Larry Bellehumeur

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

thanks for everyone, who took the time to read and comment.

KSA -- I would personally rather look at Viterra than ADM, as it is more of a pure play on Grain prices. If you prefer ADM, you would also have to likely think that there is some validity to the expansion of Ethanol. As for MOO, I just took a look at their holdings. I rather like the broad exposure (Equipment, Fertilizer, Seeds and more). Might not be a bad play.

ChefDavid -- I have heard that argument before. Since there is so much scrutiny on these large companies now, I would have to believe that they are following what is in their mandates. You never know, though, I guess...

DirtyOil -- One does have to admit (even someone who benefits from the Oil Sands, like me, as I like in Alberta), that the Oil Sands do burn off a lot of other resources, including Water and Nat Gas. However, the world simply needs to produce more oil, or risk the price skyrocketing over the next few years. The Oil Sands producers are under extreme pressure to clean up their acts, and with the Billions being thrown at them, one has to hope that they can.

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

ok, having troubles keeping up with all the comments!

George09 -- Can't say that I totally agree. Oil's rise affects all things in the economy, from manufacturing to Ag to Transportation to heating your home. This spike in prices is not caused by inflation, but rather by a supply/demand inbalance. Look at the past few inflationary times (such as the 70s/80s) and it was caused by the sudden spike in Oil. Leeb's theory in the Oil Factor is that whenever Oil rises 80% over the previous year, inflation is bound to build up in the system to cause a recession within 18 months.

Dallas -- to be clear, Leeb coined the term "BRAC". I also agree with the previous comment that many of the Middle East Producing countries could also be mentioned. I wasn't aware of NZ's Commodity promises.....I am curious now.

433429 -- I think that Grain prices may also be an interesting thing to watch. I think that Leeb did mention is, but the major point was that Oil tends to be the commodity that is most noticed in Inflationary results. However, since Food is also left out of the CPI, Ag's true impact may not be fully known. Your point is well taken.

GeoJoe -- To quote the CEO of Suncor, when asked if we are in Peak Oil, "We wouldn't be, if the Oil Companies were allowed full access to all of the Oil that is held by the Nationalized Programs". Peak Commodities is as much Political as it is Geological.

Cheers
Larry

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

This must be my most "Commented-on" article....thanks for all the great comments..

Emerald -- Can't agree with you more. I also like CNQ (which I am long on), due to the fact that I don't believe that their Horizon Oil Sands project has been fully priced into the stock.

Tipalia -- I have to believe that KMP's dividend is sustainable for now. I haven't seen their payout ratio, but Pipelines as a rule generally have one of the best cash flow reliability in all of the stock world. What I would be worried about with any of the pipelines is if they over-extend themselves (build too fast), or if there truly is going to be a lack of product (i.e. conservation) flowing through their product. Not likely scenarios.....Disclosure, no position in KMP

Ozzy -- I think that people, in times of distress, often turn to what they know, which is often the reason that History repeats itself. I think much of what worked in the 70's will indeed work....the only class that I can see not working as well is REITs, but it still will be a better investment than most.

Michael Young -- It should be interesting to see what happens to the Non-Commodity sectors of the BRAC countries. As a resident of "Commodity Rich" Alberta, I can tell you that it became virtually impossible for a Non-Oil/Gas business to afford to remain competitive in Alberta, as the costs of labour just got out of control. As well, the CDN dollar began to trade with the rise in commodities, gaining it the nickname of the "Petro-Buck" locally. This virtually killed much of the manufacturing in the rest of the country, as the price of their shipments globally rose by close to 60% in 5 years. I think that it will be a lot of division in the BRAC countries, which is why I recommend to no use a General ETF to cover each country. It will also be fun to see how they keep inflation cool in the BRAC countries....

Cheers everyone,
Larry

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

Thanks for everyone's comments.

MCI -- As mentioned in the article, Gold (in addition to its inherent protection against inflation) is often seen to as a Safe Haven. My point was more that people did not seem to view it in this way to the extent that one would expect (as seen by many of the investors/analysts). I still personally think that it is a great place to run and hide during bad times, but unless the masses think the same thing, we may not see the rise be as dramatic as it should. The other problem is the nasty decline that Gold took in the early part of this crisis when it should have exploded upwards, but I chalk that up to more of people unwinding positions that they could....

Guapo - Your points are well taken. I personally think that the US dollar may get to the point that even the main commodities themselves won't be priced in them by 2011. Then, it will be a freefall...

If nothing else, Leeb's views make one look at alternative ways to invest, ones that steer greatly away from the usual Wall Street mentality.

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

Update -- I actually did take a small opening long position in BHP Billiton yesterday, with the anticipation of making the position larger if there is any further weakness in the stock.

Thanks for reading, Buy it Cheap! Those who can sell things into any of the Emerging Markets are also likely to do well in the upcoming years....

Five Great Companies to Buy at a Drop

234569 -- Couple of points. GSM (Global System for Mobile communications) is actually the over the air technology, like CDMA, and does not refer to the generation of product. GPRS is actually 2G in the GSM family, with 2.5G being EDGE, and their initial launch into 3G being HSPDA/HSUPA and now HSPA.

Most GSM carriers, and many CDMA carriers will actually be moving to LTE when it is available, as my comments show.

You may have missed the point of my article entirely, though. We can argue for days as to where this market might go in 3-5 years. No one will ever win that argument. My point wasn't to challenge their technology, or their business model. My point was their EVALUATION at this stage of the game. Should a company that has serious threats to its revenue stream be trading at such a multiple (in a time when companies are facing serious Multiple contraction due to the threat of inflation)?

Finally, I don't get a cent for my time. I'm just a Do it Yourself investor, who wants to share his opinion. For the record, I've averaged 13% since 1998, even factoring in the last two bear markets. I've built a net worth that I can easily retire from, even at the age of 36. I have been featured in the Associated Press, and as of next week, Canadian Business and the Globe and Mail. But, all of our opinions count on here, so I appreciate yours....

Larry

Five Great Companies to Buy at a Drop

LT / Experienced....while Wikipedia is not the most "professional" source for information, please note what it lists for Carrier Adoption of LTE, as it echos what I have heard from the US Carriers:

en.wikipedia.org/wiki/...

Carrier Adoption:
Most carriers supporting GSM or HSPA networks can be expected to upgrade their networks to LTE at some stage. However several networks that don't use these standards are also upgrading to LTE.

Alltel, Verizon, the newly formed China Telecom/Unicom and Japan's KDDI have announced they have chosen LTE as their 4G network technology. This is significant, because these are CDMA carriers and are switching networking technologies to match what will likely be the 4G standard worldwide. [16] They have chosen to take the natural GSM evolution path as opposed to the 3GPP2 CDMA evolution path UMB.

Verizon Wireless plans to begin LTE trials in 2008, choosing the standard over the natural evolution path for the CDMA2000 family, Ultra Mobile Broadband (UMB).[17]

AT&T Mobility has stated that they intend on upgrading to LTE as their 4G technology, but will introduce HSUPA and HSPA+ as bridge standards. [18]

T-Mobile, Vodafone, France Télécom, Telia Sonera and Telecom Italia Mobile have also announced or talked publicly about their commitment to LTE

Bell Canada plans to start LTE deployment in 2009-2010
==================

One would think with these types of comments publicly by the major carriers in the world, investors might be a bit more spooked...

Five Great Companies to Buy at a Drop

LT -- I don't dispute what Experienced is saying, from a Technology standpoint. That is a path that the carriers can go. From my discussions, many are looking at LTE, however.

However, many still will go to W-CDMA, and Qualcomm will not be going away anytime soon. The point of the article was questioning its evaluation in the face of competition, and market uncertainty. At a lower multiple, Qualcomm is a fabulous company.

Cheers and thanks for reading!

Five Great Companies to Buy at a Drop

Many thanks for reading. One of these days, I'm actually going to write an article that people like....=)

PaulMars -- In terms of CL, it isn't a bad buy, if you are assuming that normal market conditions are present (by normal, I mean that we are entering into a normal downturn). There are a lot of ifs in their short-term potential growth (by that, I mean rising potential costs), and I don't believe that those are accounted for in their evaluation. I'm not saying that it should fall by 40%, but a 10-15% drop would put it more inline with expectations. They do have a great growth path internationally, and are ever expanding their market share (points that I don't disagree with you on). I just believe that you can find similar growth patterns for a lower price....

Experienced -- I wouldn't be so quick to dismiss LTE. You sound like you are in the Wireless space, so i am sure that you are aware that Verizon has formally announced their plans for LTE. I suspect that others will follow (I am a Sales Director for a company that sells to all major North American carriers, and I know that all of them have begun testing). As for WiMax, it may have some play in the Rural areas, but I don't suspect that it will ever be a large challenger.

My point wasn't that the company was going to roll over and die. Their business model is a strong one....my point was that I believe that there were serious challenges to its technology and this wasn't being factored into the stock price.

Your view points are well taken, though. I would still give it a superior Multiple to the general S&P at 18x or so times current earnings (even in a down market).

Again, thanks for taking the time to read, and to comment!