Updates

I've recently sold most of my commodity ETFs and precious metal investment trusts due to my perception that they're not good bets for the next while. I also sold Aqua America. Earlier in the month I bought more Nintendo and China Education Resources, and sold Microsoft, Yahoo, and Monster.com. Did I mention that I bought Clearwire? My portfolio's cash holdings are now 20%.

The private equity boom is not over for Blackstone

Yes, Blackstone's (BX) owners have sold approximately 20% of their stake (including 10% to China). However, even if it's your view that they want to cash out, they still need to cash out their much more substantial holdings in the future. Assuming it is not their intention to sell at much lower prices than current levels they will need growth in revenue and earnings, and preferably growth in expectations of future revenue and earnings. Another way of saying this is if you think Schwarzman et al understand the credit and business cycles, they would not have gone public at a point in these cycles that would not afford them time to unload.

Additionally since many expect that borrowing costs will continue trending upward (myself included), perhaps with a slight drop toward Autumn, Blackstone is doing well by attaining capital at an earnings yield of 4.39%. I arrived at this figure by taking the midpoint number between the 2006 trailing price-to-earnings ratio (at Wednesday's closing price of 30.75) of 28 and the estimated 2008 forward P/E ratio of 17.6, which is 22.8. A P/E of 22.8 is an earnings yield of 4.39%. Blackstone is selling itself at a high price/low earnings yield but will use the money to buy a firm with a higher (potential) earnings yield. This is essentially an arbitrage that will reward all shareholders.

Of course a big risk to Blackstone, Fortress (FIG) and other private-equity groups looking to go public is possible legislation that would tax them at 35% and not 15%. I don't know what the decision will be, but I think there is a strong possibility that congress will not want to cut the legs off one of America's vanguards in rationalizing markets, reforming corporations and soon to be gaining access to overseas markets. Still, this risk means one shouldn't bet anything other than speculative money on Blackstone at these prices.

Another concern is that there is too much buyout money chasing too few companies. This may eventually be the case, but future growth in mergers and acquisitions in Asia with China's government on board the Blackstone train gives Blackstone an edge over others.

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Regarding the proposed tax increases: It seems to me that a fair compromise would be taxing now public firms like Blackstone 35% on investments made with public offering money and 15% for the traditional private money. Of course fairness doesn't play into legislation and the matter will be determined mostly based on what effect the current or future tax policy will have on markets.

Blackstone (BX) should be bought

Regardless of what price it starts trading with tomorrow I will be buying Blackstone (BX). I'm not buying more than a 4% portion of my portfolio since I don't know important details like the price-earnings ratio yet. I don't think more than 10% would be a good idea for almost anyone because of the risks inherent in any stock, the added risks of an ipo, and the additional risks of one as complex as Blackstone. Regardless, Blackstone will be up (most-likely) big by the closing bell and even bigger by year's end. Optimism is high even now, but it will be higher when Blackstone announces it's first big buyout in China... I expect no less than a triple by 2010.

I would have some exposure to India but...

there is a lack of great investments available to investors limited to North American stock exchanges. As with India, the same goes for Russia, Brazil, Vietnam, Eastern Europe...

For fun... Okay, for bragging rights (fantasy portfolio competition)

These are my choices which basically means these are the stocks I'm most bullish on for this year. (You start with $50,000.)

The Facebook Yearly Competition: 2007 Cash: $4,768.66
Name	Symbol	Cost Basis
GOOGLE	GOOG	4,558.59
NEW ORIENTAL EDUC	EDU	2,973.28
HOME INNS & HOTEL	HMIN	2,971.35
GUANGSHEN RAIL CO	GSH	2,967.80
WHOLE FOODS MARKT	WFMI	2,994.42
NINTENDO CO LTD A	NTDOY.PK	3,988.20
CLEARWIRE CORP	CLWR	2,983.76
APPLE INC	AAPL	3,880.58
POWERSHARES DB AG	DBA	2,994.78
SHANDA INTERACTIV	SNDA	2,993.86
CDC CORPORATION C	CHINA	2,994.06
VIMPEL COMMUN	VIP	2,956.50
BANCO ITAU HLDG A	ITU	2,966.16
BAIDU.COM, INC.	BIDU	3,008.00
Totals		45,231.34
Your Total Net Worth: $50,048.13

Buying more Apple but currencies are further complicating things

Buying Apple at a P/E of 39 is a tough call in the short-term, but I'm going to increase my position to 4% of the portfolio (my new target for buys, 8-10% is my target for strong buys).

What complicates this further is the action of currencies. The Canadian Dollar, which much of my portfolio, though less of my cash is denominated in, has risen 11% in the last 3 months. I'm not so worried because in the long run the Canadian dollar has more to go, but Apple will do better.

New entrants are not beholden to old ways of doing business. (Apple, Clearwire, Whole Foods)

Apple (AAPL) will break (and transform) the cellular-phone carrier industry the same way it did with the record industry. It remains to be seen whether it will be able to do the same with the cable TV industry, but I wouldn't bet against it.

The iPhone will eventually be available without the carriers. You will be able to use wireless internet access. This will allow innovation and lower costs. This will be good news for Clearwire (CLWR), which provides wireless internet access.

The reason why this will happen is because of the convergence of the technology necessary, the power and vision of Apple, but also because Apple doesn't make money from cell-phone contracts so it has no problem with reducing profit in an industry that won't let go of it's monopoly in mobile phone access without force.

Similarly, Whole Foods (WFMI), the leading organic food retailer regardless of whether it is able to buy Wild Oats or not, will continue to beat the me-too grocers that have non-organic and now some organic as well. They can't market organic and natural foods and better environmental practices as well because they are selling the other stuff too.

Skype (EBAY) and other VoIP companies are another example of this. They are forcing change in the land phone industry.

It is hard for people to give up on the ways of doing business that give them power and profits in favor of innovation, competition, which would be destabilizing to them. New entrants are necessary to challenge the status quo.