Tuesday, July 31, 2007

Uglier than Abe Vigoda's Colon

Let's be honest... Today was one of those horrifying whipsaw affairs that investors like me really loathe... yet we can NOT look away.

It's like a car wreck... First the market screeches up almost a percent before noon, and everything's rosy with the old consumer confidence brimming over and all... and suddenly armageddon arrives.

People out there are worried about the mortgage industry. Well, no kidding. They should have worried BEFORE they signed up for the 5-year ARM at zero percent for the first three years, ticking up slightly to 23% for the rest of the loan.

Poor souls... whatever shall they do? I seriously wouldn't want to be refinancing right now, although have you noticed? Interest rates are still pretty reasonable! But housing prices are absolutely retarded.

I just got back from California and noticed that the price of a 3-bedroom shack in Petaluma where I grew up starts at around $450,000. For a decent place you'll pay at least $575,000.

Now to actually afford that mortgage at current rates you would need to be making approximately $183,600 per year if you were allowing for your mortgage to be 25% of your gross monthly income (before taxes).

If you were talking about net income, you'd have to be pulling in well over $200,000 a year to afford this 3-bedroom hovel! Listen, I like organic food and temperate weather as much as the next guy, but $575 large? Come on.

Anyway... I'm tired of investors getting spooked about the mortgage thing. I mean, what are they scared of? The housing market's already imploding, so who cares? If you're not making money with equity, should you then flee the markets altogether?

That seems like thowing the baby out with the bathwater. A silly plan.

As I said in yesterday's post... get ready for a choppy, ugly summer... but one that in the end should see the markets having gained about 1 inch of ground...

Good day,


Monday, July 30, 2007

KEP and NRM: Two Plays for the Asian Century

The market is a fickle lady, and that is a fact that many great books at the Barnes & Noble have detailed ad nauseum.

Some of the best on the subject are Burton Malkiel's Random Walk Down Wall Street... Edwin Lefevre's Reminiscences of a Stock Operator and of course the absurdly readable Liar's Poker by Michael Lewis.

But that is not important now.

What is important is that Kepco surged back 3.6% for us today... while Nomura Holdings continued its recent rebound by posting a 2.99% upmove during the session.

Of course we knew this would happen (yeah, right).

Well, we suspected it would happen if the markets woke up and realized how valuable these two companies are - both being key players in this, the very early stages of the Asian Century... and in the most modern of ways, too.

Kepco not only is the sole electricity provider to the South Korean peninsula... It also happens to be building the biggest wind-turbine farm in mainland China at the moment, and could soon be contributing to several other alternative energy projects in China.

Meanwhile, Nomura is at the heart of the blossoming Japanese financial renaissance... and a member in good standing of the Dow Jones World Sustainability Index.

Really keep an eye on this one... By the end of the year, our laggard could well become our sweetheart.

Another Moron Takes a Wild Guess as to Where the Market Is Headed

So what's going to happen to the markets this summer? I see continued choppiness, but an overall upward arch to the indexes. To ride this out, we'll mind our stops, widen them if necessary, and stay somewhat diversified with an additional commodity-based recommendation in the near future.

Till then, good times to you and yours,


Friday, July 27, 2007

Green Investment Blog to Check Out

I just came across this interesting green blog, with audio interviews... Check it out:



Time to Add SBUX to the Portfolio

Today we're adding Starbucks to the Evergreen Portfolio... Here's why...

The economy is growing, posting a 3.4% rate of growth in the second quarter over 0.6% for the first quarter. Business spending helped spur the increased vigor, according to the Commerce Department report.

Spending and consumer products like SBUX go well together and we could be catching a wave with this one. The stock has been eviscerated this year so far, trading about 23% off it's high hit in January... but it has begun rising in recent days and could continue with some help from the broad markets (even a little!).

There is no sound fundamental reason for this price decline, with same store sales growing modestly, tremendous expansion into the Chinese market, and a renewed focus on the core appeal of the company (the quality of the stores - the "experience" and the coffee).

The other good news is that SBUX has begun showing signs of life. And the company just announced a 9 cent per drink price increase that should help its margins significantly (meanwhile, caffeine addicts like me will continue lining up - we just can't help ourselves).

Of course SBUX has killer SRI credentials: it gives all employees benefits... it minimizes product packaging... it supports eco-farming of its beans... and of course, like NMR, it's part of the Dow Jones Sustainability Index.

Action: Buy Starbucks (SBUX) at $26.98 or better, and place a 25% trailing stop under this position. That means we'll drop it from the portfolio if it closes below $20.24.


NMR - The Green Investment Bank Stages Rally!


Our one laggard, Nomura Holdings, is showing signs of life amid a tumultuous week for the stock markets (see above)...

Over the past two days, NMR has rallied some 5.31% from $17.50 to $18.43. But I think we're in the beginning stages of a longer-term surge in this quality Japanese bank.

Profits for the most recent quarter tripled, from 20 billion yen to 76 billion yen, year over year. In addition, the bank's considering leaving the U.S. mortgage market altogether, after suffering heavy losses in that part of its business.

Instead, NMR plans to refocus on its core business of assets management, alternative assets and the Japanese mortgage market, which is poised to surge after a 20-year down cycle.

Let's keep a close eye on this one...

Good investing,


Thursday, July 26, 2007

Markets Get Hammered - Hail Diversity

The markets are getting slaughtered today. As I write, the Dow is down more than 334 points on the day... The Nasdaq and S&P are down by the same percentages (2% roughly).

This is the kind of rough sledding that skittish investors dread, and experienced investors simply prepare for...

Witness our holdings in Bunge - a straight up commodity play that often zigs when the broad markets zag.

Today Bunge is UP 5.14%... and NMR is also rallying, up more than 2% amid this bloodbath.

Our portfolio is so far weathering this lightning storm pretty well... we've only lost about 1.08% while the Dow is off 2.44%... Again, there's always luck involved when this happens...

But is it just luck? Of course not. Diversification into commodities and commodity stocks is part of the plan. It's a hedge against broad stock declines, but it's also a great long-term bull play on the worldwide shortage in so many commodities.

Recall from my last post that I was looking to add another commodity-green play next... can you see the logic now? I do believe that the rest of the summer could get even uglier (as predicted in the spring on this blog).

But no need to panic... Let's just keep our course for now, mind our trailing stops and keep going.

Until then we're STILL long green,


Sunday, July 22, 2007

Green Investments Beating the S&P by 231% - with an 80% Win Rate

Well, it's been awhile since I've updated this blog... There's been a lot going on in the markets - the Dow hitting record highs, etc. - but nothing that's made me want to jump into the markets with a new pick recently.

So let's take a quick look at where we are now - with our current portfolio - and then consider what our next move might be.

Currently, 4 out of 5 positions are profitable, despite the recent roller-coaster ride in the stock markets. Here's the overall picture right now:

BG +19.83%
LDK +70.15%
KB +25.16%
KEP +13.46%
NMR (-13.11%)

We certainly nailed the LDK Solar bottom - a true investing rarity but we'll take it.

Here's what we said:

"This is a trend play all the way, and we're hoping for some fast, dramatic gains in the face of rising oil prices, demand for green stocks and alt energy plays, and LDK's positioning as only one of two current Chinese solar plays trading in the U.S. (with a third on the way)."

The position is up 70% over the past month and a half. Meanwhile the Chinese solar play we rejected in favor of LDK is up 3% over the same time frame (CSUN).

NMR is our one laggard, but it's well above our trailing stop of 25%... Meanwhile, we're indeed beating the S&P by a broad margin: 23.64% versus 7.13% as of closing July 25th.

Indeed, we have managed through fortune and good timing to beat the S&P by 231% so far this year (not including our big options winners) - and it's been a record year for the S&P, too.

Yet in the process we are investing in a clear-air company... a Chinese solar company... two green-oriented Asian banks... the biggest wind-power contractor in mainland China... and perhaps the most important American player in the burgeoning market for ethanol and agri-fuels, Bunge.

Our next round of picks I'm thinking could come from the commodity sector. I've been looking to add another green commodity play to our portfolio to go along with Bunge.

I'll keep you posted.