Stock talk for the main street investor.
Jul 15 2010

More Bullish News From JPM and GE

JP Morgan (JPM) announced better earnings helped by loan losses. Since I don’t believe big banks are particularly honest or great indicators of a better economy I only take snippets from their earnings. I gloss over trading and investment banking all together. What I did see was that lower loan losses and a smaller amount put into reserves is helping results. What that means is they’re more confident about getting paid back by borrowers and seeing less borrowers default.

The other news for the day came from GE. Jeff Immelt, their CEO, said he was increasing R&D spending 18% and staking the companies future on growth from R&D. This is great news. Companies are tepid about spending R&D dollars if their uncertain about the future so this shows me that he is ready to put money to work building the foundation of new businesses. R&D leads to capital spend which leads to increased output which leads to jobs. All great indicators.

Disclosure: The Mayor has no position in JPM or GE.

Jul 14 2010

Don’t Underestimate The Engineers

As an alternative energy investor I read a lot of naysayer commentary about how it’s just a pipe dream or “magic” as Fortune pointed out this week. After all, we’ve been in this position before. During the 1970s there were similar cries for energy independence and talk of technologies like solar power were all the rage. Then oil got cheap, policies changed and investment stopped.

The challenges many point out are certainly true. Electric cars run on lithium batteries, which is mined in places like South Africa and Afghanistan, not exactly home grown. Wind won’t produce enough power to replace coal. Solar has a long way to go before replacing more traditional electric sources and must be turned into some other energy source to be transferred around the country/globe.

But this is where the bimbos on Wall Street and the non-technical writers get it wrong. True we don’t have a solution today. True we won’t have a solution tomorrow. But there are thousands of people smarter than you and I working on technologies we will count as givens when the energy revolution is complete. What that technology is I don’t have any idea (but I think it involves hydrogen). What I do know is I would rather put my energy future in the hands of engineers and scientists than oil companies, Wall Street and politicians. Aren’t they the ones who will create a true energy revolution?

This process will take time. It took over 100 years to get where we are with oil. But the groundswell is building faster than you think. 0.5% of our electricity capacity was added by wind turbines each of the last two years. Solar should count for similar numbers in the next five years. By then we may be replacing 3-4% of our “dirty” electricity with “clean” electricity each year. The move to replace oil will take longer but once manufacturing ramps up, costs go down and alternatives look even more attractive.

I’ve made my bets. Who do you believe will win in the end?

Jul 13 2010

Intel Increases Capital Spend

Intel (INTC) announced good numbers today with earnings of $0.50 vs. $0.43 expected. Sales also beat estimates. But hidden in in their report was the most important note for those watching the economy.

Capital spending forecast was increased $400 million to $5.2 billion. This is one of the first steps to an economic recovery because capital spending will translate into jobs for those building equipment, jobs for those running equipment and jobs for those selling the additional product. It shows Intel has enough faith in the future to invest dollars now.

Keep watching manufacturing earnings for clues on the economy. If companies are increasing capital spending, R&D and hiring we are on our way. I’d like to call this recovery a reverse slippery slope. When the ball gets rolling and unemployment falls we’ll be shot off like a cannon by the capital waiting on the sidelines.

Disclosure: The Mayor has no position in INTC.

Jul 12 2010

Alcoa Shows Growth

Alcoa’s (AA) numbers are in. They swung to a $0.13 per share profit but what’s important in their earnings is the growth in revenue from $4.24 billion to $5.19 billion. What this tells me is that the global economy is in a much better place than a year ago and we’re starting to see that drive down to material suppliers.

The reason Alcoa is so important is what they provide, aluminum. You know of aluminum as a supply in soda cans and other miscellaneous items but it’s also used in things like airplanes, cars and manufacturing equipment. If more aluminum is being purchased it’s a bullish data point for the economy. When aluminum struggles it’s bad for the economy. So chalk one up for the bulls.

The rest of the week is more “fluffy” companies like Google and JP Morgan. We won’t get a great indication if the economy is in full swing from them. But it will be entertaining none the less.

Disclosure: The mayor has no position in AA.

Jul 7 2010

A Flying Side Note

Let’s take a quick side note from investing for a minute and talk about flying. Today a Switzerland team is taking a 24-hour test flight of a solar plane. Now solar isn’t exactly as powerful as jet fuel so this is really nothing more than a powered hang-glider but it’s a cool step.

The plane is a 262 foot wing span one man plane and if all goes well will make a trip across the Atlantic as the next step of a goal to cross the globe on solar power. If that concept can be proved it would be feasible to think a small plane could be powered primarily by solar or at least as an auxiliary power source.

Solar may not soon be able to power the world’s airplanes but it’s cool to see engineers working toward that direction.