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Oil & Energy Archive

Me on CNBC Fast Money Optionmonster Largest Tweetup Ever Live NYC

Yes, at the last second, I took down a plane ticket and flew out to NYC on Jetblue’s redeye flight on Thursday night, landing in NYC Friday morning 4:45am for the CNBC Fast Money Optionmonster Largest Tweetup EVER! Why is it the largest tweetup ever you ask? Since we only had about 10 people? Because it’s the first Tweetup synchronized with a global cable show (CNBC’s Fast Money) at 5:00pm Eastern on 3/6/09.

Met a ton of my “twitter” trader friends at tweetup, including @TraderAlamo (Vincent Bagnato- My partner for FINZ.tv), @CoffeyGrinds (Andrew Coffey), @OptionMonster (Jon Najarian) @BullishBeauty (Carolyn Lloyd-Ferguson), @Barrieabalard, @ShaneDrozdowski, @Ferrari321 (Kevin Cheng), @theTrading (Dave Johnson), and @Millionare007 (John), @Alf2126 (Amanda) whose step-dad @jaycoje (Jason) called from Vegas for her to come down to Time Square and get him a Po-Baby (mortgage crash formula) Tshirt.

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Lots more videos and tweetup stories as well as stuff from Invest Like a Monster conference on Saturday 3/7/09! so stay tuned here and on FINZ.tv!

Here’s the uncensored version of Largest Tweetup Ever video by @Coffeygrinds (Andrew Coffey)! Thanks Andrew! Love it!

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Cool Videos! Minyanville’s Todd Harrison interviewed by Aaron Task

Longtime Bear Todd Harrison Turns Bullish — for a Trade

Hedge Fund Carnage: ‘Invisible Catalyst’ Causing Big Market Moves

Fear Stalks the Street: Does Paulson Have Any More Tricks Up His Sleeve?

McDermott Press Release: B&W Positioned for $960 Million in New Defense Contracts

B&W Positioned for $960 Million in New Defense ContractsHOUSTON–(BUSINESS WIRE)–

McDermott International, Inc. (NYSE:MDR) (“McDermott”) announced today that its subsidiary, The Babcock & Wilcox Company (“B&W”), has received a new award for the manufacture of nuclear components in support of U.S. defense programs. Under this award, the contracts for 2008 are valued in excess of $230 million. These are the initial contracts under a negotiated set of orders that, if executed, would total more than $960 million between 2008 and 2010.

These awards are in addition to a $1.7 billion series of contracts that B&W previously announced for 2007 to 2009. If the future orders are placed, the total value of the awards for the period of 2007 through 2010 would be approximately $2.7 billion.

The contracts employ a multiple-award approach over a number of years. This system is designed to give the U.S. government cost predictability while providing B&W with additional financial incentives based on performance.

“This multiple-award system provides additional opportunities to load level our manufacturing facilities to improve efficiency and scheduling activities,” said John A. Fees, Chief Executive Officer of McDermott International. “Both parties will benefit from improved efficiencies to control cost and schedule. All of us at McDermott are proud of our work for the government, and we look forward to continuing to provide products of the highest quality.”

The work that is funded by these contracts is conducted by B&W’s subsidiary, Nuclear Operations Group, Inc. Headquartered in Lynchburg, Virginia, the Nuclear Operations Group’s other locations include Barberton, Ohio; Mount Vernon, Indiana; and Euclid, Ohio.

McDermott is an engineering and construction company, with specialty manufacturing and service capabilities, focused on energy infrastructure. McDermott’s customers are predominantly utilities and other power generators, major and national oil companies, and the United States Government. With its global operations, McDermott operates in over 20 countries with more than 25,000 employees, and can be found on the internet at www.mcdermott.com.

McDermott cautions that statements in this press release which are forward-looking and which provide other than historical information, involve risks and uncertainties that may impact actual results. Forward-looking statements in this press release include statements about the expected timing and value contracts subject to the award and benefits or opportunities from the award. These statements are subject to numerous uncertainties and risks, including adverse changes in the needs of the U.S. government, the possibility that some of the contracts under the multiple-award system will not be finalized or awarded as expected, or other adverse changes or modifications to the award. If these or other risks materialize, actual results may vary materially from those expected. For a more complete discussion of these and other risks involved in our operations, please see McDermott’s most recent annual and quarterly reports filed with the Securities and Exchange Commission.

Source: McDermott International, Inc.

**Disclosure: I own shares of MDR as of this post.**

Historic Day Bouncers

“Historic day” definitely refers to the global coordinated interest rate cut by the U.S., England, Europe, and China- the four most influential economies of our day.  I was joking on my Twitter feed how exciting it was that China joined the “Allied Forces.” Yeah, the rate cuts probably took the world a step back from the cliff of a worldwide deep recession, but the positive benefits of the cuts, if any, probably won’t be felt for months and months.  What mattered more for me today, and probably for those who monitor their investment accounts closely, it was just good to have a day where we weren’t in freefall.  Down 200 on the DOW is never a happy day, especially working off a DOW 9450 base rather than a DOW 13000.  Despite the last hour selloff, there was sustained buying for the later half of the day after the initial selloff.  That was encouraging. People weren’t just letting things free fall anymore.  A lot of stocks were actually up today- stocks that haven’t seen the (green) light of day for quite a while now.  Many of these have been blown back to levels of 2, 3, or more years ago where there was sustained buying interest, so maybe those acted as temporary support as well.

So, I grabbed a stock screen off of FinViz.com (the coolest free financial website) of the stocks that were up today.  These might indicate where some buying interest are, and where long term holders have felt the stocks have gotten back to prices where they’d buy them.  Also, a lot of these stocks were held by liquidating hedge funds and, at least for today, they’ve stopped liquidating.  Doesn’t mean they, or their copycat funds, won’t.  So there’ll likely be a lot of resistance (sellers selling into strength).  But after the bounce today and the sellers do their thing, if these levels can hold I’ll dip into a few of these.

About half the list the screen turned up were basic materials stocks (probably another interest rate cut = lower dollar = higher commodities).  A lot of the basic material stocks were the gold miners, f.y.i.

Screen: Market Cap Over $300mln, Relative Volume over 1.5x average

No. Ticker Company Sector Industry Country Market Cap P/E Price Change Volume
1 ABX Barrick Gold Corporation Basic Materials Gold Canada 31.13B 16.77 35.71 17.08% 29,922,500
2 AEM Agnico-Eagle Mines Ltd. Basic Materials Gold Canada 7.26B 63.14 50.51 12.97% 7,672,300
3 ANR Alpha Natural Resources Inc. Basic Materials Industrial Metals & Minerals USA 2.79B 24.01 39.62 10.79% 8,357,600
4 CAM Cameron International Corporation Basic Materials Oil & Gas Equipment & Services USA 6.21B 11.94 28.54 8.11% 11,076,900
5 AU AngloGold Ashanti Ltd. Basic Materials Gold South Africa 5.56B - 19.71 19.53% 3,736,000
6 AUY Yamana Gold, Inc. Basic Materials Gold Canada 5.25B 24.23 7.51 18.83% 34,883,100
7 CF CF Industries Holdings, Inc. Basic Materials Agricultural Chemicals USA 3.24B 4.91 57.31 11.52% 9,480,800
8 CNX CONSOL Energy Inc. Basic Materials Industrial Metals & Minerals USA 6.77B 38.49 36.95 11.26% 11,352,900
9 FCX Freeport-McMoRan Copper & Gold Inc. Basic Materials Copper USA 16.36B 5.45 42.60 10.11% 33,631,000
10 GBN Great Basin Gold Ltd. Basic Materials Nonmetallic Mineral Mining Canada 340.85M - 1.61 11.03% 1,624,300
11 GFI Gold Fields Ltd. Basic Materials Gold South Africa 5.84B 10.16 8.94 32.05% 14,869,400
12 GG Goldcorp Inc. Basic Materials Gold Canada 22.10B 45.62 31.02 19.72% 30,307,500
13 GOLD Randgold Resources Ltd. Basic Materials Gold Channel Islands 3.17B 74.29 41.60 22.79% 2,454,100
14 HMY Harmony Gold Mining Co. Ltd. Basic Materials Gold South Africa 4.29B - 10.66 34.77% 8,845,900
15 HSVLY HIGHVELD STEEL ADR Basic Materials Industrial Metals & Minerals South Africa 1.19B 8.65 12.02 9.57% 35,700
16 KGC Kinross Gold Corp. Basic Materials Gold Canada 9.97B 31.76 16.20 18.94% 19,087,400
17 KWK Quicksilver Resources Inc. Basic Materials Independent Oil & Gas USA 1.95B 3.96 12.29 8.76% 6,945,500
18 LIHR Lihir Gold Ltd. Basic Materials Gold Papua New Guinea 34.77B - 18.30 10.17% 1,753,200
19 MON Monsanto Co. Basic Materials Agricultural Chemicals USA 44.79B 23.88 81.44 9.79% 27,036,900
20 NEM Newmont Mining Corp. Basic Materials Gold USA 16.95B 533.29 37.33 14.83% 16,291,200
21 POT Potash Corp. of Saskatchewan, Inc. Basic Materials Agricultural Chemicals Canada 30.07B 15.60 98.60 13.52% 32,992,400
22 PXP Plains Exploration & Production Company Basic Materials Independent Oil & Gas USA 2.56B 5.24 23.75 9.45% 8,448,400
23 RGLD Royal Gold Inc. Basic Materials Gold USA 1.35B 59.30 39.73 16.00% 1,218,000
24 RRC Range Resources Corp. Basic Materials Independent Oil & Gas USA 4.75B 78.56 30.64 9.27% 8,418,600
25 SD SandRidge Energy, Inc. Basic Materials Oil & Gas Drilling & Exploration USA 2.31B - 13.97 11.40% 10,866,200
26 SSRI Silver Standard Resources Inc. Basic Materials Silver Canada 835.66M - 13.33 10.53% 1,579,300
27 WLT Walter Industries Inc. Basic Materials Industrial Metals & Minerals USA 2.02B 16.63 36.26 10.62% 5,429,000
28 XCO EXCO Resources Inc. Basic Materials Independent Oil & Gas USA 1.74B - 8.26 7.97% 8,203,600
29 SYT Syngenta AG Basic Materials Agricultural Chemicals Switzerland 17.06B 12.17 36.02 7.14% 2,604,100
30 SPW SPX Corporation Consumer Goods Appliances USA 2.61B 7.57 48.13 7.72% 4,776,500
31 FBN Furniture Brands International Inc. Consumer Goods Home Furnishings & Fixtures USA 459.11M - 9.41 8.41% 1,899,900
32 GGP General Growth Properties Inc. Financial REIT – Retail USA 1.45B 21.60 5.40 20.00% 17,753,200
33 CBL CBL & Associates Properties Inc. Financial REIT – Retail USA 717.03M 22.06 10.81 19.84% 4,246,600
34 AOC Aon Corporation Financial Accident & Health Insurance USA 11.78B 20.10 42.42 8.27% 5,080,100
35 STT State Street Corp. Financial Regional – Northeast Banks USA 18.82B 10.43 43.60 9.14% 14,257,900
36 SLG SL Green Realty Corp. Financial REIT – Retail USA 2.85B 21.24 49.07 8.25% 1,763,200
37 RBS Royal Bank of Scotland Group plc Financial Foreign Money Center Banks United Kingdom 18.54B - 1.85 24.16% 14,986,300
38 XIDE Exide Technologies Industrial Goods Industrial Electrical Equipment USA 384.13M 7.61 5.10 7.37% 3,115,100
39 FLS Flowserve Corp. Industrial Goods Diversified Machinery USA 3.66B 9.93 63.84 12.12% 3,258,400
40 MELI Mercadolibre, Inc. Services Business Services Argentina 853.91M 77.12 19.28 8.50% 1,748,800
41 IRM Iron Mountain Inc. Services Business Services USA 5.51B 37.44 27.33 11.37% 2,735,600
42 DISH Dish Network Corp. Services CATV Systems USA 8.19B 8.54 18.19 7.44% 7,346,700
43 YRCW YRC Worldwide Inc. Services Trucking USA 362.01M - 6.32 26.91% 7,084,900
44 SYNA Synaptics Inc. Technology Business Software & Services USA 801.19M 31.26 23.76 10.05% 2,927,800
45 RHT Red Hat Inc. Technology Application Software USA 2.80B 38.55 14.65 8.76% 3,889,700
46 NTCT NetScout Systems Inc. Technology Business Software & Services USA 376.22M - 9.60 21.21% 745,100
47 PCLN Priceline.com Inc. Technology Internet Service Providers USA 2.47B 14.43 63.51 10.74% 3,897,600
48 PEGA Pegasystems Inc. Technology Business Software & Services USA 398.94M 39.25 10.99 7.43% 178,600
49 WFR MEMC Electronic Materials Inc. Technology Semiconductor – Integrated Circuits USA 5.19B 8.07 22.99 11.12% 10,347,800
50 DASTY Dassault Systemes SA Technology Technical & System Software France 5.35B 19.01 45.25 8.93% 54,400
51 CLS Celestica Inc. Technology Printed Circuit Boards Canada 1.20B 10.92 5.24 8.94% 3,341,700
52 CNQR Concur Technologies, Inc. Technology Technical & System Software USA 1.56B 92.88 31.58 7.78% 1,970,100
53 ARBA Ariba Inc. Technology Internet Software & Services USA 942.45M - 10.96 8.51% 2,530,800
54 ATML Atmel Corp. Technology Semiconductor – Broad Line USA 1.84B 103.00 4.12 8.71% 7,950,700
55 CBR CIBER, Inc. Technology Information Technology Services USA 337.29M 11.26 5.63 7.85% 666,500
56 CEL Cellcom Israel Ltd. Technology Wireless Communications Israel 2.97B 10.86 30.40 7.61% 414,700
57 LDK LDK Solar Co.Ltd. Technology Diversified Electronics China 2.29B 8.49 21.48 11.18% 4,630,500
58 FORM FormFactor Inc. Technology Semiconductor – Broad Line USA 816.85M - 16.65 12.27% 1,462,600
59 BRKS Brooks Automation Inc. Technology Semiconductor Equipment & Materials USA 464.21M - 7.30 7.20% 1,201,400
60 AYE Allegheny Energy Inc. Utilities Electric Utilities USA 5.08B 9.90 30.10 8.63% 7,126,500

Please visit my stock research tools site, SuckingLess.com, for more resources like FinViz.com

**Disclosure: no positions in stocks mentioned.**

Purchasing.com Price & Supply Alert – 9/18/08

In a market that’s been 90% panic and cannibalism, it’s hard to think any fundamentals matter anymore. I’m not sure when and how fundies will come back into play as the shockwaves of the financial collapse around the world has very very real effects in the real world. Still, I like keeping an eye on this stuff.

Sorry haven’t been posting much exactly because of the madness.  Just been making tiny “bunts” or “single hits” day trades and posting these throughout the day on my Twitter feed- follow me on Twitter! or check my Twitter feed here on the top left column.  Other than that, I like hiding in my foxhole, eating some marshmellows, listening to some She & Him (I didn’t know actress Zooey Deschanel was such a good singer!), watching Erin Burnett on CNBC, and waiting for the world to implode.  Hmm…Erin and Zooey do look kinda alike.  Nice.

Oh, prepping for my trip to NYC on Monday for the Merrill Lynch (MER) (well Bank of America (BAC) now I guess) Power & Gas leaders conference…except I dunno how many people will actually be there now as companies keep disappearing. Constellation (CEG) was supposed to be there…but Buffet just ate them today.  Kinda disappointed- I had done the homework on all these Utils.  Oh well, maybe Buffet will go instead for CEG….now that’d be uber awesome…and uber not happening.

Ok, back into my foxhole.

** Disclosure: No positions in the stocks mentioned **

might GE be the best infrastructure investment thesis with a financial kicker

buyitcheap on seekingalpha asked on “Investing in Infrastructure” (a.k.a. “Infrastructure: Power Grids and Bridges” article I posted on July 31, 2008)

Any thoughts on ETFs or other vehicle that might be available or are individual companies the only play?

Actually…this might be a crazy idea but… how about GE? More and more of their portfolio is geared towards global industrial and infrastructure needs. Oil, petrochemical, aerospace, engines, railroad components. Restructuring to spin off it’s legacy, dead-weight consumer appliances businesses. They have so many businesses that they’re almost like a ETF. GE’s finance arm took down the rest of the company, the good infrastructure parts of the company. But for those who are looking for the recovery and best long-term gain in the financials, why not GE- with a finance division AND great infrastructure?

Weird idea not being mentioned…but love to hear pros and cons….

Rolling with the Transports: Rails and…Truckers?!?

Financials.  Oil.  Financials.  Oil.  Financials.  Dollar.  Oil.  Anyone look at the transports (IYT) lately?  Rails and truckers specifically? It’s as if fund managers have classified all stocks as financial trades or oil/dollar trades, and the media piles on and that’s all we ever hear about.  Doesn’t the individual industries and business fundamentals matter?  It doesn’t seem like it matters for a lot of sectors, but anyone look at the transports lately?  Rails and truckers specifically?  (Just these two because we have lost the airlines and autos to “the dark side” and its futile to try to mount a rescue mission anytime soon)

Union Pacific chart from StockCharts.com But rails!  One of the strongest, if not the strongest, old industrials sector charging ahead all year.  First riding the ag and coal momentum on the back of rising energy prices (which was sometimes weird because higher oil prices hurt the rails’ fuel input costs too).  Then, even as the ags and coal got kneecapped when energy rolled over in July, the rails kept going, probably on the idea that lower energy would boost the economy, or lower energy would lower the rails’ fuel costs.  It’s hard to make a correlation with any of these factors, and rarely do they work to trade off of in the stock price anyway.  Either way, the rails have been one of the few sectors constantly fighting back this bear market.  And look at the likes of Union Pacific (UNP)!  Tagging all time highs after a minor pullback that people thought meant the rails have finally given up the ghost and was about to roll over.

YRCW Stockcharts ChartMore impressive is what appears to be a bottom in the truckers and the likes of YRC Worldwide (YRCW).  Looks like an inverse head and shoulders bottom, or the Kilroy bottom as the editor of Technical Analysis of Stock Trends by Edwards and Magee likes to call it.  Left shoulder: tried a bottom on January 4th, 2008.  Stock dived again, with the actual “head” bottom the week of March 18th.  Since then, it’s been making the right shoulder, i.e. higher lows.  And, finally in July, higher highs as oil broke down in these months, breaking through that $18-$20 resistance, where you see the high volume (committed capital at this price) to the left of the chart.  Interesting to note, though, that while YRCW seemed to have bottomed in March, it’s been able to make higher highs and higher lows in the face of that big runup of oil to that record $149 in this period!  A possible explanation might be retailers stocking inventory during this time to meet the demand from the rebate checks.  I’m not too sure that’s a good explanation as retailers have been going lean with their inventories all year.  If truckers’ stocks can rally in the face of rising oil, i.e. rise in the face of bad news, the bottom’s likely in?  If YRCW can pierce this $20 level to the upside with conviction, I’d hop on this puppy, along with UNP mentioned above as UNP breaks to a new range above its all time high.

Yesterday’s strong GDP showed that away from the financials’ damage epicenter, the U.S. economy is still chugging along great.  Which is probably what the Rails and Truckers have been telling us since March.  However, the Rails have been driven mostly from exports, whether it be large industrial machinery or coal and fertilizers.  That’s my area of concern as the global economy has obviously slowed, and the impact of Europe in a worse economic condition that the U.S. might bring.  The other leg of this transport trio I’d like to see support from is the shippers.  They’ve been weak most of the summer, and the analysis from the Imarex Report on Capital Link Shipping continues to show weakness in the shippers.  I’m having trouble seeing how the rails’ support from exports can continue if the shippers aren’t shipping the exports to the likes of China.  As I’ve said before, I think China just took a breather as it clamped down hard on its industrial activity for the olympics.  But it’s yet to be seen where the world supply/demand of goods and commodities evens out when China’s fully back online.  Did 2 weeks of Olympics slow China too much to recover, or will things come back as strong as ever?

I think the transports have been muddling up the Dow Theory of needing trend confirmation between the Dow Jones Industrial Average (DIA) and the Dow Jones Transportation Index (IYT).  I believe that’s because the autos and airlines so much problems internally within their industry: union problems, factories fitted for too many SUV’s, airline mergers and bankrupcies.  However, with the autos and airlines near all time lows and basically flailing around as trading vehicles to play oil, I’d think you can sort of ex-out the effect of the autos and airlines.  So, moving forward, with the rails and truckers leading the transports…if the IYT can get above $98 and Dow Jones Industrial Average above 11,800 we might be looking at a confirmation rally?  Don’t want to anticipate anything in this market, but just thinking of things to look out for…

Related SuckingLess.com Research Tools:

** Disclosure: No positions in the stocks mentioned. **

The Plot Thickens for the Mining Giants

Sure why wouldn’t Australia approve of Chinalco’s stake in Rio Tinto. Australia’s wealth has grown like a weed thanks to it’s biggest customer, China, and China’s buying of Australia’s commodities. So why not play buddy buddy with you’re biggest customer? Sure, other “developing countries” are growing too…and while this might sound awkward referring to a commie country like China…China’s actually good for it’s money. You don’t just want a customer that pays, but pays steadily and that you know they’re good for it. Some of the politically unstable countries? I dunno. Countries (well country- U.S.A.) with debt growing like a tumor? Not too sure either. But China, a country that’s growing fast and steadily, and strategizing around the world, such as with African nations, to secure it’s future growth, and with national reserves growing up the wazoo- just on interest alone. Yeah, I’d play buddy buddy with China too. It’s like in the old days how a king would send over his sister or daughter to marry another country’s royalty. In this case, I guess the princess’ name is Rio Tinto. But then eventually (well after a year or so) the two kingdom’s would be at war again and the sacrificial princess be killed. Let’s see how this modern remake plays out!

Australia approves Chinalco stake in Rio Tinto

SYDNEY (Reuters) – Australia has approved Chinese aluminum giant Chinalco’s recent purchase of a minority stake in Anglo-Australian miner Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz), but warned the Chinese firm against buying more shares without prior approval.

State-owned Aluminum Corp of China (Chinalco), backed by U.S. peer Alcoa Inc (AA.N: Quote, Profile, Research, Stock Buzz), began amassing shares this year with the aim of taking up to 14.9 percent of Rio, the target of a $127 billion takeover bid from rival BHP Billiton (BHP.AX: Quote, Profile, Research, Stock Buzz)

Full Article: Australia approves Chinalco stake in Rio Tinto

Related SuckingLess.com Research Tools:

Tracking this Oil Energy Commodity Bounce

As they say, when something goes up on bearish news, it’s probably time to buy. When they weren’t able to push oil lower today on that ridiculously huge build in crude inventories of 9M barrels, and oil actually ended higher, we might’ve found a short term bottom for oil and have begun the bounceback rally. Since oil’s the commodities General, all the commodities from energy to agriculture to metals bounced with vigor today. The commodities (and the companies fund managers treat like commodities- including my beloved McDermott, now in a wheelchair after having is legs cut out from under it) have dropped basically in a straight line since end of June/early July that a bounce was inevitable. Moreover, the commodities and the collateral damage of related names have fallen so far so fast, all so far below their 50 day moving average, 200 day moving average, you name it, that this countertrend rally would likely have some umph and last for a while. (Nucor closed at $52.5 and it’s 50 day moving average is nearly 20% higher around $63!) I’m ready to add to these sectors to ride the relief rally, but keeping in mind the magnificent commodities uptrend of the first half of the year has been broken. Unless there’s reason to believe otherwise, I shall treat this rally as what it is, a countertrend rally in a downtrending market, and sell into this rally.

However, I think there’s a good chance the commodities and their friends can re-take the uptrend. My calendar has just alerted me that Joe Terranova of CNBC’s Fast Money had called for natural gas to bottom this very week and to resume the uptrend began earlier this year. I mentioned this call Joe made in a previous post, where Joe alerted viewers to the natural gas rule of thumb “June highs July lows” at the end of June, telling people to take profits in natural gas right when natural gas looks like it could go up forever, but subsequently took a death dive from above $13 to below $8 in just a month or less. With the brunt of the hurricane season still to come in September and early October, and heating oil demand to drive oil demand in the winter, the coming months are usually bullish for energy. Now we just have to see how the price reacts to this bullish environment. If energy can’t re-take the uptrend in a bullish environment, it’s probably time to get out our parachutes and bail.

Anyway, yesterday was an interesting stabilization and reversal day. Even more impressive given the dollar didn’t fall (i.e move inversely to crude), thus possibly breaking the correlation between the dollar and oil. Looking forward to seeing how this develops!

Referenced SuckingLess.com Research Tools:

** Disclosure: I own shares of MDR as of this post **

Ingersoll Rand makes Appearance on “Four Energy Efficiency Trades for a Cool Summer” Redux

Industrial machinery conglomerate Ingersoll Rand (IR) will report second quarter earnings this morning. This is not an earnings preview post or comments about my expectations. Obviously this market is not right in the head, cookoo, insane, whatever you want to call it. So I’m not expecting the stock price to correlate with the fundamental story one way or another. I do want to point out to folks that Ingersoll Rand is a completely different beast that we’ve all known it as. No longer is it construction equipment or the road building machinery that we’ve all seen when driving around. While it still has a lot of those identifiably Ingersoll products, Ingersoll Rand went through a dramatic transformation this past year as it sold off Bobcat (small excavators and loaders) and acquired heating, ventilation, and air conditioning (HVAC) maker Trane.

Folks should forget the old Ingersoll Rand and focus on the newly-acquired Trane business as that should be the pride and joy going forward. Trane was such a big acquisition that Trane is now the dominant business for Ingersoll Rand, and rightly so. HVAC (heating, ventilation, and air conditioning) is a major component of both the infrastructure and energy theme, but a story which the media has chosen to neglect. Given the high energy prices, more attention should be paid to HVAC systems since the heating and cooling of buildings, homes, factories, etc. is actually the top user of energy in the U.S. All this talk of alternative fuels for our cars or solar power pales in comparison to the amount of energy we could save on heating and cooling buildings. Also, energy conservation rather than increasing energy production would lighten the load on our already failing power grid. Similarly, it would save costs as we wouldn’t have to build out our power grids and increase power generation capacities with new power plants, wind farms, solar panels, etc.

Last summer, I wrote an in-depth piece on this topic in Four Energy Efficiency Trades for a Cool Summer. I think it’s such a decently written piece that I’m not gonna do it again- just read it! But remember, Trane was a brand of American Standard at the time of the publication, but Trane is now part of Ingersoll Rand. So what was said about Trane now applies to Ingersoll Rand. In 2003, I was part of a team that conducted an energy efficiency study of the Keck Science Building of the Claremont Colleges (CA), working with both Trane and Johnson Controls (JCI) on proposed solutions. I can attest to the importance and viability of the HVAC system to increase energy efficiency.

For a closer look into the “new” Ingersoll Rand, Jim Cramer had a great Mad Money segment dedicated to it: The Great Transformation of Ingersoll-Rand. He explained it much better than I can. Take a gander. Or, read the segment’s transcript on Mad Money Recap.

Referenced Resources:

** Disclosure: I am long IR calls as of this post **