Saturday, July 21, 2012

Review of Barron's -- Dated 23 July

I was immediately curious about the Cover Story of this weekend's Barron's: "The Veggie Juice Craze" as I was en route to the only place like that we have here in my town.  They serve sandwiches as well, but really are into the smoothies and juices now getting very trendy.  So I went there right away, ordered a sandwich and a "Raspberry-Something" smoothie while starting in on the weekend's issue.

Robin G. Blumenthal writes that fresh juice (that is, made right there in the shop from fruits and vegetables) and the specialty (expensive) bottle juices have become a $5 billion business, and is predicted to grow at 4% - 7% a year.  This is a trend seen nationally, not just as a meal replacement or snack, but a move towards healthier eating, especially among the young (20s and 30s).

These juices are not cheap!  My sandwich and smoothie left me $15.00 lighter...

Because this is a growing trend and because the business is highly fragmented (lots of small players, no cartel formed yet), some large players have already started to act.  Campbell Soup (ticker: CPB) has just agreed to buy Bolthouse Farms (of California, I mix their "Berry Boost" with grapefruit juice on many mornings).  Coca-Cola (CO) bought Odwalla and PepsiCo (PEP) bought Naked juices.

Starbucks (SBUX) is now about to enter this space in a big way, they have already opened up an Evolution Fresh store there in Seattle and plan to expand.

Blumenthal provides a handy table showing chains of juice stores, the 10 largest in number of stores with their estimated 2012 sales.  The biggest chain (sales) is Jamba Juice.  Just because there already ARE at least 10 major players, do not think that is stopping others from coming into this space...  McDonald's (MCD) and Dunkin' Brands (DNKN) are already there as well.

My prediction?  Lots of blood will be spilled in this battle for juice customers...

***

Alan Abelson writes that the Bad-News Bulls are back!  Whatever bad news (Europe, bankster thievery, whateva) comes out, that means it's bullish!  (He does not say if he reads Zero Hedge, LOL)  There is LOTS of bad news out there (Spain is the disaster du jour), and the ugly possibility of us hitting the Fiscal Cliff (automatic tax hikes and spending reductions starting January 1) looms.  And the (now seems like age-old) question of more QE, why Senator Schumer of New York told Bernanke straight out "to get to work!" (meaning cut rates or other QE).  Abelson wonders if the stock market is starting to sober up from its six week mini-buying binge.

Abelson then goes on to write comments on PFGBest (in liquidation, it is not clear if any customers will get their money back...), Stephanie Pomboy (more below, she is interviewed in this week's edition) and finally Abelson notes the death of Wall Streeter Barton Biggs.

(No ad for Swap Clear this week)

***

"He Said:"


Our on-the-ground sense of the emerging markets leaves us more positive than we were a few months ago."

Vikram Pandit -- CEO Citigroup  (finally someone different, but another bankster...?)

***

Jack Willoughby writes up the interesting case of Calpine (CPN) and electric power company that (I guess) uses natural gas to power all of its plants, and their power plants are scattered nationwide, though somewhat concentrated in Texas.

Natural gas power plants have lower emissions that cola-fired power plants do, and so the likelihood in the future is more NatGas power will be generated.  NatGas now represents some 32% of our electricity generation, tied with coal, in 2009 NatGas was only about 20%.  The very low prices of NatGas have meant that Calpine now is running its turbines at low prices.

Calpine DID go bankrupt in 2005, as the then CEO had made a big bet that NatGas would be the future, so Calpine overbuilt (and with high debts) just as restrictions on coal were eased...

But, Calpine is back, and even thought the Heat Wave has cut power usage somewhat, and the share price is down from its 52-week high of $19.02 to it current $17.50.

Willoughby makes his bullish case on the fact that Calpine still retains unused capacity from before its bankruptcy...   In that in some of its markets, it would be easy to ramp up production.  And in its important Texas market, the regulators are allowing them to raise electricity prices, as the state needs more power...

The US has some 100 years worth of NatGas (well, that depends on whom you talk to), and it seems likely that NatGas will be a BIG component of US electricity production.

So, yeah, OK, I go along with Willoughby on this one, looks bullish!

***

Teresa Rivas writes in "Weekday Trader" that AT&T (T) looks to be a better bet than Verizon (VZ), partly because of its higher yield (5%, hey, that's pretty good!).  But, both AT&T and Verizon might be becoming a duopoly...  And that tablet & smartphone sales are good for both as more people do their Internet stuff wirelessly...

Disclosure: I have a tiny position in AT&T.

***

Tiernan Ray ("Technology Week") writes that investors are holding their breath as Windows 8 looms to be launched!  Well, I am not holding my breath, but you get the idea.  Both Microsoft (MSFT) and Intel (INTC) came out with acceptable earnings (former because MS Office and SQL Server software did well).

[rant]

Hey, Microsoft!  Sell me SQL Server (one guy here!!!) for cheaper than the THOUSAND$ you normally charge!  I could REALLY use your program!  While you're at it, create a good STATISTICS (complete)  program too!  You'll clean up!


(any of you readers who are hooked up w/ Microsoft, please let them know, thanks!)


[/rant]

There is still a LOT of uncertainty in tech-land as to whether PCs, laptops, tablets, smart-phones, etc. are going to wind up on top.  Still a LOT of worry among investors too.

***

Leslie P. Norton interviews Stephanie Pomboy, founder of MarketMavens.  I am always happy when Barron's interviews her, especially when they include a photo...  The title of the interview is "Coming: The End of Fiat Money".

She believes that the current fiat system will break within five years (but, almost everyone I TALK to does as well, yet everyone I SEE on TV says everything's OK, back to sleep sheeple...).

She believes that the Fed will continue to be a huge buyer of Treasuries in the future (who else will buy them?) and she opines that another QE will happen before the election.  She says that recent corporate high profits are based in large degree to non-repeatable cost cutting, and that margins are now getting squeezed.  And that the middle-income investors are cutting spending.  Deleveraging.

And if we go over the Fiscal Cliff?  A severe recession.

She says that if Romney wins, and does things right (cuts corporate taxes, improves the regulatory climate), then it might get better a little sooner, I'll along with that.

But, she is a BEAR!  Recently she wrote that even the Bank of Kazakhstan wants out of the US dollar!  And many of our creditors overseas are migrating to gold and other hard assets.  She does NOT like junk bonds, which have become a crowded trade in today's yield-starved environment.

***

Washington pro Jim McTague ("D. C. Current") writes that a quantitative trader (Reid Holloway) has a computer model showing an Obama victory this November...  And Holloway's record has been pretty good...

***

Editor Thomas Donlan visits a topic I have run into before: just because China is building a national high-speed rail network does not mean that WE need to.

Donlan is completely correct.  High speed rail in this country is WAY too expensive, and there would be considerable resistance at the local levels (and he writes that it would be much worse that the resistance against the Interstate Highways).  He rightly pans the California plan to connect the first phase: to connect Bakersfield with Madera (Madera, California, where's that?) as the first part of the plan to connect LA to SF.  Like that is going to happen...

China has certain advantages in building such a network that we do not.  A command economy (police state) to get people out of the way (of the rail lines).  Cheap labor.  Plenty of corruption.

The USA has real estate that is just worth too much to let its value be destroyed by rail lines (witness the Big Dig in Massachussetts).  Donlan finishes:

"The answer is paradoxical but true: America cannot build high-speed rail because it's too rich already."

***

I will not discuss too much in the Market Section, because last week not much happened in the markets!

"European TRader" author Jonathan Buck writes that BollorĂ© (BOLFrance) is worth a look.  Vincent BollorĂ© has built a rough equivalent of Berkshire-Hathaway there, buying stakes in other companies to get them to clean up their act.  ANd he runs hos own businesses well.

"Asian Trader" Kopin Tan writes about Chinese milk companies...  *yawn*  But, China is bringing in 55,000 cows from Australia to meet increased Chinese demand for dairy products.

Michael Aneiro ("Current Yield") writes for the second week in a row that pension funds are having problems meeting investment expectations, this time it is Calpers, the public sector pension fund in California only made 1% last year...  I have a feeling that Mr. Aneiro is going to be busy about writing up woes in pension funds woes because they earn so little but have promised so much...

The "Bond Center" (which shows those informative four graphs) shows the continued STEEP drop in euro short term rates, rather remarkable, but easy to understand given what a mess there is over there.

Alexandra Wexler ("Commodities Corner") writes that lousy weather in Brazil (too much rain) may drive up coffee prices...

In the Classifieds there is an intriguing ad: "Own A Gold Mine".  I will email the guy, and since he is in my telephone Area Code, maybe meet up with him.  I will keep any of you all up to date if you ask.

Northern Tier Energy LP may IPO this coming week.  They are an oil refinery in Minnesota that appears like it will be a REIT...  That might be interesting...

NO big insider sales or 144 Filings.

The Mighty Peruvian Sol was not so mighty last week, it declined about 0.1%, after last week's leap of almost 1.0%.  Ningun problema...

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