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Money Report


Profit Under the Sand

On Aug. 20 the U.S. State Dept. approved a pipeline from the tar sands of Alberta to Superior, Wis. While the pipeline could deliver a relatively insignificant 800,000 barrels of oil a day to the U.S., its impact on the industry could be much larger. Oil's rally back to $70 a barrel makes the expensive extraction and refinement process for the kind of petroleum in tar sands, called bitumen, worth it. But processing bitumen produces more greenhouse gases than other kinds of oil. The State Dept.'s approval signals that it will put energy security over concerns about greenhouse gas emissions, says T. Rowe Price (TROW) analyst Tim Parker. That could benefit engineering and construction companies such as Amec and Fluor (FLR), which are working on ExxonMobil (XOM)'s Kearl oil sands project in Alberta. Suncor Energy, a Canadian producer whose business is 70% tar sands, also could profit. Even after a 60% rally, the stock, at 32.08, "is reasonably priced," Parker says.

Investing in Longer-Term Munis: A Smart Move?

Yields on tax-exempt bonds maturing in less than 10 years hit a six-year low in the week ended Aug. 21. With 30-year munis yielding near 5%—four percentage points higher than two-year munis—investors are shifting into the longer-term bonds. Is that smart right now?

Peter Hayes, BlackRock (BLK)

Yields on short-term munis are extremely low. And long-term munis are scarce because of the success of Build America Bonds, which let municipalities issue long-term debt in the taxable market. That, combined with demand for 20- and 30-year munis, means investors in high tax brackets who aren't fearful of inflation can lock in higher yields now, since bond prices are likely to rise—and thus yields fall.

Dan Genter, RNC Genter Capital Management

It doesn't make sense to own munis with maturities beyond 15 years, because investors aren't paid for the incremental interest rate risk and already get 80% of the yield of a 30-year bond. As more municipalities issue longer-term bonds and rates start to rise due to more supply and future inflation fears, there will be better opportunities to invest in 20- and 30-year munis.

A Hot Play in Emerging Markets

Vietnam's General Statistics Office reported on Aug. 24 that the country's trade deficit in the first eight months of 2009 narrowed 67%, to $5.1 billion, from the same period the year before, thanks to improving exports. Vietnam's economic growth prospects look good, with IHS Global Insight forecasting a 4.7% increase in gross domestic product in 2009 and 6.2% for 2010, vs. -2.7% and 1.8% for the U.S. The Ho Chi Minh Stock Index, though still 52% below its March 2007 peak, has returned an average 20% a year since inception in July 2000.

Investors hoping to capitalize on the fledgling market's growth can use the recently launched Van Eck Market Vectors Vietnam exchange-traded fund, which currently tracks 28 companies that are either domiciled in Vietnam or generate more than 50% of sales there. Investing is not without risks: The ETF's prospectus warns that Vietnam's government may adopt rules that could—among other things—prevent the fund from repatriating its investments.


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