Natty Gas Buses-A-Move

According to the CEO of Chesapeake Energy (CHK), Aubrey McClendon, 20% of All buses operating in the United States are fueled by Natural Gas.

Looking Overseas, currently 1/7 of all cars in Argentina and 1/4 of all cars in Italy run on natural gas. According to T. Boone Pickens, there are a total of 8 million vehicles in the world that run on Natural Gas but only 142,000 of these are in the U.S. (Can you say 'GROWTH market appeal' ?)

Anecdotally thinking..Maybe the Pickens Plan has a chance AfterALL ? (Or at the very least give US something resembling an ENERGY PLAN focused on switching OUR country's transit fuel of choice to something Cheaper, Cleaner, Domestic and More Abundant like Natty Gas.)

* For more info on the Pickens Plan you can visit: http://www.pickensplan.com/ (...Also feel free to check out my 7/18/08 post titled 'REF - The (Revolutionary) Pickens Plan...)

A Windy Proposition - MarketShare + Cost

According to the Brussels based industry group, Global Wind Energy Council, WIND Power made up 1% of the World's Electricity Production in 2007 and is expected to make up 3% in 2012.


According to EIA data, U.S. Electricity from --- COSTS :
* WIND: costs about 8 cents per kilowatt-hour

* SOLAR: costs about 15 cents per kilowatt-hour

* COAL-fueled electricity: costs 4 cents per kilowatt-hour


Also worth noting, Rising material costs (steel) have driven up wind turbine prices by about 20% since July 2007.


http://www.bloomberg.com/apps/news?pid=20601109&sid=a9B6qZ11iwwc&refer=home


Data Courtesy: Bloomberg

ALUMINUM - Abundant + Energy Expen$ive

Despite being the world's most abundantly available metal, ALUMINUM is the MOST-Energy Intensive to produce. Aluminum makes up about 8% of the Earth's solid surface weight and is the 3rd most abundant of all elements, behind oxygen and silicon. However, because of its strong affinity to oxygen, it is almost never found in the elemental state; instead it is found in oxides or silicates.

According to Wikipedia, Electric Power represents about 20% to 40% of the total cost of producing aluminium, depending on the location of the smelter. As a result, Aluminum Smelters tend to be situated where electric power is both plentiful and inexpensive, such as: South Africa, the South Island of New Zealand, Australia, China, the Middle East, Russia, Quebec, Canada and Iceland.

According to Bloomberg, the energy used by China's aluminum smelters each week is enough to provide electricity for more than 2 million people for a year.

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The Chinese Are Cutting (and Prices are Rising) :

* According to the British Geological Survey, China was the World's Largest Producer of Aluminium in 2005 with almost 20% world market share..followed by Russia, Canada and the U.S.

* China's largest aluminum smelters agreed on 7/10/08 to cut output by as much as 10%

* As a result of China's recently announced production cut, the research arm of Goldman Sachs (GS) cut their 2008 forecast expectations for a global aluminum surplus of 275,000 tons this year to 62,000 tons because of power shortages in China and South Africa...Because of a tightening supply environment Goldman Sachs also RAISED its 2008-2010 Aluminum Price Forecasts:

- Raised 2008: From $1.30 to $1.39 a pound (+7%)
- Raised 2009: From $1.32 to $1.60 a pound (+21%)
- Raised 2010: From $1.25 5o $1.45 a pound (+16%)

* Goldman Sachs also believes Chinese aluminum demand will rise 20% in 2009 and 15% in 2010, resulting in deficits (of supply)

bloomberg.com/apps/news?pid=20601087&sid=aHuHv.qdqDTY&refer=home

Data Courtesy: Bloomberg + Wikipedia
Full Disclosure: I own shares of GS.

SOLAR - $30 Billion + GROWING

According to Reuters and market research firm Photon Consulting, the SOLAR technology end-market size in 2007 was $30 Billion (up 50% from 2006).

...Anecdotally, I'm surprised at just how LARGE ($30 BILLION??) the solar energy industry is TODAY (don't forget the 50% growth). Assuming a more conservative 35% forward growth rate for the next 5 years and the solar energy market more than quadruples into a $135 Billion industry !

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* Check out the somewhat obvious U.S. solar energy generation map below showing WHERE most of the country's solar energy is generated (the southeast states):

Data Courtesy: Photon Consulting + NREL (map)

IDKT - 20 Year Commodity Bull Markets

I Didn't
Know
That
...According to the New York Times, since 1792 there have been 5 major bull markets in commodities. These lasted: 23, 21, 23, 18 and 12 years respectively...for an average of 19.4 years.

FYI, We are currently eight years into this commodity bull market.

U.S. Residential Mortgage Securitizations

Per respected Oppenheimer & Co. financial analyst Meredith Whitney, for every $1 of U.S. mortgages that were originated since 2000 there were about $7 of 'assets' that were created/SECURITIZED by Lenders. (FYI, the 'securitization' process would largely consist of mortgage lenders + banks packaging the mortgages they originated into mortgage-backed assets that were then sold to a plethora of GLOBAL customers including institutional holders like hedge funds, pension funds, brokerages, banks, etc.)

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*The Average Quarterly amount of U.S. Residential mortgage SECURITIZATIONS that were produced from 1991 to 2004:

- 1991 to 1995: $9.8 Billion
- 1996 to 2000: $59.7 Billion
- 2001 to 2004: $174.4 Billion

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*The Banks with the Greatest Residential Mortgage Exposure:

1.) Bank of America (BAC) --> $266 Billion
2.) Wachovia (WB) --> $170 Billion
3.) Citigroup (C) --> $155 Billion

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*The Banks with the LARGEST Asset Writedowns since the Beg of 2007:

1.) Merrill Lynch (MER) --> $24.5 Billion
2.) Citigroup (C) --> $19.9 Billion
3.) UBS (UBS) --> $18.1 Billion
4.) Morgan Stanley (MS) --> $9.4 Billion
5.) IKB Deutsche (DB) --> $8.9 Billion
6.) Bank of America (BAC) --> $7.0 Billion

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Net of the net, this subprime problem runs DEEP and I'm continuing to stay away from the VAST MAJORITY of stocks that belong in the financial sector. My only financial sector positions are IBN and GS and that's largely because I believe both large cap stocks offer compelling/cheap valuations given their exposure to sustainable, long term INTERNATIONAL GROWTH. Who knows when a bottom will be hit in the U.S. financials...in the meantime there are way too many other (largely international) opportunities out there to research + invest in. Lastly, fyi, the CEO of Wachovia, Kennedy Thompson, was FINALLY FIRED today...good riddance.




Data Courtesy: Oppenheimer & Co.
Full Disclosure: I own shares of IBN and GS.

INDIA - The Anti Boomer Generation

Three out of every Ten kids in the WORLD are Indian as 54% of India's 1.2 BILLION population is below the age of 25 years old !

That's some 650 million people...over 2 times the U.S's population...Holy smokes Batman, India's demographics are a whole different BALLGAME vs. the U.S. and its 'Baby Boomer' generation.

Brazil's REAL Appreciation

Since May 2006 the value of the Brazillian REAL (Brazil's currency) has Appreciated 31% against the U.S. dollar.

IDKT - India's $1 Trillion INFRA Fix

I Didn't
Know
That
...Over the next five years, India's government will be spending $1 TRILLION to repair the country's ailing roads and highways system (including the build-out of rural roads connecting villages, roads connecting urban centers, roads connecting ports, roads connecting to airports, etc.)

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India's Commerce & Industry Minister, Kamal Nath, believes one of the key overlooked differences between China and India is that China is an export-driven economy (an economy whose growth rate is dependent on free trade + the spending of other countries) while India is a domestic demand-driven economy (a more 'self-sufficient' economy). According to CNBC, China has about 100 million 'middle class' individuals vs. India's 300 million.

REF - World's Largest RICE Ex/Importers

The WORLD's Largest Exporter of RICE is THAILAND.

The world's largest three EXporting countries are:
1.) Thailand (accounts for 26% of world exports)
2.) Vietnam (15%)
3.) The United States (11%)

*It should be noted that China and India are the top two largest producers of rice in the world..but they are also the top two consumers...both countries consume the majority of their domestically-produced rice leaving little to be traded (as exports) internationally.

The world's largest three IMporting countries are:
1.) Indonesia (14%)
2.) Bangladesh (4%)
3.) Brazil (3%)

*Between 1961 and 2002, per capita consumption of rice has increased by 40% (!)

*5-6% of the world's produced rice is available to be traded internationally

Random
Thought
Of
Brilliance
...ONLY Five to Six % of the WW rice SUPPLY is available via the global EXPORTs market ?!? Look at the DEMAND- A steady, impressive 40% increase in consumption AND this demand should only increase at a FASTER rate in the future given India and China's promising economies. Thus, given the above supply/demand fundamentals - Doesn't RICE have the classic look + feel of not only tight WW supplies moving forward but maybe even the HOLY grail...an investing thesis that has YEARS of legs because is driven by (GASP)...scarcity !

At the very least, this situation bears further watching. NO WONDER rice prices have been on fire the past year or so..check out the below graph (and NOTE the Hyper-growth 'spurt' from 3Q07 to present):




http://futures.tradingcharts.com/chart/RI/M

Data Courtesy: Wikipedia.com.

Sell in MAY and Go Away ?

According to CNBC market reporter Bob Pisani, the seasonal stock trading theory of 'Sell In MAY and Go Away' (being a seller of S+P 500 stocks during the 6 month time period of May through October) has worked in all but 4 of the past 25 years.

In other words, in 21 of the past 25 years (84% of the time) it has been a better time to own stocks during the 6 month time period of November to April (versus May through October). Guess this lends some credence to the idea that the market tends to outperform during the 4th and 1st calendar quarters of the year vs. the 2nd and 3rd.

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*For some additional numbers related to the performance of the Dow Jones Industrial Average (a PRICE-weighted index tracking 30 megacap companies):

From 1950 to 2005:
*During May 1st to October 31st --> the Dow is up 0.5%

*During November 1st to April 1st --> the Dow is up 8%

Data Courtesy: CNBC.

IDKT - GM + Brazil

I Didn't
Know
That
...General Motors (GM) is BRAZIL's Automobile industry marketshare LEADER.

REF - State Controlled OIL

For my reference, State-owned oil companies (Russia's Gazprom for example) CONTROL about 80% of the WORLD'S Total Crude Oil Reserves.

In other words, public integrated oil companies like Exxon Mobil (XOM), Conoco Phillips (COP), Chevron (CVX), BP, etc., own just a small piece of the total crude oil pie.

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Related, check out the below linked article from Newsweek writer, David Victor, on the current set of serious challenges facing Mexico's state-owned oil company, Pemex. In the piece, David highlights a CRITICAL issue related to the state's ownership of oil (vs. private sector ownership) - a track record + higher likelihood of oil production supply inefficiencies:

" Pemex generates two fifth's of the Mexican government's income and is a lucrative employer, but it is ailing from neglect. For years the government has milked Pemex of cash without giving it the wherewithal to invest in and develop new sources of oil...Mexico is hardly the only country that treats its state oil companies as ATMs for governments, unions, cronies and others who siphon the rich benefits for themselves. A large fraction of the world's oil patch is struggling with the problem that bedevils Calderon: how to make state-owned oil companies more effective at finding and producing oil. Veneuzuela's oil output is flagging. Russia's state-owned gas company, Gazprom, is on the edge of a steep decline in production..."

http://www.newsweek.com/id/132601/page/1

Net of the net, looks like another Fundamental reason to be BULLISH on the long term supply-constrained pricing prospects of Crude Oil.



Full Disclosure: I own shares of COP.

IDKT - Nigeria, Oil + The U.S.

I Didn't
Know
That
...Per respected Commodities trader Dennis Gartman, in any given month Nigeria is either the 2nd, 3rd or 4th Largest Crude Oil Supplier to the United States.

Guess I need to start paying more attention to the geopolitical stability of Nigeria..

*FYI, OIL closed today, 4/18/08 at $116.69/barrel (UP 278% from the January 2004 price of $30.81/barrel!)

SOVEREIGN Wealth Funds - $3.3 TRILLION

According to the Financial Times, WW assets managed by SOVEREIGN WEALTH FUNDS (SWF) grew 18% last year to $3.3 TRILLION!

According to Wikipedia.com, "sovereign wealth funds are entities that manage state savings for the purposes of investment...The accumulated funds may have their origin in, or may represent foreign currency deposits, gold, SDRs and IMF reserve position held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings."

By 2015, assets under management of sovereign wealth funds are expected to increase to $10 TRILLION!

http://www.ft.com/cms/s/0/fda12b16-fec4-11dc-9e04-000077b07658.html?nclick_check=1

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*NOTE the below link to see a List of the World's Largest Sovereign Wealth Funds:

http://en.wikipedia.org/wiki/Sovereign_wealth_funds#Largest_sovereign_wealth_funds

Data Courtesy: Wikipedia + FT.com, snagged on 4/01/08.

Shopping At The $44 Trillion Market

I Didnt
Know
That
...The entire GLOBAL marketcapitalization for ALL stock markets is $43.6 TRILLION (as of March 2006).

Fact Courtesy: Wikipedia.com, snagged on 3/26/08.

IDKT - ComScore Sample Size

I Didn't
Know
That
...Internet survey usage data provided by 'web measurement firm' ComScore (THE data used by so many investors to gauge + predict the earnings results of Internet Ad companies like Google, Microsoft, Baidu, Yahoo, etc.) is based on a worldwide sample size of (ONLY) 2 million users.

For some perspective, the entire U.S. population is about 305 million. The world's population? About 6.7 Billion. Both stats courtesy of Wikipedia.com.

Full Disclosure: I own shares of GOOG and BIDU.