Shares of Apple Inc. (Nasdaq: AAPL) have gained 100% since the start of the year, and with the likely release of an innovative “tablet” computer and the pending debut of its wildly popular iPhone in China both in the offing, the company’s stock could still find some room to run.

Shares in the Cupertino, Calif.-based company are at their highest level since August 2008, thanks to a successive string of upbeat earnings reports, a near-$30 billion cash reserve and recession-defying sales of its products.

The iPhone alone sold 5.2 million units in the second quarter, compared to 717,000 the year before, and its Macintosh computers, which still have a miniscule share compared to Windows-based PCs, are gaining momentum.

Several market research firms, including Deutsche Bank AG (NYSE: DB) and Barclays PLC (NYSE ADR: BCS), now have price targets for Apple stock that exceed $200 a share.

Apple’s shares closed Friday at $170.05, up 60 cents, or 0.35%, each. An advance to $200 would represent a gain of about 18% from current levels.

Sales of Apple’s now-ubiquitous iPod have slowed, but Apple executives anticipated that would be the case, as sales of its music-playing iPhone and iPod Touch grow.  Both of those devices have access to thousands of applications sold in the App Store.

A tablet computer from Apple, which has been a hot news topic in the tech world since last spring, moved closer to reality last week. The Wall Street Journal reported that since returning from leave to undergo aliver transplant, Apple Co-Founder and Chief Executive Officer Steve Jobs has devoted almost all of his time to this specific device.

Pundits have already dubbed the gadget the “MacBook Tablet” or “iTablet,” and executives believe it will have positive implications for media going forward.

“It’s a portable entertainment device,” one entertainment executive toldThe Financial Times. “It’s going to be fabulous for watching movies.”

Recording executives say Apple plans on using the large screen for interactive booklets and liner notes that typically accompany compact discs. And book publishers could view the tablet as an alternative to Amazon.com Inc.’s (NASDAQ: AMZN) popular Kindle or Sony Corp.’s (NYSE ADR: SNE) Reader in the growing e-book market.

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“It would be a color, flat-panel TV to the old-fashioned, black-and-white TV of the Kindle,” one book executive told the FT.

Hollywood and video game executives haven’t been briefed on the tablet, but both have shown optimism for it. A large selection of movies and games are already available for the iPod, iPod Touch and iPhone.

Apple is one of the most secretive companies in Silicon Valley. Its iPhone 3G S, which sold 1 million units in its first weekend, wasn’t announced until a few days before its release. By contrast, one of its primary competitors Palm Inc.’s (NASDAQ: PALM) Pre smartphone, released a few weeks before the 3G S in June, was first announced in January at the Consumer Electronics Show. Apple is aiming for a September or October launch of the tablet, The FT said.

While tablet computers are nothing new – they first debuted in the early part of this decade – they only comprise 1.4% of the global portable market, The Journal said. Toshiba Corp., Hewlett-Packard Co. (NYSE:HPQ) and Fujitsu Ltd. (OTC ADR: FJTSY) all attempted to sell tablets, but ultimately the devices proved to be too cost-prohibitive for consumers.

Despite the worst economic downturn since World War II, Apple is having no trouble convincing consumers to buy iPhones with pricey plans and more expensive Macs. Oppenheimer & Co. analyst Yair Reiner told the FT he expects Apple’s tablet to cost between $600 and $1,000, the range for many Windows-based laptops today.

The tablet is considered by analysts to be Apple’s answer to popularnetbooks, which are smaller laptop PCs designed for navigating the Internet. They usually cost between $200 and $400. CEO Jobs and others in the Apple brass ruled out developing a netbook in a conference call last fall.

“We don’t know how to make a $500 computer that’s not a piece of junk,” Jobs said at the time.

The iPhone Meets the Red Dragon

Apple, whose Mac computers have played second fiddle to personal computers since 1984, found mainstream success in the gadget realm starting in 2002 when it debuted the iPod. To date, roughly 300 million iPods have been sold since 2002. In 2007, Apple debuted the iPhone, which has sold more than 26 million units.

The iPhone will make its debut in mainland China in the fourth quarter with state-owned China Unicom Ltd. (NYSE ADR: CHU) having cut a deal to act as the exclusive carrier for three years. Like AT&T Inc. (NYSE: T) in the United States, Unicom will not share revenue with Apple. Instead, it will offer a subsidy to consumers to lower the price, which is expected have a similar $99 to $299 range with two-year service contracts.

Unicom, which is rolling out its third-generation network (3G), enabling wireless video and high-speed Internet navigation, has 141 million wireless users. Unicom will be competing with an estimated 1.5 million gray market iPhones, The Journal reports, citing research firm BDA China Ltd. Unicom, which just reported a 45% drop in profit, is counting on Apple’s iPhone to gain share over market leader China Mobile Ltd. (NYSE: CHL), which has over three times Unicom’s subscribers.

The overall Chinese mobile market, which has 687 million subscribers – more than twice the population of the United States – is highly competitive. Several phones running Google Inc.’s (Nasdaq: GOOG) Android operating system are due by year’s end, and China Telecom Ltd. (NYSE ADR: CHA) is in talks with BlackBerry maker Research in Motion Ltd. (Nasdaq: RIMM) and Palm to bring those phones to the world’s fastest-growing major market.

“It’s essential for Apple to be in China; it’s a huge market,” CIMB Securities Ltd. Deputy Head of Research Bertram Lai told Bloomberg News. The iPhone “is not just the premium product, it’s an aspirational product,” he said.

Source: Hot Stocks: Up 100%, Apple’s Shares May Still Have Room to Run ]]> http://www.contrarianprofits.com/articles/hot-stocks-up-100-apple%e2%80%99s-shares-may-still-have-room-to-run/20247/feed 0 http://www.contrarianprofits.com/articles/boeing-will-test-dreamliner-in-2009-but-delays-delivery-again/20209 http://www.contrarianprofits.com/articles/boeing-will-test-dreamliner-in-2009-but-delays-delivery-again/20209#comments Fri, 28 Aug 2009 20:34:40 +0000 Don Miller http://www.contrarianprofits.com/?p=20209 Boeing Company (NYSE: BA) yesterday (Thursday) announced it would test-fly its 787 Dreamliner later this year but disappointed customers by delaying delivery of the plane until the fourth quarter of 2010.

Wall Street cheered the announcement as Boeing’s stock soared more than 6% in New York trading after the company said it still expects the 787 to be profitable.

The rally came despite news that costs for the first three test planes would be charged-off as having no commercial value, resulting in an estimated pretax charge of $2.5 billion, or $2.21 a share, in the third quarter. Boeing said the charge wouldn’t affect its cash flows.

“This new schedule provides us the time needed to complete the remaining work necessary to put the…

As Money Morning warned in an investigative report that ran in early April, the stumbling U.S. commercial real estate sector was developing into a financial black hole that was threatening to blot out the resurgence of the U.S. economy. Commercial real estate prices have been in sharp decline for the past two years, making it tough for owners to refinance and pressuring companies to sell buildings at steep discounts.

The plummeting prices not only jeopardize a possible recovery, but they put pricing pressure on commercial mortgage-backed securities (CMBS) that are held by institutional investors.

Commercial property is “certainly going to be a significant drag” on growth, Dean Maki, a former Fed researcher who is now chief U.S. economist at Barclays Capital Inc. (NYSE ADR: BCS), told Bloomberg. “The bigger risk from it would be if it causes unexpected losses to financial firms that lead to another financial crisis.”

Property values for commercial real estate such as hotels, apartments, shopping malls, and office buildings fell by more than 18% on a year-over-year basis during the second quarter, according to an index published by the Massachusetts Institute of Technology’s Center for Real Estate. That’s the biggest decline in the 25 years since the index was first published. It’s also the fifth consecutive quarterly drop and the seventh quarterly decline in the past eight quarters.

The index is down 39% from its mid-2007 peak, surpassing even the 30% decline in housing prices.

That means companies that earlier in the decade borrowed heavily and expanded as property values soared have been left with buildings that are worth far less than their mortgages and aren’t generating enough cash from rental fees to pay off financing expenses.

Maguire Properties Inc. (NYSE: MPG), one of the largest office-building owners in Southern California – including in the downtown Los Angeles market, for instance – is making preparations to turn seven properties with about $1.06 million in debt over to creditors.

But even with those sales, Maguire still has $3.5 billion in debt and many analysts believe that exceeds the value of the properties in its portfolio.

“Almost everything in Maguire’s portfolio is underwater,” Michael Knott, an analyst with Green Street Advisors Inc., told The Wall Street Journal. “I don’t envy some of the choices that they are having to make.”

Maguire reported a second-quarter net loss of $380.5 million, more than triple the loss of $110 million reported a year earlier.

If the slump in commercial real estate continues to test these depths, the Federal Reserve may be forced to keep emergency-lending programs in place and leave its benchmark interest rate close to zero for longer than some investors expect.

The Fed expanded the Term Asset-Backed Securities Loan Facility (TALF) in June to cover as much as $100 billion in loans to support commercial mortgage-backed securities.

More than 40 members of Congress, led by Rep. Paul E. Kanjorski, D-PA, on July 31 sent a letter to Bernanke and U.S. Treasury Secretary Timothy Geithner, asking them to extend the program through 2010.

“The $6 trillion commercial real estate market has recently experienced a massive credit shortfall, which the TALF program has only just begun to help stabilize,” the petition read. ”While I would like to wind down the government’s emergency support for the private sector as quickly as possible, we need to provide more time for the TALF program to work in this industry, especially with $1 trillion in commercial real estate debt maturing in the near future.”

Fed Chairman Bernanke – in his testimony before the Senate Banking Committee on July 22 – assured lawmakers that he is ready to counter the threat posed by the ailing commercial real estate market, and said he would consider the policymakers’ petition for an extension of the Term Asset-Backed Securities Loan Facility.

“We will certainly be monitoring the situation, and if markets continue to need support, we will be extending the final date of that program,” Bernanke said. “We are somewhat concerned about that sector and are paying very close attention to it. We’re taking the steps that we can through the banking system and through the securitization markets to try to address it.”

Source: Will Commercial Real Estate Pose the Next Hurdle for the Federal Reserve?

But the news – released in a government report Friday – isn’t all good: Unemployment is likely to remain high in the months to come as some of these encouraging indicators of new economic growth evolve into a painful jobless recovery.

Friday’s jobs report and other recent data “reinforce our view that the U.S. recession ended in June, and we have raised our third-quarter 2009 growth forecast to 3.5%,” Christian Broda, a Barclays Capital (NYSE ADR: BCS) economist in New York, wrote in a research report yesterday.

Alan Krueger, the U.S. Treasury Department’s top economist, said he thought forecasts that growth would resume this year were “plausible” but expressed concern about long-term unemployment, which remains as a nagging problem.

“The administration is constantly looking at how to get people back to work, how to lessen the pain of the recession,” Krueger said in a news briefing.

In the government report released yesterday, the U.S. Labor Department said that U.S. payrolls fell by 247,000 after tumbling by 443,000 in June.

Factory payrolls fell by 52,000, their smallest decline in a year. Builders shed 76,000 jobs, an improvement over June’s decline of 86,000, and service-sector payrolls fell by 119,000 last month after dropping 220,000 in June.

Monthly job losses peaked at 741,000 in January.

While optimistic about the figures, analysts warned that the unemployment rate remains high and said that American consumers are likely to feel considerable strain for months to come.

Retail sales likely dropped for the eleventh consecutive month in July. And the two leading indicators of U.S. consumer sentiment – the Reuters/University of Michigan index of consumer sentiment and the Conference Board’s confidence index – continue to show weakness.

The Reuters/UM index dropped to 66 in June from 70.8 the month before, and a preliminary report for July shows further erosion to 64.6. The Conference Board’s index fell to 46.6 in July, down from June’s 49.3.

“We have in motion a turnaround in the labor market,” James O’Sullivan, a senior economist at UBS Securities LLC (NYSE: UBS) told Bloomberg News. “For a sustained pickup in consumption, we need a sustained improvement in the job market, and hopefully that’s in process now.”

Also, the official 9.4% rate doesn’t reflect the complete unemployment picture, because it doesn’t include people who were unable to find jobs and subsequently left the work force.

The rate of unemployment was actually 10.1% in June and 10.2% in July, according to the Bureau of Labor Statistics (BLS), which includes discouraged workers in its analysis.

The jobless have also been unemployed for longer stretches of time. The number of long-term unemployed – those jobless for 27 weeks or more – jumped to 4.9 million from 4.4 million in June. That means 32.5% of the all those who are unemployed had been looking for work for longer than half a year, a statistic that was up from 28.9% in June.

That problem is particularly severe as jobless benefits for many unemployed Americans are beginning to run out. Unemployment benefits generally are offered for a period of 26 weeks.

About 540,000 people nationwide will run out of benefits by the end of September, with the clock running out on an additional million by the end of the year, according to the National Employment Law Project.

“You have this desperate situation with long-term unemployment, and now folks are running out in big numbers of unemployment benefits,” Maurice Emsellem, policy co-director of the National Employment Law Project, told the Los Angeles Times.

Long-term unemployment will also keep many young, first-time jobseekers on the sidelines as more experienced unemployed workers file back into the workforce.

“Long-term unemployment is debilitating for people trying to find jobs in the first place,” University of Texas Prof. James K. Galbraith told TIME magazine. “Even if things stabilize and start to improve, bringing the unemployment rate down below 9% is going to be a struggle.”

Source: Joblessness Continues to Plague the Economy

Managed futures programs – alternative-investment vehicles that enabled professional money managers to take positions in a wide variety of securities and derivatives – posted strong returns in a year that was marked mostly by investment losses. The average managed futures program returned about 14%, according to the Barclay CTA Index, and 11.4% as measured by the Stark 300 Traders Index.  By comparison, theStandard & Poor’s 500 Index and the tech-laden Nasdaq Composite Index each plummeted nearly 40% in 2008, while the Dow Jones Industrial Average nosedived 33.8%.

“Managed futures funds like drama and volatility, so 2008 was a banner year,” said Curtis Lyman, managing director of HighTower Advisors LLCand principal of its West Palm Beach, Fla.-based Alpha Wealth Division.  “While I don’t know what is going to happen tomorrow, some of the major dislocations in the marketplace still exist, which could offer the potential for a good environment for this strategy moving forward.”

While investors who participated in managed futures programs reaped significant performance benefits both on an absolute and relative basis last year, many retail investors and even some institutional players are still unaware of this product and the characteristics that contributed to the lofty returns.  And while the entire asset class still only holds about $225 billion, according to Barclay Trading Group (NYSE ADR: BCS), it has grown significantly over the past two decades as investors learn about its performance history and strong diversification features.

“Managed futures, as an asset class, is still relatively unknown,” said Paul Wigdor, president of Superfund USA Inc., a public managed futures fund that oversees $1.7 billion in assets apportioned across 18 countries.  “We are trying to build this asset class  by educating advisors, investors, and the media about this product.  We are not trying to replace the more traditional asset classes, but merely to educate people about the need to diversify beyond just stocks and bonds.”

The Lowdown on Managed Futures

Before making an investment in a managed futures account, an investor must first develop some insights on the overallfutures market. Afutures contract is considered a derivativeinstrument, whose value is determined by the movement of the underlying asset or market. The contract represents an agreement to buy or sell an underlying asset at a predetermined price and date in the future.

Managed futures funds are managed by commodity-trading advisors, or CTAs, who monitor and trade in up to 150 to 200 different futures markets that range from equities to fixed income to currencies to agricultural products to energy to metals.  The positions can either be “long” (buy the underlying asset) or “short” (sell the underlying asset) based on expectations of future price movements.  These managers often employ “leverage” – using borrowed funds to buy on margin – which allows them to maintain larger positions in the underlying assets than they otherwise would be able to if they paid upfront in full. Buying on margin is a tactic that can dramatically increase returns when the manager has made the correct market call, but which likewise magnifies the losses when the investment manager is wrong.

CTAs typically charge investors management fees in the range of 1.5% to 2%, and may also earn incentive fees of 20% to 25% on any new profits generated by the managed-futures fund.  While some investors may claim that such fees seem excessive, performance is always quoted on a “net of fees” (after fees have been paid) basis, so the returns these funds generate can be accurately compared to the gains or losses generated by more-traditional investment vehicles.

Other factors that are important to note:

• The managed-futures industry is highly regulated by the U.S. Commodities Futures Trading Commission (CFTC).
• The future exchanges offer tremendous liquidity,
• And the existence of clearinghouses to guarantee transactions reduces the counterparty risk.

“Our fund is publicly registered and regulated by the SEC and CFTC,” said Superfund’s Wigdor.  “In light of Madoff and other scandals, our clients take great comfort in its transparency.  We file 10-Ks and 10-Qs; our auditor is Deloitte & Touche and our [net asset value] is computed by PNC Bank (NYSE: PNC).”

A Look Back at the Beginning

While managed futures remain an untapped market in many investment circles, the earliest futures market was actally formed in the mid-1800s when the Chicago Board of Trade was established to provide an outlet for Midwest farmers to sell their products to East Coast merchants.  The farmers were able to lock in prices and often hedge their operations against poor weather conditions or other situations that could adversely impact future sales.

In the early days, agricultural-based contracts dominated the futures markets and the first financial futures were not introduced until 1975. Today, more than 70% of all futures transactions are based on financials as their underlying securities, with contracts related to stocks and interest rates among the most frequently traded, according to Man Investments.

The Joys of Non-Correlation

For most investors, the main appeal of a managed futures account is its ability to provide significant diversification to a well-balanced portfolio.  Because the managed-futures asset classes are largely non-correlatedwith stocks and fixed-income products, an allocation can reduce the overall portfolio risk, while offering the potential for yield enhancement, particularly during challenging times for traditional assets like those experienced in 2008.

Hightower’s Lyman agrees that non-correlated assets can be a welcome addition, which is why he incorporates managed futures into portfolios of his more-sophisticated clients.  He believes managed futures play an important role in his clients’ overall risk-adjusted returns.

“The addition of managed futures offers the potential to smooth out portfolio performance because of their low correlation with equities,” Lyman said, noting that he builds client portfolios that are designed to provide consistent returns over time and that are broadly diversified across various asset classes.

Managed-futures assets can be particularly beneficial during some of the stock markets roughest stretches, he said.

“Since we are always looking to reduce volatility through the inclusion of low-correlated asset classes, managed futures represent an investment we need to consider,” said Lyman.  “From a performance standpoint, if you look at the 10 worst months for stocks since 1987, managed futures on average have dramatically outperformed.”

However, it’s important to note that investors use managed futures as only one piece of a well-diversified portfolio. In fact, due to the highly regulated nature of the futures markets, most investors will limit this part of their portfolio to no more than 10% of their total assets. And as the various asset classes rise or fall in value over time, investors will need to periodically rebalance their holdings to make sure that they do not exceed that 10% allocation limit.

Lyman has not experienced any problems working within the regulatory framework and says the portfolios of his most-aggressive clients tend to allocate an average of 5% to 7% of their holdings into managed futures.

Source: Managed Futures Can Put Investors in the Black – Even When Stocks Are Deep in the Red

Eugene S. Takle, a professor of atmospheric science at Iowa State University, and the director of the school’s “climate science initiative,” says the research study concluded that U.S. wind strength has potentially declined by 15% to 30% during the past 30 years – an average decline of as much as 1% a year.

While conducting the study – which will appear in the Journal of Geophysical Research – researchers reviewed wind data taken at airports around the United States, and then based their findings on two sets of figures: One set from 1973-2000, and the other from 1973-2005.

The study concluded that three factors could be contributing to the declines in U.S. wind strength: Land-use changes, a changing climate and changes in the kind of instruments used to measure the wind, Takle told MarketWatch.com.

“If there have been trees growing or new buildings constructed near airports, it could impact the speed of winds on airports,” Takle said. However, it is also “[basic] meteorology that the wind is driven by differences in temperature between the poles and the equator, and those differences have been narrowed by climate change.”

Tough Timing

The findings come at time when the United States is making a serious push to increase the amount of electricity that’s generated by wind turbines grouped into so-called wind-power “farms.” Attempts to harness the wind are part of a broader national – or even global – commitment to “green” energy sources as a way of reducing dependence on oil and other fossil fuels for power generation.

Other power sources include solar, geothermal, hydroelectric and nuclear for commercial electricity production, while automakers are looking at new types of batteries and such innovations as power-storing “fuel cells” as alternatives to the conventional internal combustion engines that power most of the world’s cars and trucks.

The objectives are twofold. By decreasing the U.S. reliance on foreign oil, the country is hedging against the time when global supplies of the “black gold” begin to dry up, an eventuality that will propel the prices of crude and gasoline skyward. Diversifying away from oil and, perhaps, even coal is also a way of reversing – or at least slowing – environmentally ruinous (and politically controversial) global warming.

President Barack Obama is attempting to use the ongoing financial crisis to create a sense of urgency about America’s energy future, a challenge that no prior administration has yet been able to meet.

About one-third of President Obama’s $800 billion-plus stimulus packagewill go to infrastructure, with $30 billion allocated for U.S. roads and highways and another $10 billion earmarked for railways and mass-transit systems.

President Obama has also proposed spending $150 billion “over the next 10 years to catalyze private efforts to build a clean energy future.” The administration also proposes to increase the amount of electricity that comes from renewable resources from 10% in 2012 to 25% by 2025,Wall Street 24/7 reported in early January.

Creating the power is only part of the problem. Delivering it will be a challenge, too, especially given the country’s aging power grid. Upgrading that aging equipment is expected to cost more than $880 billion, according to a November 2008 report from the Brattle Group.

An Energy Boon For Entrepreneur T. Boone?

In many cases, those federal outlays will serve only as seed capital. It will likely fall to innovators in the U.S. private sector to really energize the alternative-power market.

One key player is legendary oilman and venture capitalist T. Boone Pickens, who has unveiled a plan to cut U.S. dependence on foreign oil through the power of alternatives such as wind and natural gas, Money Morning reported last July.

“We’re paying $700 billion a year for foreign oil. It’s breaking us as a nation,” Pickens said at the time. Former U.S. President Richard M. Nixon “said in 1970 that we were importing 20% of our oil and that by 1980 it would be 0%. That didn’t happen. It went to 42% in 1991 with the Gulf War. It’s just under 70% now. Where do you think we’re going to be in 10 years when our economy is busted and we’re importing 80% of our oil?”

Pickens wants to create what he calls a “bridge to the future” that will help cut slash the U.S. reliance on imported foreign oil by focusing on two specific alternatives:

• Cars that burn natural gas instead of gasoline.
• And electricity generated by wind power.

There’s a smooth and elegant logic to his strategy: By constructing electric-generating wind-power farms, the United States can free up natural gas supplies that currently generate 22% of the nation’s electricity. That natural gas can then be used to power cleaner-burning cars and trucks, thereby reducing our dependence on imported oil while also reducing the damage to the environment. This will also buy time for the development of other, even-greener, alternative sources of energy.

Pickens’ Wind Power Project

According to Pickens, wind power could eventually fulfill as much as 20% of the United States’ energy needs. Calling the Great Plains region of the United States the “Saudi Arabia of wind,” Pickens last summer launched plans for a $10 billion alternative energy project in the Texas panhandle that has the potential to one day become the world’s largest wind-power farm.

Picken’s Mesa Power LLP plans to purchase 667 wind turbines from U.S. industrial giant General Electric Co. (NYSE: GE). Each turbine can produce 1.5 megawatts of electricity – enough to provide the ongoing power needs of 360 to 600 U.S. homes, according to Money Morningcalculations based on statistics provided by Oregon Power Solutions Inc., a Baker City, OR consulting firm.

The first phase of the Pickens project, already under construction, will produce 1,000 megawatts of electricity, enough energy to power 300,000 homes. GE will begin delivering the turbines in 2010, and current plans call for the project to start producing power in 2011.

Ultimately, Mesa Power plans to have enough turbines to produce 4,000 megawatts of energy. Overall, the “Pampa Wind Mill” project is expected to cost $10 billion and be completed in 2014.

Pickens has launched a “Pickens Plan” Web site, which is urges the country’s “energy army” to lobby Congress for funding and a commitment to green-energy projects.

Other Players Showing Interest

An Irish company – its interest in the U.S. alternative energy market piqued by the green-technology money included in the Obama administration’s stimulus package – on Monday acquired three Illinois wind farms located within 100 miles of Chicago, The Chicago Tribunereported.

Plans call for the Dublin-based Mainstream Renewable Power to invest $1.69 billion over four years to develop the wind farms. The purchase price was not disclosed.

“The U.S. market is of strategic importance to Mainstream, and the scale of the opportunity is strongly reflected in President Obama’s economic stimulus package, which includes $56 billion in grants and tax breaks for U.S. clean energy projects over the next 10 years and a budget of $15 billion a year to fund renewable energy programs,” Mainstream co-founder and Chief Executive Officer Eddie O’Connor said in a statement. “The administration’s goal of generating 25% of the nation’s electricity from renewable energy sources by 2025 will help revitalize the U.S. economy and protect consumers.”

The farms have the potential to generate 787 megawatts of electricity by 2013, The Tribune said. The most advanced is the 120-megawatt Shady Oaks project in Lee County. When finished next year, it should be able to generate enough electricity to power about 30,000 homes, Mainstream said.

The other two wind-power farms are the 467-megawatt Green River project, also in Lee County, and a 200-megawatt project set for Boone County. Construction on the Green River project will begin next year, while the Boone County project is still in is development stages.

This is Mainstream’s second North American deal in three months; it earlier announced a Canadian wind farm project. It has also announced plans to build a wind farm in Chile.

Founded a year ago, Mainstream was created to build and operate wind-energy, solar-thermal and ocean-current power plants in partnerships with government agencies, electric utilities, developers and investors in North and South America, Europe, and South Africa. Barclays Capital (NYSE ADR: BCS) has a 14.6% stake in Mainstream.

Going Global

As Mainstream’s proposed forays into South America, Europe and Africa demonstrate, the push to harness the wind isn’t limited to the United States.

As of the end of last year, worldwide wind-powered generators were capable of generating 121.2 gigawatts (GW) of electricity. Wind power produces about 1.5% of the world’s electricity and its use is surging: The amount of electricity generated by wind power doubled between 2005 and 2008 alone.

Several countries have already embraced wind power in a major way: As of last year, it accounted for 19% of electricity production in Denmark, 11% in both Spain and Portugal and an estimated 7% in both Germany and Ireland. As of this May, 80 nations around the world were using wind power on a commercial basis.

Not surprisingly, China is making a big push to commercialize wind power and by last year was already the world’s sixth-largest user of wind-generated electricity. The country’s largest manufacturer of wind turbines - Xinjiang Goldwind Science & Technology Co. Ltd. – went public last year, raising nearly $250 million. It has about 33% of China’s wind-power-equipment market, according to KGI Securities Co. Ltd., a Taiwan investment-banking and brokerage firm.

“As China’s wind power sector takes off, we think Goldwind is well positioned to become a major beneficiary, thanks to its strong brand and first mover advantage,” KGI wrote in a research report.

Not a Complete Answer

Although wind power has substantial promise, it’s not an infallible energy solution, and has some serious limitations – as the U.S. wind-power study shows. For one thing, although an estimated 72 terawatts of wind power on Earth can be potentially commercially viable – an amount that’s six times the estimated 15 terawatts of total power usage on earth – not all the wind energy flowing past any given point can be recovered.

Accoridng to a science axiom known as Betz’s Law – named for the German physicist,  Albert Betz, who discovered the rule in 1919 - no turbine can capture more than 59.3% of the potential energy in wind.

And there are other challenges, some of which are caused by the natural lay of the land in a given location. In the United States, for instance, where there are now concerns about diminishing wind strength, some coastal areas may retain wind strength because of the greater temperature differences between the land and the ocean.

Given the growing importance of wind power, more study will be required.

Concludes the study: “Given the importance of the wind-energy industry to meeting federal and state mandates for increased use of renewable energy supplies and the impact of changing wind regimes on a variety of other industries and physical processes, further research on wind climate variability and evolution is required.”

Source: U.S. Ramping Up Wind Power Programs Even As Concerns Surface About Possible Declines In U.S. Wind Strength

Here are just a few statistics in the news lately from respected market mavens like the S&P/Case-Shiller Indices and the National Association of Realtors:

• The “average” price of homes in the U.S. is down almost 35% from the record highs of 2006.

• “Median” housing prices are down 19% in 90% of the major markets in the United States.

• Building permits were up 4% in April from last year, and homebuilder confidence increased from 16 to 18.

So what do these numbers mean to you?

Probably nothing.

“It’s like a weatherman who combines conditions in Nome, Alaska and Clearwater, Florida and issues an “average” national forecast of 45 degrees,” according to Andrew Waite, a former institutional investor who is now the publisher of a magazine focusing on real estate investing. “Real estate markets are by their very nature ‘hyperlocal. Averages simply don’t apply.”

Waite is the publisher of thePersonal Real Estate Investor, a glossy magazine that focuses on investors who buy houses or condos to manage for income or to fix up and sell for a profit, and he wastes no time in dismissing most of the “indicators” in use as useless and irrelevant.

As a onetime Wall Street venture-capitalist who subsequently joined Silicon Valley’s Sand Hill Road private equity crowd, Waite also understands how the Wall Street investment game is played – and, in the case of the U.S. housing market, the missteps many overly-anxious analysts make as they attempt to create a “one-size-fits-all” picture of the nation’s housing market.

And he would like you to know that all those gloom-and-doomers are overshadowing a real estate rebound that is already underway.

The Fractionalized Housing Market

The housing market is too fractionalized to put a finger on an “average” price, Waite says.  Real estate is segmented by individual neighborhoods, and is further subdivided by price points and such price-influencing factors as condition, cash flows – and even cap rates on rental properties.

To find the facts about housing prices for his investors, Waite compiles and verifies data directly from records kept by local Multiple Listing Services.  From sales records, Waite determines the inventory supply in months for major markets. That gives him the “hyperlocal” data that reveals an accurate picture of individual markets.

“The formula’s pretty simple,” he says. “As housing inventories shrink in real estate markets around the country, demand and prices go up.”

After examining the statistics for March, Waite thinks he sees a clear bottoming pattern, at least in some markets. If he’s right, the Western United States is already making a comeback and the ripples of resurgence will soon make their way to the Midwest and then to the East Coast markets.

What’s more, the improvement from year to year indicates the bottoming sequence will soon have prices on the rise.

Housing Markets in Western U.S. Have Already Bottomed

Remarkably, Waite’s research reveals the downtrodden Las Vegas housing market has already bottomed and is currently “balanced” between buyers and sellers.  Housing markets in Seattle, Los Angeles, Phoenix and Denver are on the move too:

• Phoenix’s MLS housing inventory is 7.33 months, down from 19.1 months last year.
• Denver’s current inventory is 5.59 months, down 35% from a year ago.
• San Diego’s inventory stands at a paltry 4.19 months, down 58% from a year ago.
• And Las Vegas’ inventory stands at just 6.25 months, down a whopping 64% from an inventory of 17.5 months in 2008.

In fact, Waite sees the trend on the West Coast as a leading indicator that the worst is behind us. In short, if you’re in one of those depressed markets where prices are still dropping, relief may well be on the way.

Here’s the “market-bottoming” sequence as he sees it:

The chart depicts the market for houses in the Western United States.  It follows the natural sequence of a housing market recovery through its progressive phases:  As the supply of homes drop, demand picks up. And as that demand picks up, prices first stabilize and then begin to rise.

Based on this research the housing cycle on the West Coast has already bottomed and prices will start to swing upward in the fall.  Eventually the trend will move from West to East and prices will move up broadly.

But the recovery will be painfully slow getting to certain markets where cities are still being hit with swelling inventories, which is likely to continue to put downward pressure on prices.

Housing supplies in Baltimore, for example, have increased 11% from March 2008, to 15.9 months this year.  Similarly, listings grew from eight months to about nine and a half  months in Houston, and from eight and a half months to 10 months in Charlotte.

But some of the hardest hit markets are clearly on the upswing.  Miami has slashed inventories from a staggering 52 months to 31 months, a decrease of 40%.  Rochester, New York and Boston have each dropped housing supplies by about 13% in the last 12 months.

Some realtors in Boston are even reporting that sellers are receiving multiple competing offers to buy homes for more than their asking price and buyers are entering counteroffers.

Fewer New Homes Stoke Demand

And it’s not just pre-existing home sales driving a rebound in the sector.  In October 2007, new home permit applications stood at roughly 800,000 nationwide.  A year later, in October of 2008, that number had dropped to about 480,000.

Since it takes about 12 months for buildout to progress from permit to finish — and with many builders halting construction altogether — Waite estimates only about 450,000 of those permits will actually translate into new homes that will hit the market in 2009.  And with new home inventories drying up, demand will start climbing as well.

In fact, declining new home inventories are already beginning to stabilize prices in hard-hit southern California, an area where prices were hammered by waves of foreclosures.

KB Home (NYSE: KBH) Chief Executive Officer Jeffrey Mezger said on May 4 home prices in Southern California have begun to stabilize, making his company’s new houses competitive with existing homes, including foreclosures.

“If you go to Southern Cal, as an example, we’re seeing a floor on pricing,” Mezger said recently in a conference call with analysts organized by J.P. Morgan Securities Inc., Bloomberg News reported. “We don’t see prices going down right now, which is a good thing, because then you can set a baseline.”

In March, Los Angeles-based KB Home, reported a narrower first-quarter loss as orders increased for the first time in three years.

And there are other positive signals.

• The median price paid for a home in six Southern California counties was $250,000 in March, the same amount as in January and February, according to San Diego-based research company MDA DataQuick.

• The National Association of Realtors says a total of 3.7 million homes were listed for sale nationwide at the end of March, down 10% from a year earlier.

• The supply of homes for sale in 29 major metropolitan areas at the end of April was down 3.6% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif.

That last figure defies normal trends — listings typically increase in April as for-sale signs bloom heralding the spring home-shopping season.  Since 1982, the average increase in April from the prior month has been 4.8%, according to Zelman & Associates, a research firm.

Tom Lawler, a housing economist based in Leesburg, Va., says the decline in listings “suggests that the bottom in home prices is much closer than many pundits believe.”

Still Looming: Foreclosures, Credit Crisis, And Unemployment

But Lawler says the future remains unclear because no one really knows how many homes in the foreclosure process will eventually land on the open market.  Estimates are that some of the nation’s largest banks currently are listing only about 60% of foreclosed homes.

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), are the biggest owners of foreclosed homes, but they have only about 35% to 50% of those homes listed for sale at any given time, according to industry estimates.

And some foreclosed homes aren’t listed because they’re on the rental market, are undergoing repairs or are subject to legal action or other delays.

Barclays Capital PLC (NYSE: BCS) estimates that banks and investors owned 765,500 foreclosed homes as of April 1, up from 629,100 a year earlier. Barclays forecasts that this inventory will peak at around 1.3 million homes in mid- to late-2010, The Wall Street Journal reported.

The credit markets pose another obstacle to recovery.

There’s no doubt that banks have made it more difficult to borrow money.  And mortgages are far more expensive than they appear, especially for people borrowing large amounts or trying to refinance.

As previously reported in Money Morning, buyers can only get those rock bottom 4.75% interest rates you’ve been hearing about if they put 20% down, borrow $417,000 or less, and boast a high credit score (730 to 750).

And the days of “stated income” loans where you don’t have to document your earnings, and option adjustable-rate mortgages, where you could choose to pay less than the interest due, are long gone.

But while that’s true, it’s also true that mortgage lending is still one of the banks most important sources of revenue.

“Tight lending standards and the credit lockup is absolutely the limiting factor on how soon prices will recover nationwide,” Waite says. “But eventually, banks will loosen their purse strings if for no other reason than it’s their most efficient way to earn profits.”

But the cold reality is that skyrocketing unemployment remains a major threat to the recovery of the U.S. housing market.  The unemployment rate soared to 8.9% in April, leaving more than 5 million workers without jobs. Economists predict the national jobless rate will probably hit 10% by year-end even if an economic recovery kicks off before then.

Consumers who are unemployed cannot buy homes, much less pay for the homes they’re already living in. And even consumers who are afraid that they might be joining the jobless ranks are loath to take on the added risk – making them unlikely candidates to buy a new home either.

Bottom Line: Prices Don’t Matter if You’re Not Selling

But while the current news is full of talking heads espousing the latest “average” numbers about the downward spiral in housing prices, the basic truth is the vast majority of homeowners won’t be selling this year or next.

The typical house is owned for five to seven years, and only about 5% of U.S. housing stock turns over in a single year, meaning only 1 in 20 homeowners plan to sell this year.

And, as Waite points out, houses aren’t a tradeable commodity so there’s no reason why you should consider marking your home “to market” as the Wall Street bankers are being forced to do with  those derivatives they’ve been trying to dump.

In fact, if you’re not in a hurry to sell, chances are good your home will recover at least most of its pricing power in the next few years.

“Unless you have to sell now, you’re pretty much insulated.  If you sell in five years, chances are what’s happening now won’t have any effect on your selling price at all,” Waite said.

Source: “Hyper-local” Stats Show Housing Market Has Bottomed

• U.S. home prices posted their biggest drop on record during the first quarter, with the median price falling 14% to $169,000 from a year earlier, the National Association of Realtors said. Prices fell in 134 of 152 metropolitan areas, with values plunging the most in Florida and California.

• The U.S. trade deficit grew 5.5% to a smaller-than- forecast $27.6 billion, dropping for the first time in eight months.  The gap widened as exports slumped to a two-year low, overwhelming shrinking imports, reflecting reduced American demand for goods made abroad. The report buoyed hopes that a record contraction in global trade flows may be easing. “It’s one more indicator that things are getting worse at a lot slower pace than before,” said John Ryding, chief economist at RDQ Economics LLC in New York, Bloomberg reported.

• The Social Security trust fund will run out of assets in 2037, four years sooner than previously thought, a report by the fund’s trustees said yesterday (Tuesday).  The same report said spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014.  Payroll tax contributions to Social Security and Medicare, the two main safety nets for American retirees and the elderly, are declining due to the recession just as the baby-boom generation begins to retire, Bloomberg reported.

• Citigroup Inc (NYSE: C) is using almost all of the $45 billion in U.S. taxpayers’ money it received from the TARP program to make new loans.  A committee at the bank, appointed to oversee the use of the money it received from TARP, approved $44.75 billion in lending initiatives as of March 31, according to an AP story, which appeared on the New York Times website.

• A.P. Moller-Maersk, the owner of the world’s biggest container shipping business, swung to a bigger net loss than expected in the first quarter and warned that the full year might end up that way too.  The company posted a net loss of $390 million for the first three months, as the dive in global trade and freight rates hit shipping and low oil prices hit its oil business even harder than expected, Reuters reported.

• Bank regulators in all 27 countries of the European Union will conduct confidential stress tests by September, stepping up scrutiny of risks after lenders absorbed more than $1 trillion of losses and writedowns in the global financial crisis, Bloomberg reported.  Finance ministers and the EU’s executive agency will get private reports and industry data from regulators.  Results for individual banks such as Spain’s Banco de Santander S.A. (ADR NYSE: STD) or Barclays Plc (ADR NYSE: BCS) won’t be released.

Source: Investment News Briefs Wednesday, May 13, 2009

Last week’s report could have been worse if the numbers hadn’t been held in check by a burst of federal government hiring of temporary workers to prepare for the 2010 Census.

The report was also skewed by the way the government categorizes the unemployed.  As Money Morning previously reported, if laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the numbers skyrocket.

In fact, if the latest unemployment report had included those workers, the rate would have soared to 15.8% in April, the highest on records dating back to 1994. The total number of  unemployed now stands at 13.7 million, up from 13.2 million in March.

The data released Friday wasn’t as high as the 620,000 job cuts that economists were expecting, but the payroll figures for March and February were revised to show 66,000 more job losses than previously reported.

The report showed job losses across almost all sectors of the economy, but at a slower pace than previous months.  The manufacturing sector lost 149,000 jobs in April, after cutting 167,000 the prior month. Construction industries cut 110,000 jobs after shedding 135,000 in March.

The service industry, responsible for roughly 90% of economic activity lost 269,000 jobs after eliminating 381,000 in March.

The one bright spot was government hiring, with public payrolls soaring by 72,000 after the U.S. Census Bureau began hiring 140,000 temporary workers last month to produce the population count that comes once every 10 years. It will hire more than 1.4 million people to conduct the survey over the next year.

Even though unemployment rolls are now at the highest level since September 1983, many analysts believe the numbers signaled the economy’s steep decline may be easing.

“We appear to have passed the point of the most severe job losses,” Dean Maki, co-head of U.S. economic research at Barclays Capital PLC (ADR NYSE: BCS) in New York told Bloomberg News. “It’s still a weakening labor market but it’s weakening less fast. There are a few headwinds to growth, and a recovery will” likely be “modest.”

The worst financial crisis since the 1930’s has taken a steep toll on U.S. workers and companies, and most economists expect the unemployment numbers will get worse as the housing, credit and financial sectors sort out the mess. The jobs numbers usually don’t rebound until well after an economic recovery begins.

Government “stress tests” to determine whether 19 of the largest U.S. banks had enough capital to weather further economic turmoil used an “adverse scenario” that included an average unemployment rate of 8.9% in 2009 and 10.3% next year.  But economists projected in an April survey that the jobless rate would rise to 9.5% by year-end, Bloomberg reported.

In the coming months, economists expect job losses to continue for most — if not all — of this year. But some are hopeful the cuts won’t be as deep.
“There are glimmers of hope. We are moving in the right direction in terms of layoffs. They are measurably less bad than what we’ve been through,” Mark Zandi, chief economist at Moody’s Economy.com, told the Associated Press.

The biggest impact of job losses on the economy is the threat to consumer spending, the engine that drives 70% of Gross Domestic Product (GDP).  After a first-quarter rebound, Americans could retrench again this quarter before spending shows sustained gains in the second half of 2009, according to economists surveyed by Bloomberg last month.

Joel Naroff of Holland, Pennsylvania-based Naroff Economic Advisors, thinks the numbers will be good for consumer confidence, which should help spending. In a note to investors, Naroff said the unemployment numbers are the latest in a long string of good news/bad news economic reports.

“This is a truly awful report that will likely be taken as a good report because the job losses have slowed,”he said. “As long as we continue to see the silver lining in the black clouds that overhang the data, then confidence will build.  It does look as if we are falling more slowly and we are likely to hit bottom reasonably soon, at least as far as economic growth,”

The job cuts continued this week as steelmaker Severstal International (MCX: CHMF) said it’s shutting plants in Wheeling, W.Va., and Warren, Ohio, forcing 3,100 layoffs due to the  pullback in the steel industry.

E.I. duPont Nemours & Co. (NYSE: DD), the third-biggest U.S. chemical maker, plans to eliminate an additional 2,000 positions, while Microsoft Corp. (NASDAQ: MSFT) started laying off some of the 5,000 job cuts it announced earlier this year and left the door open for more in the future.

“We will continue to closely monitor the impact of the economic downturn,” Microsoft Chief Executive Officer Steve Ballmer said in a e-mail obtained by Bloomberg News. Redmond, Washington-based Microsoft will, “if necessary, take further actions on our cost structure including additional job eliminations.”

[Editor's Note: Money Morning Investment Director Keith Fitz-Gerald is the editor of the new Geiger Index trading service. As the whipsaw trading patterns investors have endured this year have shown, the ongoing global financial crisis has changed the investment game forever. Uncertainty is now the norm and that new reality alone has created a whole set of new rules that will help determine who profits and who loses. Investors who ignore this "New Reality" will struggle, and will find their financial forays to be frustrating and unrewarding. But investors who embrace this change will not only survive - they will thrive. With the Geiger Index, Fitz-Gerald has already isolated these new rules and has unlocked the key to what he refers to as "The Golden Age of Wealth Creation". "The Geiger Index system allows Fitz-Gerald to predict the price movements of broad indexes, or of individual stocks, with a high degree of certainty. And it's particularly well suited to the kind of market we're all facing right now. Check out the latest report and find out how you can profit.]

Source: Census Hiring and Reporting Methods Minimize April Unemployment Numbers

Nickel was flat until mid-morning, then it too caught fire and shot up to close at its intraday high of $5.7516/lb., up more than 43 cents. Zinc made a strong upmove, ending at $0.713/lb., up nearly 4 cents. Aluminum was solid, adding over a penny and three-quarters, to $0.6926/lb., while lead posted a modest gain to $0.6453/lb., up just under a penny.

Copper led the industrial metals higher, making a powerful move that took it up the most in a month after the better-than-expected jobs data left traders with hope that the economic worst is in the rear-view mirror. It was the metal’s fifth positive session in the past six.

“I think people are feeling pretty confident that the economy is in fact bottoming and we are starting to see the light at the end of the tunnel,” said Matthew Zeman, of LaSalle Futures Group in Chicago.

“It’s just one in a long line of more encouraging economic data that has been coming out in the last couple of weeks,” said Gayle Berry, an analyst at Barclays Capital (NYSE:BCS).

The jobs report notched another positive in a week that has featured less-than-dismal numbers from the service industries in the U.S., manufacturing in China, U.S. construction spending, and the housing market.

Berry added that market participants are coming around to “the view that global output may now be starting to pull itself out of the hole it fell into at the end of last year.”

Oddly on such a strong day, the supply situation failed to be supportive. Copper inventories monitored by the LME were up sharply yesterday, rising by 7,225 metric tons, to 402,150 tons.

That could signal a slowing of the movement of copper from Europe to China, since the price differential has narrowed of late.

“Because the arbitrage halved over the past couple of weeks and physical premiums have come off, maybe we’ll see less European metal going into China,” Berry said. “But [we don’t want] to read too much into one day’s trend.”

Source: Base Metals Rally