Agora Financial’s Rude Awakening

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Laguna Beach, California

• A conveniently-packaged, energy-focused mutual fund for your
  consideration,
• Ever heard of the Emerging Baltics-Southeast Asia-Central America
  portfolio? Neither had we,
• Weighing fear against greed, burning fuel at Mickey D’s and plenty
  more…

Eric Fry, reporting from Laguna Beach, California…

At this very moment, as we put quill to parchment, all of the world’s major
stock markets are nursing loses for the year. The S&P 500 has slumped nearly
6% during the first 15 days of 2008, and has tumbled about twice that amount
since reaching an all-time high last October.

Over in the Old World, London’s FTSE Index is also down 6% for the year and
down double-digits from its all-time high. And in the Orient, Japan’s Nikkei
225 Index has already dropped 11% during this young year, punctuating a
wicked 25% drop from its 2007 high. The Nikkei now sits at 2-year lows.

But lest you be inclined to despair, dear investor, please consider that the
short list of winning bourses in 2008 includes perennial favorites like the
Ukraine (+2.9%), Latvia (+2.6%) Malaysia (+2.2%) and Costa Rica (+1.1%). So
if you had the foresight to construct an Emerging Baltics-Southeast Asia-
Central America portfolio, you’d be sitting pretty. (We’re sure we must have
recommended such a portfolio, but a thorough search of the Rude archives
turns up nothing.) Every one else is sitting ugly.

How much uglier can the global stock markets get before they turn pretty
again? Your guess is as good as ours, or probably better. But since guesses
are like, well, you know what they’re like (hint: everybody has one), we’ll
offer up a guess: Things will get worse before they get better.

Under most circumstances, our well-honed contrarian instincts would compel us
to fade these tumbling markets – i.e. to nibble on the long side as stocks
fall. But for reasons we cannot quite explain, the long side of these
tumbling stock markets does not tempt us…at least not yet. We’re feeling
more fear than greed.

Many years have passed since the last good, old-fashion bear market. The
world is overdue for one. So just maybe a new bear market is gathering a head
of steam. And just maybe it will consume trillions of dollars of paper wealth
and last for months. Or maybe not. We’re just guessing, remember.

But even in the worst of circumstances, bear markets don’t last forever.
Eventually, panicked sellers exhaust themselves, as timorous buyers become
intrepid buyers. Eventually, selling yields to buying, just like darkness
yields to dawn and winter yields to Spring Break. (Woo-hoo!! Who wants a body
shot?!)

Maybe the sellers have already exhausted themselves and the buyers will soon
take command once again. We have no idea. But we suspect that the next “buys”
an investor ought to make should be relatively conservative “buys.” Heroes do
not often prosper in the financial markets. They get carried out on their
shields. Discretion is almost always the better part of valor. We’d advise
hanging out near the back lines and waiting for a few valiant investors to
meet their demise…and THEN jump into the fray.

But if you must buy something – and you wish to buy something other than a
successful investment like gold – you should probably buy a bona fide blue
chip. In the column below, Byron King nominates one particular AAA blue chip
to buy for the next bull market…whenever that might arrive.

— Byron King’s Energy & Scarcity Investor —

A California Energy So Secret, You Can’t Even See it Without a Top-Level U.S. Navy Clearance…

But a former Navy ‘insider’ is now ready to disclose the names of five
’secret’ energy companies that could make you $372,340…

The Navy has already collected $194 million from this discovery.

And CNNMoney.com reports that ‘Investments in [this 'secret' energy sector]
jumped nearly four-fold over the last two years, to about $100 million last
year… Because it’s [still] so small, there’s large growth potential
here…’ Here’s the Full Report.

————————————————-

Putting the Green in Green
By Byron King

General Electric is an American icon. Founded by the prolific American
inventor Thomas Edison, GE embodies the spirit of American ingenuity. And at
the dawn of the 21st century, the legacy of Thomas Edison endures, as GE re-
invents itself into a forward-looking, world-leading innovator.

Today’s GE is a vast worldwide company that includes 14 major business units.
These GE business units include several sectors with a direct bearing on our
interests in energy and natural resources. In fact, if you were looking for a
great mutual fund that focused on energy and resource technology, you could
not do much better than a set of holdings that looks a lot like GE.
Specifically, GE is a major player in power generation and electrical
distribution, lighting, oil and gas, railways and water.

These diverse operations have powered GE’s 35% earnings growth over the last
three years. And yet, the stock is no higher than it was three years ago.
Maybe GE’s shares deserve a little more credit. Let’s take a closer peek…

Power Generation

GE has been a leader in power generation systems since the dawn of the
Electric Age. GE is a manufacturer of systems for coal-fired steam turbines,
as well as hydropower systems, and has been doing this for nearly a century.
GE is also a leader in the manufacture of gas turbine systems, as well as
nuclear power generation systems.

There are, for example, over 90 GE-designed nuclear boiling water reactor
(BWR) systems installed worldwide today, about one-third of the total
installed nuclear power base in the U.S. alone. According to its Web site,
“GE is the last remaining U.S. vendor of light water reactor (LWR) technology
owned by a U.S. company.” Furthermore, GE has the world’s most current
ongoing nuclear plant construction experience and is “construction ready,”
based on its foreign experience in recent years.

Wind Power

But GE is also “construction ready” with a broad range of “environmentally
advantageous” energy solutions. For example, GE is one of the world’s leading
manufacturers of windmill systems. Over the past 20 years, the company has
supplied and installed over 7,500 wind turbine installations worldwide,
comprising more than 9,800 megawatts of capacity. By way of comparison, there
are about 40,000 megawatts of windmill systems installed worldwide, so GE has
provided almost 25% of the world’s installed base. GE has windmill
manufacturing and assembly facilities in Germany, Spain, China, Canada and
the U.S., where it fabricates wind turbines with rated capacities ranging
from 1.5-3.6 megawatts.

GE’s impressive wind division (not to be confused with its PR division)
reflects the company’s commitment to a process it calls “ecomagination.” This
somewhat corny slogan, according to GE’s Web site, refers to the company’s
“commitment to imagine and build innovative technologies that help customers
address their environmental and financial needs and help GE grow…GE’s
portfolio of energy efficient and environmentally advantageous products and
services [totals] 45.”

Electrical Distribution

But even while pursuing “ecomaginative” ventures, GE does not neglect its
traditional businesses. When it comes to electrical distribution products and
systems, for example, the entire field is synonymous with GE. GE holds
literally tens of thousands of patents on critical technologies within the
electrical distribution field. GE also has great depth in the design,
installation and maintenance of entire distribution systems, with a history
that goes back to creating the electrical systems that powered the Panama
Canal when it opened in 1914. The U.S., as well as much of the rest of the
world, has already embarked on an energy system reconstruction effort that
will carry through the next several decades. GE will surely be in the thick
of things, providing critical components, assemblies and services to the
endless array of projects.

Oil and Gas

GE is a leading manufacturer of capital equipment for the global oil and gas
industry. GE products include both rotating and stationary equipment, such as
LNG compression trains, pumping systems, re-injection equipment for natural
gas, safety equipment for oil and gas pipelines and subsea equipment for the
production of oil and gas.

Among the many names in the GE lineup is Vetco Gray, a leading provider of
equipment for both onshore and offshore oil and gas development. GE acquired
Vetco Gray earlier in 2007. GE/Vetco Gray offers customers and clients large-
scale capital drilling equipment for deepwater work, floating production
systems, shore-based and offshore drilling and completion systems and subsea
production systems. These latter items are among the most technically
challenging, highest-margin and highest-profit items in the resource
extraction business today.

Railway Systems

GE has manufactured more than 15,000 locomotives for railroads around the
world. This sector has become a fast-growing winner for GE because the
worldwide commodity boom requires railway equipment to haul carloads of
everything from coal to iron ore, grain to petrochemicals. According to
recently released earnings information, the GE locomotive segment has been
the most profitable business unit of all of GE’s holdings.

GE’s locomotive lineup includes the new “Evolution” series. These locomotives
are the product of six years of research and design and an investment of over
$250 million. The end result, according to GE’s Web site, is “the most
technologically advanced, fuel-efficient and environmentally compatible
diesel locomotive in history.” The Evolution locomotive consumes about 10%
less fuel than the competition and emits between 60-80% less air pollution,
especially particulate matter. GE’s backlog for these locomotives is growing
fast, so the business will be solid for at least the next four years.

GE does not make money just when it sells the locomotive, however. GE offers
its customers a satellite-linked tracking and control service that sends
diagnostic data back to a GE facility in Erie, Pa. There, GE technicians can
track the status of GE-built locomotives and determine in advance if wear or
failure is affecting one or more parts or systems. Then, the GE technicians
can contact the railway operator and consult over what action to take. This
includes ordering parts in advance to preventive maintenance or taking a
locomotive out of service to avoid further damage. This monitoring and
preventive maintenance service is highly profitable for GE.

Water

Water scarcity and shortages are becoming acute in many regions of the world.
So water-related industries are growth sectors. We believe that moving and
treating water will, in the future, typically carry high profit margins. GE
Water & Process Technologies is a fast-growing business unit that provides
system-based solutions to problems concerning water and wastewater treatment
and related water processes. GE has had a long history as an industrial
manufacturer, in which the company had to deal with its own wastewater and
other pollution issues. (Remember PCBs in the Hudson River?) Now GE can
capitalize on its own internal corporate experience by offering water-related
services to commercial and industrial users.

GE water systems include desalination equipment, membrane filtration and
industrial pollution control. One of GE’s major water-related efforts is with
the government of Alberta, concerning treatment for wastewater coming out of
the immense tar sands development projects. GE will provide both research and
consulting services to the Alberta government in an effort to mitigate the
large amounts of contamination to Alberta waters, as well as to lessen the
impact of corrosion on the vast pipeline systems that crisscross that
Canadian province.

So as we look ahead to the energy and natural resource issues that confront
the U.S. and other parts of the world, GE will likely to play a key role in
providing solutions. GE is positioned for long-term, large-scale growth in
the energy and natural resource field, and GE is also positioned to profit
from it.

[Joel's Note: Most of us agree that oil ain’t going to get much cheaper.
Sure, we’ll probably see a short-term price pullback as fears of a US
slowdown and the end of the winter season alleviate a little of the demand
pressure…but this period of calm won’t last for long. It will get cold
again just as sure as demand from emerging markets like China and India will
continue to outpace new oil discoveries. The key, as Byron reminds us, is to
identify the companies that will profit from “the next trillion barrels…and
beyond.”

As the energy crunch escalates, one Californian company Byron has selected
for readers of his Energy & Scarcity Investor looks set to take off. And the
tipping point could come from an interesting new piece of legislation just
inked in that state. If you’re interested, here’s a report with all the
details to get you started. Beyond The Next Trillion: A Special Report

——————————

Rude Endnote: “Cheap Crude Oil in the future?” queries one Rude reader,
responding to our solicitation for predictions on the price of commodities in
‘08. 

“All you have to realize is to take a look at JFK Airport…just one of the
large Airports of the world. Those Jumbo Jets, stacked up 16 deep, don’t burn
Ethanol nor used McDonald’s French fry oil, they suck up Crude Oil in the
form of Jet Fuel, just as the 18-wheelers on Interstate 10 running bumper to
bumper 24 hrs a day do.

“Cheap Crude Oil is not going to happen, reach for your pocketbook in the
future.”

On the subject of everyone’s favorite fast-food joint, another Rude reader
chimes in.

“I made a noon date to meet a client in a small town in Ohio, at a McDonalds. 

“It was about 50 degrees when I parked so I ran the heat at “high” before I
shut off the engine. The sun was shining brightly.
 
“A pickup truck with two working men parked next to me.  Leaving their truck
running, the two talked for about five minutes, then one went in and brought
back two meals. Truck still running, they ate then talked for another twenty-
five minutes, then drove away.
 
“A few minutes later, a car with a middle-age woman pulled in to the vacant
spot. She, too, left her car running, but she did no more than read a book. 
I assumed that she was waiting for someone.  But she read for nearly a half
hour, then put the book down and drove away.
 
“With the sun coming in I was comfortable the whole time, without my engine
running.  The client finally showed up, apologetic at being an hour late. 
When I told him about the vehicles next to me, burning gasoline the whole
time, he said “aren’t you glad you own so much oil stock?”
 
“Oh, yes I am.  Yes, I am.”

And with that, your editor is off to McDonalds. (And yes, there are plenty of
them here in the Emirates too.)

Adios,

Joel Bowman
Rude Awakening