Wednesday, September 10, 2008


Just when we think that oil is headed down, Russia is sending bombers to Venezuela for exercises. I wrote in my blog a couple of weeks ago that I thought Russia was going to do what they could to keep oil prices high. They must have oil prices to sustain their otherwise crappy economy. Putin's party remained in power solely because of the growth of their economy during his tenure. We don't need oil going up right now. With the U.S. taxpayer now on the hook for the Freddie/Fannie bailout--we don't need the dollar having to fight rising oil. And the taxpayers obligations for the FDIC might not a small amount by the time this crisis is over.

We say a good bounce in the energy and ag names--the ones that I blogged about last night did well today. At the time of this post gold is a little higher as is oil in the overseas markets. U.S Futures are down. I think the construction names are going to do well as they have just gotten obliterated. EME (which I own), FWLT, JEC are good value plays at these levels. I think you can start to buy these names at these levels.

Now for those who love to gamble, and I mean literally---I like Las Vegas Sands (LVS) right here. Now I will not argue that this stock had gotten to lofty levels, but in my opinion this correction has been overdone. When the economy turns, this stock will see multiple expansion and could be a double. This stock can take high percentage moves in a short period, so know your risk tolerance and goals if you decide to trade this one.

My friend Ryan Krueger mentioned 2 names when he was on our show last time that really look to have some appeal. Northern Trust and Schwab SCHW. If you like the financial space---these look to be attractive plays within the space.

I have to brag a little---Sanofi SNY jumped on high volume the last two days. I think this one goes to $45. They have a strong pipeline and have good cash flows. I particulary like their position with vaccines---an ounce of prevention is worth a pound of cures in todays insurance environment. In other words, they will have pricing power with these vaccines. I really like this one and you get a fair dividend while you wait.

Many have sent emails asking what we think about the overall economy and the inflation outlook. What I will tell you is rooted in common sense---not any economic textbook. I think that demand destruction definitely caught many "experts" by surprise. That said, I think that we are going to see growth accelerate once again. For one thing the Chinese still have the Olympic Pollution restrictions on. When those are lifted, look out again. The global demand story was and is very real, but as with any story---it can get ahead of reality. I think the pendelum swung too far and now we will see the growth begin again. Ask yourself this question "Even if demand destruction continues to surprise---is oil really going below $80 with the Russians, Iranians, and Venezuelan's acting like nutjobs? My answer is no. This group of 3 will resort to desperate measures to keep the price of oil up. That is why I still like watching RIG,DO,FLR,EME,JEC,NOV. I certainly don't think what is happening with these names can be fairly equated to the internet bubble of 2000. Many have been trading it like the bubble was bigger than the internet bubble---it just isn't.

I don't think the strong dollar is a slam dunk like most of the pundits. We should get more clarity over the next few months as the election unfolds. Make comments below.