Feb

1

Last Jan. 31 I picked water and coal as the plays for the year. In that time, the Dow. has gone down .2% while the S&P dipped 4.51%. The water stocks listed showed a slightly positive return of 1.56%. I didn't list any coal selections since I owned too many and wasn't particularly crazy about the rest.

It can be revealed now that I held CNX (+116.75%), FCL (+57.39%), and ICO (+17.25%). However, after Congress completely passed over coal in the energy bill and the geniuses running California, Florida, Nevada, and South Carolina banned new power plants utilizing the product, I bailed on two of the three (I leave it to you to guess which I still hold). Please look carefully at the states that pointed the way in the anti-coal charge - none really appreciate the cold since they so rarely experience it - I was thrilled last week, then, when I heard it was snowing (and sticking) in Santa Barbara.

Coal's out performance, however, hinged on three unusual events: floods in Australia, power outages in South Africa, and snow storms in China. I still believe it's our best hope for somewhat alleviating the energy shortage. However, I'm in a smaller minority than a year ago. I also mentioned that coal-to-liquid stocks might be a good bet. Very wrong. Every potential alternative energy source received a few nickels and dimes from Congress - not CTL, though, and the stocks tanked badly. And the best of the bunch, Sasol, is now advesely affected by the SA power crisis.

A closer look at the water stocks shows that Companhia de San Basi (SBS) once again was the best performer among the foreign entries gaining 37.96%. Suez (SZEZY) gained 23.92%, and Kelda Group was up to 20.22%. The American stocks were lead by Lindsay (LNN) with a 99.09% gain, and then a huge gap down to Northwest Pipe (NWPX) with a modest 10.45% move, and last year's American leader, Layn Christensen (LAYN) with an OK 4.39% push up. Major diappointments were Gorman-Rupp (GRC -31.16%) and Watts Water (WTS -31.00%). Tetra (TTI) was the biggest loser at -32.51%. The only loser among the foreign stocks was United Utility (UUPLY) at -4.81%.

Please note that neither Suez nor United were Pink Sheet stocks when selected a year ago. Both are huge companies and both decided they didn't need the NYSE or SarbOx. This trend has gained momentum this year and I expect it to continue. (Can you blame them when the utlimate authority and high priest of foreign investment is little Chuckie Schumer?) To keep abreast sign up with otcqx.com/otcqx/home as they not only announce the delistings but provide information on the quality of the companies moving.

In conjunction with these moves and others from the NYSE, a Mastercard survey revealed that London is now considered the leading center of commerce, besting NY in economic stability, ease of doing business, financial flow and business center ("depends on the clustering effect of business formation, supported by efficiency in logistics and transportation linkages").

In a similar vein, Bob Adams of New Global Initiatives hired Zogby to get a feel for American emigration. The results indicate 1.6 million households have already decided to leave, 1.8 million are seriously considering it, and 7.7 million are "serious about leaving and may do so." Since no similar study has been conducted, these figures may well be normal. However, when constituents as diverse as Russian airlines and Uruguayan day laborers will not accept dollars, it's possible that the bloom is off the rose.

Of course, much of the concern revolves around how serious and extensive the fall-out will be over poorly extended mortgages, the CDOs in which they're packaged, and the financial heft of the counter-parties who have guaranteed these pieces of dreck. No one need worry about the dollar as it is establishing itself as a carry-trade funding currency (although Bernanke still has 250 basis points to cut before he achieves Japanese levels - and if Cramer has anything to say about it, it will happen.)

I'm in the process, a very slow process, of puttng together my favorite "pinks." Some of the world's great companies refuse to play by our rules (e.g., Nestle, Samsung, Gazprom) yet can provide some great returns. Unfortunately, there exists an irrational fear of stocks listed in the Pink Sheets. Admittedly, many, many are dogs, but there are quality issues also.

Before I sign off, though, I have a question for a group which lives and breathes the dogma of "ever-changing cycles." If "the cycle" is your touchstone, why are recessions so feared and, in some cases, denied? Without them there would be no cycle. An occasional flushing is essential to any system, so why don't we just get it over with and carry on?
 


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