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Monthly Archives: February 2012

On Gas, Cars and Bernanke

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The story below is interesting and provides some perspective on the variation of a gas prices throughout the country.  It also has some random thoughts on the economic and political ramifications of escalated gas prices.

The USA has evolved into a two-tier gas market. The supply of crude from Canada and the Bakken fields has created a lower cost of supply for the central portion of the country. This differential is most notable in the market spread between WTI (a futures contract that settles physical delivery in Oklahoma) and LLS (Louisiana Light Sweet Crude) – the pricing of crude for the big Gulf refineries…READ MORE.

Alaska North Slope May Hold 80T Cubic Feet of Shale Gas

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My Take: This story (below) is important for investors and non-investors. Right now may people are concerned with the increase we are experiencing in gasoline prices, which is being driven by more expensive oil prices on the world market.  Most people drive and therefore feel the negative effects of higher gas prices.  Yet, I think it’s important to understand that a fundamental shift in the type of resources we use to generate energy is in the works.

The shale gas boom is very real and has taken many parts of the nation by storm.  North Dakota is the most stark example, since its region has been almost completely undeveloped until our recent progress in extracting natural gas and other liquids from the ground.  This shift has changed our perspective as to what energy we have in the U.S. and what energy sources will we rely on in the future.

Infrastructure changes are often slow.  A shift from oil and/or coal to natural gas will take time.  Changes in power plants, engines, or manufacturing machinery is not an overnight process.  If we continue to see a greater and greater supply of natural gas come on the market, industry will have a greater incentive to change business processes to capitalize on a cheaper form of energy.

The Alaskan survey by the USGS is another indicator that the U.S. has a tremendous amount of energy within its boarders that can be relied upon.  The energy landscape is changing whether you realize it when you pull up to the pump or not.

Story: For the first time, the U.S. Geological Survey has estimated the potential of undiscovered, technically recoverable onshore shale oil and gas resources in Alaska’s North Slope. The estimates range from 0 up to 2 billion barrels of oil and from 0 up to 80 trillion cubic feet of gas – representing technically recoverable oil and gas resources, which are those quantities of oil and gas producible using currently available technology and industry practices, regardless of economic or accessibility considerations…READ MORE.

Boomer Retirement: Headwinds for U.S. Equity Markets?

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Over the past few weeks I’ve read reports from the S.F. Federal Reserve, Credit Suisse, H.S. Dent and Jim Fink that have been echoing a similar story.   The story has to do with the coming Baby Boomer demographic shift and its impact on the stock, bond and real estate markets.  The outlook is not good, especially for equities.  I’m linking below to the report put forth by the S.F. Fed and a link to where you can download the Credit Suisse report.

If you do not have time to read the entire report, I’d highly recommend you at least skim over the report.  The visuals are helpful in summarizing and communicating the main observations.

In next month’s edition of TheMarketCapitalist.com newsletter I will be discussing how you may need to adjust your investment strategy in light of the information contained in these and other reports.

http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html

http://www.scribd.com/doc/81556120/7754802-Cs-How-Demographics-Affect-14-Feb-1

Mad Men & Event Driven Investing

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If your a fan of dramatic television series, such as the Sopranos, you probably watch or at least are aware of Mad Men. Mad Men is a hit television show that is carried by AMC Network (American Movie Classics). Next month will launch Mad Men’s 4th season. It is a popular show that is changing the face of AMC. If you’re an investor, or a viewer, this change is good.

The AMC Network (AMCX) was spun off from Cablevision last year. Until the last few months the stock has traded in the 30′s and now it has risen into the 40′s. The stock is poised to continue its run because of a specific even that is occurring. On March 25th AMC will premiere the first episode of Mad Men’s 4th season.  The season will span 13 episodes and will most likely draw higher ratings than the previous seasons and further intrench the show into popular culture.  All this means more profits for the network.

If you wish to learn more about how popular the show is click here.

Last year I released an investing e-book titled, Event Driven Investing. The example of Mad Men plays nicely into the strategy I outline in the book. This event is known, but not something that all investors are aware of already. As the premier approaches more chatter will be made and thus more eyes will be focused on AMC as an investment.

To learn more about event driven investing and how you can profit from the strategy, Event Driven Investing – Increasing Returns and Lowering Risk on the Road Less Traveled is available now for the very affordable price of $3.99.

Disclosure: No Position

Are Investors Becoming More Cautious?

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The market has been on a great run since December, but I’m sensing investors are becoming more cautious about the longevity of this spurt of stock price appreciation.  I say this not from reading articles of authors opining about such matters.  It is actually the behavior of a handful  of stocks I watch that makes me wonder what’s going on ‘out there’.

What I’m seeing is a trend where the market can be flat or down, while certain stocks actually go up.  They’re bucking the trend.  Why is this occurring?  The first question I would ask is what type of stocks are we talking about?  Are they the same type of stocks and, if so, what characteristics do they exhibit?  They are all value stocks that pay sizable dividends.  The dividends are seen to be very stable or stable and growing.  These are stocks that I would use as my more conservative equity bets.  In the case of this group of stocks, if the market falls, I still will receive a dividend and ride out the storm knowing that a temporary set back in share price does not mean all is lost.

I’m concerned that the ‘odd’ behavior I’ve seen on multiple occasions is the behavior of a large amount of investors repositioning their portfolios to ride out what they believe is a coming market downturn.

My conclusions might be totally off base, but even if my observation is correct, the behavior of a certain group of investors does not mean they know the future.  Yet, the market is driven by the supply and demand of investor money.  People can become spooked for correct or incorrect reasons.

If you’re an investor that has seen significant gains since the fall (season), it might be a good time to consider taking a profit.  It’s hard to call a market top, but it’s easy to execute a trade and lock in a profit.  Don’t be a pig.

The February Edition of Market Capitalist Newsletter is Here!

Posted on by Posted in Dividends, Investing, Newsletter, Opinion Leave a comment

The February Edition

What you will find inside….

  • In what remote area of Asia is a huge natural resource boom occurring & how to gain exposure to this growth story
  • An updated model portfolio with a new stock added
  • What Trust has recently been released with a +10% annual dividend yield that is expected to grow throughout 2013
  • How to ask yourself “What matters most?” when considering changing your financial habits

Thoughts on the January unemployment numbers

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On Friday some good news came in terms of job creation within the United States.  Current numbers indicate that 243,000 jobs were created in January.  In addition, these jobs were private sector jobs, not government jobs.  The national average for unemployment is now around 8.3%.

The unemployment numbers gave life to financial markets on Friday as many investors saw this increase in jobs as a sign that we might finally be turning a corner in terms of our fiscal condition.  Making such an assumption from the newly released data might be correct, but I think we should not become overly elated.

The reason for my reservation comes from the fact that we are still 5.6 million jobs down from where we were in 2007. This is a sobering fact.  We came down from a peak and we are still far from making it back to the level we were once at.

Secondly, the pool of people on the job market is larger than it was in 2007.  Yes people have retired, but people have also graduated from high school and college.  A mass exodus of the Baby Boomer generation has not happened from the workforce…yet.

Lastly, though we reached a peak of sorts in 2007, it was an inflated peak.  A large part of the growth experienced in the last decade was concocted through loose lending and questionable fiscal engineering.  If we are to get to the position we were previously in it will now take more effort.  Creation of products and services that are actually of value will have to be at the forefront of the recovery, since credit markets have come down from the cloud they were riding a few years ago.

The world has not changed overnight or over the last month.  I’m still cautious.