I am officially back on the road working on the next venture.  Over the last three weeks, I have circled Lake Ontario and Lake Erie, hitting hotspots in New Jersey, Montreal, Bell-Vegas, Toronto, Grosse Point, Ann Arbor, Cleveland, and where the industrial revolution began, Bethlehem, PA.  I then took a very cheap Southwest flight down to Texas and then onto the Left Coast.  I am working on an industry consolidation venture that makes a lot of sense.  The timing is right and after meeting with over 15 companies in three weeks, I am confident that half of the group will agree to a consolidation.  It has all of the components of a successful merger.   

First of all, it’s a simple proposition that make sense.  The technology is scalable and can be run on one platform.  The immediate bottom line will improve by 50%.  The owners are all smart, level headed, hungry, trustworthy entrepreneurs who built a company profitably, with strong support, which they believe in.  No one is in trouble or needs to sell due to the downturn of the economy.   The consolidated company will go forward as a strong number two player in the industry with a team of professionals second to none.  I am very excited to say the least.  I’ll tell you more about the venture once it is completed this Spring.

I met up with many old friends on this trip as well as made some new friends.  When I was not in meetings, I was socializing at parties and social events.  There has been one central theme to my travels and interviews; FEAR.  Fear covered up in booze.  The bars were busy with business people crying in their beers.  It seemed to be pretty consistent with the exception of one enthusiastic tax attorney bowler at the Grosse Point Country Club.  In his words, “no matter what the economy is doing, people always need help with their taxes.”  However, he admitted his portfolio, real-estate and stocks, have taken a beating.  There is nowhere to hide. 

Americans hold over 80% of their net worth in (1) the home and (2) the retirement fund.  All other non-liquid assets are worth less as well.  The home front trend, as confirmed by a real-estate agent at ‘The Hill’over a glass of Makers Mark, is downsizing.  The McMansions days are over!  Thank God.  The trend is to downsize in a big way.  With layoffs, business transactions on hold, bonuses not getting paid, stock profits gone, and people downsizing their home, who is going to pay the taxman? 

Now enter the stimulus plan.  I read the 404 page plan (well… glanced at it) and it says one thing, ‘we are pumping a whole lot of money into the economy.’  That together with the Fed moving interest rates to zero, banks getting a government Put, and people NOT WALKING FROM THEIR UNDERWATER HOME, sounds inflationary.   Not to mention that the government action came together, never before seen, at a record pace.  Once the market rebounds this Spring, the velocity of home sales will pick up, and business will resume.  But wow, what a debt load the nation is left holding.

So, I am finally calling the bottom.  It was yesterday, Tuesday March 3rd.  That is it.  That was the bottom.  There you have it.  If you ignore this message, I am going to haunt you with “I told you so” SPAM for the rest of your life.  If I am wrong, I take absolutely no responsibility except to come buy you a beer that we can both cry in.  I have put my money behind it.  I went from a large cash position to 75% long equity position in two positions GE and PGH.  For the remaining 25% cash, I am watching the following stocks: AMSC, BAC, BHP, GOOG, INFN, ATHN, QSII, and VMW.

We are well positioned for a springtime rally.  We have seller exhaustion.  And the place to be invested, in my opinion, is energy.  My personal favorite is a nat gas play out of Canada that pays high dividends, called Penn Growth Energy, PGH.  It is a buy right now just below $6.

The market has overreacted, as it has done in the past.  The downturn has been swift and so will the upturn.  The government actions will devalue the currency further and commodities, food and energy will be the best position to be in long.  Get ready for inflation.

Here are some interesting statistics:

US National Debt as of Feb 23, 2009 is $10,813,202,742,450.59

Estimated US Population is 305,696,468

Each Citizen’s share of the debt is $35,372.35

As of last month, the overall median (mean) US citizen’s net worth value is $81,276.30 ($391,278.60).

The large difference between the median and mean net worth is due to the top 1% of the population that holds the largest portion of the country’s wealth.  Each person’s share of the debt is basically half the net worth of the median citizen.  Debt is the American way!

Embarrassingly, after being fed many rounds of shots by a top one-percenter on my journey, I got out of control and left a little memento on my dear friend’s basement bar (Sorry Joe, I got a case of Bordeaux with your name on it).  Luckily it was a laughing matter to him and I am back on the road to the recovery.

Cheer up.  Don’t cry over spilt milk.  The markets will improve, business will continue.  Now is the time to position yourself for the new growing economy.

Cheers,

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