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Carmen Vincelli
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Carmen has been personally investing his own earnings for more than 15 years. He earned a BSBA in Finance in 1998 and has been employed as a financial analyst with a global accounting firm and as a consultant with a national management consulting firm.
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  • Change We Can Believe In
    Last week Chesapeake Energy (NYSE:CHK) announced that it would invest $1 billion dollars in Clean Energy Fuels (NASDAQ:CLNE) over the next decade to help fund the build out of its fueling stations.  Last Friday morning BHP Billiton (NYSE:BHP) announced its intent to purchase Petrohawk Energy Corporation (NYSE:HK) for more than a 60% premium.  If the casual investor wondered if change is taking place in the oil and gas industry when Exxon Mobil (NYSE:XOM) bought XTO Energy several months ago, then the events of this week were a big dose of validation.
     
    Change is happening and we can all benefit from cleaner air, cheaper energy costs, and energy independence. I know there are those that can, but who would want to argue against those benefits? At the very least the pros outweigh the cons (potential harm to the environment), do they not? So, what is the change and how can we as investors take advantage of the opportunity?
     
    The change is that technology has enabled us to access significant new deposits of natural gas and even oil. Energy companies are starting to realize the U.S. has significant energy resources, and how to get them to the consumer. In addition, other companies are inventing technology and methods to aid in the distribution of resources to consumers.
     
    The opportunity is finding the best companies with the best products, services and prospects as we transition from oil to natural gas, at least for transportation purposes. From companies like Chesapeake and Devon Energy Corporation (NYSE:DVN) in exploration and development to Clean Energy Fuels, which designs, builds, finances and operates fueling stations for vehicle fleets. Other companies with innovative products also stand to benefit from the oncoming transition to natural gas such as Westport Innovations, Inc. (NASDAQ:WPRT), Fuel Systems Solutions, Inc. (NASDAQ:FSYS), and even General Electric (NYSE:GE). Westport Innovations, Inc. is a manufacturer of alternative fuel, low-emissions technologies that enable engines to operate on fuels, such as compressed natural gas, liquefied natural gas, hydrogen, and biofuels. Fuel Systems Solutions, Inc. engages in the design, manufacture, and supply of alternative fuel components and systems for use in the transportation, industrial, and power generation markets. General Electric makes advanced gas turbines.
     
    The companies listed above are just ideas in the natural gas and oil industry. There is an abundance, almost unlimited amount of energy everywhere, not just in the U.S. The problem is not a lack of energy; it is harnessing sources of energy in the most economical and environmental way possible, and then distributing it to consumers. Companies like Chesapeake are at the forefront of the technology to do this in the natural gas and oil industry. In addition to oil and natural gas, there is coal, wind, solar, biomass, geo thermal, kinetic and others that I have not even thought of. In addition, there is nuclear energy, even if it is less favorable after the Japan tragedy. But I digress.
     
    We need to use the technologies and inventions the above companies have created to our advantage until we reach a similar point with even more sustainable energy sources. While there are many people against the continued use and drilling for fossil fuels, most of them still ride in automobiles and fly in planes, which rely on fossil fuels. Especially people the likes of Al Gore. When was the last time you saw him riding a bike or jogging to the store? 

    The point of all of this is that free markets will gravitate towards products and services that are less expensive, efficient, or allow us to become more productive. Subsidies or not, investors need to realize the (natural gas) energy revolution is beginning and represents a significant investment opportunity. Say what you will about Chesapeake CEO Aubrey McClendon, but he just made a decision that knocked down the proverbial domino. The events of last week is a sure sign we will use more of our oil and gas domestically, rather than being an exporter. I feel he realizes we have a chicken or egg situation and decided to take action. To clarify, the outstanding question up until last week was what is going to come first, compressed natural gas vehicles or the filling stations to fill the tanks? With the investment last week, it appears we are going to get the fueling stations first, which will then give consumers confidence they will be able to refuel their cars. Demand for natural gas will increase, provided auto companies producer affordable vehicles – some of them have.
     
    Unlike our government, which recklessly spends taxpayer money, McClendon and Chesapeake are not investing in Clean Energy Fuels for nothing. I assumed they see a win, win opportunity for both companies. By investing in Clean Energy Fuels, not only is Chesapeake helping to expedite the build out of fueling stations, which will eventually make Clean Energy Fuels profitable more quickly, but this would increase demand for natural gas vehicles, which would increase demand for natural gas. In addition, Chesapeake is looking for an actual return on investment as it has preferred shares and will receive a dividend. That is how investing is done – with the intent that both sides win, and the intent to minimize the downside risk.

    Regardless of taxes, regardless of regulation, great American minds and entrepreneurs press on.  When we reach a roadblock, we adjust and move forward. The natural gas industry does not need government subsidies to have an impact. Those willing and able to see its benefits realize the opportunity even as companies such as Solazyme (NASDAQ:SZYM) improve upon technology to eventually mass produce sustainable renewable energy. A revamped natural gas industry is emerging because good old fashion American vision, technology, entrepreneurial spirit and free markets will win out in the end. 
     
     
     
     
     
     


    Disclosure: I am long CHK.
    Jul 20 10:12 PM | Link | Comment!
  • The Rich Get Richer...And That's Not a Bad Thing!?!

    While your definition of “rich” may vary, for the purposes of a financial website, let’s assume rich to be in financial terms.  Why would anyone want to be rich? Why would anyone want to become more rich?   After all, if you believed everything you read and heard, rich people are god-awful heathens who do not care about anyone, or anything except monetary riches and they would step on someone’s throat if they could make a dollar doing it. 

    Rather than take a negative view of the rich, let's try to understand the real reasons why the rich almost always do get richer, and see that this is a road we all travel. Whether the road leads to financial independence, or the poorhouse, the actions we choose make determine our own destination.   Or, as the economic cliché goes, it is a pie we all have a piece of, and most would either like to have larger or more pieces of the pie.

    The simplest and most obvious reason the rich get richer, not to mention the least talked about, can be understood by anyone who has passed junior high school math.  It is really quite simple - the law of percentages and compounding. 

    To keep the math simple, if a "rich" individual earns 10% a year on $100,000 of savings and investments, he or she will have an additional $10,000 at the end of the year compared to an additional $1,000 on someone else's $10,000 of savings and investments. If both individuals chose to let that cash ride for a second year, assuming a 10% growth/interest rate, the "rich" individual will earn another $11,000 compared to $1,100 for someone else.  If this continues for several years, the other individual can accumulate significant riches, but the “rich" individual will be exponentially richer provided he or she does not squander it, or make bad investments.  The same math applies to compensation increases.  A 1% increase on $100K is always going to be more than a 1% increase on $50K.  It's a powerful truth that renders taxing the rich useless - they will always get richer simply because they have and continue to accumulate more.  This does not mean they should pay MORE than their fair share, they have paid their fair share.  As long as they acquired their riches by legal means, it has nothing to do with my financial status.  I am not impaired as a result of another’s success. 

    Most individuals become rich through a mix of several avenues such as education (doctors and lawyers), creativity (Bill Gates, Steve Jobs), hard work cultivating a marketable talent (Michael Jordan, Peyton Manning), and most of all common sense. Whether it is through education, realizing a creation, or cultivating a marketable talent, all successful individuals have to add some level of hard work to achieve. 

    Still, you can have all the education, creativity, or marketable talents in the world, work hard cultivating them, and squander it all if you don't have an ounce of common sense.  We have read time and again about athletes, movie stars, financial professionals, and just about anyone who “had it all” and lost it. 

    The road to financial independence and the road to the poor house is one we all drive on and has many paths, but we should be free to choose our own route. Many scenarios can play out between where we start and where we end up. Thomas Jefferson’s quotation in the Declaration of Independence, “we hold these truths to be self evident, that all men are created equal,” still holds true today.  We may have different families, attend different schools, live in different places, but we are all born with the ability to succeed and overcome deficiencies in families, education, neighborhood and most other tribulations.  Alternatively, we can choose to give up.  We should be free to choose our own route and if most strive to improve, why do only the successful people get most vilified?  I am all for helping those who cannot help themselves (some people are born mentally or physically disabled and not all can overcome those limitations) but we should tax those who choose to be a tax on society too. You cannot discriminate against those who are successful, and not those who arguably are not.

    All of this begs the question, if the rich can not only get richer, but they can also go broke, and the poor individual can stay poor, but could also become rich, don't both types of individuals theoretically have the same opportunity?  The odds of some scenarios are higher than others, but all of the scenarios have been accomplished.

    At the moment I consider my personal situation to be slightly above average with great potential to be above average.  Hopefully one day I will have enough to easily support a family and easily be able to significantly help others who can’t help themselves.  I am trying to drive the road to success, and will have many clear paths and some dangerous curves along the way, but I do not appreciate those who are trying to create a steep, icy, and curvy hill in my path.  Those who financially have more than I do, are either more educated, more creative, make better investment decisions, have cultivated a marketable talent, or inherited it all.  Again, what those individuals do still has no bearing on my ability to attain financial independence.

    Rather than taxing and (recklessly) spending, to hopefully redistribute the wealth (although there is no guarantee because wise decisions have to be made by others), an environment should be created where we all can get rich - if we choose.  Even if you are not the materialistic type, most would like to have more financial resources to live the life they dream of.  It doesn’t have to be all about self-indulgence, it could also be for philanthropic purposes.  Instead of worrying who has the most pieces of the pie, as a nation we need to take the steps to bake a larger pie so we can all not only have more pieces, but larger pieces too.  Since we cannot keep most of the rich from getting richer, and most of us would like to be one of them anyway, let's not make it more difficult for the rest of us.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jul 18 11:04 PM | Link | Comment!
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