Filed under: International markets, Rumors, Google (GOOG), Politics, Stocks to Buy, Israel

As Middle East leaders prepare to convene together, again, I was looking for some ways to play this event in my portfolio via Israeli Ingenuity, something we discuss a lot at IsraelNewsletter.com. This time around, the location is Annapolis, Maryland, site of the U.S. Naval Academy. Tuesday’s conference aims to relaunch Israeli-Palestinian peace talks for the first time in seven years. Looks like almost everyone is going to attend. Even Lebanon looks ready to join the U.S., Israel, the Palestinians, and Syria in making history.

I’d be a buyer here of Elbit Systems (NASDAQ: ESLT), an Israeli defense contractor working on some large deals and really cool technology. BloggingStocks’ Aaron Katsman wrote this past week about the anti-hijacking technology Elbit is marketing and this will certainly come in handy in Annapolis while each attending party will be working diligently to secure its best interest at the expense of all the others’. We’ve been here before and most of us do not so readily imbibe the peace kool-aid as in years past.

The second company I’d be buying here is Answers.com (NASDAQ: ANSW). Answers.com is an Israeli internet firm that runs an answer-based information portal providing users with answers covering millions of topics. I hope the participants in Annapolis are using Answers.com to find a path to peace because from where I’m sitting, it doesn’t look particularly promising.

Answers.com, which gets a lot of its traffic from search monolith, Google (NASDAQ: GOOG), is in the process of acquiring the parent company of Dictionary.com, in a bid to secure more organic search traffic to its site. Dictionary.com may come in handy for Annapolis participants to find the definition of “disappointment” when this is all over.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author’s fund holds a position in ESLT but not in ANSW.

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Filed under: China, PetroChina Co Ltd ADR (PTR), Economic data

I wrote here recently that China was experiencing a nasty bout of inflation along with meteoric growth. China admits as much and is taking active steps to combat it. With a recently published inflation rate of 6.5% and certain food prices spiking (pork is up 55%), China is pledging to rein in export growth.

With all the focus on China, I was interested to see Dr. Enzio von Pfeil on CNBC discussing Chinese inflation. While I don’t have access to the video, you can read about the interview on Enzio’s own blog, Enzio’s Clock.

Dr. von Pfeil’s thesis is that food inflation, while spiking in China, is something beyond the purview of the Chinese Central Bank. Through monetary policy, central banks can affect only non-food inflation. Inflation in food prices comes from policy issues, weather, and rising global commodity prices — not excess supply of money and excess demand for good.

Dr. von Pfeil doesn’t think China is overheating, though he does caution waiting to step into the Chinese market until after the subprime mess has run its course in the U.S. and abroad. Good, sagacious advice.

As is frequently the case in quickly growing economies, it’s hard to stay on the sidelines until after all overhangs have cleared. By then, a big chunk of the investment opportunity has passed the investor by. There are always significant risks in investing and returns provided have to be greater to compensate investors for assuming such risks. I like Dr. von Pfeil’s analysis, and he’s a much smarter investor than I am — I’m just not sure how actionable this really is.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Disclosure: I personally own shares in Chinese ETF, FXI.

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Filed under: Products and services, Coca-Cola (KO)

This post is part of our Hottest Products of 2007 feature. Also check out our other Hottest Products of 2007 posts and let us know which product you think is the greatest thing since sliced bread.

When I first discovered the products of glacéau, maker of Vitaminwater, it was the summer of 1998, and there were four flavors of Fruitwater. The lemon ginger flavor was strange, at best, but I could drink an entire cold bottle of watermelon water after a run. Cranberry mint was curious and refreshing. They were lovely, with the tiniest hint of color and no sugar: what I’d always wished for in a bottled water.

Cut to 2007, when, in order to cater to the mass market’s taste for sweets and the craze for vitamin-enhanced beverages, glacéau’s Vitaminwater has been stocked with sugar and color. This summer, Vitaminwater was being guzzled by all my friends’ children at family barbecues and birthday parties. The day-glo orange and green look oh-so much like the Kool-Aid and Gatorade we drank in decades past, and I have to say they’re just as sweet. The watermelon water I loved has been replaced by four new flavors, all “naturally” sweetened; peach, raspberry, grape, lime. Sounds like Lifesavers! The kooky Whitestone, Queens management has sold (out?) to Coca Cola (NYSE: KO) for $4.2 billion. 50 Cent, famously, had a big payout thanks to his prescient investment in the stuff (he wanted to put his money in something healthier than his rap rivals’ liquor ventures). For Coke, of course, it was just the latest salvo in the next generation of the cola wars (now it’s enhanced waters and super-premium juices, but it’s still the same ol’ Coke vs. Pepsi).

Continue reading Hottest Products of 2007: Vitaminwater sweetens your daily H2O

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Filed under: International markets, Rumors, Google (GOOG), Politics, Stocks to Buy, Israel

As Middle East leaders prepare to convene together, again, I was looking for some ways to play this event in my portfolio via Israeli Ingenuity, something we discuss a lot at IsraelNewsletter.com. This time around, the location is Annapolis, Maryland, site of the U.S. Naval Academy. Tuesday’s conference aims to relaunch Israeli-Palestinian peace talks for the first time in seven years. Looks like almost everyone is going to attend. Even Lebanon looks ready to join the U.S., Israel, the Palestinians, and Syria in making history.

I’d be a buyer here of Elbit Systems (NASDAQ: ESLT), an Israeli defense contractor working on some large deals and really cool technology. BloggingStocks’ Aaron Katsman wrote this past week about the anti-hijacking technology Elbit is marketing and this will certainly come in handy in Annapolis while each attending party will be working diligently to secure its best interest at the expense of all the others’. We’ve been here before and most of us do not so readily imbibe the peace kool-aid as in years past.

The second company I’d be buying here is Answers.com (NASDAQ: ANSW). Answers.com is an Israeli internet firm that runs an answer-based information portal providing users with answers covering millions of topics. I hope the participants in Annapolis are using Answers.com to find a path to peace because from where I’m sitting, it doesn’t look particularly promising.

Answers.com, which gets a lot of its traffic from search monolith, Google (NASDAQ: GOOG), is in the process of acquiring the parent company of Dictionary.com, in a bid to secure more organic search traffic to its site. Dictionary.com may come in handy for Annapolis participants to find the definition of “disappointment” when this is all over.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author’s fund holds a position in ESLT but not in ANSW.

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Filed under: Analyst reports, Forecasts, Industry, Wal-Mart (WMT), Economic data, Housing

ShopperTrak RCT Corp says that retail sales on Black Friday rose 8.3% according to a report at Bloomberg.. “It’s an extraordinary number, beyond what we anticipated,” Bill Martin, co-founder of ShopperTrak, said in an interview with the news service. The research firm says that sales on Friday are usually about 5% of all holiday sales.

What the report fails to say, but should concern retailers, is how much they had to give up on pricing to get customers in to stores. If foot traffic was not high enough for some chains, it is likely that they will move prices down on some items again in an attempt to clear out inventory by the end of December.

The National Retail Federation in Washington only expects sales to rise 4% in November and December, a number that is not enough to support any real recovery in the retail sector which has been hurt by both fuel prices and softness in the housing industry.

If late November sales are running better than expected, it may cause a turnaround in Wall St.’s expectation for the holiday and lift shares in companies like Wal-Mart (NYSE:WMT). It would also pointed to unanticipated strength in consumer spending.

Economists still expect that, if there is a recession, the consumer, who has kept the economy afloat for so long, will lead the fall into negative growth. The theory is that he has simply carried US spending on his back for too long.

What if he actually has the strength to carry it further?

Douglas A. McIntyre is an editor at 247wallst.com.

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That’s the $25,000 question as we roll in to 2008, and the highlight of today’s Wall Street Journal report on the ramifications of adjusting adjustable rate mortgages on the housing market. The stunning figure is the total number of mortgages resetting each and every month. The White House pegs the number at over 150,000. That breaks down to:

• 5,000 loans resetting every day
• 208.3 loans resetting every hour
• 3.5 loans resetting every minute

This torrid pace is only expected to continue through the first half of 2008, with devastating consequences to the housing market.

Banc of America Securities, a unit of [Bank of America], estimates that $85 billion in subprime mortgages are resetting during the current quarter, and the same amount will reset in the first quarter of 2008. That will rise to a peak of $101 billion in the second quarter. The estimates include loans packaged into securities and held in bank portfolios.

Larry Litton Jr., chief executive of Litton Loan Servicing, says resetting of adjustable-rate mortgages, or ARMs, has recently emerged as a bigger driver of defaults. “The initial wave was largely driven by a higher frequency of fraudulent loans…and loose underwriting,” says Mr. Litton, whose company services 340,000 loans nationwide. “A much larger percentage of the defaults we’re seeing right now are the result of ARM resets.”

These defaults are quickly becoming a major part of the housing market picture; adding up to 4 months worth of new housing supply to an already over-saturated market. What’s worse is that these foreclosed homes sell at a steep discount - some auctions in San Diego were seeing 33% price reductions at final sale - driving down sales prices and limiting options for home owners in the area.

The Mortgage Bankers Association estimates that 1.35 million homes will enter the foreclosure process this year and another 1.44 million in 2008, up from 705,000 in 2005.

The projected supply of foreclosed homes is equal to about 45% of existing home sales and could add four months to the supply of existing homes, says Dale Westhoff, a senior managing director at Bear Stearns. This is a “fundamental shift” in the housing supply, says Mr. Westhoff, who believes that home prices will drop further as lenders “mark to market” repossessed homes.

Foreclosed homes typically sell at a discount of 20% to 25% compared to the sale of an owner-occupied home, analysts say. Lenders are eager to unload the properties, and the homes tend to be in poorer condition.

This is the chain reaction that is literally boxing home owners in. I talked about my neighborhood as one example where a couple of units headed to foreclosure has dragged the comparable sales down from the mid-600’s to the low 500’s; putting even those who put down 20% (like me) in a very tenuous position (to say the least).

So what does this mean? It has a couple of implications:

1. If you are a home owner with an ARM that is set to adjust any time soon, it’s time to get moving on how you’re going to tackle that problem.
2. If you are a home owner who is thinking about refinancing any time soon for a strategic reason, it’s time to get moving before your neighbor gets foreclosed on and wipes out your ‘equity’ with a comparable sale that will make you blanch.

For those of you in group 1, read this article on how to combat an adjustable rate mortgage reset. For those of you in group 2 you may want to consider this piece on ‘protecting’ your home equity with a home equity line of credit; and if you don’t know if you have an adjustable rate mortgage, watch this video on how to examine your loan documents to find out if you have an ARM or not.

What do you think? How bad will this surge in resets be for the housing market, and how will it compare to the upcoming Option ARM reset wave?

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