Saturday, August 2, 2008
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Here's a stock you can buy all day long... Boardwalk Pipeline Partners (BWP). This year, one of the world's best value investors, Jim Tisch, put another $700 million into the operator of natural gas pipelines.
Pipelines are wonderful businesses, especially in a country like the U.S., where you need government approval to blow your nose. You put goop in one end and pressurize it. Then it comes out the other end. Not hard to figure out. As long as you don't run out of goop, you're golden. And once a pipeline is built through a given area, chances are there won't be any competition coming around any time soon.
If you built a new line today, you'd have to charge 50%-100% higher than what BWP charged one year ago. The stock yields around 8%.
Alternative energy just got a strong new backer. Billionaire James Tisch, CEO of holding company Loews, wrote an op-ed piece for the Washington Post in support of wind and solar power.
He said two factors will drive the shift to "clean" energies – the high price of traditional fuels and cheaper alternative technologies. According to Tisch, wind energy is economic at about 7 cents per kilowatt-hour, down from 15 cents to 20 cents a few years ago. It costs 12 cents per kilowatt-hour to build a gas-fired power plant.
And with retail electricity prices set to rise as much as 30% this year, we should see a "liftoff" in solar energy. Tisch also believes hybrid cars will soar in popularity. A hybrid costs 2 cents per mile versus 20 to 25 cents per mile for traditional cars. Click here to read the full article.
A new search engine... that's better than Google? So claim the engineers who launched Cuil this week. The founders – former wizards at Google, IBM, and other tech companies – took $33 million from venture capitalists and have created an engine they say searches four times as many websites as Google.
Will Cuil really challenge Google for search supremacy? Who knows? But knowing a handful of engineers with just $33 million in capital could build a competitor sure makes me wonder if Google is really worth $150 billion.
Barron's interviewed Leon Cooperman and Steven Einhorn of Omega Advisors, a $5 billion hedge fund, about today's economy. The group is still bearish on financials, as evidenced by Cooperman's great quote:
I determined many years ago that if you want to make money on Wall Street, you work there; you don't invest there. They just pay themselves too well. I would rather look elsewhere for investment opportunities.
Omega's buying Corning, a company that makes glass for flat-panel TVs; Transocean, the world's largest offshore rig operator; and health care companies.
Professor Mark J. Perry's blog, Carpe Diem, updates us on the real estate scene in Detroit: "The good news is that home sales in the city of Detroit through June are up by a whopping +46.56% (YTD) compared to last year... But the bad news is that the average price for a home sold in Detroit has fallen by 56% to only $19,448 so far this year... Bottom Line: The average priced house in Detroit ($19,448) is cheaper than the average priced new car ($22,650)."
We expect Detroit real estate will become one of the great investments of the next 20 years. Why? Sooner or later, GM will go bankrupt. Bankruptcy will eliminate GM's huge dual "taxes" of union wages and crushing interest payments. That will free up billions of dollars per year, money that can be spent building new plants and improving older ones, creating a renaissance in Detroit.
We'd buy trophy properties, like lakefront and golf course mansions. They're selling for about one-quarter what it would cost to build them today.
According to Bloomberg and available public filings, Fannie Mae and Freddie Mac have paid their shareholders over $30 billion in dividends since 1990. We know the number isn't exactly right. Bloomberg is missing a few years of dividends, and Fannie and Freddie's filing archive isn't stellar. The real number is probably something closer to $32 billion.
Whether the real number is $30 billion or $32 billion, it's essentially the same amount of money Congress expects to give Fannie and Freddie to prevent a default on their obligations. You could argue the two companies were merely a front, a scheme, to pass money from taxpayers to wealthy investors. It's socialism, the American way.
Date Range:7/24/2008 to 7/31/2008
Date Range:7/24/2008 to 7/31/2008