AverageJeremy

Denial isn't just a river in Egypt

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Well, we're getting close to the end of the competition and I have really enjoyed reading some of the posts. Namely dishwasher's blog posts. There is a good reason that he has been at the top through most of the competition. He knows what he's talking about. I know that I don't even understand half of what he does about investing and I really hope that he wins this competition in the end because he really deserves to. As for the title of my post this time, I am referring to the banks, investment firms, investors, and anyone else that was involved in the whole subprime mess. Why would anyone want to create, let alone invest in, something so complicated that few, if any, actually understand them. I don't really understand how CDOs work but it doesn't sound like the people that should understand them have a clue either. We need to expose Wall Street's shadow-banking system. Pimco's chief investment officer Bill Gross expects mortgage defaults to rise well into 2008: "There are $1 trillion worth of subprimes" and they're "basically garbage loans ... we've only begun to see the pain." And a lack of transparency is damaging our international credibility. This debt needs to be completely written off right now. If we wait any longer we will only prolong the inevitable, a recession, and make matters even worse. The train wreck has already happened and the banks need to quit living in a state of denial by ignoring the problem. I realize that many banks are still trying to assess the damage but rather than continuing to drag their feet they should just come to terms with the fact they they royally screwed up and write down all of the CDOs as bad debt.

The other problem that we seem to be facing right now is a great amount of greed by a select few. I was reading an article last week by Jon Markman on MSN http://articles.moneycentral.msn.com/Investing/SuperModels/CreditPainIsGainForASelectFew.aspx?GT1=10621. In the article he gives us a great perspective on what was going on with all of the CDOs and why the stock market has become a roller coaster ride. It seems to me that this "conspiracy", if you will, has rattled the confidence of investors all over the world. I realize that everyone is terrified of the U.S. catching a cold and sneezing on the rest of the world but that fear has been heightened due to these elite few that are making money off of that fear. By creating false news reports about companies they have thrown an aerosol can into the fire that is the housing debacle and now that it's exploded it's anyones guess as to when we can expect the panic to stop. So, I will probably begin to take some profits from some of my positions and redistribute my funds into "safer" vehicles. I will of course continue to stay in some positions for the long haul since that is more my style, but I'd be crazy to let my winners come crashing down while I'm still on-board. I am also going to tinker with a new strategy that involves earnings calls that I will discuss in greater detail in a week or two.

As for my current portfolio positions, I am really excited about the prospects for one of my newest acquisitions. I recently bought shares of Sinoenergy Corp. (SNEN). This company deals with compressed natural gas (CNG) and has plans to build 20 CNG filling stations in China. On October 9 they announced that the first two were up and running. Both stations are located in Wuhan City, Hubei province. Sinoenergy is building 20 CNG filling stations within the city of Wuhan with one central station and a large-scale compressed natural gas plant. These stations are expected to open over the next 6 months with a target of 30 CNG filling stations being operational by the end of 2008. Currently there are 4,900 vehicles that burn CNG in Wuhan City with another 2,500 expected to be in use by the end of the year. It is estimated that at least 20 to 30 CNG filling stations will be required to fill those 7,400 vehicles. Currently there are only 10 stations. I expect to see massive growth for Sinoenergy over the next 2 years. Sinoenergy started out as a pressurized container producer and still manufactures a large number of containers for several industries. They also make conversion kits, which began to produce revenue last quarter. Sinoenergy is also building two refineries and a pipeline that should be up and running in 2008 and 2009 respectively.

To put this in perspective, in India, CNG only costs 50 cents per kilogram compared with $1.50 USD per liter of regular gasoline. There have been reports of CNG costing around $7.17 USD per 100 km (62 miles). If regular gas costs around $1.59 USD per liter the cost per 100 km is $15.95 USD. That's a savings of $8.78 per 100 km or 55%. That's a huge cost advantage. Not only that but CNG can be used in modified diesel engines and since CNG produces very little soot, oil changes are only necessary every 10,000 miles. In Germany, CNG burning vehicles are expected to increase to 2 million units by 2020. Argentina and Brazil are the two countries with the largest fleets of CNG vehicles. So, as you can see there is a great deal of upside for this company over the next two years and possibly beyond. I expect great things from this company and good gains.

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