Also enticing me to buy CBI is the company’s impressive backlog- $6.2 billion of backlog with 704 million dollars of new backlog last quarter(see below). In addition to that, CBI is well positioned to take advantage of a move toward liquefied natural gas, wind power and nuclear energy.

Conclusion

CBI is really cheap right now - but it may stay that way for a while. I think this is a bargain name for anyone looking to invest, but not necessarily a great play for someone looking for a quick trade. The firm has caught some bad luck with its UK operations and will most likely not be profitable this year. But revenue is growing, and the company has tons of money it can call upon in the forms of letters of credit. In short, CBI is a really cheap way to play the future energy infrastructure market.

Disclosures - plan to be long CBI soon.

Chicago Bridge & Iron (CBI) - No Comments »

The global financial system is in a state of bedlam – just ask anyone whose 401k had WM, BSC, LEH, AIG, GM, or Citi in it. And then there is the US, which has run historically large current account, trade and budget deficits over the last decade. One would think that the US with an est. 2007 current account deficit of 731 billion, a trade deficit this year of about 700 billion and perhaps the first ever 1 trillion dollar government deficit next year, should be facing a run on its currency in the wake of this credit crunch. But in reality, quite the opposite is happening.

Why?
Despite all of the fundamental problems with the US dollar, people around the world still want to hold greenbacks. Why? Firstly, and in my opinion most importantly, the US has an unbeatable military. I don’t think this factor can be underestimated when considering why a group of people chooses the currency it denominates their assets in. Secondly, the dollar has been seen historically as a reserve currency with the best liquidity on the planet. That is, the fact that so many people are trading the dollar makes it a more attractive investment as high liquidity, you guessed it, reduces liquidity risk. Moreover, the recent run-up in the dollar can be largely attributed to an international flight to quality. In And I think this flight should be able to silence any economists out there who are still trying to argue that the rest of the world has decoupled from the US.

In short, the US economy is bad, but it is still seen as one of the safer places to park one’s wealth.

Is the Rally sustainable?
In my opinion- highly unlikely. The fundamentals for the dollar are too bad for it to stay at these unsustainably high levels. Once the world panic subsides, which could be in 6 months, 2 years, or 10 years, then the dollar is going to resume its slump towards a reasonable valuation. In my opinion, after this crisis is over, the rest of the world is going to think twice about holding dollars as their primary reserve currency and diversify into holding a basket of currencies. Right now there are too many dollars out there – the Asian appetite for dollar denominated debt will have to be satiated at some point, it’s an eventuality. What is that point and when will it happen? I don’t know I assume I will see a “run on the dollar” or several decades of dollar positions unwinding, at some point in my lifetime.

The current system is not sustainable. Don’t get me wrong it was great while it lasted – Chinese appetite for debt kept interest rates low and their cheap source of labor kept inflation low. But the day will come when the US debts come due. My advice - keep a short biased on the dollar long term, and make sure you diversify your assets (especially your retirement funds) globally. The home biased is tempting, but it is also very dangerous. I would suggest looking at globally diversified ETF’s from iShares. Also, I would recommend taking advantage of this dollar strength to diversify outside the US if you have not already done so.

Conclusion
In the past the mantra has been “America sneezes and the world catches the flu.” I think today it is more appropriate to say “America catches the flu, and the rest of the world panics (who is going to buy our stuff?) and decides to pay the medical bills.”

Disclosures- None

Dollar - No Comments »

There is no doubt about it- Halliburton has taken a beating in the last few months. In late August this oilfield services giant traded for about $45 but due to falling oil prices and an expected fall in North America drilling demand, HAL now trades for only about $19. Now there are tons of reasons to be bearish about the oil services industry right now, the drop in crude will undoubtedly lower demand for HAL’s product as oil exploration companies will spend less money on drilling. The global slowdown and OPEC’s inability to stop falling oil prices are also worrisome for HAL. But I think this all has been priced into HAL and despite these risks I still see upside to old uncle HAL, especially if you have a long enough investment horizon.

Overview
Halliburton is headquartered in Dubai and has operations in over 70 countries. In 2007, HAL had revenues of $15.3 billion and operating income of $ 3.5 billion. According to its 2007 report, the company generates 45% of its revenue (40% of its profit) from Drilling and Evaluation and 55% of its revenue (60%of its profit) from Completion and Production. Also it is important to note that 45% of overall revenue comes from the US

The Bullish Case for HAL
It’s cheap, granted for a reason, but it’s still cheap. Falling oil prices, less drilling, potential terrorist threat, low capital expenditures from US oil companies, yes – But HAL is still trading for about 6.5 times next year’s earnings (18.6/2.85). Halliburton also has $1.2 billion of credit it can draw upon until July 2012. With a ROE for 35 % and a safe LTD/cap of 27 %, I think HAL is in a good position to benefit from the long term oil demand.  The recession will not last forever, China, India, and the rest of the world are going to come back thirstier than ever for the black crack.

Conclusion
In conclusion, I think HAL is a great 401 K stock. The world is not going to stop needing new sources of oil, especially since 70% of current production comes from mature fields. I would take this drop in HAL’s price and add some HAL to your portfolio at bargain basement prices (6.5 times next year’s earnings).

Disclosures - None.

Haliburton (HAL) - No Comments »