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Dallas, TX
May 16, 2008, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Oil Man Goes Against The Grain
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What's Hot Today: |
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U.S. stocks were moving higher in pre-Wall Street trading. Oil was back above
$125. Watch for housing starts and consumer confidence numbers to move the
market. See directly below for schedule.
Today's Economic Calendar:
- 8:30a.m. Apr Housing Starts. Previous: -11.9%.
- 10:00a.m. Mid-May Reuters/U Mich Sentiment Index. Previous: 62.6.
News For Thought
Interpol confirms findings of FARC laptop. According to The Wall Street Journal: 'Interpol yesterday issued its findings on the authenticity of the computer files seized from Colombian terrorists in March, and they won't make Venezuelan strongman Hugo Chávez's day. "We are absolutely certain that the computer exhibits that our experts examined came from a FARC terrorist camp," said Robert Noble, head of the international police agency. "No one can ever question whether or not the Colombian government tampered with the seized FARC computers."'
China's earthquake problems worsen. China is allowing outside assistance to its earthquake relief efforts, as aftershocks have collapsed schools, killing children, and the potential for worse problems, including damage to dams persists. |
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Oil Man Goes Against The Grain
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Texan Goes Big On Wind Power
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T. Boone Pickens has made his money, billions of it, on oil. But his latest energy gamble is on wind power, suggesting that the energy markets might be working on a new dynamic.
Wind power is not new. And in Texas, it's plentiful, even outside the hallowed halls of the Capitol, where Mr. Pickens has not shown much interest as far as placing wind generation equipment. Intead, the oil billionaire wants to turn Pampas, TX, where he has a huge ranch, into the wind generating capital of the world.
According to the Dallas Morning News: "Mr. Pickens' company, Mesa Power LLP - ordered 667 turbines from GE for about $2 billion," on Thursday, a load of equipment that "will produce 1,000 megawatts of power, more than the average nuclear power plant, and enough juice to light 300,000 homes."
And this is only a partial installment, as "it's just a quarter of the turbines that the legendary oilman plans to erect near his ranch in Pampa. By 2014, Mr. Pickens wants to have 4,000 megawatts of windmills turning in a $10 billion to $12 billion project."
More interesting is the fact, that a potential bottleneck in the deal, the availability of power lines to transport the power, might turn Pickens into even more of a maverick, as he may build his own set of power lines, turning the Texas grid into something resembling the old, "Wild, Wild," west.
According to the Morning News, the way things are currently set up is this:
1. "Texas has more wind power than any other state, with 6,903 megawatts. But wind capacity has grown faster than the transmission lines to accommodate the power."
2. "The Public Utility Commission is in the process of ordering transmission lines to accommodate new wind power. Commissioners could designate a line to Pampa, even though the wind farm would sit outside of the Texas grid, operated by the Electric Reliability Council of Texas."
3. If Mr. Pickens decides to build his own transmission lines the development "could rock the traditional regulatory framework of a grid paid for by all power users and extend Texas' experiment in deregulation to a whole new side of the industry."
And here is the key. The traditional set up calls for utility companies to build the power lines, and eventually pass the cost onto consumers in their electric bills. But, according to the Morning News "Mr. Pickens is willing to eat that cost to build his wind farm."
Conclusion
As the world faces the possibility of perpetually higher energy prices, Mr. Pickens is taking his oil money and putting into a renewable form of readily available energy, which is plentiful in Texas, wind power.
In the meantimme, he is also pushing the regulatory envelope and creating an interesting situation for legislators, which has the potential of creating significant legal precedents, for Texas, and perhaps the rest of the country.
More than anything, it seems as if Pickens is setting up a potentially dangerous situation for electric companies by his willingness to build his own power lines, ie. bypassing the middleman.
Yet, despite the current status of the story, it's almost certain to develop and change over the next few months to years, as Mr. Pickens is well known to be very savvy in the way he develops his business entities.
The bottom line, though, is that windpower has finally made the big time, which makes the whole thing very interesting both as a social trend, as well as an investment angle.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
S & P Close To 200-Day Line
The S & P 500 didn't quite make it, but the Nasdaq Composite finally closed above its 200 day moving average, reversing the long term down trend.
The Nasdaq 100 also moved back above key resistance. The chip sector continues to lead the market higher.
Selective investors that are moving toward the few up trending areas of the market are doing fairly well.
Our S & P timing model is still on the long side and we still have several open positions in our growth stock list.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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IBM (NYSE: IBM) Shrugs Off Hewlett Packard's (NYSE: HPQ) Purchase of EDS (NYSE: EDS)
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Hewlett Packard's (NYSE: HPQ) bought EDS (NYSE: EDS) to compete with IBM (NYSE: IBM), but the threat failed to materialize as IBM broke out to a new high.
Chart Courtesy of StockCharts.com
IBM transformed itself into a software and services company many years ago, and has built a huge business book in the area. So much so, that Hewlett Packard plunked down nearly $14 billion for EDS, a software and administration firm whose stock had seen much better days in order to compete.
So the question is whether HP bought a dud, or a gem. And even if the latter is true, will it make a difference to IBM? So far, the market has shrugged of the potential for danger to Big Blue, as the shared vaulted to new highs on 5-15, soon after the HP-EDS deal became official.
The initial back of the napkin analysis puts HP as the number two big time IT company in the world, while IBM remains number one. The question then becomes what HP does to become number one. If history is any guide, HP, which has grown by acquisition (remember Compaq?), will likely add more to its portfolio by the same method.
IT is getting interesting, then, as HP mulls its next move, and of course, now IBM has to think about a way to keep its number one position. |
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