Transcript:

In focus this week: Are Florida condos on fire? $70 oil from the White House, donuts for growth and the SITFA.

Many people are thinking about bottom fishing for real estate, so I thought this piece about Florida real estate would be particularly timely.

A recent Barron’s article described condo buying in South Florida by Europeans, South Americans and Russians as buying without concern for maintenance costs, quality, or resale value.

Canadians are showing more restraint, but not by much; they’re avoiding South Florida, which the article describes as less than appealing in what is otherwise a good buying opportunity, if you do your homework.

According to Barron’s, prices are down 50%, interest rates are very low and sellers are anxious. That’s sounds like my kind of market.

But beware of a game being played by developers in the hugely over-built Miami area that the article called “extend and pretend.” The idea is for developers to extend their mortgages and pretend their Miami area properties, and South Florida almost as a whole, are worth a lot more than they really are.

What Barron’s sees as the big growth wave in Florida is North of Palm Beach County and any area that didn’t participate in the crazy growth from 2003 to 2007; the space coast and the treasure coast are looking good, and avoid the inland glut of single family homes.

The real news though is the biotech boom in Northern Palm Beach County and St. Lucie County. The prime location to capitalize on this boom is Martin County, between Palm Beach and St. Lucie, which has a no high-rise policy, therefore no condo glut.

Low prices, anxious sellers, waterfront, no state income tax; but do your homework and stay north of Palm Beach.

Works for me.

$70 Oil

The cheapest oil in the world right now is in coming from North Dakota, Montana and Canada, and it all flows through one town called Clearbrook. And there’s a huge glut there that’s driving prices down. How’s $70 a barrel and dropping?

It seems we don’t have the pipeline capacity to move the oil from Clearbrook to the Gulf Coast refineries. So, we have another glut, similar to the Cushing glut of last year, and the price drop that has resulted from the glut could jeopardize our efforts to be energy independent.

Oil output, just from the Bakken shale in North Dakota, has surged five times since 2005, but there has been no increase in our capacity to move it where it needs to go. Cheap oil and from the U.S. – and we can’t get it where it needs to go.

Brilliant!

There is some good news here. The big winner, Burlington Northern.

Oil producers are relying on trains to move the oil from Clearbrook to the gulf coast, which of course is great for Buffet’s BN, but adds tremendously to the cost of the finished product.

If the price at Clearbrook drops below $65 a barrel, production in the richest oil field in the U.S. will have to be reduced. That’s exactly what we don’t need.

Maybe our President can appease his far left base and veto all the new pipeline projects. Then we can shut down our domestic oil production completely.

Funny thing, Buffet, a big supporter of Obama, both financially and verbally, reaps huge profits from his single biggest investment ever, Burlington Northern, after his hero, Obama vetoes the pipeline that would have moved the oil at a much lower price, and without Burlington Northern’s trains.

I’m sure it’s just a coincidence.

 Donuts for Growth

Dunkin’ Donuts, my favorite by the way, and the topic of a recent Barron’s recommendation, surged 47% after its IPO last July, but has run sideways since then. But there are good reasons according to Barron’s to expect more from this brand in the next few years.

Yes, Starbucks, seen as one of the key competitors (I still don’t know how they get people to drink their regular coffee, it’s too acidic for me), has shown a 25% gain during the same period, but Dunkin’ has a lot more room for expansion and some very nice points in its favor.

While Starbuck’s has to go to exotic places for more growth, Dunkin’ Donuts has only begun its expansion in the western U.S. and has lots of room for growth and plenty of good locations available.

Most Dunkin’ stores are franchises that have royalties set as a fixed percentage of sales, so there’s less of a swing in profit margins when sales fluctuate.

And, 30% of same stores sales growth last quarter came from the K-Cup craze that has been showing very good sales growth in newer locations.

Here’s a company that has lots of room for growth in the U.S., lots of cash, .6 billion, and there is talk about returning some of it in a dividend and is expecting 5% free cash flow by 2013. It may have a high PE for this market right now, but it’s primed for real growth in sales and bottom line.

Oh, and the best Boston crème and chocolate covered donuts in the business.

This is one to watch. Watch your waist, too.

 Finally, the SITFA

This week it goes to the citizens of France who in the next presidential election, according to MarketWatch, will elect, by a wide margin, a confirmed socialist, one Mr. Hollande, to replace Sarkozy.

Now, besides the fact that the EU socialists are blind to the fact that their give-away mentality is the cause of and will hasten the collapse of the EU, Hollande has promised to cancel the EU balanced budget deal the French made with Germany to keep the EU afloat, hire another 60,000 teachers and another 150,000 state supported workers, reduce the retirement age to 60 when every other country is raising it or thinking about raising it, raise taxes on financial transactions and increase taxes on the rich in France.

If this sound familiar to our own Commander in Chief, sit down, it gets better.

Hollande has eight full years of political experience, that’s right, eight years, as the mayor of a little village called Tulle. Tulle has 15,600 residents. That’s up from about 10,000 in the year 1793.

I’m not making this up! He looks to be the next President of France.

Of course, by Obama standards he’s over qualified. Obama had 42 days of experience in the Senate when he ran for and won the most powerful office in the world. Oh, I forgot, and he was an organizer for ACORN in Chicago.

Can somebody please tell me what people are thinking about? This is insane.

Article by Investment U