"Fast Money" For Wednesday

Here are the picks for tomorrow.

Jeff Macke recommended selling Wendy’s (WEN) on the Peltz takeover news. Open $35.03

Pete Najarian preferred Alvarion (ALVR) Open $10.26

Guy Adami liked EMC Corp. (EMC) Open $18.51


There were no picks for Tuesday so here are the records.

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)

Adami= 9-8 Gain $26.18
Bolling= 8-8 Loss $4
John Najarian= 13-3 Gain $15.54
Macke= 16-9 Gain $5.76
Pete Najarian=4-5 Gain $17.18
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68
Gilbert= 1-0 Gain $.29

Today's 52 Week Lows

Here is the list, same disclaimer: if you own homebuilders, financials or REIT's consider them at or near the low.

VOXX Audiovox Corporation
TR Tootsie Roll Inds Inc
THC Tenet Healthcare Corp
SHRP Sharper Image Corporation
POP Pope & Talbot, Inc
ODP Office Depot, Inc
NI Nisource Inc
MWRK Mothers Work Inc
MKC Mccormick & Co Inc
LXK Lexmark International
JNY Jones Apparel Group, Inc
HRL Hormel Foods Corporation
COA Coachmen Industries, Inc
CC Circuit City Stores,
BSX Boston Scientific Corp.
ATAR Atari Inc (they still exist?)
ALQ Alabama Power Co
ALL The Allstate Corporation

Citigroup Radioshack Downgrade: Are You Kidding?

Here is another one that just has me shaking my head. Citigroup analyst Bill Sims downgraded Radioshack (RSH) to "Sell" from "Hold" and said RadioShack's wireless business remains pressured and is not likely to rebound soon because of declining market share and other factors. He said RadioShack is losing market share to direct channel retailers such as Sprint Nextel (N), Verizon (VZE), and Cingular (T).

"With the direct channel finding it more profitable to sell phones through their own stores than through RadioShack, they are increasingly opening stores next to Radio Shack with better merchandising, contracts, etc. and winning share as a result," Sims wrote in a client note.

OK, all that is logical stuff and you can agree with it or not but the logic is there. Here were the head shaking comes in:

Sims cut his price target for the company from $32 to $20. How? How can you make am almost 40% reduction in your target price based on one earnings call that had, by the way the company swing from a 2 cent loss a year ago to a 34 cent gain and nothing announced that was not already really known? What is different about Radioshack today from yesterday or the day before? Nothing

This stuff mystifies me and is the reason these folks should be ignored when they talk stock prices.

New Goldman Sachs Debt Fund A Good Sign

In what may be a sign of a bottom, the Wall St. Journal reported Friday that Goldman Sachs (GS) is launching a $20 billion fund to invest in corporate debt, taking advantage of a turmoil in credit markets.

The fund was expected to be $12 billion but has been increased, the paper said, citing the typical unnamed sources. It has good company as a slew of hedge funds have been jumping on debt the past week as the "credit" crunch has lead to spectacular deals to be had. It is ironic as the talking heads on TV are pondering the effects of "tightening credit" on business when, at the same time, groups intimately familiar with the action are buying that very debt as fast as they can get their hands on it.

Sounds like the TV folks may be behind the curve here and the "issue" has already come and gone?

In another note, can anyone, anyone at all out there attempt to explain to me how a company like Goldman can trade for LESS than 9 times current earnings and LESS than 9 times next years? How? Can anyone please give me a reasonable explanation?

Goldman is by far the cream of the crop of the the investment bankers / brokers, almost no deal gets done out there that they do not have their hands in somehow. What is the logic to the current valuation? The current mortgage situation? Please, that barely qualifies as a blip on the screen for a company like Goldman. It isn't like they are Citigroup (C) that has had operational issues and it is not clear if they have totally solved them or a Bank of America (BAC) that is really tied to the US consumer. Goldman is firing on all cylinders and in all reality is not even totally tied to the US market as over 50% of its profits come from overseas operations and the last I checked, foreign economies were simply on fire.

I think financials, and Goldman in particular may end up being the ValuePlays of the year when all is said and done 12 months from now. Goldman is a screaming buy at these levels..

US Lead Paint Litigation Update

File this under "everything you wanted to know about lead paint litigation is the US but where afraid top ask". It updates litigation against Sherwin Williams (SHW), NL Industries (NL) and now RC2 Corp. (RCRC), the makers of the Thomas The Tank Engine children's toys that were recently recalled to to lead pain. Again, thank to Jane Genova.

Full text here

"Fast Money" For Tuesday

Here are Tuesday's picks:

No specific "fast money" picks for today.



Monday's Results

Stacey Briere Gilbert recommended buying Intel (INTC) Open $23.54 Close $23.85 Gain $.29

Guy Adami liked NVIDIA (NVDA)Open $44.25 Close $45.49 Gain $1.19

Pete Najarian preferred shares of NASDAQ Stock Market (NDAQ) Open $31.18 Close $30.90 Loss $.28

Jeff Macke told investors to get long Disney (DIS) Open $33.74 close $34.01 Gain $.27

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)

Adami= 9-8 Gain $26.18
Bolling= 8-8 Loss $4
John Najarian= 13-3 Gain $15.54
Macke= 16-9 Gain $5.76
Pete Najarian=4-5 Gain $17.18
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68
Gilbert= 1-0 Gain $.29

Upgrades / Downgrades

Here are the late Monday and early Tuesday's analyst calls

UPGRADES


CH Energy CHG Soleil Sell » Hold
FirstEnergy FE Jefferies & Co Hold » Buy
Mortons Restaurant Group MRT RBC Capital Mkts Sector Perform » Outperform
ABM Industries ABM Lehman Brothers Equal-weight » Overweight
Varian Semi VSEA Credit Suisse Underperform » Neutral
Cameco CCJ CIBC Wrld Mkts Sector Perform » Sector Outperform
Darling International Inc DAR Avondale Partners Mkt Perform » Mkt Outperform
Ballard Power BLDP Ardour Capital Reduce » Hold
ValueClick VCLK Credit Suisse Neutral » Outperform
MTS Systems MTSC Ferris Baker Watts Neutral » Buy
Gorman-Rupp Company GRC Boenning & Scattergood Market Perform » Market Outperform
Weyerhaeuser WY DA Davidson Neutral » Buy
Smurfit-Stone SSCC DA Davidson Underperform » Neutral
MicroStrategy MSTR First Analysis Sec Equal-Weight » Overweight
Goodrich GR Credit Suisse Neutral » Outperfor



DOWNGRADES

American Reprographics ARP Sun Trust Rbsn Humphrey Buy » Neutral
Energy Transfer ETP UBS Neutral » Reduce
Unilever PLC UL Credit Suisse Neutral » Underperform
Double Hull Tankers DHT JP Morgan Overweight » Neutral
Intevac IVAC Piper Jaffray Outperform » Market Perform
RadioShack RSH Citigroup Hold » Sell
Cobra Electronics COBR Northland Securities Outperform » Market Perform
Foot Locker FL Susquehanna Financial Positive » Neutral
MC Shipping MCX Cantor Fitzgerald Buy » Hold
ValueClick VCLK JMP Securities Strong Buy » Mkt Perform
Symbion SMBI RBC Capital Mkts Outperform » Sector Perform
QLogic QLGC Needham & Co Buy » Hold
Chartered Semi CHRT JP Morgan Neutral » Underweight
Children's Place PLCE Susquehanna Financial Positive » Neutral

Today's 52 Week Lows

Here is today's list. REIT's are now joining homebuilders and financials as daily participants.


TUES Tuesday Morning Corp
TRMP Trump Entmt Resorts Inc
POP Pope & Talbot, Inc
PNY Piedmont Natural Gas
THC Tenet Healthcare Corp
STMP Stamps Com Inc
ODP Office Depot, Inc
NI Nisource Inc
MOT Motorola, Inc
HDL Handleman Company
GMCR Green Mountain Coffee Inc
FL Foot Locker Inc
DF Dean Foods Co New

ADM Earnings: Investments Pay Off

Archer Daniels Midland (ADM) released results today and reported earnings of $954.8 million, or $1.47 a share, up from net income of $410.3 million, or 62 cents a share in 2006. Results included gains on asset sales of $616 million in oilseeds processing and agricultural services.

Net sales rose 28% to $12.21 billion, topping analysts' prediction of $10.13 billion. Corn processing operating profit fell 16% to $241.3 million and the company cited lower ethanol sales volume and higher net corn costs as the culprits.

Oilseeds processing operating profit more than tripled to $587.2 million, boosted by a gain on the exchange of the company's interests in several Chinese JV's for shares in Wilmar International, the largest ag processing business in Asia. Agricultural services operating profit nearly tripled to $240.8 million due to a gain on the sale of the company's Agricore United investment.

ADM repurchased $533 million worth of shares during the year.

So, what to think? About what I expected in corn processing and oil seed processing and good news on the asset sales. ADM clearly want to expand into Brazil to produce ethanol. They are doing everything except issuing a press release stating as such. The assets sales are giving ADM the funds they need to make that investment without a significant jump in debt, always a good thing. Now that these gains are booked and in the bank, I would look for action in Brazil soon.

Another positive sign is the 28% jump in sales. A real good sign. Corn prices are what they are as these prices are contracted and locked in before the crops go in the ground. ADM will see the benefit of this year's record crop in the fall and winter contracts they sign for next year. This will significantly lower input costs and boost profits going forward.

Additional capacity begins to come on line this fall which will add to profits also. The ND biodiesel plant just came on line and the Rhondopolis, Brazil biodiesel plant will commence operations in August. The fall of 2008 will bring additional ethanol capacity in Iowa and Nebraska that will expand current capacity by 50%.

All in all an unspectacular quarter but one that has the company perfectly situated to execute it plans for the future, that is a very good thing.

A Buffett Primer

The business editor of US News & World Report, James Pethokoukis sent me and email over the weekend alerting me to a special they put out on Berkshire Hathaway's (BRK.A) Warren Buffett. It is entitled "Making Money The Buffett Way".


Here are the table on contents:

1) The Ultimate Guide to Investing like Warren Buffett

2) Six Keys to Investing Like Buffett

3) From Nothing to $52 Billion: A Buffett Timeline

4) Berkshire After Buffett -- Buy, Sell, Hold

5) Buffettesque Fund Managers

6) The Anti-Buffett

You can read all the pieces here.

It is a great introduction to Buffett and the time line piece is really neat. However, hard core Buffett devotees will not find anything new in the pieces but despite that, I think it is an excellent accumulation of Buffett information and well worth the read.

Today's Upgrades and Downgrades

Here are this mornings analyst calls

UPGRADES

MicroStrategy MSTR First Analysis Sec Equal-Weight » Overweight
Goodrich GR Credit Suisse Neutral » Outperform
Ashworth ASHW B. Riley & Co Neutral » Buy
Kinder Morgan Prtnrs KMP AG Edwards Hold » Buy
Leapfrog LF Wedbush Morgan Sell » Hold
Atheros Communications ATHR AG Edwards Hold » Buy
Turkcell TKC Bear Stearns Peer Perform » Outperform
Transalta TAC RBC Capital Mkts Underperform » Sector Perform
Exxon Mobil XOM AG Edwards Hold » Buy
McAfee MFE WR Hambrecht Hold » Buy
American Axle AXL Soleil Sell » Hold
Fortune Brands FO Barrington Research Mkt Perform » Outperform
XM Satellite XMSR Janco Partners Mkt Perform » Buy
FNB CORPORATION (VA) FNBP Janney Mntgmy Scott Sell » Neutral
Granite Constr GVA Davenport Neutral » Buy



DOWNGRADES

Symbion SMBI RBC Capital Mkts Outperform » Sector Perform
QLogic QLGC Needham & Co Buy » Hold
Chartered Semi CHRT JP Morgan Neutral » Underweight
Children's Place PLCE Susquehanna Financial Positive » Neutral
American Home Mortgage AHM JMP Securities Mkt Perform » Mkt Underperform $8
American Home Mortgage AHM RBC Capital Mkts Outperform » Sector Perform

US Market Cheapest vs Earnings Since 1991: A Lot Of Irony Here

Here is one for those of you who like irony. The S&P 500 currently trades for 15.4 times future earnings according to a Bloomberg report. That means that on a earnings basis (and isn't that what really counts?), the US market has not been this cheap in 16 years!!

I guess that explains why Berkshire Hathaway's (BRK.A) Warren Buffett has been initiating and adding to positions left and right recently. Now, about the irony part?

1991- We had a Bush family member in the White House
1991- We had a housing "bust"
1991- We were in a war in Iraq
1991- In April 1991, the Dow Jones Industrials crossed 3,000 for the first time ever. In 2007, the Dow crossed 14,000 for the first time ever.
1991- A Clinton announces their intention to run for the White House.
1991- Dick Cheney served the President (Secretary of Defense)
1991- The S&P crossed 400 for the first time ever. The S&P hit a record 1555 in July of 2007
1991- Court bars Jack Kevorkian from assisting in suicides. 2007, Kevorkian released from prison
1991 -Exxon (XOM) agrees to pay $1 billion to clean up after Exxon Valdez spill. In May, 2007, Exxon said it will appeal to Supreme Court a $2.5 billion punitive damage award from the spill.
1991- Pete Metzelaars is in a Super Bowl as tight end for Buffalo Bills. In 2007. Metzelaar is a coach for the Indianapolis colts


The good news? The bargain prices investors paid in 1991 lead to barrels of profits over the next decade and stocks embarked on a historic steady climb. What is interesting is that even though stocks in 1991 were at "all time record highs" and there was a war going on, because they were cheap relative to their earnings, they proved to have plenty of room to run to the upside and they did just that.

I have said it here before many times, ign ore the "noise" out there and just focus on earnings, buy cheap stocks, and hold on to them. It is a winners game.

Starbucks at $22? Maybe lower....

I got a great question to my recent Starbucks (SBUX) post last week.

Here is the question: Matthew asked, "Earlier you wrote that SBUX is a matter of price for you, and you mentioned the $22 level as the highest you'd pay. Does this news make your price go lower? Or were you already discounting the fact that having screwed up already, they're likely to screw up some more?"

This got me to thinking, is my $22 target actually too high? To date, none of the moves Starbucks had made since the beginning of the year have worked and I strongly feel the recent price increase will backfire on them in a major way. The bottom line for them is store traffic and that is falling fast. I cannot think of a retail situation in the past in which raising prices increased foot traffic to a location.

$22 may end up being just a way point downward from here. I know Starbucks fans out there are coughing up their latte's but they did the same thing early this year when the stock was trading north of $35 and I said it was just way overpriced. If anything, things have only deteriorated for the company since then and I cannot see any light at the end of the tunnel right now. Costs are rising and look to stay there, the competition is getting more fierce, people are becoming very price conscious and the lack of convenience Starbucks offers is becoming a larger issue now that the competition offers a quality substitute with the convenience. All these add up to more headwinds to earnings going forward.

What should Starbucks do? Much like many people feel Citigroup (C) shares would jump if CEO Chuck Prince was let go, I would expect the same from Starbucks shares should CEO Jim Donald be ask to seek "other opportunities". Founder Howard Schultz's support of the CEO is noble but it is a bit like standing next to the captain of the Titanic and telling him "things will be ok".

They are not and do not look to get better any time soon.

Supporters will point to the recent announcement with Hershey (HSY) as proof the company is moving in the right direction. But, my opinion is that this is just another move further in the wrong direction. They only industry that is seeing prices skyrocket and industry fundamentals deteriorating faster is the chocolate business. They have gotten so bad that makers have petitioned the FDA to let them call a substantially cheaper substance called "mocklet" chocolate. Does this means we will be buying a "double mocklet latte"?

They will then point to the "overseas" expansion but to date is has been a bit of a mess. Plans into India were shelved this week and their entry into China's "Forbidden City" was a unmitigated disaster and a huge PR flop for the company. We need to scale back our expectations here. Just because they are huge in the US does not mean a billion tea drinking Chinese will run to them. Just ask WalMart (WMT) about expansion in other countries, it is not alway just a matter of "if you build it, they will come".

Now, stop frothing and relax, Starbucks is not going under nor will it become irrelevant, nor am I saying "it sucks". I actually think it is a great company but even great companies go astray and make moves (or have CEO's) that hurt performance. That being said, earnings growth is going to slow dramatically and paying 35 times that slowing growth, well, will be a losing game.

Starbucks reports earnings Wednesday, August 1st. Want a prediction? They will miss, or, if they hit, it will be due to some creative number crunching (nothing illegal, or another huge unsustainable share repurchase like in Q1)If they meet expectations and that is a major "if" I would expect them to guide earnings lower or at the very bottom of estimates for the rest of the year. Now for those of us who do not own shares, a miss and a decimation of shares into the high teens might just be the catalyst to get changes made that turn this thing around.

The earnings call will be infinitely more important than the numbers they release in telling us plans or at least the though process they have. A word of caution, Starbucks has not been very forthcoming or honest with shareholders up to this point so to expect much may leave you disappointed. Stay tuned..

Interview With The Legal Blog "Law and More"

I recently did an interview with Jane Genova for here blog "Law and More" . As far as I am concerned Jane's blog is at the forefront of anything lead paint. Interested parties could easily spend an entire day there educating themselves on the lead paint and public nuisance areas of law. Our interview focused on the investing aspects of the litigation on companies like Sherwin Williams (SHW), DuPont (DD) and NL Industries (NL). The full text is below and can be read on her blog here. The interview was also referenced by Walter Olson at the Manhattan Institutes's blog "Point of Law".

It's the stock price, stupid - along with hits to brandname, the distraction from operations, and the actual legal expenses of being ensnared in a lawsuit. These are the reasons business in the U.S. and increasingly now in Europe factor in liability risk into everything from their accounting to where they will locate a new facility [think Nissan and Toyota's eventual decision to build plants in a tort-reformed Mississippi].

Because of the importance of this matter, I am providing readers with an exclusive interview with financial-markets expert Todd Sullivan. In addition to being a frequent commentator on this blog, Sullivan contributes his financial assessments to, among others, THE WALL STREET JOURNAL and FORBES. He publishes VALUE PLAYS, which is morphing into the go-to site for investors and the investment community.

JG: In myriad ways, the threat of litigation itself costs public companies. Do you know how some of these costs can be reduced? Does settling rather than going to court tend to put a lid on those costs?

TS: When the federal government is involved, it seems that settling may be the only option if for no other reason than the limitless pockets and the ability to pursue the litigation from all angles until it is exhausted. When we drop to the state government and individual plaintiffs, the only recourse is to fight.

Had the lead paint litigation happened prior to the asbestos cases, we may have avoided bankruptcies at USG, Owens Corning, WR Grace and dozens of others due to that litigation. The resources of state government and private plaintiffs can be exhausted or future litigation can be discouraged by the ferocity of the fight by defendants. This is what we are seeing currently with lead paint. After the Rhode Island victory it would seem that the plaintiffs had a false sense of future victories and that the defendants stiffened their resolve, as well as learned from their defeat and honed their strategies. As I assess the lead paint public nuisance litigation situation, I see that the tide has turned.

JG: As a value investor, are you attracted to or turned off by public companies which have a record for settling?

TS: Had the lead paint defendants even broached the word "settlement," an avalanche of suits would have followed that would have bankrupted them. I have no doubt about that. The ferocity of their fight has essentially discouraged additional suits being filed and has lead to several localities dropping suits.

Jane, settling local or private litigation is an admission of guilt in the eyes of the public. The only time settling is acceptable is to stop federal charges as there is really no limit to how far the government can push a case. In this instance, settling is not seen as an admission of guilt but as "a cost of doing business" because, as a group, the government seems to be trusted less than business.

Many people have had dealings with federal, state or local government over myriad issues and settling usually seems to be the best resource for most individuals. For business it is no different. There is a sense of being powerlessness against the government when it decides you are guilty. So, businesses are usually not penalized in public perception for acting in a way that depicts these feelings and putting the issue to bed, so to speak.

JG: In your opinion, how was Sherwin-Williams able to protect its share price during the prolonged lead paint public nuisance litigation?

TS: Sherwin-Williams separated its situation from the tobacco and asbestos mass tort cases. Comparisons were drawn immediately by the investment community and Sherwin-Williams was careful to distance itself from that litigation. It did so by educating the public about the differences in the kinds of litigation. Moreover, it explained in detail and kept reinforcing the local government's roles in the "nuisance." In addition, it downplayed the potential significance of the litigation.

Sherwin-Williams was careful in its earnings calls to ever so briefly summarize the litigation and then continue on to its results and plans for the future which included expansion and growth. There was no talk of "setting aside reserves" for the litigation of anything that would have lead people to believe they anticipated either ultimately losing or settling. At no time did Sherwin-Williams act as a company which even believed for a minute it may ultimately be liable.

JG: What advice would you give public companies about preventing being sued or what to do when sued?

TS: Fight, fight, fight. The tide is slowly turning against mass tort litigation and the longer and harder the fight, the odds are greater that other potential litigates will stay away.

Read more about Jane Genova here

"Fast Money" Picks For Monday

Here are tomorrow picks and Friday's results

Stacey Briere Gilbert recommended buying Intel (INTC) Open $23.54

Guy Adami liked NVIDIA (NVDA)Open $44.25

Pete Najarian preferred shares of NASDAQ Stock Market (NDAQ) Open $31.18

Jeff Macke told investors to get long Disney (DIS) Open $33.74



FRIDAY'S RESULTS

Jeff Macke recommended buying Costco (COST),Open $59.09 Close $58.57 Loss $.52

Pete Najarian likes Myriad Genetics (MYGN). Open $39.43 Close $38.46 Loss $.97

Guy Adami preferred Dell (DELL) because their PC shipments are up 12% year over year.Open $28.49 Close $27.81 Loss $.68

Eric Bolling said Goldman Sachs (GS) is a buy, Open $194.77 Close $192.65 Loss $2.12

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)

Adami= 8-8 Gain $24.99
Bolling= 8-8 Loss $4
John Najarian= 13-3 Gain $15.54
Macke= 15-9 Gain $5.49
Pete Najarian=4-4 Gain $17.38
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Top Stories This Week AT Value Investing News

Here they are. please visit the site at www.valueinvestingnews.com


1- Today's Biggest Market Losers

2- Should You Follow Marty Whitman Into Handelman?

3- Mohnish Pabrai- Additional Answers


4- Expedia Tender Offer

5- Getting Ready To Strangle Apple

The Lunacy of Regulators

At the end of last year Owens corning (OC) and St. Gobain announced a joint venture for the production of composite materials. It was going to be 60 /40 owned by OC and either company had the option to buy out the other's interest in 4 years and OC indicated that they would most likely eventually exercise that option.

The plan ran into hurdles with EU regulators and both companies withdrew their application earlier this year. The objections of the regulators was never really made clear.

So, in order to satisfy them, OC is selling it's siding business to St. Gobain for $371 million and then turning around and buying St. Gobain's composite business for $640 million. Can anyone tell me what has been accomplished? How is this any different than before and why are regulators now satisfied?

It seems that EU regulators just needed something to do so they thought they would make the two companies alter an agreement to do the same thing another way. At the end of the day OC got rid of a siding business they have been trying to sell for almost a year now and with those funds they were able to finance the purchase of a composite business they had every intention of buying anyway. The regulators must have wanted to accomplish something, I just for the life of me cannot figure out what. It need to be point out that neither business was a world leader in either siding or composite so it did not have a monopoly issues attached top it.

Maybe just a slow Monday at the EU regulators office?

Who knows, but the deal is good for OC. composite sales are exploding around the globe and this deal ads 40% to OC composite sales that are growing organically at double digit rates. "This is a transformational acquisition for Owens Corning," said Dave Brown, Owens Corning president and chief executive officer. "This acquisition expands Owens Corning's footprint around the world and strengthens our position in key markets such as Russia, China, India, Mexico and Brazil. It also brings talented people and proven technology to Owens Corning, and it balances our exposure to the cyclical downturns associated with the residential construction market in North America. Composite Solutions is a core business at Owens Corning and we are committed to its continued growth."

"Glass fiber markets are global, diverse and growing at two-times global GDP," said Mike Thaman, Owens Corning chairman and chief financial officer. He continued, "This strategic acquisition extends our global reach to commercial and industrial markets of interest and expands our global presence in a capital- efficient way that adds near- and long-term value to shareholders."

Chuck Dana, the president of Owens Corning Composite Solutions business, said, "This acquisition will accelerate the ability of Owens Corning to grow with our customers in both developed and high-growth emerging markets.

It is a great deal for OC, just a mystifying regulator intervention.

Interesting ADM Purchase

Much has been said about what might be the next move for Archer Daniel's Midland's (ADM) US operations. We got a very interesting answer Friday.

There has been speculation that ADM maybe after another ethanol producer like Verasun (VSE) or Aventine (AVR) or even a jump to the west coast and a partnership with Bill Gates and Pacific Ethanol (PEIX). On Friday ADM may have given us a glimsp at their direction. Rather than adding more production (ADM already produces more than twice it's closest competitor), ADM entered into an agreement to acquire the Fasco Mills Company in Illinois.

Fasco Mills is a family-owned grain and feed company operating one of the largest networks of grain elevators and rail shipping terminals in Illinois. Their thirteen grain elevators will dramatically increase ADM's footprint tributary to the prime farm production areas of northern Illinois. The grain from these elevators will flow into ADM's domestic and global processing and marketing network.

Matthew Jansen, president of ADM's Grain Group, said "these elevators allow ADM to offer increased marketing alternatives to farmers in northern Illinois while securing the commodity flow for ADM's biofuel, food and feed needs."

Richard Zimmerman, chairman of Fasco Mills, said "our management team at Fasco has built significant value into these operations, and we feel that ADM's diverse resources will further enhance their value to the farmer." The parties expect the transaction to close on September 1, 2007.

To be honest I am a bit miffed at myself for not looking in this area sooner. Rather than go after another producer, what is ADM doing? Securing the corn! The recent high prices must have convinced ADM that the single most important move for them now is expansion to cheaper production areas abroad and securing feedstock at home. ADM is moving into Brazil very soon and this move, to be honest is brilliant. With the other, less diversified producers struggling now to cope with temporary high corn and low ethanol prices, only ADM is in a position to do deals like this.

What they have effectively done is secure lower cost inputs for their ethanol than their rivals and other grain products from the upper Midwest. This move basically corners the region for ADM. This is like Exxon (XOM) making a huge oil find in the US.

ADM is moving to control it's corn cost for decades to come and at the same time, act a a toll bridge for the corn coming out of that area to other companies.

Nice. In the end what will be the most important, producing the most ethanol or controlling the corn that makes it? If you control the corn, you dictate ethanol profits, at least for the other companies. It at least guarantees you significantly remain the low cost producer of the stuff.

Notable Dividend Hikes

Here are this weeks dividend increases

Noble Corp (NE) = 100%

Republic Services (RSG) = 59%

Greenhill & Co. (GHL) = 52%

National Instruments (NATI) = 42%

Gannett & Co. (GCI) = 29%

Bank Of America (BAC) = 14%

Time Warner (TWX) = 13%

Reynolds American (RAI) = 13%

Anheuser - Busch (BUD) = 12%

Wells Fargo (WFC) = 10%

This Weeks Notable Insider Buys

Again as Peter Lynch famously said "the are many reasons insiders sell shares but only one reason they buy, they feel the price is going up".

Company and amount of insider purchases:

Jeffries Group (JEF) = $9,821,000
Gatehouse Media (GHS) = $6,605,000
Thornburg Mortgage (TMA) = $5,997,000
Allied Nevada Gold (ANV) = $5,614,000
Western Alliance Bancorporation (WAL) = $3,433,000

52 Week Low Club

Here are todays cellar dwellers. Homebuilders actually escaped the list today

WMG Warner Music Group Corp
WCC Wesco Intl Inc
SIX Six Flags Inc
SHRP Sharper Image Corporation
RNWK RealNetworks Inc
ODP Office Depot, Inc
OB Onebeacon Insurance
LNY Landry's Seafood Rest
FORR Forrester Research, Inc
FBN Furniture Brands

KKR Will Pull IPO Plans

After watch shares in fellow PE guys that went public plummet, KKR has wisely pulled plans to list it's shares. Both Blackstone (BX) and Fortress (FIG) are now trading almost 30% below their IPO prices. Why?

Democrats. Democrats are looking to take power in 2008 and are already sharpening their tax pencils with cigarettes, your dividends, your capital gains, oil companies and now private equity in the cross-hairs. Currently PE can classify earnings in a way that provides them with a 15% tax rate. Democrats want to change the rule and make it 35%. Why would anyone want to buy shares in a company whose tax liability may jump 125% in a year?

They wouldn't, and aren't.

Blockbuster Loses More Money

So, it would finally appear that the "lower prices" plan at Blockbuster (BBI) is only "lowering profits"?

This one is really bad. Despite a GAIN of $77 million on the sales of Gamestation Stores, the company still managed to lose $35 million. Lest one think this is "not that bad", last year at the same time they had a $68 million profit. Blockbuster currently has a "get more subscribers that Netflix (NFLX)" at all cost mentality and it is coming at, unfortunately, too great a cost. Far too great...

I am just waiting for the next earnings call when they announce that "in an effort to gain more subscribers, we will now pay them $2.99 per rental. If we have to pay every person in America to rent from us in order to be the number one video rental chain we will do it."

At least they will have more subscribers than Netflix.... fools..

GAP's Choice: Looks Good

Let's just ignore that GAP (GPS) said when the board committee first launched its search it said that it intended to find an apparel merchant with "deep" experience in retail and merchandising.

GAPS new CEO comes from Canada, where much of his two decades of business experience is in grocery stores and book retailing. Glenn Murphy, 45 was unanimously chosen after a "rigorous process," according to Gap's recent statement. Murphy's last job was a six-year stint as chairman and chief executive of Shoppers Drug Mart, Canada's largest drugstore chain were he credited with leading the company through an unprecedented period of growth and shareholder returns. Before that, he spent time selling groceries and books. When he joined Shoppers Drug Mart, it was a mature retailer that was generating lots of cash from 800 stores. When he left, there were more than 1,000 stores and sales and productivity were dramatically improved as they turned in 22 straight quarters of increasing revenues and per-share profits. So, we know the guy can get results. But, can a grocery store guy sell clothes?

In a word, yes.

The problem with GAP as I have claimed several times before is not it's merchandise but it's operations. Too many stores with the same merchandise competing against each other (GAP and Old Navy) for dollars and not enough investment in the brand that has the most value and growth in it, Bannana Republic.

GAP does not need someone who can come up with the latest style to lead them what they need is someone who can allocate capital smartly to get the most out of what GAP already has. In my first GAP post in March I detailed how minor changes could produce good return for shareholders almost immediately. I also like that he is going to pony up $2.5 million of his own cash to buy shares this week.

Murphy has a track record of succeeding in this area. "Murphy implemented several innovative changes including altering interior layouts, converting the in-store cosmetics area to a destination, and elevating product mix to include luxury labels," Citigroup (C) said on Murphy's performance at his previous role in upgrading the retailer to a "buy"

What to do? Based on his past record a gambler should buy shares. Those will a little less risk tolerance may want to wait and here what he has to say on the subject..

All in all, I think this will end up being a good move for GAP.

Sherwin Williams Chart Analysis

I do not pretend to nor do I want to know how people come up with this stuff but it is interesting reading for you chart folks out there



Here it is

Interesting Post On Management Attitude

Here is a really interesting post on Sherwin Williams (SHW) and the power of a business's attitude. I think not enough thought is given to the culture managers create and how the business either benefits or suffers due to that culture and the manager own attitude. It is a great read because it is transferable to any business and really does make you think about the subject.

Another nice job by Jane Genova (it that becoming redundant?)...

Please read it here

Dow Chemical Earnings Call Highlights

Here are the notable from the earnings call on Wednesday regarding the Dow 's (DOW) future, the joint Venture Strategy (Asset Light)

Joint Ventures

-Equity earnings (JV's) for the quarter were up 11% from a year ago to $258 million; -Year-to-date they climbed more than 30% to $532 million.
-Cash contributions from joint ventures were also up significantly in the second quarter compared with a year ago.
-Cash contributions to these joint ventures so far this year have been minimal, as their activities are in fact largely self-funded.
-Given the importance of joint ventures to future strategy, Dow will be providing more detailed information on how they are performing
-Before the end of the third quarter they will issue a white paper offering greater clarity around Dow's joint venture strategy and more insight to the dynamics that shape equity earnings.
-Dow currently participates in more than 75 joint ventures
-A relatively small proportion of them have significant impact on financial results. -Principal joint ventures include
about a dozen companies and collectively accounted for more than 90% of equity earnings last year
-These joint ventures will be the focus of the upcoming white paper, which they plan to update annually.
-Joint ventures added significantly to the bottom line in Performance Chemicals

Responding to the question, "Andrew, are you pushing the ball forward on doing a MEGlobal type deal in your U.S. basics? Liveris replied, "I remain committed to making it a transformational year in the company. I also remain committed to do the very best for our shareholders so that we don't just do any deal. And we have been working very hard and doing deals that we fit. MEGlobal is a classic example of a deal that fits. Similarly, some of these projects we have announced I think fit that criteria. And we have a very powerful basics franchise that we're not just going to monetize with short-term endeavors. We're going to marry and joint venture because it makes strategic sense and improves the returns and cash flows to our shareholders. As you can see in the transparency that Bob Koort referred to in our JVs, these are tremendously strong cash flow, high-return enterprises we're setting up, and you ain't seen nothing yet. And the answer to your question is yes, we are working diligently on the right deal for the right reasons."

I love it.. "you aint't seen nothing yet"...


Full transcript may be found at seekingalpha.com

Today's Upgrades / Downgrades

Here are today's early calls


UPGRADES

Building Materials BLG DA Davidson Neutral » Buy
Natl Instruments NATI Sanders Morris Harris Neutral » Buy
Precision Drilling PDS BMO Capital Markets Underperform » Market Perform
Universal Truckload Services UACL Morgan Keegan Mkt Perform » Outperform
Rackable Systems RACK Caris & Company Below Average » Average
AU Optronics AUO HSBC Securities Neutral » Overweight
FMC Corp FMC Longbow Neutral » Buy
Foundry Ntwks FDRY CE Unterberg Towbin Market Perform » Buy
Dime Community DCOM FTN Midwest Sell » Neutral
AutoZone AZO Kevin Dann Sell » Hold
Foundry Ntwks FDRY Sanders Morris Harris Hold » Buy
Columbia Sportswear COLM Caris & Company Below Average » Average
Oplink Comms OPLK Needham & Co Hold » Buy
Cymer CYMI Needham & Co Hold » Buy
Flow FLOW McAdams,Wright,Ragen Hold » Buy
Aeropostale ARO Citigroup Sell » Hold
McAfee MFE WR Hambrecht Hold » Buy
Grant Prideco GRP Calyon Securities Neutral » Buy
Universal Truckload Services UACL Stifel Nicolaus Hold » Buy
National City NCC Stifel Nicolaus Sell » Hold
Bankunited Fin BKUNA Stifel Nicolaus Hold » Buy
Embarq EQ RBC Capital Mkts Sector Perform » Outperform
Snap-On SNA Matrix Research Hold » Buy
Convergys CVG BMO Capital Markets Underperform » Market Perform
Genesis Microchip GNSS Roth Capital Sell » Hold
Cash America CSH Roth Capital Hold » Buy
Microtune TUNE Roth Capital
Nordstrom JWN Citigroup Hold » Buy
SPX Corp SPW Citigroup Hold » Buy
Gap Inc GPS Citigroup Hold » Buy
Brunswick BC Rochdale Securities Sell » Hold
Old Dominion ODFL Credit Suisse Neutral » Outperform $34
Alaska Air ALK JP Morgan Neutral » Overweight
Penn Natl Gaming PENN Jefferies & Co Hold » Buy
Rightnow Tech RNOW Jefferies & Co Hold » Buy


DOWNGRADES

RadiSys RSYS Merriman Curhan Ford Buy » Neutral
3M MMM Hilliard Lyons Buy » Long-term Buy
QLogic QLGC Caris & Company Above Average » Average
Sierra Wireless SWIR Piper Jaffray Outperform » Market Perform
CTC Media CTCM UBS Neutral » Reduce
Volcom VLCM Piper Jaffray Outperform » Market Perform
Taiwan Semi TSM HSBC Securities Overweight » Neutral
Isilon Systems ISLN AG Edwards Buy » Hold
Cutera CUTR Lazard Capital Buy » Hold
Riverbed Technology RVBD Janco Partners Buy » Mkt Perform
Diomed DIO Roth Capital Buy » Hold
Marvell MRVL Matrix Research Hold » Strong Sell
Darden Restaurants DRI Matrix Research Buy » Hold
AutoNation AN Bear Stearns Outperform » Peer Perform

"Fast Money" Picks for Friday

Here are today's picks.

Jeff Macke recommended buying Costco (COST),Open $59.09

Pete Najarian likes Myriad Genetics (MYGN). Open $39.43

Guy Adami preferred Dell (DELL) because their PC shipments are up 12% year over year.Open $28.49

Eric Bolling said Goldman Sachs (GS) is a buy, Open $194.77


THURDAY'S RESULTS

Eric Bolling recommended owning MEMC Electronic Materials (WFR) Open $57.76 Close $61.06 Gain $2.30

Guy Adami liked Harley-Davidson (HOG). Open $58.66 Close $57.30 Loss $1.33

Pete Najarian preferred Bristol Myers (BMY) Open $31.59 Close $29.85 Loss $1.74

No stock pick from Jeff Macke.

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 8-7 Gain $25.67
Bolling= 8-7 Loss $1.88
John Najarian= 13-3 Gain $15.54
Macke= 15-8 Gain $6.01
Pete Najarian=4-3 Gain $18.41
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Today's 52 Week Lows

Same drill, homebuilders, financials and mortgage companies get whacked. Even though it is not on the list, assume yours may be near it.

WWE World Wrestling Entmt Inc
WMG Warner Music Group Corp
WLK Westlake Chem Corp
WFMI Whole Foods Market Inc
UTSI Utstarcom Inc
USG USG Corporation
SPF Standard Pacific Corp
SPC Spectrum Brands Inc
PNY Piedmont Natural Gas
PNRA Panera Bread Co
PEET Peets Coffee & Tea Inc
PAG Penske Automotive Grp Inc
ODP Office Depot, Inc
MYL Mylan Laboratories Inc
MOT Motorola, Inc
LZB La-Z-Boy Incorporated
KKD Krispy Kreme Doughnut
JNY Jones Apparel Group, Inc
HSY Hershey Foods Corporation
DTG Dollar Thrifty Automotive
C Citigroup, Inc
BX Blackstone Group L P
BSX Boston Scientific Cor
BSR Bear Stearns Cos Inc

A Nice Read On Walmart and Apparel

Here is a great post that talks about WalMart's (WMT) clothing issues. You can read it here

"Fast Money" Picks for Thursday

Here are today's picks

TODAY'S PICKS

Eric Bolling recommended owning MEMC Electronic Materials (WFR) Open $57.76

Guy Adami liked Harley-Davidson (HOG). Open $58.66

Pete Najarian preferred Bristol Myers (BMY) Open $31.59

No stock pick from Jeff Macke.



WEDNESDAY'S RESULTS



Vodafone (VOD) down over 3% today represented a buying opportunity, Guy Adami says. Open $32.09 Close $32.32 Gain $.13

Pete Najarian liked Teva Pharmaceuticals (TEVA) Open $43.44 Close $43.29 Loss $.15

Jeff Macke reiterated that Costco (COST)is a buy. Open $60.15 Close $60.30 Gain $.15


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 8-6 Gain $27
Bolling= 7-7 Loss $4.18
John Najarian= 13-3 Gain $15.54
Macke= 15-8 Gain $6.01
Pete Najarian=4-2 Gain $20.29
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Today's Upgrades / Downgrades

Here are todays calls.

UPGRADES

AtheroGenics AGIX Needham & Co Underperform » Hold
VASCO Data Security VDSI Lazard Capital Sell » Hold
Human Genome HGSI Lazard Capital Sell » Hold
PC-TEL PCTI B. Riley & Co Neutral » Buy
CyberSource CYBS Wedbush Morgan Hold » Buy
Convergys CVG Wedbush Morgan Sell » Hold
Vignette VIGN Roth Capital Hold » Buy
LHC Group LHCG Stifel Nicolaus Hold » Buy
Amerigroup AGP Stifel Nicolaus Hold » Buy
Aaron Rents RNT Merriman Curhan Ford Neutral » Buy
Baidu.com BIDU Citigroup Hold » Buy




DOWNGRADES

Exelixis EXEL Stanford Research Buy » Hold
Business Objects BOBJ Wedbush Morgan Strong Buy » Buy
Mattson MTSN Am Tech/JSA Research Buy » Sell
F5 Networks FFIV Janco Partners Buy » Accumulate
Southwest Air LUV Matrix Research Strong Buy » Buy
Actuant ATU Matrix Research Strong Buy » Buy
Advantest ATE Matrix Research Hold » Strong Sell
Lincare LNCR Stifel Nicolaus Buy » Hold
Newport NEWP Needham & Co Buy » Hold
Covenant Transport CVTI Wachovia Outperform » Mkt Perform
Akamai Tech AKAM Jefferies & Co Buy » Hold
Akamai Tech AKAM Credit Suisse Outperform » Neutral
Akamai Tech AKAM Merriman Curhan Ford Buy » Neutral

Dow's Quarterly Results: A Brilliant Management Job

It what perhaps could be the toughest operating environment in over a decade for Dow Chemical (DOW), management did a brilliant job with company and the results were earnings growth in what was expected to be a flat or declining quarter (especially after DuPont's (DD) recent earnings release).

Highlights

-- Sales for the quarter set a new Company record, rising 6 percent from
the same period last year to exceed $13 billion for the first time in
Dow's history.
-- Earnings were $1.07 per share, up from $1.05 per share last year.
-- Equity earnings for the quarter increased to $258 million, up 11
percent from 2006.
-- Solid cash flow in the quarter supported investment in organic growth
and acquisitions, as well as $400 million in share repurchases.
-- Purchased feedstock and energy costs surged by almost $700 million
compared with the first three months of the year - the highest ever
sequential increase. Year over year, costs increased by more than $550
million.
-- Strong volume increases in Asia Pacific, Latin America and most
operating segments in Europe offset continued weakness in the North
American housing and automotive sectors.


How many businesses could experience a record increase in input costs of almost a billion dollars and still produce a year over year increase in earnings? A key factor was the Joint Venture strategy Dow has embarked on that to date in 2007 has produced 11% year over year earning growth. As new ventures are announced monthly, shareholders have to be excited about their potential.

Said CEO Andrew Liveris, "We have a very clear strategy, with well-defined priorities, which we are executing with discipline to deliver strong financial results for the Company."

"During the quarter, our global strength, diverse business portfolio, focus on price/volume management and commitment to joint ventures combined to overcome an unprecedented rise in feedstock and energy costs.

"In addition, we continued to invest in exciting new joint ventures, such as the recently announced Dow Crystalsev project in Brazil, in our Performance businesses with acquisitions like Wolff Walsrode, and in strong organic growth programs - implementing a strategy that can deliver a consistent earnings growth profile through the years ahead."

I had been expecting earning a small decline in earnings and Dow being able to pull of an increase is just fantastic new. Here is some math. Currently 50% of Dow input cost are the raw material costs that are skyrocketing. Many of the recently announced venture will be in areas that will enable Dow to obtain feedstock at less than a third of their current costs. If we translate that to their current structure, that means Dow will recognize those costs going from 50% to around 20% for most of it's major product lines. These are cost savings that will drop directly to the bottom line as Dow sells in global markets so their end selling price will not be affected. Theoretically, this means Dow could be looking at 30% eps growth just from cost savings alone. The fact that eps from the current ventures grew 11% while non-JV earnings grew 1.5% in the recent quarter only serve to back up this assertion.

Dow transition to a JV models will have a compounding effect as high cost revenues are replaced with dramatically lower ones, compounding their eps effect.

Commenting on the Company's outlook, Liveris said, "We expect global GDP to remain healthy, as the U.S. economy stabilizes and growth around the world continues to be strong.

"We anticipate solid demand through the third quarter, although Agricultural Sciences is likely to see a typical seasonal decline. Feedstock and energy costs are expected to remain relatively high and volatile through this quarter. Our performance through the first half of the year reinforces our view that our strategy is working and that we will continue to deliver strong results for the Company and for its shareholders."

So far so good...

Starbucks Still Doesn't Get It

You own a business that is suffering declining store traffic for consecutive quarters. Your business is being challenged by competitors that offer a quality product at a fraction of the price you charge for yours. What do you do? If you are Starbucks (SBUX) you raise prices and make the affordability gap between you and your competitors even greater? Please tell me how this make sense.

Starbucks recently announced that meeting estimates for the upcoming quarter "would be a challenge" due to higher milk and coffee prices. Now, if they were serving more people each day, this decrease in margins would be offset by the additional transactions. What this warning tells me is they are still facing stagnant or declining store traffic in addition to decreasing margins. Can anyone explain how making your product less affordable will solve this store traffic issue?

I mean, Mcdonalds (MCD) and Dunkin Donuts both serve milk and coffee so we must assume they are facing the same cost pressures, right. It would be foolish to assume only Starbucks is facing these issues. Today McDonald released results and revenue came in 12% higher at more than $6 billion, while sales at restaurants open for more than a year were up 7.4%. They also met expectations of 71 cents a share profit from operations, 26% higher than last year and Starbucks admits they are struggling . How did McDonald's do it? They sell a quality product at affordable prices, novel. Said CEO Jim Skinner "In the U.S., we are aggressively going after the $60 billion beverage industry with the focus on coffee. We added credibility in this arena now with lots of premium coffee last March. Today, premium coffee sales are up 20%. This credibility gave us brand elasticity to expand further into specialty beverages. Currently, we are testing a wider range of offerings including hot and cold drip coffee beverages an espresso-based coffee and ice beverages. We are encouraged by the preliminary results. Including these specialty offerings, total coffee sales are up more than 30%."

I have been pounding this point since January, Starbucks is at the peak of what they can charge for a cup of coffee. Increasing those prices will lead to further decreases in store traffic and with Starbucks now relying on more ancillary sales to customers for revenues and profits, decreased visits now have a compounding negative effect on the bottom line.

I also fully understand the hard core Starbucks "aficionados" will continue to visit Starbucks no matter what type of home equity loan becomes required to purchase a latte, it is the casual customer who is walking away in hoards and the numbers continue to back up this assertion. Goldman Sachs (GS) analyst Steven Kron said today that higher prices could reduce store traffic given the state of the consumer, media coverage and increasing competition in the coffee space. Not could Steve, will.

The only way for Starbucks to reverse this decline is to get more people into their stores. Once there they will buy more muffins, sandwiches, CD, toaster ovens, and SUV's or whatever else they sell there now. Raising prices will not accomplish this. If the consumer is becoming more cost conscious and recent retail sales report would support this than one must assume discretionary items like a cup of coffee will be one of the first items they will pinch pennies on.

I also recognize that it is only 9 cents on some drinks (ones in cups?), but we live in a appearance is reality world out there and the last thing people want to hear nowadays are the words "price increase". It is a turn off and the extra revenue they may get per cup is more than offset by the negative sentiment they are creating.

I have asked this question repeatedly and have yet received a decent answer. Why should I pay $5 for a cup of coffee when I can get the same thing for $2 other places and not have the DMV like "wait in line" experience?

Answer? I shouldn't and apparently increasingly other folks are not either.

Dow Falls 226: Predictably, Hysterical Headlines Follow

About 4:15 yesterday my blackberry started buzzing as the end of the day emails came pouring in. They contained the words "tumbles", "plummets", "free fall" and other dramatic phrases. My initial reaction in seeing them was to think the market collapsed and there was blood running in the street. After reading the details of a 226 point drop in the Dow Jones Average, my reaction was "are you kidding me?".

Gang, 200 points stopped being a big deal a real long time ago and a whole lot of perspective is needed here. Look at it this way, if you owned a $140 stock and it dropped $2.26 today, would you panic? That is exactly what the Dow did. A piddly little $2 drop. Now, you might be slightly annoyed at the $2 drop but if anyone ever asked you how your stock did today would you say it "plummeted" or "collapsed" ? Me either.

We need to stop looking at the number gain and loss for the Dow and start focusing on it's percentage gain or loss. As we climb higher and higher, not only are 200 point swings either up and own more insignificant, but mathematically, they are more likely. Both these scenarios diminish the importance of the event. It also stands to reason that as we climb towards 15,000 and then 20,000 (FYI, 20,000 is only 35% higher than today) not only should we expect more 200 point swings but we should logically expect the occasional 300 point swing to appear.

Again, this is really no big deal. It does makes for a snappy little headline though and those who live off inducing market panic for news purposes will start using colorful adjectives to describe these days. I mean, "Dow Plummets 226 Points" will attract more readers than "Dow Slips 1.6%", right?

Stop looking at the points and start following the percentages, it will save you some unnecessary angst.

"Fast Money" Calls For Wednesday

Here are today's picks and yesterday's results. It seem the gang is getting a little skittish..

Wednesday's Picks

Vodafone (VOD) down over 3% today represents a buying opportunity, Guy Adami says. Open $32.09

Pete Najarian liked Teva Pharmaceuticals (TEVA) Open $43.44

Jeff Macke reiterated that Costco (COST)is a buy. Open $60.15

Tuesday's Results

Jeff Macke liked Microsoft (MSFT).Open $31.19 Close $30.80 Loss $.39

Pete Najarian preferred Sterlite Industries India Limited (SLT). Open $17.97 Close $17.07 Loss $.97

Guy Adami recommended American Express (AXP).Open $64.66 Close $61.17 Loss $3.49

Eric Bolling said keep an eye on Google (GOOG) Open $512.51 Close $514 Gain $1.49 and recommended owning IBM (IBM) Open $116.38 Close $116.17 Loss $.21

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 7-6 Gain $26.87
Bolling= 7-7 Loss $4.18
John Najarian= 13-3 Gain $15.54
Macke= 14-8 Gain $5.86
Pete Najarian=4-1 Gain $20.44
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Upgrades / Downgrades

Here is the late Tuesday and early Wednesday action

UPGRADES

Hain Celestial HAIN UBS Neutral » Buy
Payless Shoe PSS KeyBanc Capital Mkts / McDonald Buy » Aggressive Buy
Countrywide CFC Keefe Bruyette Underperform » Mkt Perform
Alaska Comms ALSK Lehman Brothers Underweight » Equal-weight
Amazon.com AMZN Lehman Brothers Underweight » Equal-weight
Amazon.com AMZN Bear Stearns Underperform » Peer Perform
Seabright Insurance Holdings SEAB Friedman Billings Mkt Perform » Outperform
Amazon.com AMZN RBC Capital Mkts Sector Perform » Outperform
Amazon.com AMZN JP Morgan Underweight » Neutral
Total System TSS JMP Securities Mkt Perform » Mkt Outperform
Ultra Clean Holdings UCTT Needham & Co Hold » Buy
Ultra Clean Holdings UCTT Stanford Research Hold » Buy
Telus TU RBC Capital Mkts Sector Perform » Outperform
Amylin Pharms AMLN Stanford Research Hold » Buy
Sonoco Products SON Matrix Research Buy » Strong Buy
Commercial Metals CMC Matrix Research Buy » Strong Buy
Ceragon CRNT Morgan Joseph Hold » Buy
Rightnow Tech RNOW Credit Suisse Neutral » Outperform
Wachovia WB Citigroup Hold » Buy


DOWNGRADES


Radian Group RDN Friedman Billings Outperform » Mkt Perform
MGIC Investment MTG Friedman Billings Outperform » Mkt Perform
PMI Group PMI Friedman Billings Outperform » Mkt Perform
Spectrum Pharma SPPI Friedman Billings Outperform » Mkt Perform
Skechers USA SKX First Albany Buy » Neutral
Inter Parfums IPAR Oppenheimer Buy » Neutral
Overseas Shipholding OSG Banc of America Sec Buy » Neutral
Weight Watchers WTW Lehman Brothers Equal-weight » Underweight
Nutrisystem NTRI Lehman Brothers Overweight » Equal-weight
Countrywide CFC Friedman Billings Mkt Perform » Underperform
Sterling Financial STSA Punk, Ziegel & Co Accumulate » Mkt Perform
Tellabs TLAB Kaufman Bros Buy » Hold
Astec Industries ASTE Janco Partners Accumulate » Mkt Perform
Netflix NFLX Cowen & Co Outperform » Neutral
Neoware Systems NWRE BMO Capital Markets Outperform » Market Perform
Cumulus Media CMLS BMO Capital Markets Outperform » Market Perform
TASER TASR Feltl & Co. Buy » Hold
San Juan Basin Royalty SJT AG Edwards Buy » Hold
DuPont DD BB&T Capital Mkts Buy » Hold
Netflix NFLX Needham & Co Buy » Hold
American Express AXP Friedman Billings Outperform » Mkt Perform
Canadian Natl Rail CNI Stifel Nicolaus Buy » Hold

Today's 52 Week Low Club

Here are today's 52 weeks lows. If you own a regional bank, homebuilder or mortgage company, even though they are not here, assume they also hit a new low. I am sick of putting them here everyday.

USG Corporation
TZOO Travelzoo Inc
TRB Tribune Company
TRMP Trump Entertainment
TBL The Timberland Company
SMRT Stein Mart Inc
PSA Public Storage, Inc
NFLX Netflix, Inc
MSO Martha Stewart Living
LZB La-Z-Boy Incorporated
JRC Journal Register Co
JNY Jones Apparel Group
GCI Gannett Co.
FIG Fortress Investment
FBN Furniture Brands
CFC Countrywide Financial
CC Circuit City Stores
BGP Borders Group, Inc

Upgrades / Downgrades

Here is the late Monday and early Tuesday calls..

UPGRADES

Rightnow Tech RNOW Credit Suisse Neutral » Outperform
Wachovia WB Citigroup Hold » Buy
Lee Enterprises LEE Wachovia Underperform » Mkt Perform
Xcel Energy XEL Lehman Brothers Underweight » Equal-weigh
Expedia EXPE Soleil Sell » Hold
Chemtura CEM KeyBanc Capital Mkts / McDonald Underweight » Hold
Forest Labs FRX Pacific Growth Equities Neutral » Buy
Illumina ILMN Pacific Growth Equities Neutral » Buy
Eagle Rock Energy EROC RBC Capital Mkts Sector Perform » Outperform
Jack In The Box JBX Wedbush Morgan Hold » Buy
TiVo TIVO Kaufman Bros Hold » Buy
Navteq NVT UBS Neutral » Buy
Satyam Computer SAY Stifel Nicolaus Hold » Buy
Progressive PGR Stifel Nicolaus Sell » Hold
Fifth Third FITB Stifel Nicolaus Sell » Hold
Knoll KNL Matrix Research Buy » Strong Buy
Stoneridge SRI KeyBanc Capital Mkts / McDonald Hold » Buy


DOWNGRADES

Parametric PMTC Jefferies & Co Buy » Hold
Turkcell TKC Bear Stearns Outperform » Peer Perform
Netflix NFLX Cantor Fitzgerald Buy » Hold
Lifepoint Hospitals LPNT CIBC Wrld Mkts Sector Outperform » Sector Perform
Chesapeake Energy CHK Fortis Bank Buy » Hold
Astec Industries ASTE BB&T Capital Mkts Buy » Hold
Dexcom DXCM First Albany Buy » Neutral
Canadian Natl Rail CNI Citigroup Buy » Hold
Cumulus Media CMLS Barrington Research Mkt Perform » Underperform
TASER TASR Merriman Curhan Ford Buy » Neutral
Wachovia WB Punk, Ziegel & Co Buy » Mkt Perform
Labor Ready LRW Davenport Buy » Neutral
Nucryst Pharma NCST Sun Trust Rbsn Humphrey Buy » Neutral
Open Text OTEX Canaccord Adams Hold » Sell
Netflix NFLX Cantor Fitzgerald Buy » Hold
Netflix NFLX Jefferies & Co Buy » Hold
Cephalon CEPH Am Tech/JSA Research Buy » Neutral
Transocean RIG Deutsche Securities Buy » Hold

Citigroup Turnaround Progressing

Much like a large ocean liner turns slowly, Citigroup's (C) size determines that a turnaround at the banking giant will not be immediate. But, when you have consecutive quarters of year over year strong earnings growth for the fist time in recent memory, one must be encouraged.

International operations posted a 34% increase in earnings and "alternative investments " (read: hedge fund operations) saw a 77% increase. Citi has made a huge push internationally the past two years and those efforts are now paying off in a major way. In thew recent quarter they closed the acquisition of Egg in the UK (credit card and online banking businesses) and Grupo Cuscatlan (Central American banking). Deals for the Bank of Overseas Chinese and Taiwan, of Bisys and of ATD are all businesses that will expand operations in high growth markets. Also they closed Old Lane early this month and managers Vikram Pandit and John Haven that come with the have a value that cannot be quantified. Most significantly, they now own 60% of Nikko Cordial in Japan in a deal that puts them in the forefront in that region. Roughly 1/3 of the international units growth came from acquisitions meaning that Citi is consistently picking winners.

The big negative and the reason for jittery investors selling shares? Credit costs rose to $934 million in the quarter, including a $259 million rise in credit losses and a $465 million charge to increase loan loss reserves. The $465 million net charge compares to a net reserve release of $210 million in the prior-year period, the company said. Simply put, credit losses are expected to mount.... no kidding. Bank after bank so far has reported the same thing so this should be no surprise. What this news means is that for the first time during his reign, CEO Chuck Prince was able to manage the business to it's best quarter ever during a tough time. Since we are so worried about load losses, let's look closer at the same quarter last year. Last year Citi released $210 million from loss reserves that help earnings and this year added $465 to them. That is a cool $675 million swing to earnings or a additional 12% earnings from operations in 2007 over 2006 when these items are backed out. That is significant because it means that when US credit improves and yes it will, Citi is sitting pretty with it's international operations to really boost earnings.

The consumer unit experienced a 15% earnings decrease and again, this was not totally unexpected. It was pointed out that they are opening up new locations at a "very healthy clip" and this will negatively impact earnings for that segment until those locations are up and running.

Citi is also still cutting costs and said they were "less than halfway" through the $2.3 billion they anticipate saving this year through staff reductions and IT improvements. The reductions to date have finally lead to operations leverage improvements as witness by Q2's revenue increase of 20% vs cost increases of 16%.

Where does all this leave us? Citi finally seems to be being "managed" and is producing results. It will not happen overnight but I do not have a problem getting paid a rock solid 4.2% by them to wait. T think the street is waiting for confirmation of a turnaround and another strong quarter or two should do the trick and get shares that trade at only 12 times earnings running.

"Fast Money" Picks for Tuesday

Here are Tuesday's picks and Monday's results


Jeff Macke likes Microsoft (MSFT).Open $31.19

Pete Najarian prefers Sterlite Industries India Limited (SLT). Open $17.97

Guy Adami recommends American Express (AXP).Open $64.66

Eric Bolling says keep an eye on Google (GOOG) Open $512.51 and recommends owning IBM (IBM) Open $116.38

Monday's Results

Jeff Macke told investors to add to their position in Microsoft (MSFT) Open $31.16 Close $31.19 Gain $.03

Pete Najarian recommended Clorox (CLX) on recent options volume. Open $63.90 Close $64.87 Gain $.97

Jon Najarian liked Zimmer Holdings (ZMH), Open $88.08 Close $89.39 Gain $1.31 as well as Rowan (RDC) Open $44 Close $45.70 Gain $1.70

Tim Seymour preferred buying Stillwater Mining Company (SWC) Open $11.25 Close $10.91 Loss $.34


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 7-5 Gain $30.56
Bolling= 6-6 Loss $5.46
John Najarian= 13-3 Gain $15.54
Macke= 14-7 Gain $6.25
Pete Najarian=4-0 Gain $21.17
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Sears: A Look Back At The Merger Announcement

With all the clatter out there about Sears Holdings (SHLD) results and the frustration out there a look back is necessary. I was emailed a copy of the press conference announcing the merger of Kmart and Sears by the blog "Concentrated Value" and it was very revealing given what has transpired since and what may happen down the road.

Lampert on Earnings:
"And given the large ownership that we will have on the Board, we will be able, similar to what Kmart has been able to do for the last couple of years, we will be able to manage the business strategically and for the long-term without having to worry about figuring out how to make monthly same-store sales, hit a specific target, and without giving any type of quarterly earnings guidance and then trying to manage the business to that guidance. We understand the potential for the combination. We're going to manage to the potential, and we're not going to manage to try to generate sort of steady progress. It's going to be probably lumpy progress over time."

Lampert On Real Estate Value
" I don't think any retailer should aspire to have its real estate be worth more than its operating business. There's been a lot of speculation about real estate strategy, real estate value, and I think that there is some truth to the notion that there are certain retailers whose real estate is worth more than its operating business. I think while that may have been true at Kmart at one point in time, we've worked very, very hard to improve the profitability of each of our stores and to make those stores worth a lot more as an operating business than as real estate. The more money the store makes, the more valuable they are as operating businesses, and that's something that I think the combined company can do very, very well.

To the extent that we have stores that can produce the type of profit that we're looking for, we would have to consider other alternatives. I think well-run retailers over time should be able to earn a 10 percent EBITDA to sales ratio. I think when you look at Home Depot, you look at Target, you look at The Gap, they all achieve that metric. And again, that's not something we think that we're going to be able to do anytime soon, but that's something that we're going to work towards. We're going to work towards best-in-class financial metrics and best-in-class customer metrics."

Lewis on Cost Savings
"Savings we expect to be fully realized by the end of the third year. We expect this transaction to be accretive in the first year, excluding some onetime costs"

Lampert responding to the comment: Beyond doubling the synergies here, you are not just doubling the challenges also; taking 2 admittedly weaker retailers and just increasing the challenges that both of them face in one larger perhaps weaker retailer entity?


"You made the sure statement that you're talking about 2 weaker retailers, and I would say that there is probably unanimity of opinion that that's the perception of the 2 companies. My perception of Sears is that in terms of the Sears experience, the Sears service, and certainly the Sears products, they're every bit as good as any of its competition. The problem is they are not where the customers are, and that's the big opportunity. It is not that the retailer per se is weak, but if you have the greatest store and it's not near where the customers are, that's a problem. So I think Sears has a very, very different problem in a sense, or had a different problem than Kmart had. So I think that it's a pretty substantial opportunity to simply bring Sears experience and the Sears product closer where, by the way, Home Depot, Best Buy, Lowe's, Target, Wal-Mart, that is where they are building, that's where they're growing. We're there. We know it because they seem to want to open stores near us, meaning Kmart, because we are perceived as a weak competitor.

In effect, Sears in a Kmart box in that same environment ought to do very, very well. So that's the presumption; we've got to make it happen. So I think that is really the answer to the first question. In terms of cross-merchandising, we're going to try all different types of things, and I think that we have the ability because we have such a large store base to experiment. And we're going to get some things right and we're going to get some things wrong. But we're going to have a flexible culture, and with a flexible culture, we're going to correct our mistakes quickly and move onto something else."

Lampert on Capital Allocation

"I would say that in terms of capital allocation, I mean that is something that I think that this company will do very, very well. It is great to have internal opportunities where you could actually take the free cash flow and invest it in the business. We have a very significant opportunity, whether it is converting the Kmart stores to Sears, whether it is converting the Kmart stores to a better version of a Kmart store. But we are going to have very strict return on capital requirements, and we're going to want to allocate the capital to where the best -- where it is best used. And if the best use is to repurchase shares, we're going to look at that. If it is to build new stores, we're going to look at that.

I think it is important that at least through the transition period, we have a very, very strong balance sheet. And I think that Kmart went through a period where it had a weak balance sheet, and we basically built up sort of undeniable financial strength. I think once Sears sold the credit card business, its balance sheet was very, very significantly strengthened. And I think on a combined basis, you look at the combined cash flow, we feel obviously very comfortable with where we're coming out of the box. But I do think that at different stages of opportunity, you have different capital structures, and it is something that I think we will critically review on an ongoing basis."

So, where are we? Lampert and Lewis are managing the business exactly as they said they would just over two years ago. Lampert anticipated a bumpy earnings ride and it has been, he promised balance sheet improvement as a priority and has accomplished that, they also said they had no set idea as to merchandise and was going to try various ideas and are doing it. Notice no mention of the Land's End expansion currently underway and this illustrates they are flexible and still looking at ways to improve and coming up with new ideas.

All in all, the plan is being executed as initially proposed. It seems the first two years were being spent fixing the financial mess the two separate retailers were in and now we are onto the sales end. That this stage of the plan has coincided with the housing bust and it's corresponding effect on all retailers like Home Depot (HD), Target (TGT), Lowes (LOW) and Macy's (M). It does also mean that other retailers will get cheaper and may mean that Lampert may choose to invest the cash in another retailer rather than build new stores from scratch.


Either way, it will be exciting

Now, the recent stock activity. Take a look at a long term chart of Sears Holdings here. The summers of 2004, 2005 and 2006 all saw large percentage share price declines of 15%, 26% and 15% respectively followed buy large run ups and no, same store sales were not increasing back then either. This current one is a great buying opportunity as shares are off 26% from their all time high, just like 2005. Let's call it the "Annual Sears Summer Stock Sale Event"
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