Rising From Destruction

The words of Thomas Paine may have never been more pertinent than during these days. The people of the Gulf Coast are enduring the greatest natural tragedy ever to befall our wonderful nation… but as Americans, they will overcome… and as Americans, we have rushed to their aid. There are difficult days ahead, but the worst is behind.

As an optimist, I try to find the bright side of every picture. However difficult it may be to find, there is light at the end of this tunnel. The city will rebuild, just as Chicago did after their great fire… just as Hiroshima, Nagasaki, and Europe did after WWII and just as Homestead Florida did after Andrew. Within this glimmer of light there is an even brighter shimmer for the US, and southern economies.

Although gas prices have spiked rather drastically and fuel shortages are hitting the south, the economic implications of the storm are as far reaching as the hearts of Americans.

Billions upon billions of dollars will be spent in the coming months and years to rebuild. Job creation in the area will be enormous. Thousands of carpenters, roofers, plumbers, electricians and merchants will be needed on the Gulf Coast while tens of thousands of construction workers spend the next decade without a weekend off. Phone companies, utilities and road crews will be in high demand and will pay workers handsomely.

Billions of dollars will trade hands at the fastest pace in the areas history creating the need for new services, new workers and new technologies. The Gulf Coast has not fallen; it was presented with an enormous tragedy and will overcome with vigor never before seen.

While Louisiana, Mississippi and Alabama deal with the disaster on the ground, Alan Greenspan may attempt to deal with a possible short term fiscal disaster resulting from this tragedy. Because of the shut down of oil rigs and refineries, gasoline prices have hit all time highs. At over $3 per gallon (in some areas), the government expects some decline in GDP as consumers are squeezed out of their normal spending habits.

It is now possible that Greenspan will hold off on another interest rate hike to keep the cash flowing and people spending-- to avert a slowdown in growth. Up until now, growth has been self sustained and there was no need for the Fed to help the economy along. But the effects of gasoline prices on consumers may have altered that reality.

The next fed meeting on rates is this month. There is strong speculation in the futures market that Greenspan will hold rates steady in September and possibly November as well. This speculation has pushed the 30 year mortgage lower and could possibly extend the life of the so called “real estate bubble” by months.

Greenspan is expected to meet with President Bush in the coming days. It is very likely that Bush will ask the Fed Chairman to hold off on hikes for a bit so the current cash in the system can absorb some of this impact. This bodes well for the stock market, the housing market and the Gulf Coast as loans to rebuild will be cheaper than anticipated.

"Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all." –Dale Carnegie

Lighten the Load

With gasoline prices hitting new highs every day and shortages affecting areas of the south, it’s time to look at ways to save. But before you abandon your Cadillac for a Toyota Prius or a tandem bicycle, allow me to show you some simple methods to reduce your fuel costs.

First, never let your gas tank approach empty. You may find yourself in a pickle where the closest gas station also happens to be the most expensive. Avoid purchasing gas from stations near interstate ramps. Their price is often five to eight cents more expensive than a “main road” station. Shopping for the best price only makes sense if your new bargain station is close enough to your normal route where the extra distance doesn’t end up costing you.

Secondly, Empty the junk from your trunk. Extra weight in your car can shave miles off your tank. If you don’t need the kids’ baseball equipment or your golf clubs in the back seat seven days a week, keep ‘em in the garage… and your book collection belongs in your library, not your trunk. According to AAA, 100 pounds of extra weight shaves 1% off your fuel efficiency. Get a tune up and check your tires. Well tuned cars are efficient cars.

There’s a slew of other “tactics” available to help you cut fuel costs, but most involve joining a shopping club, signing up for a new credit card or driving that annoying guy to work every other week. But your best bet is to invest in energy.

Energy stocks have been outpacing price growth at the pump. In the past year, the average price per gallon of gasoline has gone from $1.86 to $2.68, a 44% increase. But many of the mid-cap energy stocks have handily beaten this… with the blue chips inline, plus dividend payments. Investing in an energy stock that returned 80% over the past 52 weeks leaves a 36% gain on your investment if you subtract the price increases you paid at the pump.

Our Suncor position is up over 120% from our initial recommendation, while Cheniere Energy has just surpassed 300% gains. The best way to ease strains on the wallet due to high gas prices is to own the companies who provide energy. But while oil and gas stocks are a great investment, a new bourgeoning energy industry is growing at breakneck speeds and will offer investors huge returns in the years to come.

The September issue of Powerhouse Profits highlights a company which is bound for substantial growth in the wind power industry. Wind power is growing at roughly 25% per year with projections of a 10 to 12 fold increase in growth over the next 15 years.

The company highlighted is a forerunner in the industry, pays a 3.3% dividend and is a relatively “safe” investment. This is a stock which should be in everyone’s portfolio. To learn more about this company, and the Viking like emergence of the wind industry, please see the September issue available this week at www.powerhouseprofits.net.

Please contact the American Red Cross to help our fellow Americans in need.

Luke Hodgens is the editor of
Powerhouse Profits a conservative investment newsletter.