Africa On My Mind

Africa remains the only region I am currently not exposed to in any meaningful shape or form. I say meaningful because I do have a small exposure to South Africa and Egypt through the MSCI Emerging Markets Index Fund (EEM), which is one of my favorite holdings.

I don't want to be exposed to just one Africa country, so what I'm looking for is an Exchange Traded Fund (ETF) stock that covers several African countries. To this end, I've got the Market Vectors Africa ETF (AFK) on my watch list.

When I took a closer look at AFK, i realized it's heavily weighted in the fastest growing sectors of the continent, such as telecommunications and banking, which is a good thing.

At this point I'm yet to find another ETF similar to AFK in exclusivity to Africa, so right now it's in pole position to become the portfolio flagbearer for Africa. I shall decide soon.

The Banks Just Pimped Us

No, seriously.

Six months ago free market capitalism as we know it was about to end, and big bank stocks were trading for less than an ATM access fee.

Analysts were breathing down the necks of bank executives, daring them to declare just how "balanced" their balance sheets were.

To keep hedgies from turning their companies into penny stocks and avoid the wrath of average Joe and Jane, executives begged the government for mercy and got plenty of government funds and government guarantees of their debt. I don't buy the argument that banks were forced to take the money. If they hadn't taken it how many of these banks would be around today?

Now, all of a sudden, they don't need this money anymore?

I smell a rat.

After using taxpayers money to pay executive compensation, raise capital, and avoid a mutiny by investors, could it be that the big banks now want to return the money before government clamps down on executive compensation and credit card interest rates hikes?

Well, well, well. If that's not pimping taxpayers, then i don't know what is.

IBM to GE: I’m the New American Idol

IBM is one of the “giants” of American industry, with a history dating back to the 19th century.

In case you haven’t noticed, Big Blue is no longer just a “tech” company. It’s now a company that just happens to be tech.

This company has been busy. Just google “IBM Acquisitions” and check out the Wikipedia table of its buying spree since 2000. Sun Microsystems is its latest target.

Big Blue has always had plenty of cash but now it’s flaunting it, right in the midst of a credit crunch that has many other “conglomerates” begging credit rating agencies for mercy.

The shopping spree is changing Big Blue fast. It’s now involved in, or looking to be involved in, major sectors of the U.S. economy: Healthcare, Energy, Industrial, Transportation, Nanotech, Financial/Consulting, Communications, and Retail.

Are you thinking what I’m thinking? That’s like GE, right? Exactly.

Big Blue may be the new GE.

So what?

Well, if you are new to investing in stocks, and you’re thinking about creating a “diversified” stock portfolio, you really could just buy Big Blue and you’d be diversified. You’d even get global exposure since it now earns around two-thirds of its revenue from outside the U.S.

However, would you really want to have a one stock portfolio of just IBM stock?

Many years ago, when I started to get into stocks and wanted to create a diversified portfolio, one of my options was to just buy GE and call it a day.

When it comes to gauging the health of the U.S. economy, GE is considered the “bellwether” company because it’s involved in pretty much every major sector of the economy. As GE goes, so goes the economy. GE moves markets…I’m not sure Wall Street still sees it this way but that’s a debate for another time.

Anyway, I decided not to buy just GE back then. In fact, I didn’t buy GE at all. Regardless of its “blue-chip” status, I figured it would be too risky to put all my eggs in one basket. I also reasoned that holding GE would have made my portfolio too heavily weighted in certain sectors of the economy where GE was heavily involved – as I added more stocks to the portfolio.

Today, I hold neither GE nor IBM in my current portfolio, but I’m as diversified as the S&P 500 Index. Think about that as you construct your stock portfolio.

So is Big Blue now the new face of the U.S. economy?

It’s too early to tell. However, one thing is clear. The current financial crisis has GE in the financial doghouse, while Big Blue is living it up with its buying spree. We may be witnessing the emergence of a new idol of the U.S. economy.