Jeffrey McLarty

Growing middle class, consuming more and more meat and processed foods…what do you think, get long SDA, or am I too late?

Fertilizers and Pesticides for agiculture…good. Lithium for mobile…good. Soda Ash for paper, glass, and detergents…good. What do you think, get long FMC?

No position…yet.

That the pollution haze, alt. energy phase, banking craze, water ways, derivative maze, urbanization blaze, crop yields on maize and inflation daze…have given me too many ideas to throw money at, I just don’t know which ones are best.

Pollution and energy are two big problems, combine that with urbanization and CVA is likely to prosper. I think FAN, and TAN, are both good bets. Good banks will be fine, and it’s time to start buying value. Mind you, 300 out of the 8000 will fail, or more, but the rest will be ok and prosper on the new standards and previously failed bank clients. PHO has too many starting points to ideas for stocks…I still haven’t found the best ones. Combining the emerging growth with rising middle class, and world water problems HEK is likely to prosper. Urbanization has many vehicles, but right now I like TEX…can’t get enough cranes, etc. Crop yields are amongst the few things in the world that have risen nearly linearly for decades, that’s a good thing for planet earth and investors. Isn’t it ironic how every country in the world seems to have +5, 6, 7%, 2,2000,000% inflation…and the US is only just now starting to count it. Rising middle class in other parts of the world, SDA is likely to prosper. I also see CL doing well for the same reason. I like the new AFK/PMNA/FRN ETFs too, these are where tomorrows money will come from, get long these names and short the S&P, dollar for dollar.

This market has me second guessing myself, and every move I make. I’m not alone, that’s why it’s been volatile, and that’s why it’s will keep being volatile. Learn to Buy-Write. Short-to-Own.

Disclosure: I put my money where my blog is, when the timing is right.

After buying a condo in the center of Toronto, out of necessity, I got a little more curious about specifics in pricing and housing costs in different US cities.

I found the Trulia housing heat map helpful, which accompanied this list of average listing price of homes, for the entire STATE’s real estate listings:

Hawaii $935,452
Wyoming $859,654
New York $761,945
California $702,176
District Of Columbia $681,335
Connecticut $643,126
Colorado $569,900
New Jersey $521,040
Massachusetts $495,533
Nevada $489,991
Utah $489,021
Montana $487,482
Rhode Island $478,896
Washington $455,489
Maryland $450,270
Florida $425,327
Arizona $424,785
Oregon $413,585
Virginia $407,792
Vermont $402,066
Delaware $398,884
Idaho $388,361
New Mexico $387,137
New Hampshire $377,144
Illinois $367,713
South Carolina $355,848
North Carolina $351,462
Alaska $340,727
Maine $325,733
Georgia $319,859
Minnesota $309,031
Pennsylvania $294,639
Texas $285,073
Tennessee $272,868
Alabama $268,668
Louisiana $256,966
South Dakota $253,015
Wisconsin $249,835
Arkansas $232,074
Missouri $230,284
Mississippi $230,016
Michigan $228,748
West Virginia $227,085
Kansas $225,135
Kentucky $218,949
Indiana $204,482
Ohio $203,996
Oklahoma $197,696
Iowa $195,452
Nebraska $194,217
North Dakota $182,284

Average price for a home in Toronto (notice it’s a major city center as opposed to the prices above which are for entire states), was forecasted to average $394K for 2008 (written just a few months ago) in a report by the CHMC.  In the same report it is forcasted 2.5% YoY appreciation ‘08 to ‘09…the slowest appreciation since 1996.

For sake of reference.  Density of the entire district of columbia is about 3.6 people / m^2 where as Toronto, it’s 3.9 people / m^2.

But…we have our silly (yes that’s sarcasm) 25% down or mandatory insurance policy known as CMHC. The government just made it a little more strict by forcing 5% down and maximum amortization of 35 years.

AND…Here’s why Canada should be okay…

Canadian Cities
Average House Prices
November 2007

Canadian Provinces
Average House Prices
November 2007

 I also found this link to the NYTimes Real Estate listings search helpful, and american’s might find the MLS listings helpful.

Disclosure: Long Toronto & CANADA!

I am an equity/derivatives guy - I think I always will be, but, I KNOW I need to expand my knowledge of how the bond market works, and the signals it gives off. I’ve been reading one of Bill Gross’s book, you know the manager of PIMPCO, “The Peter Lynch of Bonds” according to the cover. He called Treasurys the “most over-valued asset class in the world, bar none” in April of this year. It’s sentiment like this that I’m pretty sure why ProShares created PST, and TBT; leveraged ETFs that short the 7-10 year, and 20+ year, US Treasury Indexes from Lehman brothers. I started learning about the bond market back in ECON 101, but have relatively ignored learning more. I have been smacked in the face with it over the last six months in the news, and ramped up during this recent GSE debacle. From what I can tell, the upside for TBT is much better than the downside, at this point in time. Do you concur, or disagree, why - or why not? Any insight from any expert macro / bond guys would help. I am new, and learning.

Speculation ramped up on Friday, as investors hypothesized that the GSCs would need help, thus hurting credit rating of the U.S. As such, TBT had nearly it’s second highest trading volume since it’s launch. PST actually did set a record for trading volume, since it’s launch.

Interest rates are bound to tick up…I mean, they almost have to.

I have to give a hat tip to Joe Dowling, for pointing these vehicles out on twitter, I didn’t even know they existed before Friday. I did something impulsive and after only an hour or so reading about TBT, Dan Conway can contest, I bought some…early in the day. Every conversation I’ve had with Joe, he has left me with nothing but a good impression of intelligence. Plus, I think he’s likely the second richest guy I’ve ever talked to. So yeah, I have no shame in cherry picking his ideas, making some money, and learning along the way. The way I see it, win or lose, I’ll either pay tuition to the market, or make some money. I’m young, and need to learn. I applied the exact same logic, that new derivative traders should use - you learn allot faster with skin in the game. Maybe this is reckless, I dunno. I know I learned really quick when my first derivative trade fell 100%, and my next one doubled, that was almost 4 years ago - I have no regrets over losing ALL the cash on that first trade.

Disclosure - like this matters…I AM short 20+ year Treasury Index via TBT.

As oil rises, and urbanization trends continue, I’m thinking about what might happen.  Shipping rates go up - duh.  So, I think sales and margins will improve for concentrated solutions, where the competition selling finished products will be squeezed.

Eg. Canned frozen juice vs the 2L of ready to drink stuff.  If you have to ship 2L, you’ll pay more to ship a very comparable product.

…just thinking out loud…likely many have thought about this already…it just hit me today.

So, ‘Blank Check’ Company, Heckmann Corp. (HEK) recently announced they bought a Water Bottling company in China. I’m like - wow - what a great business to be in right now. Probably a scam. The chart exploded this morning. Some heavy money traded the shares north of $8.50, then it pulled back to ‘pre-publicized’ levels of $8.25. I figure 1. What a scam, these guys are investing in a likely trend/shell company, which their brother in law probably owned. If it is legit, it’s likely a great investment - anybody in charge of a ‘blank check’ likely knows what they are doing. If their crooks - no way did they go to all that trouble for the shares to peak at $8. If they aren’t crooks, same holds. So since it went back to pre-publicized levels, I bought a few shares at $8.2799. I especially liked the fact that I could consume everything in current circulation, in english, in less than an hour. It has just become my smallest holding, my biggest gamble, and most un-researched purchase. According to Lindzon, due diligence if for underperformers, lets see if he’s right. I’m literally gambling with ~1.5% of my portfolio…so blow on the dice for me…I know it’s wrong…and I’d never do this with other peoples money.

Plus, the downside shouldn’t be worse than the lows during the chart where the company was just a blank check. That’s $7.22. Soooo…yaaah. D

I specifically watch the advertisements on TED, because the companies sponsoring this stuff, deserve my eyeballs for a few extra seconds. Watch this video.

In a global economy, if you’re not adding value, you’re going to be left behind.  If you don’t carve out a niche for your own importance, well…there’s a bunch of Indians and Chinese who are going to out-run you.  Totally serious, trends are scary, education is being commoditized.  Make no mistake, if you are not a leader, you will be forced into the opposite.  For the followers, or the ones not adding value, the world will make sure to it that your life will suck…I’m talking to the growd under 30 and not a millionair or happily married.

I’m 23, ready to start making impact.  I’ve got a modest advantage compared to my peers financially, so I’ve got to put it towards good use. Nothing was ever handed to me, I worked hard…so don’t hate.

The question is, what niche do I carve myself? 

Right now, I’m thinking Solar, Wind, or Water.  These are areas that are going to be important for the next 100 years, at least…(right?)

Thanks to my diverse degree in engineering, I’d understand the technology deep at the roots of every one of these topics, but now which one should I run with?

Yah the capitalist in me knows that if you become an expert in any of these fields, it should lead to amazing returns in the ‘folio…BUT it will also lead to opportunities to contribute to society some way some how - obviously, as an engineer, I’m speaking in context of innovation but, but I mean I don’t want to waste my brain, time or money on designing the next UI for RIM, or checking sodium meta bi-sulphate levels at Ontario Power…been there done that.  That work is for [educated] zombies.  Like, actually do some good for the world….somehow…down the road.  And maybe, i’ll never get my shot at it, but experts are tomorrows’ change agents…so I’d rather open the door, leave the option, to potentially become a change agent reather than definately stay a zombie.

I’m talking about marrying a trend here, for life, and serious about it…like…live, eat, and breath a trend…so I can have a chance to make impact.  I’m talking present value.