Respirate

Federal Spending Continues to Drastically Outpace Median Income Growth

Of course, the 'Heritage Foundation' is where I go for all the best, unbiased information.

Oil: Is It a Bullish Rally or a Sucker's Rally?

Concur with epeon. Not withstanding the hourly and quarterly price gyrations, and the concerns of short term market watchers, the mega-trend is higher crude prices. Nobody knows what the price will be at year's end, or next year. Despite that, oil (oil majors) may be the safest long term investment around, due to steadily declining production from the world's major fields, and steadily increasing global demand. Neither of these factors is likely to change.

Fuel Systems Solutions, Toyota and the Phill

New SA posting on Fuel Systems by Mark Krieger. Worth a quick read.

seekingalpha.com/artic...

I don't like buying stocks that have jumped like this one has, but I may make an exception here.

--R

Is This Rally in Its Final Innings?

Good article, Mr Shaefer - smacks of reality. Especially like your take on unemployment and the ongoing Bank of America mess.

I posted the comment below a few days ago, and immediately got four "thumbs down" from people who would rather ride the train than think for themselves:

" ... while you say "The financial crisis has been 'fixed' ", I suggest instead that we have successfully moved from financial "meltdown" territory to merely a bad situation -- weak lending and poor earnings by financial institutions, with few exceptions. We're not yet half way out of these woods.

When you say, "I see no compelling reason why news [equity] letter reports would suddenly turn bearish", it seems to be simply a case of being overbought. In their rush to jump on many stock bargains made available by the huge a year-long decline, investors have gotten ahead of earnings and the economic recovery still ahead. Further, may eventually come to grips with the possibility of a very slow recovery rate of growth for a prolonged period, given the cost of the bailout that will somehow extract payment. Last, many equity holders were badly burned by the depth of the market decline. They may be ready to take recent profits off the table for now. I still think there are stock bargains out there, but this is not necessarily the time to jump in with both feet. "

Not that much as changed in a few days!

--R

Making Natural Gas Transportation a Reality

Michael, thanks for another exceptional article tying together the topics and constructive comments of the past several weeks. IMO this is by far the best written and most persuasive of the series.

You've convinced me that we could be very close to reducing our gasoline use and foreign oil dependence IF the national will were there. Unfortunately ours is a reactive, not proactive society. Despite our self image as a forward thinking people, the reality is that precious little is accomplished proactively, little sacrifice for our future is made, unless it involves lining our personal pockets. Therein lies the key to acceptance of NGVs. It has to be advantageous economically, either now or projected into the immediate future.

Action may be forced upon us the next time oil prices skyrocket, or if (heaven forbid) crude supplies become interrupted. That's exactly the wrong time to find panic-driven "solutions" - a la ethanol, or spin-doctoring "clean coal" and other non-solutions. No, I'm not very optimistic for thoughtful planning to find intelligent solutions for our energy problems. Still, I'll voice my enthusiastic support for an NG bridge solution to my local legislators and others, using some of your text (with credit given) if that's ok.

I'm sick and tired of this great nation making bad choices and failing to take timely actions, leaving us at the mercy of outside forces. By acting now we can preserve our freedom of action and do better for our posterity.

--R

Sentiment Overview: Bears Take the Lead

Good article, Babak. Your summary finding of advisor sentiment is not surprising to many of us. In anticipation of a drop in equities I've been hedging a little, with buys of QID, PSQ, etc. on dips. If done judiciously that can provide a cheap insurance buffer against a drop.

Cetin, while you say "The financial crisis has been 'fixed' ", I suggest instead that we have successfully moved from financial "meltdown" territory to merely a bad situation -- weak lending and poor earnings by financial institutions, with few exceptions. We're not yet half way out of these woods.

When you say, "I see no compelling reason why news letter reports would suddenly turn bearish", it seems to be simply a case of being overbought. In their rush to jump on many stock bargains made available by the huge a year-long decline, investors have gotten ahead of earnings and the economic recovery still ahead. Further, may eventually come to grips with the possibility of a very slow recovery rate of growth for a prolonged period, given the cost of the bailout that will somehow extract payment. Last, many equity holders were badly burned by the depth of the market decline. They may be ready to take recent profits off the table for now.

I still think there are stock bargains out there, but this is not necessarily the time to jump in with both feet.

Respectfully,
--R

Watsco’s Big Potential in Housing Recovery and Cuba

Thanks for the solid contrary opinion on this very good company. I believe Watsco will do over the long term, but I also contend that it's no bargain right now and at this price level.

Are we now placing bets that Cuba will open its doors to US developers, en masse? Sounds like speculative reasoning to this investor. Yet another sign that market valuations have come very far in a very short time is Cramer grasping for straws in order to keep his television audience entertained.

--R

Obama vs. the New Deal: Obama's first few months weren't as frenzied as FDR's, but they might have been more productive.

Article: " Obama has taken a shaken nation, deeply disillusioned with government, and helped it believe again that politics is not necessarily a dirty word, that progress can be made, and that government can at least sometimes be trusted. "

Mr Obama has guided our government, the only organization large enough to tackle the immense problems currently facing our nation, in a direction that engenders trust.

Is it perfect? Of course not.
If I were president would I do things differently? I'm not.
Do I believe that President Obama will (1) take action, and (2) do the best that he can for the greater good of the United States? Yes.

I for one am glad Mr Obama has the reigns at this time.

-- R

Is There Enough Natural Gas?

Congratulations, Fitz ... your work here really helps to define the scope of what NG may or not be able to do for our energy future. (You had a busy weekend!) I've been through your article only once so far, and it raises both answers and questions.

- a 20-30 year supply (for all uses) on the shorter end doesn't sound like much help, but balanced against the marginal outflow of wealth to some global rivals like Iran, SA, etc. it would be well worth pursuing.

- long before the eventual end of NG supplies and "peak gas", lower yields and more difficult exploration may drive up prices for all uses

- what will the distribution map look like for NG as motor fuel, vs. industrial and home heating uses?

- a far more complex problem will be to estimate the impact of motor fuel use on NG prices (still better to spend some of the wealth internally than send it to foreign oil suppliers).

- it appears that NG is not 'the' answer to our energy needs, but could be an important part of the overall answer for the relatively short to intermediate term

Thanks also for focusing on facts and numbers in search of constructive solutions rather than whine about big government and bad luck. When time allows I look forward to pouring through your article in greater depth.

- R

A Natural Gas Centric Strategic Long-Term Comprehensive Energy Policy

Hi Michael,
Excellent, persuasive article on your favorite topic! NG transportation happens to be important to me also, and that's largely due to some of your recent articles.

I’m frustrated beyond belief that our country is so sluggish to do anything to address the energy noose around our collective necks. We just continue to kick the can down the road. That’s been a 35 year road by my count. Ho-hum. Oil is relatively cheap now. Life is good. We can fill our gas tanks for less than two bucks a gallon. Funny how the sudden price drop makes everything seem so warm and fuzzy. Problem solved, another crisis averted by that trusty American standby -- procrastination.

The need to supplant at least a portion of our oil imports is obvious, as has been successfully argued in your posts many times.

It's hard to believe that NG/CNG is virtually ignored as a motor fuel, for all the reasons you mention. It's a proven technology that we can use NOW! Guys have been doing self-conversions of cars and pickups for over two decades. Local government fleets have proven the technology.

That NG would reduce air pollution is obvious. It's a much cleaner burning fuel, so much so that people somehow find a way to burn it in their kitchens to cook dinner. It's long been known that lubricant oil changes can be extended to the durability limits of the lubricant itself, because it doesn't become contaminated by gasoline combustion byproducts.

I suspect that the main drawback in the minds of many people is along the lines of concerns raised by User283977 in another post, whether " ... we have sufficient natural gas reserves to meet 10, 20, and 30% of transportation demand over the next 20 - 30 years ...".

Another huge concern is the impact on NG supplies and prices. That really needs to be addressed in a convincing way by anybody arguing for using NG as a motor fuel. Many people, especially politicians, would cringe at the thought of burning NG in competition with the mom and her shivering kids who already have a hard time paying for home heating in the dead of winter.

People just need a bit more reassurance on availability of supply and price. Don't get me wrong. I want that Toyota NG-Hybrid today! I believe NG is a viable and immediately available supplement to petroleum distillates for transportation. I look at it this way: political will and popular support were able to push ethanol forward until it became painfully obvious that it was a very bad idea. The US went to ethanol because it's easy. It was easy politically because it immediately appealed to the grain belt states, and it’s easy to produce using old technology, and it blends into the existing fueling infrastructure - except that it must be transporting by trucks, not pipelines. If we can develop ethanol despite its net consumption of more energy than it provides, NG as an intrinsically superior alternative, should be a fairly straightforward sell to the American people.

--R

A Natural Gas Centric Energy Policy

Hi Michael,
Thanks for another persuasive article on your favorite topic! This may be your best effort yet. NG transportation happens to be important to me also, and that's largely due to some of your recent articles.

[ Just a side note on your formatting problem. MSWord is awkward for handling table formatting - it's just not easy. I was able to copy and paste your text into Word2007, right click on the table, and select Auto fit to window. There are other option as well. Another reason to find editing help.]

Back to the content.
The need to supplant at least a portion of our oil imports is obvious, as has been successfully argued many times in your posts.

It's hard to believe that NG/CNG is virtually ignored as a motor fuel, for all the reasons you mention. It's a proven technology that we can use NOW! Guys have been doing self-conversions of cars and pickups for over two decades. Local government fleets have proven the technology.

That NG would reduce air pollution is obvious. It's a much cleaner burning fuel, so much so that people somehow find a way to burn it in their kitchens to cook dinner. It's long been known that lubricant oil changes can be extended to limits of the lubricant durability itself, because it doesn't become contaminated by gasoline combustion byproducts.

I suspect that the main drawback in the minds of many people is along the lines of concerns raised by User283977 , i.e., whether " ... we have sufficient natural gas reserves to meet 10, 20, and 30% of transportation demand over the next 20 - 30 years ...". Your initial arithmetic may be the answer, but you need to quantify in commonly applied units, away from shorthand such as GX tankfuls.

Another huge concern is the impact on NG supplies and prices. That really needs to be addressed in a convincing way by anybody arguing for using NG as a motor fuel. Many people, especially politicians, would cringe at the thought of burning NG in competition with the mom and her shivering kids who already have a hard time paying for home heating.

Don't get me wrong. I believe NG is a viable, immediately available supplement to petroleum distillates for transportation. I look at it this way: political will and popular support were able to push ethanol forward until it became painfully obvious that it was a very bad idea. The US went to ethanol because it's easy to produce using old technology and blends into the existing fueling infrastructure - except that it must be transporting by trucks, not pipelines. I mean, if we can develop ethanol despite its net consumption of more energy than it provides, NG as an intrinsically superior alternative should be a no-brainer.

--R

Why I'm Shorting Commercial Real Estate

Thanks for the Commercial Real Estate update. In more normal times I maintain about 15-20% of my portfolio in a Northeast US CRE holdings fund. It usually does very well with a minimum of drama and adds a dose of diversity. Looks like we're many months away from returning to that sector.

Is the Economy at an Inflection Point?

Cogent summary of current conditions and an enjoyable, persuasive read. However, this is a very long way to say what most everyone already knows, especially folks visiting this site.

Obviously equities are overbought. Obviously the economy is still moving in reverse. In the given circumstances, prudent would-be consumers are wise to "save and pay down debt", though I wouldn't refer to this appropriate behavior as an 'obsession'. Workers (drop the joe plumber stuff already) know employment likely won't improve in a meaningful way until 2011-12.

You make a very bold statement in saying, "The credit card culture is now broken". I rather suspect that it's merely on hold. This current financial pain must go far deeper, for far longer, to effect change that is truly "cultural" in breadth. Agree with your notion that even a temporary pull back in consumer indebtedness will dampen a recovery when it comes.

Thanks for the fine article.

--R

Agrium Shares Are Ripe for Growth - Barron's

Interesting article -- thank you.

Barron's always does a good sales job in their stock feature articles, and sometimes they're right. Obviously, sometimes they're dead wrong. It does give investors a starting point for research.

Suggestion for the author: Please refrain from making prominent statements such as, "Now trading near $40 from a high of $113, ... ". That information is utterly unimportant and implies that $113 is some sort of baseline or target for the stock. The market lists many issues selling >50% off the highs. Some may return to those levels, and you can bet that some won't.

Potash as a commodity was 2007-8's tulip bulbs, and may or may not achieve such stardom in 2009, or any year in the near future.

Respectfully,
--R

Will We See the Gradual Nationalization of Government Contractors?

With due respect to Jack Gordon's experience, I submit that's not always the case.

He said, "... support contracts are recompeted at regular intervals ... you have to change hats & do the same work at lower pay for the new contractor (or else move out of town), it's called wage busting..."

There are long term DoD operations in which the winning contract bidder hires essentially all of the existing employees, including management, at the same or better compensation. The name on the prime contractor's letterhead changes from Lockheed to Johnson Controls to Raytheon to Boeing back to Raytheon, but the change is mostly immaterial to the employees. They're still performing the same operations on government-owned (GO-CO) equipment.

It depends on the functional level of the work, but often the new prime contractor can't afford to lose the expertise already in place.

--R