Money and Investing Thoughts

“I am so buried right now with the lower prices compared to what I paid,” he said. “But if I can get what I think is a reasonable amount, I’m going to sell out.”

Investors flee to stock market’s sidelines, no return in sight – MarketWatch.

I am always happy to see articles like the one above from MarketWatch. I remember similar sentiments in 1987 and 2002.

Here are a couple of more quotes from the article from professor Terrence Odean:

“There was a sharp drop for a couple of days in 1987, but this is very different,”

“It’s not unreasonable for people to want lower exposure and risk in this environment,” said Odean.

It is a source of continuing amazement how investors love stocks when they are high and cannot bring themselves to hold them when prices are at their lows. It appears that this happens to investors at all levels. The emotional pain of seeing one’s investments lose value is just more than many can handle.

And finally when the investor quoted at the beginning of this article was asked if he would come back into the stock market:

“There’d have to be a dating period. I’d wait and see what happened three or four years down the road.”

Sounds like timing for the next market peak!

Each week I provide a review of the previous week’s performance of the WilderHill New Energy Global Innovation Index, symbol NEX. This information is provided by New Energy Finance. The NEX consists of about 90 stocks from 20 countries in seven sectors and is the bogey for the PowerShares Global Clean Energy Fund (PBD: 9.73 +0.259 +2.73%). These results are for the week ending on Friday or maybe Monday.

Last week I noted the unusual tactic of New Energy Finance to include the next Monday’s results with the previous week’s returns. This was due to the massive market decline and the 1,000 point recovery on Monday. This week’s data is though the closing price of Monday, 10/20 from the close on the previous Monday.

For the week the NEX was down 4%. The NASDAQ was also down 4% and the S&P 500 dropped 1.8%. Solar energy, the largest sector in the index, was the biggest decliner, dropping 6.4%. The second largest sector, wind energy, shed 4.9%.

On the positive side, hydrogen and fuel cells gained 3.3%. Ballard Power Systems was up 17.2% on news of the sale of 10,000 fuel cell units to power wireless base stations in India. The ‘renewable-other’ sector (geothermal & mini-hydro) also rose 3.2% for the week.

Here are the top and bottom stocks from the index for the week:

NEX top gainers since 14/10/08
Boralex BLX + 23.1%
5N Plus VNP + 20.0%
Climate Exchange CLE + 17.8%
Japan Wind Development 2766 + 17.7%
Ballard Power Systems BLD + 17.2%

NEX top losers since 14/10/08
Itron ITRI - 26.3%
Johnson Controls JCI - 21.4%
Power-One PWER - 19.9%
Brasil Ecodiesel Industria e Comercio de Bioc ECOD3 - 18.6%
Umicore UMI - 18.2%

September sales for the Sacramento region and southern California continued to show strong increases. I have been providing regular monthly updates on this site concerning the sales results for the Sacramento region with occasional data on the rest of California and Nevada. For September the region did not follow the usual seasonal slowdown at the end of summer and sales continued to increase.

Sales for the three county Sacramento area increased 135% over September 2007 sales. Sacramento county and West Sacramento sales increased 8% from August and exceeded 2,000 closings for the first time since August 2005. The median home price continues to fall with over 60% of sales consisting of bank owned real estate. Available inventory also fell 31% from a year earlier and now represents a 3-4 month supply. Quote from Michael Lyon, CEO of Lyon Real Estate on why prices continue to fall in the light of tightening inventory:

Banks are desperate to get bad loans off their books by pricing their foreclosed homes low for quick sale.

His thoughts on the current market:

….this is the hottest buyers market this region has ever seen. Record numbers of buyers are taking advantage of these deep discounts and low interest rates.

Southern California also came in with nice sales gains for September. Home sales were up an unprecedented 65% from September 2007 when the credit crunch first hit the jumbo mortgage market. Total sales for the 6 county region were also 6% greater than August 2008 breaking with historic seasonal trends. Sales of foreclosed properties made up 50% of escrow closings, up from 45% in August. The lack of availability has had a significant affect on the high end of the regions sales and the median sales price. Before August 2007, 40% of mortgages in the region were of the jumbo variety. In September 2008 only 13.% of new mortgages were jumbo. Sale prices are averaging about 30% lower than a year ago and average mortgage payments have fallen by the same amount.

At this point one might expect a leveling off of prices as sales increase and inventory decreases. However, we have the same stupid bankers who made the stupid loans in the first place dumping the homes they now own at stupid prices. I believe the available bank owned property in the smaller Sacramento market will start to decrease but the southern California market still has a lot of foreclosed property to work through. With new home builders now building at the levels of when the state’s population was 1/3 of what it is now supply will be rapidly absorbed. And we have yet to see the full effect of recent interest rate cuts on mortgage rates. I do not know when home prices will reverse but I believe the predictions of late 2009 are too pessimistic. There are many factors trending in favor of a faster turn around.

Sources: TrendGraphix, DataQuick, Sacramento Association of Realtors

BBC NEWS | Americas | Cuba claims massive oil reserves.

I have not found the news linked above anywhere else. This could be a benefit to the U.S. in the event of future normalized relations between the two countries. The states would be a natural market for increased petroleum production in Cuban waters. The report claims that the reserves in the coastal water are significantly higher than previously believed:

If correct, Cuba’s oil reserves would be almost the same as those of the US – 21bn barrels, according to the Oil & Gas Journal – and nearly twice the size of Mexico’s – 11.7bn barrels.

Cuba currently produces 60,000 barrels of oil per day and imports 93,000 barrels per day from Venezuela at preferential rates.

My last few articles have focused on the high yield stock I follow and how the current market disruption has pushed these stock to levels where they are yielding 15-20% despite the prospects of continued strong payouts. It is not a stretch to believe these stock will recover nicely once they prove the can continue to pay their dividends. My next question is what are the prospects for growth oriented stocks? Profits from growth stocks require an answer to two questions: Will the company continue their growth path? And, will the market care?

Let’s take a look at the once-upon-a-time very hot Aegean Marine Petroleum Network (ANW: 5.44 +0.22 +4.21%). ANW went public in December 2006 at $14 per share and traded in the high teens until August 2007. The price climbed up to almost $44 by the end of October. The share price fell back to $25 in January 2008, up to $48 again in June and below $11 per share on Oct. 15. In the meantime, the company has continued to expand in the highly fragmented marine fueling business. It has doubled the number of service centers and just recently announced the building of a 12th in the Caribbean. There is a long term plan in place to grow their bunker delivery fleet from the current 29 to 52, up from 12 in 2006. At the same time ANW is developing a global network of double hull bunkering tankers local regulations are forcing competing single hull tankers out of service.

All of this has allowed Aegean Marine to grow their revenues at a 42% pace over the last 2 years. By the end of 2010 they will have all of their ordered bunker tankers in service and revenues should really start flowing to the bottom line. As ANW gets established in the newer service centers they can grow revenue by increasing product delivery by vessel per day as well as increasing the number of tankers in each port. The bottom line is that Aegean Marine has several avenues of revenue growth from industry consolidation to increased utilization of their own assets.

ANW stock has been driven down by the overall bear market and a linking of the company to the Baltic Dry Index which has fallen 70% in recent months. How much their customer’s ships earn has no effect on Aegean’s revenues. If a dry bulk ship is now earning $50,000 per day vs. the $150,000 of 6 months ago, it is still earning revenue and burning fuel to deliver its cargo. ANW also benefits from a diverse customer base including cruise and military ships as well as dry bulk, tanker and container carriers.

I believe that ANW will continue its strong growth and at current share prices is very undervalued. I will be increasing the holding of ANW for this site’s hypothetical Opportunities Portfolio.