I was playing with a dollar bill at the local Starbucks (SBUX) this evening, on my way back from another long day at work. A friend who was waiting in line to get his coffee nonchalantly announced, “There was a time when I used to buy a gallon of gas with that piece of paper.” I initially thought that the comment was just a 50-year-old reminiscing about good old times and what could’ve been. But then upon returning home, I started thinking about what it takes to resurrect the dollar and how the dollar got here in the first place.

First, to understand the pain-point, just remember your most recent trip to Europe or even Canada. Didn’t the trip cost you an arm and a leg compared to good ol’ times? It’s difficult for me and for all of us. My friend from Starbucks leads me to believe that most older Americans have never seen or lived in a world in when the dollar didn’t rule. The current state of the dollar is simply un-American, and this led me to research and write this blog post. 

A lesson I learned from the Bear Stearns (BSC) fallout was that if you get into a stock when it hits rock-bottom, your investment can only go up. While I was a little late with the Bear Stearns opportunity (when it briefly traded at $2 and change); I see a potential opportunity for me (and like minded investors) to make good on the now notorious: Freddie and Fannie.

Federal National Mortgage Association, a.k.a. Fannie Mae (FNM), and the Federal Home Mortgage Corporation a.k.a. Freddie Mac (FRE), have operated as a duopoly since 1968 as government sponsored enterprises [GSEs]. In common speak it means that while they are privately owned and operated by shareholders. they are protected financially by the Federal Government. The protection includes access to a line of credit through the U.S. Treasury, exemption from state and local income taxes and exemption from SEC oversight. As of today, Fannie Mae and Freddie Mac control about 90 percent of the US secondary mortgage market.

I was ruminating about some mistakes I’ve made in my early years of investing (like not buying Hollywood video when it was a penny stock in early 2000 and rose to $26, before it eventually was acquired by Movie Gallery (MOVI)).

I remember reading somewhere “Mistakes are great. I love making ‘em all the time, as long as I make each mistake, only once”. I try to follow this mantra as much as possible, albeit sometimes it takes more than once to figure things out.

Hearing Apple’s (AAPL) earnings announcement on Monday, I found myself thinking about what Apple will look like post-Jobs. Jobs is a pioneer and one of the most admired CEOs of all time. He’s my role-model, idol and inspiration.

A couple of recent events led me to write this post. First,  I received a request on one of my earlier posts on Gold, to give my take on Silver. Why not? After all, Gold and Silver have been the choicest possessions of men and women over centuries. Be it any civilization, any era, the fascination for these pretty, shiny things has captivated and motivated one and all.

Next, some friends and I had a deep discussion on the future of precious metals, given our current economic condition.  So here’s what I’ve got to say about Gold and Silver:

I had a very engaging chat with a colleague earlier this evening. It started when he mentioned that he was planning on buying a new home. To this, I said "Good call on getting it now, as I expect interest rates to go up in the next 6 months". This grabbed his attention and he asked me "Why do you think so?" or something along the same lines.

Lo and behold, this kicked-off a very engaging discussion touching on several things ranging from the economy, inflation, recession, stocks, gold, oil, oil-sands to global warming.

Company Profile:

Somanetics Corporation, (SMTS) incorporated in 1982, develops, manufactures and markets the In Vivo Optical Spectroscopy [INVOS] System, a non-invasive patient monitoring system that continuously measures changes in the blood oxygen levels in the brain and elsewhere in the body in somatic, or skeletal muscle, tissue in patients with or at risk for restricted blood flow. The INVOS System consists of a portable monitoring system, including software, which is used with SomaSensors.

During the fiscal year ended November 30, 2007, (fiscal 2007) the Company had an installed base of 2,006 INVOS System monitors in the United States in 664 hospitals, and during fiscal 2007, the Company sold approximately 371000 SomaSensors. In addition to the INVOS System, Somanetics also develops and markets the CorRestore System, which includes a cardiac implant, which is called the CorRestore Patch, for use in cardiac repair and reconstruction, including heart surgeries called surgical ventricular restoration. 

AZZ Inc. (AZZ) operates in two product segments: Electrical & Industrial Products, and Galvanizing Services. The company’s Electrical & Industrial Products segment manufactures products used by utilities to safely generate and distribute electricity, as well as industrial lighting and tubular products for the oil and gas industry. AZZ’s galvanizing services segment coats steel products in zinc to protect them from corrosion.

The Company operates fourteen galvanizing plants, which are located in Texas, Louisiana, Alabama, Mississippi, Arkansas, Arizona, Indiana and Ohio. Hot dip galvanizing is a metallurgical process, in which molten zinc is applied to a customer’s material.

Company Profile:

Advanced Battery Technologies (ABAT.OB) manufactures and distributes rechargeable Polymer Lithium-Ion [PLI] batteries, which are used in mine lamps, electric automobiles, motorcycles, cell phones, notebook computers, walkie-talkies and personal digital assistance devices. PLI batteries are superior to traditional rechargeable batteries and are leak resistant, less energy dense, environmentally friendly, with high design flexibility, allowing the company to produce a battery as thin as 0.5 mm. The company is headquartered and operates primarily in China.

Is this the right time to invest in stocks? Well, it depends on who you listen to and what the psychological make-up of the investor in you is.

Contrarian investors believe in buying low—if that’s your make-up, then you’ll be all over the stock market right now. However, in doing so, you are betting on the economy following a cyclical pattern.

There’s something about the trinity of Oil, Gold and Stocks that catches the fascination of modern investors. I spent sometime last night looking at the correlation between these. Though, I have data on the prices of the three for the past 62 years (since WW II), in order to make this exercise relevant to modern times, I chose to do it from 1970 onwards. It was right after man landed on moon and the era of scientific, engineering and industrial evolution leap-frogged to levels only dreamt about before. From an analysis perspective, I chose to study the correlation between the 3 around the following data points:

A. Oil crisis of 1973

The debate whether we are witnessing a recession or a stagflation in the US continues (for my opinion, see my earlier postings on this blog). However, one thing that most independent and small investors like you and I can agree on is that it’s indeed a receding economy.

Given this nature of the economy, the question that comes to our minds more often than not are—should I dig in my heels and grind it out or should I convert my stocks into cash or gold ? (I like gold—it’s not my favorite color but it’s a great hedge and adds a nice balance to my portfolio and if you follow my blog, you’ll understand why).

Happy Birthday, America!

The typical economic cycle consists of two main phases: Boom and Recession. The phase leading to a boom is called expansion and that leading to a recession is called contraction. Another way of looking at this is considering expansion the transition from recession-boom and contraction the transition from boom-recession.

Let’s first define what stagflation means:

Stagflation is the state of an economy where inflation combined with stagnation locks a society into slow-to-negative economic growth and rising unemployment, invariably including recession. 

Bucyrus International, Inc. (BUCY), incorporated in 1927, designs and manufactures mining equipment for the extraction of coal, copper, oil sands, iron ore and other minerals in mining centers throughout the world

BUCY is a mixed sector company with presence in coal, copper, oil. It’s not a company directly engaged in any production, but provides equipment instead. Therefore, it’s not a simple analysis.