March Edition: URB in 60 seconds

March flew by and Easter was alot earlier than it has been in a long time. But the markets didn't disappoint and here are some things that are on my mind as we move into April. (no particular order):

Phillip Morris break-up: Yeah I know cigarettes are almost a thing of the past. You can’t even smoke in a bar/club…thank goodness for my clothes, hair, and lungs. But a new target is in sights for the tobacco industry. With less restrictions, tobacco companies are growing overseas and fueling growth for these companies. Now this is an industry that often gets labeled as a "sin" or "vice" stock/industry...no arguments from me but once Phillip Morris (NYSE: MO) spins of Phillip Morris International (NYSE:PMI) it will be off to the races. With double digit growth in the pipelines, many hope this will be a cash cow like its poppa in the US. There are some concerns with how the spin-off will be taxed so I won't be jumping in before that.
said.


WiMAX - Think wireless radio and other devices anywhere you go. Some say this new technology that provides wireless access acrosss metropolitan cities will be the wave of the future. Does this mean goodbye to Satellite Radio...we'll see. A number of big players are onboard, Intel, Sprint, Time Warner, Comcast, and Clearwire to name a few.

Private Equity Firms don't play nice - After getting my heart crushed by private equity (JC Flowers & others) dissing Sallie Mae (NYSE: SLM) and all my gains, these guys are at it again. Private equity firms just dissed Clear Channel and sent the stock spiraling down...guess the contracts just weren't written that tight in the first place!

Rebound in Financials and Mortgages - This rally spurned by the "life preserver" handouts by Ben Bernanke caused a rally on these stocks. But this is short lived in my opinion. Remember, consumer confidence is still very low, banks are still getting downgraded, and the housing situation is till a mess.

Federal Reserve Intervention - Nuff said on this topic, throw me a life preserver, playa.

Kenyan IPO – Safaricom (SCOM.NR) A good friend gave me the heads up on this telecom giant in Kenya. The window for the IPO opens March 28 and it should be interesting across many fronts. The IPO is priced to get a large local participation across the East African countries...not just Kenya. And like my idol Warren Buffet preaches, go with something you know. And after my trip to West Africa last year, I know that mobile phones are the hottest commodity in emerging markets (okay maybe not the hottest, but close). With costs being cheaper to put cellular towers up instead of wired phone lines many emerging countries are embracing cell phone. And with the ability to send someone minutes (almost like exchanging them as currency) this will be the backbone of technology growth across the world. But let's focus on Safaricom... its got the backing of Vodafone who is 40% stakeholder...which isn't a weak amount. And it has an 80% marketshare!!! Yeah take a minute to let that settle. I would be all over this like white on rice, but my brokerage firm said that they may not have access to this IPO, but note Morgan Stanley is a playing a role as a transaction advisor so if you can get in on through Morgan...make it happen.

Hey I Can't Swim...and neither can Wall Street

I am not a great swimmer, so why is the Fed throwing a life preserver to big companies and not me.

When the market starts flip flopping more than they say John Kerry did a few years ago I usually sit back and think it all through. What is really going on in front of me, did I get it right, and can I really see clearly now because the rain isn't exactly gone. To answer some of these questions here we go:

We have been discussing a Recession for a very very long time now, check out my post from LAST YEAR on this subject, where we weren't afraid to bring up the subject: (http://urbanomics.blogspot.com/2007/10/welcome-to-good-life.html).

Its good to know that most of the economists now finally agrees with us (what took so long?), and this article from last month shows a change in their stance: (http://money.cnn.com/2008/02/05/news/economy/recession/index.htm)

Now lets begin to make our way through the clouds and play out multiple scenarios to see what this all means:

Snapshot of a write-up by Bill Fleckenstein:

"Where will all this stop? Can those who behaved prudently afford to bail out those who behaved imprudently? Why should they have to? And is that what we really want? After all, this country's median income of roughly $49,000 can hardly be expected to service the debt of the median home price of $234,000, up from approximately $160,000 in 2000. Let's do a little math. Forty-nine thousand dollars in yearly income leaves approximately $35,000 in after-tax dollars. Call it $3,000 a month. A 30-year, fixed-rate mortgage would cost approximately $1,500 per month. That leaves only $1,500 a month for a family to pay for everything else! (Of course, in many communities the math is even less tenable.) This is the crux of the problem, and the government cannot fix it."

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CateringToTheBailoutNation.aspx

Thanks to Bill's write-up here, we continue to not be afraid of going against the grain. Noticed he used a familiar line that I often use here at Urbanomics and that's "Do the math"...if it don't make dollars it don't make sense!

In my opionion, I am gonna go out on a limb and say that the recession continues for awhile as the Federal Reserve continues to unnecessarily interfere and "bailout" the financial companies...instead of the financial markets. Free capital market thinking says that these companies that took risky investments understood those risks and continued forward with their strategies. I also argue that the Federal Reserve's strategy continues to do very little for 'average person' it aims to protect. I am not calling for a bailout for consumers and homeowners across the country but I am calling for a strategy to achieve balance out of all this mess. That policy would be further assistance for homeowners, increased scrutiny in lending practices and regulatory oversight of the banking institutions that lend and package loans, and finally a policy that focuses on fighting inflation, low economic growth, and a falling valuation in the 'dollar'. And this isn't just the Fed's responsibility, the SEC, FDIC, and government need to step in and do their part.

I fear the current policy gives reassurance to the investors and Wall Street but it simply realigns the financial power on Wall Street (See Bear Stearns), rather than fixing the problems. Again I go back to when Urbanomics called the current environment a true RECESSION, last year. The numbers didn't lie then and thats why we recommended readers to stay away from financials and homebuilders especially after we identified the housing bubble. No one is going to bail out the investors of those mortgage companies so lets not bail out the companies themselves.

Picks based on recent Posts

Here is the detailed write-up on the picks that I like based on my most recent posts. Although I am holding steady with my current stocks, I would be a purchaser of these stocks:

Medcath (NYSE:MDTH)
This company owns and operates hospitals specializing in the diagnosis and treatment of cardiovascular disease. As this country continues to get unhealthier and older, there will continue to be a need for this type of specialization in healthcare. After their most recent earnings release, it has been trending down and taken out its 52 low in the process. I think a base has been formed around 19.50s and should move higher from here. There is some support from private equity and a majority of the analysts have MDTH rated at least a BUY. I have recommended MDTH in the past, and re-recommended it now.

AK Steel (NYSE:AKS)
The buzz on AK Steel is too much to ignore. Every stock analyst is talking about the impact of steel…everything from high demand to reliance on steel for infrastructure projects like Exxon Mobil’s $25 billion dollar infrastructure investment. The play here is AKS along with US Steel.

OIH or PXJ or XES - Oil Services (check out these Exchange Traded Funds)

You can’t miss the impact of oil at the pump or across the world. I don’t like oil stocks as a whole partly due to the run up they’ve already had but the oil refineries have done a whole lot of nothing…see Tesoro’s (NYSE: TSO) stock price. So the play in oil should be behind the scenes with the companies that service the oil sector.

Say Hello...

to Bad Guy. And no this isn't some lame play off of the movie Scarface. Instead I was listening to a track by Jay Z, from the American Gangster album. Here are the lyrics from the last verse of the song:

"We ain't thugs for the sake of just being thugs
Nobody do dat where we grew at, brotha, DUH!
The poverty line, we not above
So out come the mask and glove cause we ain't feelin' the love
We ain't doing crime for the sake of doing crime
We movin' dimes cause we ain't doin' fine
One out of three of us is locked up doing time
You know what that type of shit can do to a brotha mind?
My mind on my money, money on my mind
If you owe me ten dollars, you ain't giving me nine
Ya'll ain't give me 40 acres and a mule
So i got my Glock 40, now i'm cool
And if Al Sharpton is speaking for me
Somebody get him the word and tell him i don't approve
Tell him i'll remove the curses
If you tell me our schools gon' be perfect
When Jena 6 don't exist
Tell him THAT's when i'll stop saying bitch---BIIITCH!"

Now I've barely edited these lyrics, but it should give you a pretty good idea of what the song was about. Now I don't agree with what everyone does out there but he is also saying that things are done for a reason, unfortunately many times for reasons that we don't want to admit to. Now my mission here at Urbanomics isn't to glorify violence or getting ahead 'no matter who gets hurts'.

My mission at Urbanomics is to empower people to become financially independent and to give back to those that are need it the most in the process. Now I know this isn't profound and sometimes not the most popular way of thinking, but there are others who truly believe that the more that you give to others the more you will receive in return. Just take a moment to tune into what Warren Buffet and Bill Gates have been saying and doing. Its no mistake that the Number 1 & 2 wealthiest man are also respected for their ability to give BIG. Speaking of giving big, how about a shot out to Oprah's Big Give, which is empowering everyday people like you and me doing bigs things for others. So some of the ways I hope to help people is to share my thoughts on how to manage your personal financial wealth and to remind you that...the best way to continue to grow that cheese is to give back in many different ways.

I wanted to highlight a hedge fund The Children's Investment Fund (TCI). This is hedge fund founded by activist investor Chris Hohn in 2003. TCI is unique because it is know for actively agitating change at the companies it invests in. The twist that I like is that The Children's Investment Fund Foundation is managed by Hohn's wife. A portion of TCI's profits go to The Children's Investment Fund Foundation making a large charity foundation in the UK. What a great concept by Mr. Hohn and he is making people give back whether they want to or not. So if you find some great picks here, feel free to use a portion of those profits to do something big or little, like giving back (Just send me a shot out on the check).

And you know I had to give you a stock pick out of all of this, (courtesy of streetinsider.com) take a look at one of his recent investments in TransAlta (TAC).

Say Hello to the Bad Guy. How long ago was I pointing out that the economy was struggling. Now every major network is complaining about rising inflation, a very weak dollar, and a US economy that just isn't growing. Interesting how they've changed their stories so quickly, because they can't hide behind the data. From my previous post I've given you the plays and in this market even I may be a little more diligent in monitor my portfolios progress.

I truly believe that you:
Short Financials
Long Commodities like GOLD, OIL, STEEL
Sell nice moves up in your stocks and by the positions i've outlined above on the dips