Fw: Risk/Reward Vol. 88
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THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"Monday, Monday, can't trust that day/Monday, Monday sometimes it just turns out that way
Oh, Monday morning, you gave me no warning of what was to be
Oh, Monday, Monday how could you leave and not take me?"----Lyrics from "Monday, Monday" by the Mamas and the Papas
"Now on the sidewalk, sunny morning/Lies a body just oozin' life
And someone's sneakin' round the corner/Could that someone be Mac the Knife?"--- Lyrics from "Mac the Knife" sung by Bobby Darin
"There is a tide in the affairs of men/When taken at flood lead on to a fortune
On such a full sea are we now afloat/And we must take the current where it serves." "Julius Caesar" Act 4 Scene 3, William Shakespeare
With the Dow closing on Friday near its three month trading range high (11,644), this coming Monday will launch a week full of promise or disappointment--assuming (and this is a big assumption) that the European sovereign debt crisis does not explode again. Next week presents the most significant earnings report calendar. The results and future guidance given by companies such as Halliburton and Schlumerger from the oil services sector, Coca Cola and McDonald's from the consumer sector, Abbott and Lilly from pharma, GE and AT&T will likely set the stage for the rest of the year. All the major banks also report, but expect nothing from these laggards whose stock prices have taken a terrible beating this year. Closing on Friday near its all time high, the expectations for Apple are huge. I bought some in the belief that come Wednesday, it will shoot from its current $422 to over $450-- assuming it reports another blockbuster quarter. A 6% profit in a few days would be nice. So buckle your belts, Buckaroos---and remember--- unlike the Mamas and the Papas you have been given warning.
As I wrote last week, I went shopping for electric utilities this week, a sector that has actually increased in value since the August stock swoon. My old favorites Duke, PGN, UIL and FirstEnergy are pretty pricey these days, yielding barely 5%. I bought some, but will buy more once they moderate in price--something surely to occur if the market otherwise stabilizes. On a related note, my research did uncover a threat to electic utilities posed by a set of proposed pollution regulations promulgated by the USEPA known as MACT (Maximum Achievable Control Technology) which if implemented will take off line several old coal fired plants and will reduce the amount of electricity nationwide 8% by 2015! Twenty five state attorneys general are trying to stop these regs, but have not been successful as of yet. Talk about "oozin' life" at the hands of MACT the Knife! This startling statistic sent me searching for electric power generators that do not rely on coal. I happened across a non utility generator called Atlantic Power (AT) which relies primarily on natural gas fired plants and which recently doubled in size through an acquisition. To pay for this, AT is issuing more stock and in order to insure its sale, it priced the offering below the market price. I bought some in the low $13 area which locks me into a very handsome 8+% dividend.
My utility search also brought me back to telecommunications--land-line and cellular. These all took a beating in August and each presents a great opportunity. With recent assurances by management that their respective monstrous dividends are secure, I added to my CenturyLink exchange traded notes (CTQ and CTW) and repurchased some of my old favorites; the common stock of Windstream, Frontier, AT&T and Verizon.
This past week, the Financial Times did an entire insert on the remarkable Canadian oil industry which has caused a sea change in the Canadian economy since the oil rich tar sands of Alberta have been commercialized. Canada now holds the world's third largest oil reserve and supplies more oil to the US than any other foreign nation (20% or more of oil imports). Most of the oil is imported through pipelines. You may have read that Canada is seeking to increase this flow through a new pipeline called Keystone XL which the Obama administration has yet to approve (can you say environmental Luddites). I am riding the "tide" called Enbridge (EEP) to great "fortune". It is the largest Canadian oil pipeline owner and pays a handsome 7+% dividend. Indeed, take a look at all oil and gas pipeline companies. They are very attractive now, and I do not see their cash flow being disrupted even if a European hiccup occurs again. Attention: these are master limited partnerships and should not be held in retirement accounts. If you want exposure to these in 401k or IRA, look at a closed end fund that holds these such as KYN.
I am slowly re-entering the market, but am still very heavily in cash. There are some great opportunities available--even outside of financial and insurance companies, all of which are too exposed to European debt contagion.
Past editions available at www.riskrewardblog.blogspot.com
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