February 15, 2008

1) Target (TGT) is now looking like a potential takeover candidate. When I have time I troll through 13-F filings looking for recent share accumulations. These are public disclosures filed with the SEC by hedge funds with over $100 million in assets. Five major hedge funds have started building large stakes in Target, including Eddie Lampert who took over Sears a few years ago. The stock was already on my 'buy' list as a cheap, early cyclical retailer. The stock has fallen from $70 to $45 since June. Earnings have fallen by 2/3 in a year, but will triple in any recovery. Look for the share price to double in two years. Home Depot is another one of these.

2) Sub prime interest rate resets, now running at $40 billion a month will go to zero by the end of the year. Outstanding loans will either refi in the current low interest environment or go into default this year. After that the problem will be gone.

3) The US?? population is growing by 3 million a year, or 1.2 households. Housing starts can't fall below a 1.2 million annual rate for very long or people will have to start living in cardboard boxes under freeway overpasses.

4) Consumer confidence came in this morning at the lowest level since 1992.

5) Money is now cheap but unavailable. The Fed has cut interest rates by 2.25% since August, but triple 'A' rated State of California tax free bond yields have risen from 4% to 10% as of yesterday.

6) China is building a new electric power plant every 4 days. The recession for them means growth slowing from 11% to 8%.

7) Oil is above $96 this morning, not exactly anticipating a recession. OPEC is meeting in early March and many are expecting production cutbacks. They are clearly trying to manipulate the price higher. Sell oil, buy natural gas and coal!

8) 50% of all new venture capital spending is going into start ups creating clean energy sources, a radical change since the nineties. If even just one out of ten of these companies becomes successful the US could become energy independent within 20 years.

9) Financial markets closing early today. The rush to get out of Dodge has started.

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