VISA IPO & LULU

http://www.economist.com/daily/news/displaystory.cfm?story_id=10753463&top_story=1

Well, here's the IPO I've been waiting for for 20 years! If Mastercard is any indication, I suggest we keep a close eye on this for a buying opp on a post-IPO dip.

Well, what can I say about Lulu? THis is the most volatile stock I've ever seen! I also bought RIM around the same time last year and these 2 have taught me about lots about investing with and against the *tradewinds*. Smartphones are the growing like weeds and RIM is the market leader so it's pretty easy money. Meanwhile, as the chances of a US recession went from 50-50 last fall to almost certainty today, the Consumer Discretionary sector has been hit hard, and Lulu was not strong enough to swim against the current. I'm still expecting good earnings but market sentiment is a tough battle to fight. We could sell into the next rally, but we may have hit bottom already....

Where is Eddie this week? I'll be in San Diego until Thurs. Next week I'll be in Dallas Mon to Wed. I wish I could contribute more but right now I'm just trying to stay above water. BTW, Costa Rica was very nice, especially compared to Feb in TO!

Stupid to the Last Drop

The title of this post is the title of a book by William Marsden (Full title: STUPID to the LAST DROP: How Alberta is Bringing Environmental Armageddon to Canada) about the oilsands and although I haven't yet read it, I think it's got a great title!

Forgive me but this post is a bit of a ramble about energy issues in general and investing second. One of the nonsensical things about the tarsands is that we're burning a relatively clean burning fuel (NG) to upgrade tarsands into syncrude and then into gasoline so that we can drive our cars, yet there do exist cars that run directly on Ng. Sounds kind of stupid.

Of course though, most of the oil we do produce is exported to the U.S. to be refined and consumed. The other economic noose that binds Canada is the Free Trade Agreement under which Canada is obligated to export the same proportion of oil and gas to the U.S. even in the event of a domestic shortfall. This proportionality only applies to Canada. Were the negotiators of this provision stupid or what? The reference article is here.

What's worse is if there is some geopolitical event that chokes off oil exports leading to oil shortages, there's no guarantee that refined products would flow back north across the border. What's interesting is that the pipelines from Alberta to the east end in Sarnia, so that Quebec and the Maritimes and part of Ontario rely heavily on gasoline imports. I recently listened to a CBC Radio interview regarding whether Canada should develop storage units for oil and gas much like the U.S. has the SPR (strategic petroleum reserve) which has a 2 month supply of oil. Many countries in the world including China are now developing these reserves to buffer any supply disruptions. From Wikipedia:

According to a March 2001 agreement, all 26 members of the International Energy Agency must have a strategic petroleum reserve equal to 90 days of oil imports for their respective country.^[2][3] Only net-exporter members of the IEA are exempt from the reserve requirement. The exempt countries are Canada, Denmark, Norway, and the United Kingdom. However, Denmark and the UK have both recently created strategic reserves due to their requirements as European Union members.

The lobbyist representing the pipeline companies say there is nothing to fear regarding gasoline imports from the U.S. because it is an integrated market and global commodity etc. etc. It doesn't sound stupid to me however, to have some on reserve.

Onto another subject is the price of Ng. Since my post Profiting from Gov't Intervention the price of Ng has drifted sideways just like the weather! Record snowfall but not that much cold. I'm still bullish about the longer term for Ng due to the geology of smaller fields and higher decline rates. A recent headline about a LNG joint venture between Petro Canada and Gazprom having been shelved, highlights the immense capital costs in developing a LNG strategy. Also a Toronto Star article suggests that there will be more Ng electricity plants to be built now that dirty burning coal is seen as a negative. It also suggested applications for new nuclear plants in the U.S. aren't materializing as predicted.

So even at the brink of a U.S. lead downturn, oil as well as energy consumption in general will continue grinding upwards. A decline in world population growth, or a concerted mass conservation effort might derail this demand growth, but I don't see much chance for either happening.

iPhone is a buy! AAPL?

As Arash hears everyday, the iPhone has changed my life. It's one of the rare tech products which actually exceed the hype! (and boy, there was some hype on the iPhone?!?!) the iPhone has "changed the game" and opened a new market for smart phones. The Wi-fi and browsing capability is truly amazing and Blackberry, Palm, or HTC will never be able to match the ease of use and the seemless interaction of the various software. E.g. My cuz sent me an MP3 in gmail, so I click on it and music starts playing in the iPod. Someone sent a youtube link, I click on it, and video starts up in the Youtube module. Awesome!

A couple of things pertaining to this club:
1) I've been reading all the posts (on the iPhone) but contributing less. Typing is, of course, much slower than a conventional keyboard. So if I want to post something, I have to turn on my computer which I seem to do with surprising infrequency since the iPhone seems to meet about 80-90% of my personal computing needs.
2) Does that mean AAPL is a good buy now at $130's? As much as I love the product, I don't know how they are making money. Apparently, just over half the 4million iPhones sold are registered with AT&T. That means the rest are unlocked and used on GSM networks all over the world. This means AAPL is losing some future profits based on their revenue sharing deal with AT&T. I actually see this trend accelerating as they introduce the iPhone in Europe and Asia, since unlike here in North America, the carriers do not sell many phones. Their inexperience in the mobile relationship game may affect their profits.

I personally think they should scrap the AT&T type deals (with BT, FT, DT, CM) and just sell the unlocked iPhones for $500-600. Ask any iPhone owner and they have all told me they would pay an extra $100 more for it, no questions... now that's a great product! But can AAPL maximize the profits?

There once was a Dutch, Norwegian, and a Canadian...

http://www.theglobeandmail.com/servlet/story/RTGAM.20080130.w-OS-main-31/BNStory/oilsands

This was a pretty good article about the Dutch (and British) disaster, when the "flood of oil money inflated the currency, provoked price increases and destroyed exports, leading to a decade of joblessness and rising inequality."
We've all heard about how the Norwegian fund has successfully managed their oil revenues and how every other exporting nation is trying to emulate that model.
The most shocking (and infuriating) part of this article is the policy of the Alberta Minister of Energy to ignore the lessons of history. In fact, Alberta has already experienced several boom and bust cycles of oil prices. Their neo-conservative ideology is ruining the future of our country.
ugh, don't get me started!