April 22, 2009

1) I took some time off yesterday to watch a piece of economic history roll through town. The Union Pacific Railway's (UNP) engine no. 844 roared past, hauling a trainload of retired union members and railroad buffs in its trademark yellow observation cars. The 4-8-4 steam engine was built in 1944 to haul the massive freight trains demanded by a wartime economy. The company has since spent a fortune maintaining the crown jewel of the great age of steam in perfect operating condition. Normally based in Cheyenne, Wyoming, it hurtled over the Rockies and the Sierras to visit us on a heritage tour. Progress of the belching 500 ton behemoth was updated every ten minutes through Twitter's tweets, which garnered 481 followers by the time it made it to the San Francisco Bay Area. It barreled through the station like a freight train, blasting its whistle, and singing with heat the faces of the enthralled kids. To see this piece of romantic transportation history, please click on the video above.

Sure, I know the train was videoed every 100 feet all the way from Wyoming to here, including by the four guys standing next to me who posted their work on YouTube. Some even chased the train over the Sierras to get multiple shots and put up montages. This is a community of over the top fanatics. But what the hell, it was fun anyway. By the way, UNP is a great long term buy as an indirect commodities play, and a call on the recovery of the US economy.

2) For those out there still looking for a 'smart grid' play, take a look at Quanta Services (PWR). The Houston based company offers design, construction, and maintenance of power infrastructure networks. At a 17 multiple of next year's earnings, it is not cheap, and the shares have already posted a double since the March 9 low, so the action is definitely there. But when the full force of Obama's stimulus plan hits, the 30% earnings growth that is the current consensus forecast may look a tad low. The Federal Energy Regulatory Commission (FERC) has already announced $10 billion in programs, and 'smart grids' are one of the few places in the energy space where the government can spend money and generate an immediate result. Up to 10% of America's electric power supply is thought to be lost through resistance from decrepit power lines and inefficient distribution. That works out to a lot of tankers from the Middle East or train loads of coal from Appalachia. Never underestimate the power of a buzz word to boost earnings. Buy on the inevitable dip.

3)?? The paint peeled off the walls while Yahoo (YHOO) CEO Carol Bartz laid out her assessment of the firm's many challenges at yesterday's conference call in language that would make a Marine drill sergeant blush. I knew Carol when she was at Autodesk in Marin, and believe me, she is no shrinking violet. She said that the engineering focus had scattered to the wind, with engineers in almost every country. There was one product manager for every three engineers. No surprise then, that she announced 700 layoffs after the 2,400 that were axed last year. YHOO's Q1 earnings actually came in line, with a $117.6 million net on $1.58 billion in revenues, thanks in large part to a $401million gain on a Chinese Internet company. No comment on the Microsoft negotiations. Is it any revelation that enormous bloat accumulated under the leadership of Jerry Yang, the world's worst manager, and the guy who infamously turned down the $35/share bid from Microsoft? Time to put the grownups in charge.

QUOTE OF THE DAY

'Stop your sinning, do more good, and give more money,' said PIMCO managing director, Paul McCulley, quoting his preacher father in an admonition to the government. He added, 'Valuation metrics have to find the new normal, and we haven't found the new normal yet.'