwood Oceanics (ATW) and Cleveland Cliffs (CLF) in posts this week. Simply put, not many places to hide this week if you are not a gold bug. In the sub $2 Billion market cap area - WuXi PharmaTech (WX), another of our holdings was the top returner @ 18% after months of underperformance.

Symbol Company Name % Price Change 1 Week
GDP Goodrich Petro Ord Shs 23.0
EK Eastman Kodak Co 16.9
GOLD Randgold Resources ADR 14.8
CTL CenturyTel Ord Shs 14.3
AEM Agnico Eagle Ord Shs 13.9
ATW Atwood Oceanics Inc 13.9
CPO Corn Products International Inc 13.2
AUY Yamana Gold Inc 12.6
GFI Gold Fields ADR Reptg 1 Ord Shs 12.5
FSUMF Fortescue Metals Group Ltd 12.3
BZP BPZ Resources Inc 10.9
CLF Cleveland Cliffs Ord Shs 10.9
HMY Harmony Gold Mining ADR 10.8
AU AngloGold Ashanti ADR 10.4
BRL Barr Pharmaceuticals Inc 9.3
FCN FTI Consulting Inc 9.3
LIHR Lihir Gold Sponsored ADR 9.0
CPX Complete Production Services Inc 8.9
JBL Jabil Circuit Inc 8.5
ANR Alpha Natural Resources Inc 8.5
WFT Weatherford International Ltd 8.4
SLW Silver Wheaton Corp 8.3
HK Petrohawk Energy Corp 8.2
WLT Walter Industries Inc 8.1
HERO Hercules Offshre Ord Shs 8.0
NEM Newmont Mining Ord Shs 7.6
RS Reliance Steel & Aluminum Co 7.6
DRYS DryShips Inc 7.3
ELP Companhia Paranaense de Energia ADR 7.1
MUR Murphy Oil Corp 7.1

NYTimes: U.S. Freezes Solar Projects on Public Land for 2 Years

Watch what they do (this) versus what they say ("we feel so much empathy for the American people, we need to find ways to bring down the price of energy!").

Environmental impact? Of "renewable" energy? Are they serious? So much for my mandate for a Manhattan Project of Energy, which included taking huge pieces of public land in sun drenched southwest and putting solar farms all over. Have to study the impact on the environment first. And "two" years, really means "four" years.
  • Faced with a surge in the number of proposed solar power plants, the federal government has placed a moratorium on new solar projects on public land until it studies their environmental impact, which is expected to take about two years.
  • The Bureau of Land Management says an extensive environmental study is needed to determine how large solar plants might affect millions of acres it oversees in six Western states — Arizona, California, Colorado, Nevada, New Mexico and Utah.
  • But the decision to freeze new solar proposals temporarily, reached late last month, has caused widespread concern in the alternative-energy industry, as fledgling solar companies must wait to see if they can realize their hopes of harnessing power from swaths of sun-baked public land, just as the demand for viable alternative energy is accelerating.
  • It doesn’t make any sense,” said Holly Gordon, vice president for legislative and regulatory affairs for Ausra, a solar thermal energy company in Palo Alto, Calif. “The Bureau of Land Management land has some of the best solar resources in the world. This could completely stunt the growth of the industry.”
  • Much of the 119 million surface acres of federally administered land in the West is ideal for solar energy, particularly in Arizona, Nevada and Southern California, where sunlight drenches vast, flat desert tracts.
  • Galvanized by the national demand for clean energy development, solar companies have filed more than 130 proposals with the Bureau of Land Management since 2005. They center on the companies’ desires to lease public land to build solar plants and then sell the energy to utilities.
  • According to the bureau, the applications, which cover more than one million acres, are for projects that have the potential to power more than 20 million homes.
  • All involve two types of solar plants, concentrating and photovoltaic. Concentrating solar plants use mirrors to direct sunlight toward a synthetic fluid, which powers a steam turbine that produces electricity. Photovoltaic plants use solar panels to convert sunlight into electric energy.
  • The manager of the Bureau of Land Management’s environmental impact study, Linda Resseguie, said that many factors must be considered when deciding whether to allow solar projects on the scale being proposed, among them the impact of construction and transmission lines on native vegetation and wildlife. In California, for example, solar developers often hire environmental experts to assess the effects of construction on the desert tortoise and Mojave ground squirrel.
  • “Reclamation is another big issue,” Ms. Resseguie said. “These plants potentially have a 20- to 30-year life span. How to restore that land is a big question for us.”
  • The industry is already concerned over the fate of federal solar investment tax credits, which are set to expire at the end of the year unless Congress renews them. The moratorium, combined with an end to tax credits, would deal a double blow to an industry that, solar advocates say, has experienced significant growth without major environmental problems.
Par for the course.

Friday, June 27, 2008

Bookkeeping: 'Rising Tide' Performance Week 47

Week 47 performance of the mutual fund

Comments: Back again so soon my toothy friend? After a stifling 3% loss last week, the markets followed that up with... well another 3% loss this week. It's been a rough month for the markets - that is putting it lightly. We have 1 more day in the month and barring a huge gusher upward Monday, the "market" (as designated by the Dow I assume) is on track for the worst June since 1930. Folks, that was the beginning of the Great Depression. Now I am not intimating anything of the sort - in fact in our low unemployment (ahem), low inflation (ahem), positive GDP (ahem) economy - we are not even facing recession not to mention depression. On the positive side - there is only 1 more market day left and (trumpets blaring) the "2nd half recovery" we've been hearing about for half a year begins Tuesday. Goodness, I cannot wait. This has been a very long week, and trying to stay afloat must be akin to what I imagine wrestling a oiled up hog must be like. (those of you who have indeed wrestled an oiled up hog, please do not email me with details, or send a picture depicting the act). One last bright spot - next week is a 3 and a half day work week; I have checked with my sources and indeed there is no way we can lose money in our stock accounts during the day and a half the market is closed. Whew!

After a devastating week punctuated by another mistaken (in)action by the Fed Wednesday, we tested the all important S&P 1275 level Friday and lo and behold, no one could of have predicted this (hand raised) but we were able to pull off a miracle and not fall through. Granted it was one weak bounce but a bounce it was. "Mission Accomplished" as those in power like to say - you could almost hear the high 5's in Washington D.C. from here. Yet we remain standing at the cliff and it's tricky to predict where we go next - an oversold bounce would be the more probable scenario after a 6% two week hammering, but who will show up next week into the vacation week? It is going to be light trading and anything can happen - and we cannot read into anything next week. We get auto sales next Tuesday which will be frightening and even more so the monthly unemployment report Thursday (which we summarily ignore for its fiction) on a "get away" day where the only people trading will be people like us! Everyone else in the Hamptons. Boy oh boy - that should be a doozy. For the fund, everything not energy related lost - except solar which is energy related but seems to fall into "technology" since they were decimated as well. Again this is not a tale of 2 markets - its a tale of 1 market versus about 30 stocks. I feel bad for the 98% of people not buried up to their nose in those 30 stocks... it's ugly otherwise.

Frankly the indexes do not show the real damage going on underneath the surface because energy stocks are quickly becoming more and more of a weighting in the major indexes. Only on Thursday was the damage apparent and that's because that was the only day "every sector" was hit. That complex and it's tangental themes are all that is working at this time. There was a lot of carnage and it has spread from the usual suspects to larger parts of the economy. It is quite worrisome in fact - if stock prices are any indication the federal government (read: you) is going to have to pony up for some airline bailouts, some auto company bailouts, and judging from today's action some hog/chicken/and beef producer bailouts (more on that this weekend). On top of the 2nd "stimulus plan" (it's coming folks, trust me). Amazingly it all ties back to the (a) ethanol boondoggle plus (b) easy money policies of cheap and easily printable US pesos that both continue to this day. I am becoming more Libertarian by the hour after watching the disaster these leaders are imparting on us, while pointing fingers anywhere from OPEC to Chindia. Look in the mirror guys - the villians are there.

The S&P 500 continued pace with last week losing another 3.0%; the Russell 1000 (more tied to the US economy) which for some gosh reason has been outperforming the big multinationals finally was weaker and closed down 3.1%. Rising Tide Growth, all things considered, had quite a good week with only a 1.1% loss - our hedging (cash/shorts) along with our remaining 'energy' positions (I've sold off much of this complex anticipating a rotation that Ben stole from us Wednesday) kept us smartly ahead of the markets. After the huge week versus the indexes last time around, I expected to give some back this week but we continue to separate from the indexes. At some point the grim reaper will be coming for us and exact it's toll - perhaps next week; we can't hide forever. But we've built up a huge cushion so we are ok with that. 5 weeks to go to close out the year.

As always if interested in pledging an investment when fund is ready to launch (shooting for late 2008) please attach a comment here, or send me an email (need your state please). We have now breached >$3 million pledged - great news and thank you.

Price of Rising Tide Growth: $12.139
Lifetime Performance to date (vs Aug 3, 2007): +21.39%

Comparable S&P 500: 1278.4 (-12.75%)
Comparable Russell 1000: 702.7 (-11.74%)

Fund return vs S&P 500: +34.1%
Fund return vs Russell 1000: +33.1%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $7.1 Billion as of April 08) is significantly below the SP500 index (median $13.1 Billion as of September 07) but higher than the median market cap in the Russell 1000 (median market cap $5.8 Billion as of September 07), I am measuring the fund against both indexes. Click here to see all fund's holdings as of April 2008.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates

Bookkeeping: New Position in A-Power Energy Generation Systems (APWR) to Create Alternative Energy Mini Basket

I am trying to build a 3 position basket of "alternative energy" (non solar) names. I started this basket with a small stake in American Superconductor (AMSC) which I actually added a bit to here as it pulls back to $36 and fills a gap from June 9th. [Jun 12: Starting a Beachhead in American Superconductor (AMSC)]

Today I am adding A-Power Energy Generation Systems (APWR). Here is a generalized description

A-Power Energy Generation Systems, Ltd., formerly Chardan South China Acquisition Corp., through its PRC operating subsidiaries, is the largest provider of distributed power generation systems in China and will enter into Chinas wind energy market in 2008. The Company is also focused on developing and commercializing additional renewable energy technologies

This company moved to the NASDAQ Global market on Jun 2, 2008, and is actually followed by a few smaller brokerage houses; therefore I can conclude it's not a complete scam ;) .. something I worry about with any tiny far flung Chinese name. At a market capitalization of about $800M at today's prices its far smaller than our average fare and I believe either the 2nd or 3rd smallest current holding.

This company has a fast growing baseline business in China (and expanding to other Southeast Asian markets) but the kicker is the potential wind business which is just beginning. Please note there are a lot of over the counter Chinese "wind plays" being touted just about everywhere - I don't do over the counter unless it's a Nintendo or something of that nature. And unlike certain small cap wind stories that a certain financial TV personality likes to tout, APWR actually has a profitable base to work off of (i.e. positive earnings) while it grows out its new wind business. So the wind business is the ultimate reason to own the name, but not a contributor (yet). But in a year or two I expect (despite being low margins) it will attract most of the attention. But the old business is not too shabby either - let's take a quick look at the last earnings report. The numbers are small in total, but very nice in terms of percentage growth.
  • For the three months ended March 31, 2008, A-Powers revenue was $32.3 million, an increase of 85.0% from $17.5 million in Q1 2007. The increase was due to continued growth in the Companys core distributed power generation business and the relatively larger size of projects under construction in Q1 2008 compared with Q1 2007.
  • Due to the stage of certain contracts being performed in Q1 2008, gross margins were 11.9%, a decrease from 13.9% in the first quarter of 2007, but an increase of 0.7% from 11.2% in the fourth quarter of 2007.
  • On an annualized basis for all of 2008, management expects gross margins on its distributed power generation business will be approximately 13.5%, similar to its gross margins in 2007.
  • Net income for the first three months of 2008 amounted to $2.9 million, an increase by $1.3 million or 79.1% compared to $1.6 million for the first three months of 2007. This increase was attributable primarily to the growth in revenue and operating income and an increased number of larger distributed power generation contracts.
Some commentary on their core business
  • Compared to the rest of the year, the first quarter has always been a slow quarter for A-Power due to the harsh seasonal weather in Northern China, where a majority of our projects are based. This harsh weather causes the construction on most of our projects to be halted in January and for a majority, if not all, of February.
  • During the first quarter of 2008 we made great progress in not only obtaining new contracts in China, but also in expanding our operations into Southeast Asia. As previously announced, we signed a $150 million distributed power contract in Thailand and began working on this project in May. We are in discussions with a number of other potential customers throughout China and Southeast Asia and expect to announce new major contracts over the next few months.
Some commentary on their future wind business
  • For an update on the wind business, we have made encouraging progress sourcing the necessary wind turbine components from China and abroad and are on-track to complete the first phase of our wind turbine production facility this month. This first phase includes a 180,000 square foot wind turbine assembly facility with the capacity to produce 420 of the 750kW wind turbines and 300 of the 2.5 MW wind turbines each year.
  • We expect to begin producing wind turbines at this new facility in the third quarter of this year and look forward to becoming one of the major providers of wind turbines in China.
Backlog of core business increased from $400M to $700M which we always like. That is over a year's worth of business The company is debt free - we like that; should mean no new equity dilution anytime soon. Despite a low margin business, they only have 32.7M shares outstanding so net income is spread over just a relatively few amount of shares - always like that. Earnings for 2008 are projected @ $1.15 and for 2009 @ $1.47, and I do believe this does not include any of the wind business which probably will take some time to really ramp up. The company has guided to $1.04 to $1.34 for 2008. But at today's $24.70, and using the analysts $1.15, we are paying a forward PE of 21x 2008 estimates versus the folks who 5 days ago were paying 28x when it peaked just under $32.

Another plus - I understand the CEO's English which is always a bonus when listening to conference calls and he has even appeared on CNBC in April of this year - not "extremely" informative but you can view it here.

We have a nice SEC presentation filed here, very good viewing. So that takes care of name 2 of the 3 stock mini basket - I'd really like to add this name into a larger scale if we get a further pullback, but it's now retraced much of its "hey we're a wind play" hype move. I generally prefer much higher margin business models, but with the growth potential, wind potential, and location in the fastest growing energy market in the world - we can live with it.

The third name acts like a coal stock - it never pulls back :) I might just have to bite the bullet one of these days and buy it as its up 68% in the 6 weeks I've been watching it. And that's after a huge gap up post earnings. Grrr...

All these are speculative so as a basket I'll probably limit them to 5%ish of the portfolio, in case one implodes or is more hype than reality.

Today's purchase in American Superconductor pushes it up to a 1.65% stake.

Today's purchase in A-Power Energy Generation Systems establishes a 1.65% stake and comes after a 5 session pullback of 22%. I bought today's stake in the $24.70s and hope to add down at $23 and if so lucky, down at $21.

Long American Superconductor, A-Power Energy in fund; long A-Power Energy in personal account

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