TGIF Randomosity!
7 hours ago
When the world was running around talking of the "subprime meltdown" and the "freezing of credit markets" Goldman quietly looked at the situation and placed their bets accordingly.
Sunday, September 30, 2007
"Fast Money" for Monday
Monday's Picks...
None. It was a "Review" show. Records and winning percentages to date below
Friday's Results
Jeff Macke recommended getting long Yahoo (YHOO) Open $26.27 Close $26.84 and Palm (PALM). Open $16.40 Close $16.27
Guy Adami liked KB Home (KBH). Open $24.71 close $25.06
Karen Finerman preferred Seacor Holdings (CKH). Open $93.83 Close $95.10
Pete Najarian said Nordic American Tanker Shipping (NAT) is a buy. Open $38.60 Close $39.24
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 28-18 = 60%
Eric Bolling= 10-11 = 48%
John Najarian= 13-3 = 81%
Jeff Macke= 33-24 = 57%
Pete Najarian= 21-17 = 55%
Tim Seymore= 3-2 = 60%
Karen Finerman= 13-6 = 68%
Stacey Briere-Gilbert= 2-0 = 100%
Saturday, September 29, 2007
This Weeks Notable Dividend Hikes
This Week's Insider Buys
Smithfield Foods (SFD)= $9,429,000
American Financial Group (AFG)= $4,211,000
Credit Acceptance (CACC)= $1,414,000
Inventure Group (SNAK)= $1,040,000
Valance Technology (VLNC)= $1,019,000
Mercer International (MERC)= $890,000
Chesapeake Energy (CHK)= $882,000
Pep Boys (PBY)= $826,000
Lions Gate Entertainment (LGF)= $636,000
The Week's Top Stories at Value Investing News
Here are this weeks tops stories. If you are a value investor and do not read this site daily, you are cheating yourself...
2. Bruce Greenwald joining team at First Eagle
(via biz.yahoo.com)
Value investing professor guru joins highly successful Global value team at First Eagle. This is just the press release, so not all that detailed, but interesting nonetheless.
3. Lectures from Columbia University's Value Investing Program
(via valueinvestingresource.blogspot.com)
A nice list of lectures from a Columbia University course intended to teach students the fundamentals of the value approach to investment management developed by Graham and Dodd.
5. Aventine Renewable Energy's hope: The 2008 Presidential Election
(via thestockmasters.com)
Ethanol investors know the Aventine Renewable Energy Holdings, Inc. (Public, NYSE:AVR) sad story well. The IPO in 2006 showed amazing potential, but then shares of AVR fell to the $30's, then $20's, and today they barely register above $10. So is ethanol just a fad fuel, yesterday's news, and a lost investing opportunity?
Friday, September 28, 2007
Apple's Intentional iPhone Destruction: Illegal
Apple's (APPL) quest to keep total control over its iPhone seems to have caused it to break the law.
Ever heard of the Magnuson-Moss Federal Warranty Act? It would seem those at Apple's HQ have not either but when they put out an iPhone update this week that disabled hacked iPhones, they broke this law.
The site Phone News.com details how Apple did do. The act says that Apple cannot void a warranty for a product with third-party enhancements or modifications to their product. The only exception to this rule is if Apple can determine that the modification or enhancement is responsible damaging the product in question. Since it was Apple that intentionally caused the damage to the iPhone, the phones are still technically still covered under the warranty. Apple has a problem because they are refusing to honor the warranty on the hacked phones.
Once ownership of the phones was transferred from Apple to the buyer at purchase, the new owners have the right to do whatever they want with the phone. Kind of like buying a car and customizing it. Now, if your customization of the car (phone) causes it not to work, the auto maker (or Apple) need not honor the warranty, but, and this is a key point, the car maker (or Apple)cannot come out and take the transmission out of the car because they do not like the modifications you made. This is essentially what Apple did. They said "if you change the phone, we will break it on you". Illegal.
If nothing else this come as another PR pothole for Apple who has gone from wearing the lovable underdog label to corporate bully in the course of a few weeks. First there was the unexpected (not to ValuePlays readers) $200 price drop on the phone less than 3 months after it's release that had those who waited in lines for two days to get the initial phones outraged. Apple attempted to sooth them by offering them a $100 rebate which still leaves them $100 short but it was better than nothing.
The iPhone hype has subsided and sales are not as hot as Apple would like them. they are running short of their 10 million unit by the end of 2008 goal and negative press like this will not encourage those folks on the fence to make the plunge and pony up the $399 necessary to get one now.
Apple could miss a quarterly earnings expectation and still keep the aura around itself. The stock would take a hit but a good quarter following it would repair that. Expectations are way too high currently for the company and its products and it would seem Apple may be letting that guide its decision making process. If they alienate those who are buying it's products with moves like this that make them feel like the enemy, that damage will take much longer to repair.
Ever heard of the Magnuson-Moss Federal Warranty Act? It would seem those at Apple's HQ have not either but when they put out an iPhone update this week that disabled hacked iPhones, they broke this law.
The site Phone News.com details how Apple did do. The act says that Apple cannot void a warranty for a product with third-party enhancements or modifications to their product. The only exception to this rule is if Apple can determine that the modification or enhancement is responsible damaging the product in question. Since it was Apple that intentionally caused the damage to the iPhone, the phones are still technically still covered under the warranty. Apple has a problem because they are refusing to honor the warranty on the hacked phones.
Once ownership of the phones was transferred from Apple to the buyer at purchase, the new owners have the right to do whatever they want with the phone. Kind of like buying a car and customizing it. Now, if your customization of the car (phone) causes it not to work, the auto maker (or Apple) need not honor the warranty, but, and this is a key point, the car maker (or Apple)cannot come out and take the transmission out of the car because they do not like the modifications you made. This is essentially what Apple did. They said "if you change the phone, we will break it on you". Illegal.
If nothing else this come as another PR pothole for Apple who has gone from wearing the lovable underdog label to corporate bully in the course of a few weeks. First there was the unexpected (not to ValuePlays readers) $200 price drop on the phone less than 3 months after it's release that had those who waited in lines for two days to get the initial phones outraged. Apple attempted to sooth them by offering them a $100 rebate which still leaves them $100 short but it was better than nothing.
The iPhone hype has subsided and sales are not as hot as Apple would like them. they are running short of their 10 million unit by the end of 2008 goal and negative press like this will not encourage those folks on the fence to make the plunge and pony up the $399 necessary to get one now.
Apple could miss a quarterly earnings expectation and still keep the aura around itself. The stock would take a hit but a good quarter following it would repair that. Expectations are way too high currently for the company and its products and it would seem Apple may be letting that guide its decision making process. If they alienate those who are buying it's products with moves like this that make them feel like the enemy, that damage will take much longer to repair.
Friday's 52 Week Low's
Ethanol makers still going lower, someone will start snapping them up soon.
SMRT Stein Mart Inc 7.66
SCSS Select Comfort Corp 13.95
RUTH Ruths Chris Steak Hse Inc 14.31
RT Ruby Tuesday, Inc. (G ... 18.37
PTRY Pantry Inc 25.69
USBE US Bioenergy Corp 7.65
UFPI Universal Forest Products 29.65
SPF Standard Pacific Corp 5.49
MGPI Mgp Ingredients Inc 10.24
MED Medifast Inc 5.58
MAXY Maxygen Inc
HMX Hartmarx Corporation 4.94
HHS Harte-Hanks Communica ... 19.83
GMTN Gander Mountain Co 5.45
LZB La-Z-Boy Incorporated 7.50
DSW Dsw Inc 25.55
DEIX Directed Electronics Inc 3.97
CRC Chromcraft Revington, Inc 4.67
SMRT Stein Mart Inc 7.66
SCSS Select Comfort Corp 13.95
RUTH Ruths Chris Steak Hse Inc 14.31
RT Ruby Tuesday, Inc. (G ... 18.37
PTRY Pantry Inc 25.69
USBE US Bioenergy Corp 7.65
UFPI Universal Forest Products 29.65
SPF Standard Pacific Corp 5.49
MGPI Mgp Ingredients Inc 10.24
MED Medifast Inc 5.58
MAXY Maxygen Inc
HMX Hartmarx Corporation 4.94
HHS Harte-Hanks Communica ... 19.83
GMTN Gander Mountain Co 5.45
LZB La-Z-Boy Incorporated 7.50
DSW Dsw Inc 25.55
DEIX Directed Electronics Inc 3.97
CRC Chromcraft Revington, Inc 4.67
Friday's Links
9/25, Housing, Natural Gas, Cheap Music Downloads
- I did not know Sept. 25th was such a notable day.
- According to this. As goes housing, so goes the economy. I hope it is wrong.
- Why would you build a plant in the US with these Natural gas prices.
- Here is how Amazon (AMZN) is selling songs for your iPod cheaper than Apple (APPL)
- I did not know Sept. 25th was such a notable day.
- According to this. As goes housing, so goes the economy. I hope it is wrong.
- Why would you build a plant in the US with these Natural gas prices.
- Here is how Amazon (AMZN) is selling songs for your iPod cheaper than Apple (APPL)
Greenspan the Odds Maker
I Greenspan jockeying for a job on Vegas?
Before the summer began he made waves with the first understandable statement of his career. "The US has a greater than 30% chance of a recession this year". Whoa, it is actually a coherent blathering from the former chief. Since that prediction seems to be wrong, Greeenie decided to follow it up yesterday.
"The danger of recession has obviously risen but in my judgment ... is still less than 50/50. It's less optimistic than one would like," Greenspan told BBC Radio 4. So, I guess that means we are about 30% to 45% chance? If only he were this clear when he was in office.
Oh yea the reason for the interview? He was peddling his new book overseas. Funny how the almighty quest for a fast buck clears ones thought process.
Before the summer began he made waves with the first understandable statement of his career. "The US has a greater than 30% chance of a recession this year". Whoa, it is actually a coherent blathering from the former chief. Since that prediction seems to be wrong, Greeenie decided to follow it up yesterday.
"The danger of recession has obviously risen but in my judgment ... is still less than 50/50. It's less optimistic than one would like," Greenspan told BBC Radio 4. So, I guess that means we are about 30% to 45% chance? If only he were this clear when he was in office.
Oh yea the reason for the interview? He was peddling his new book overseas. Funny how the almighty quest for a fast buck clears ones thought process.
Bank of America Piles on Starbucks
Just in case Starbucks thought the bashing was finally over...
Banc of America (BAC) downgraded Starbucks (SBUX) to Sell from Neutral, and lowered their target to $23 from $27, as they see downside risk to estimates due to slower growth. The firm is concerned that expectations for a near-term recovery are too high.
The analyst, Mr. Barrish wrote, "Although we believe that the company controls a very strong brand and can continue to grow, we believe the pace of growth will be slower [with international business still too small to make significant contribution to operating profits, and could be several years away from such a contribution], and that expectations are too high for a short-term recovery."
He added, "We also believe that store operations have 'slipped' and longer lines, more complexity and less-than-stellar-looking assets could be causing a modest decrease in sales in this challenging consumer environment."
I guess the first question isn't "is he right" but "where have you been"? I mean, none of this stuff is an enlightened opinion and those of you who read ValuePlays have been seeing the same sentiment since Fenruary when shares were sitting at $35 each. Shares were down some 2% yesterday and there isn't really anything to stop the fall on the horizon. If anything, the upcoming earnings release may do more harm than good as it is looking more apparent everyday that meeting their number is becoming less and less likely. What took the analyst almost 10 months to see what the rest of us already new? Also, the fact that shares dropped so much despite all this shows how much "hope" is still baked into the current price.
Starbucks may give us a valueplay soon enough. But shares will fall further first..
Banc of America (BAC) downgraded Starbucks (SBUX) to Sell from Neutral, and lowered their target to $23 from $27, as they see downside risk to estimates due to slower growth. The firm is concerned that expectations for a near-term recovery are too high.
The analyst, Mr. Barrish wrote, "Although we believe that the company controls a very strong brand and can continue to grow, we believe the pace of growth will be slower [with international business still too small to make significant contribution to operating profits, and could be several years away from such a contribution], and that expectations are too high for a short-term recovery."
He added, "We also believe that store operations have 'slipped' and longer lines, more complexity and less-than-stellar-looking assets could be causing a modest decrease in sales in this challenging consumer environment."
I guess the first question isn't "is he right" but "where have you been"? I mean, none of this stuff is an enlightened opinion and those of you who read ValuePlays have been seeing the same sentiment since Fenruary when shares were sitting at $35 each. Shares were down some 2% yesterday and there isn't really anything to stop the fall on the horizon. If anything, the upcoming earnings release may do more harm than good as it is looking more apparent everyday that meeting their number is becoming less and less likely. What took the analyst almost 10 months to see what the rest of us already new? Also, the fact that shares dropped so much despite all this shows how much "hope" is still baked into the current price.
Starbucks may give us a valueplay soon enough. But shares will fall further first..
ADM and ConocoPhillips In Pact
Well that did not take long. In the morning I pondered what was up with ADM (ADM) and their recent restructuring along the lines of an energy company and only a few hours later get an answer.
Archer Daniels Midland and CononcoPhillips (COP) announced that they agreed to collaborate on the development of renewable transportation fuels from biomass, creating a partnership between the biggest U.S. ethanol producer and one of the biggest oil refiners. The collaboration will research and seek to commercialize two components of a next-generation biofuel production process:
* The conversion of biomass from crops, wood or switchgrass into biocrude, a non-fossil substance that can be processed into fuel; and
* The refining of biocrude to produce transportation fuel.
ADM will provide "biomass," or organic material left over from crops, wood or switchgrass and ConocoPhillips will convert the materials into "biocrude" fuel for transportation.
"ConocoPhillips believes that the development of next-generation biofuels is a critical step in the diversification of our nation's energy sources," said Jim Mulva, chairman and chief executive officer, ConocoPhillips. "We are hopeful that this collaboration will provide innovative technology toward the large-scale production of biofuels that can be moved efficiently and affordably through existing infrastructure."
Patricia Woertz, chairman and CEO of ADM, added, "As we advance our global bioenergy interests, this alliance with ConocoPhillips represents an important next step. Innovative collaboration like this will identify and bring to market feasible, economic and sustainable next-generation biofuels."
This is very interesting. There has been a ton of talk out there about "cellulostic ethanol" and while ADM is developing that technology, what they seem to be doing here is creating "cellulostic crude". The ramifications of the agreement between the two are far reaching. Big Oil has thus far rejected the biofuel industry and this agreement serves as that needed recognition. It also diversifies ADM's earnings profile away from ethanol and farther into the biodiesel and now biocrude areas that are growing at staggering rates.
Consider that just three years ago, only 25 million gallons of biodiesel were produced in the US. That number will top 250 million gallon this year and it is expected to double next year. Biodiesel burns cleaner and is 30% MORE mileage friendly than it's pure petroleum brethren.
What ADM and Conoco are doing is jumping into a thus far untouched market head first to dominate it. The fact they are even setting up the refining of the finished product says it is close to a reality.
Sound good shareholders? Me too.
Archer Daniels Midland and CononcoPhillips (COP) announced that they agreed to collaborate on the development of renewable transportation fuels from biomass, creating a partnership between the biggest U.S. ethanol producer and one of the biggest oil refiners. The collaboration will research and seek to commercialize two components of a next-generation biofuel production process:
* The conversion of biomass from crops, wood or switchgrass into biocrude, a non-fossil substance that can be processed into fuel; and
* The refining of biocrude to produce transportation fuel.
ADM will provide "biomass," or organic material left over from crops, wood or switchgrass and ConocoPhillips will convert the materials into "biocrude" fuel for transportation.
"ConocoPhillips believes that the development of next-generation biofuels is a critical step in the diversification of our nation's energy sources," said Jim Mulva, chairman and chief executive officer, ConocoPhillips. "We are hopeful that this collaboration will provide innovative technology toward the large-scale production of biofuels that can be moved efficiently and affordably through existing infrastructure."
Patricia Woertz, chairman and CEO of ADM, added, "As we advance our global bioenergy interests, this alliance with ConocoPhillips represents an important next step. Innovative collaboration like this will identify and bring to market feasible, economic and sustainable next-generation biofuels."
This is very interesting. There has been a ton of talk out there about "cellulostic ethanol" and while ADM is developing that technology, what they seem to be doing here is creating "cellulostic crude". The ramifications of the agreement between the two are far reaching. Big Oil has thus far rejected the biofuel industry and this agreement serves as that needed recognition. It also diversifies ADM's earnings profile away from ethanol and farther into the biodiesel and now biocrude areas that are growing at staggering rates.
Consider that just three years ago, only 25 million gallons of biodiesel were produced in the US. That number will top 250 million gallon this year and it is expected to double next year. Biodiesel burns cleaner and is 30% MORE mileage friendly than it's pure petroleum brethren.
What ADM and Conoco are doing is jumping into a thus far untouched market head first to dominate it. The fact they are even setting up the refining of the finished product says it is close to a reality.
Sound good shareholders? Me too.
Sherwin Williams: Persistant Rumors
More rumors, true?
Sherwin-Williams (SHW) shares have been trading higher on buyout rumors. The paintmaker and retailer, which has a market cap of $8.5 billion and long-term debt of $292 million, has been the subject of rumors for the better part of a month now. The coatings industry is undergoing rapid consolidation the past 6 months and Sherwin, with its name recognition and pristine financials would be a delicious target for someone. Companies like Dow Chemical (DOW) have publicly announced their intentions to grow their coatings business by billion dollar increments and that can only be done through acquisitions. The recent Akzo Nobel buyout of ICI chemical served to further heat up the rumor mill. Dow had an interest in ICI but not at the price Nobel paid. Now that ICI is gone, could a bid for Sherwin be coming?
However, Sherwin may not be a takeout candidate, but instead an acquirer,based on recent actions. The company recently bought Spokane, Wash.-based Columbia Paint & Coatings Co. after completing the purchase of Philadelphia based MA Bruder & Sons. The purchases followed Sherwin-Williams' CEO Christopher M. Connor's comments earlier in the year that the company would continue to expand in the "do-it-yourself" market through acquisitions.
Sherwin-Williams (SHW) shares have been trading higher on buyout rumors. The paintmaker and retailer, which has a market cap of $8.5 billion and long-term debt of $292 million, has been the subject of rumors for the better part of a month now. The coatings industry is undergoing rapid consolidation the past 6 months and Sherwin, with its name recognition and pristine financials would be a delicious target for someone. Companies like Dow Chemical (DOW) have publicly announced their intentions to grow their coatings business by billion dollar increments and that can only be done through acquisitions. The recent Akzo Nobel buyout of ICI chemical served to further heat up the rumor mill. Dow had an interest in ICI but not at the price Nobel paid. Now that ICI is gone, could a bid for Sherwin be coming?
However, Sherwin may not be a takeout candidate, but instead an acquirer,based on recent actions. The company recently bought Spokane, Wash.-based Columbia Paint & Coatings Co. after completing the purchase of Philadelphia based MA Bruder & Sons. The purchases followed Sherwin-Williams' CEO Christopher M. Connor's comments earlier in the year that the company would continue to expand in the "do-it-yourself" market through acquisitions.
Friday's Upgrades and Downgrades
UPGRADES
Fresenius Medical FMS Bernstein Mkt Perform » Outperform
EchoStar DISH Oppenheimer Neutral » Buy
SAVVIS Comm SVVS Lehman Brothers Equal-weight » Overweight
Oriental Fincl Grp OFG Keefe Bruyette Mkt Perform » Outperform
Rightnow Tech RNOW RBC Capital Mkts Underperform » Sector Perform
SiRF Technology SIRF Credit Suisse Neutral » Outperform
KKR Financial KFN Bear Stearns Peer Perform » Outperform
Wal-Mart WMT Rochdale Securities Hold » Buy
Westell Tech WSTL Robert W. Baird Neutral » Outperform
Kindred Healthcare KND Wachovia Underperform » Mkt Perform
Prudential Plc PUK Bear Stearns Peer Perform » Outperform
Magna MGA CIBC Wrld Mkts Sector Perform » Sector Outperform
DOWNGRADES
Signature Bank SBNY Sterne Agee Buy » Hold
PetroChina PTR Bear Stearns Outperform » Peer Perform
Healthways HWAY Credit Suisse Outperform » Neutral
Statoil ASA STO Credit Suisse Outperform » Neutral
Alesco AFN Bear Stearns Outperform » Peer Perform
Fluor FLR Morgan Joseph Buy » Hold
Starbucks SBUX Banc of America Sec Neutral » Sell
ResMed RMD UBS Buy » Neutral
Gamestop GME UBS Buy » Neutral
Thursday, September 27, 2007
"Fast Money" for Friday
Friday's Picks
Jeff Macke recommended getting long Yahoo (YHOO) Open $26.27 and Palm (PALM). Open $16.40
Guy Adami liked KB Home (KBH). Open $24.71
Karen Finerman preferred Seacor Holdings (CKH). Open $93.83
Pete Najarian said Nordic American Tanker Shipping (NAT) is a buy. Open $38.60
Thursday's Results
Jeff Macke said sell Bear Stearns (BSC). Open $123 Close $121.15
Guy Adami liked NYSE Euronext (NYX). Open $78.60 Close $79.78
Karen Finerman thought BEA Systems (BEAS) is a buy. Open $13.33 Close $13.65
Pete Najarian preferred Isis Pharmaceuticals (ISIS). Open $15.10 Close $15.35
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 27-18 = 60%
Eric Bolling= 10-11 = 48%
John Najarian= 13-3 = 81%
Jeff Macke= 32-23 = 58%
Pete Najarian= 20-17 = 54%
Tim Seymore= 3-2 = 60%
Karen Finerman= 12-6 = 67%
Stacey Briere-Gilbert= 2-0 = 100%
Today's 52 Week Lows
RUTH Ruths Chris Steak Hse Inc 14.60
PTRY Pantry Inc 27.20
MGPI Mgp Ingredients Inc 11.18
LENB Lennar Corp 20.72
CYH Community Health Sys ... 30.71
CRFT Craftmade Internation ... 12.40
CMRG Casual Male Retail Gr ... 9.10
CHIC Charlotte Russe Hldg Inc 14.79
HB Hillenbrand Industrie ... 54.52
GSAT Globalstar Inc 7.48
GOT Gottschalks Inc 4.21
GMTN Gander Mountain Co 5.70
BLG Building Matls Hldg Corp 10.87
ARP American Reprographics Co 18.98
Thursday's Links
Financials, Sarcasm, The election, "Bloggystyle"
- Not sure if investing in financial is right for now? Looks like governments around the world do..
- I love sarcasm and this made me spit my coffee out..
- Here it is. The deciding issue of next years elections.
- I figured out what I like about Adam's blog aggregation. It is done with a topic in mind so you get reading from several different sources rather than just a shotgun article. For my money this is the best one out there currently
- Not sure if investing in financial is right for now? Looks like governments around the world do..
- I love sarcasm and this made me spit my coffee out..
- Here it is. The deciding issue of next years elections.
- I figured out what I like about Adam's blog aggregation. It is done with a topic in mind so you get reading from several different sources rather than just a shotgun article. For my money this is the best one out there currently
Third Avenue Shareholder Letter
I have money invested in only one mutual fund (actually my son does, in a coverdale) and that is in Martin Whitman's Third Avenue Value (TAVFX). Here is the most recent shareholder letter, well worth the read as it talks about "credit-worthiness".
Portions of the most recent letter are reprinted below.
"At July 31, about 21% of the Fund’s assets were in what are considered cash and equivalents (excluding the 1.3% represented by the investment in Nuveen Common). Of
this 21%, almost 58% was invested in United Kingdom Government issues, and a little over 42% was invested in U.S. Treasuries and similar instruments. Third Avenue has weighted its cash holdings toward the U.K. rather than the United States because TAVF obtains a better yield on U.K. instruments, and because of my belief that important parts of the U.S. economy, including the Federal Government, are likely to face a continued deterioration in credit-worthiness.
Absent violence in the streets (i.e., terrorism) and the continued existence of political stability, the U.S. will continue to be an attractive and relatively safe place for Outside Passive Minority Investor (“OPMI”) investment. But deteriorated credit-worthiness may well mean higher interest rates and a weaker dollar over the
long term. Thus, the Fund’s weighting toward U.K. cash equivalents.
At July 31, approximately 78.1% of Fund assets were invested in common stocks. Within the common stock portfolio, 54% of the market value were in non-North American issues, and only around 46% were in issues of companies whose princcompanies; 10% was a South Korean company; and 8% were Western European companies. An explanation as to
why the emphasis on overseas investments ought to be informative to TAVF shareholders.
Put simply, the Fund has invested in the equities of overseas companies with super strong financial positions for two reasons. First, the overseas common stocks, based
on TAVF’s cost basis, appear to be much cheaper than U.S. issues, measured by estimated discounts from readily ascertainable NAVs. Second, the overseas
common stocks appear to have much greater growth potential than their domestic
counterparts, measured by the probabilities that over the next five to ten years, it will be easier for the foreign companies to increase readily ascertainable NAVs by at least 15% compounded annually.
As bottom-up investors following a “safe and cheap*” approach, Third Avenue Management has always focused on credit-worthiness much more than almost any other
OPMIs. Thus, there exists for TAVF the strict discipline of not investing in any common stock knowingly unless the issuing company enjoys a super strong financial
position. This is in contrast to almost all conventional investors who emphasize a primacy of the income account, i.e., principal weight in an equity valuation goes to earnings from operations and/or cash flow from operations. Almost all other OPMIs seem to denigrate the importance of strong financial positions.
This tendency to downplay the importance of creditworthiness is prevalent also on the macro-level, probably even more so than for bottom-up investors. This attitude has been well summarized by Vice President Dick Cheney who is quoted as saying, “Deficits don’t matter”.
For the vast majority of people, the important economics statistics are Gross Domestic Product, employment and unemployment levels, corporate earnings, and productivity increases. Credit-worthiness is pretty much ignored.
Credit-worthiness is, in the final analysis, a function of two factors. First, how much indebtedness is being incurred via balance of payments deficits, other governmental borrowing, corporate borrowings and borrowings by consumers. Of itself, increasing indebtedness is not a huge problem, provided the use of funds created by the borrowing is used productively, i.e., to create wealth. Insofar as the use of proceeds do not result in wealth creation, or it creates only modest increases in wealth, i.e., there exists a negative multiplier, or a modest multiplier, the borrowing entity, sooner or later, has to face diminished credit-worthiness (except if the entity can sell assets on a massive scale).
The U.S. is incurring massive debts. By and large, the use of proceeds from incurring this debt seems to be only modestly productive or even counter productive. These
uses of proceeds seem to have non-positive, or even negative, multipliers. Non productive uses of proceeds include the following:
• By the U.S. government: massive expenditures in Iraq.
• By Consumers: massive expenditures for consumer
goods that depreciate rapidly.
• By Corporate America: Leveraged Buy Outs where
most of the proceeds from debt incurrence are used to
make cash payments to stockholders, rather than to use
the cash to build or acquire productive assets.
Given the gradual deterioration in U.S. creditworthiness, I think it is important to encourage foreign entities to acquire control of U.S. assets and U.S. companies. Foreigners can use the proceeds from providing finance to the U.S. in three ways:
1) Buy and hold U.S. debt instruments.
2) Acquire U.S. equities or assets as passive investors.
3) Acquire control positions in U.S. equities and
assets.
Insofar as increased amounts of debt instruments are held by foreigners, this seems likely to detract from U.S. credit-worthiness, sooner or later. This would not be the
case if the proceeds from U.S. borrowing were recycled into equity investments. Given the massive amounts of U.S. debt held off-shore, passive investing is probably of
limited use to creditors located in China and Japan.
Rather, those creditors ought to be encouraged to acquire control of U.S. companies and U.S. assets. If so, this might prove to be a bonanza for Third Avenue. Many of
the domestic companies in the TAVF portfolio appear to
be ideal take-over candidates.
Again, put simply, the U.S. has so far in the 21st Century achieved prosperity and paid for prosperity with a steadily deteriorating credit-worthiness. Macro factors point to a less optimistic outlook for the U.S. than for, say, Hong Kong or Mainland China. In spite of this, the U.S. remains the best place in the world to invest in individual securities for a bottom-up investor such as TAVF, other things being close to equal. These other things encompass businesses having strong financial positions; prices of common stocks reflecting meaningful discounts from NAVs, and that for the long term, there exists reasonably good prospects that such NAVs will increase by no less than 10% per annum compounded."
Marin J .Whitman
Portions of the most recent letter are reprinted below.
"At July 31, about 21% of the Fund’s assets were in what are considered cash and equivalents (excluding the 1.3% represented by the investment in Nuveen Common). Of
this 21%, almost 58% was invested in United Kingdom Government issues, and a little over 42% was invested in U.S. Treasuries and similar instruments. Third Avenue has weighted its cash holdings toward the U.K. rather than the United States because TAVF obtains a better yield on U.K. instruments, and because of my belief that important parts of the U.S. economy, including the Federal Government, are likely to face a continued deterioration in credit-worthiness.
Absent violence in the streets (i.e., terrorism) and the continued existence of political stability, the U.S. will continue to be an attractive and relatively safe place for Outside Passive Minority Investor (“OPMI”) investment. But deteriorated credit-worthiness may well mean higher interest rates and a weaker dollar over the
long term. Thus, the Fund’s weighting toward U.K. cash equivalents.
At July 31, approximately 78.1% of Fund assets were invested in common stocks. Within the common stock portfolio, 54% of the market value were in non-North American issues, and only around 46% were in issues of companies whose princcompanies; 10% was a South Korean company; and 8% were Western European companies. An explanation as to
why the emphasis on overseas investments ought to be informative to TAVF shareholders.
Put simply, the Fund has invested in the equities of overseas companies with super strong financial positions for two reasons. First, the overseas common stocks, based
on TAVF’s cost basis, appear to be much cheaper than U.S. issues, measured by estimated discounts from readily ascertainable NAVs. Second, the overseas
common stocks appear to have much greater growth potential than their domestic
counterparts, measured by the probabilities that over the next five to ten years, it will be easier for the foreign companies to increase readily ascertainable NAVs by at least 15% compounded annually.
As bottom-up investors following a “safe and cheap*” approach, Third Avenue Management has always focused on credit-worthiness much more than almost any other
OPMIs. Thus, there exists for TAVF the strict discipline of not investing in any common stock knowingly unless the issuing company enjoys a super strong financial
position. This is in contrast to almost all conventional investors who emphasize a primacy of the income account, i.e., principal weight in an equity valuation goes to earnings from operations and/or cash flow from operations. Almost all other OPMIs seem to denigrate the importance of strong financial positions.
This tendency to downplay the importance of creditworthiness is prevalent also on the macro-level, probably even more so than for bottom-up investors. This attitude has been well summarized by Vice President Dick Cheney who is quoted as saying, “Deficits don’t matter”.
For the vast majority of people, the important economics statistics are Gross Domestic Product, employment and unemployment levels, corporate earnings, and productivity increases. Credit-worthiness is pretty much ignored.
Credit-worthiness is, in the final analysis, a function of two factors. First, how much indebtedness is being incurred via balance of payments deficits, other governmental borrowing, corporate borrowings and borrowings by consumers. Of itself, increasing indebtedness is not a huge problem, provided the use of funds created by the borrowing is used productively, i.e., to create wealth. Insofar as the use of proceeds do not result in wealth creation, or it creates only modest increases in wealth, i.e., there exists a negative multiplier, or a modest multiplier, the borrowing entity, sooner or later, has to face diminished credit-worthiness (except if the entity can sell assets on a massive scale).
The U.S. is incurring massive debts. By and large, the use of proceeds from incurring this debt seems to be only modestly productive or even counter productive. These
uses of proceeds seem to have non-positive, or even negative, multipliers. Non productive uses of proceeds include the following:
• By the U.S. government: massive expenditures in Iraq.
• By Consumers: massive expenditures for consumer
goods that depreciate rapidly.
• By Corporate America: Leveraged Buy Outs where
most of the proceeds from debt incurrence are used to
make cash payments to stockholders, rather than to use
the cash to build or acquire productive assets.
Given the gradual deterioration in U.S. creditworthiness, I think it is important to encourage foreign entities to acquire control of U.S. assets and U.S. companies. Foreigners can use the proceeds from providing finance to the U.S. in three ways:
1) Buy and hold U.S. debt instruments.
2) Acquire U.S. equities or assets as passive investors.
3) Acquire control positions in U.S. equities and
assets.
Insofar as increased amounts of debt instruments are held by foreigners, this seems likely to detract from U.S. credit-worthiness, sooner or later. This would not be the
case if the proceeds from U.S. borrowing were recycled into equity investments. Given the massive amounts of U.S. debt held off-shore, passive investing is probably of
limited use to creditors located in China and Japan.
Rather, those creditors ought to be encouraged to acquire control of U.S. companies and U.S. assets. If so, this might prove to be a bonanza for Third Avenue. Many of
the domestic companies in the TAVF portfolio appear to
be ideal take-over candidates.
Again, put simply, the U.S. has so far in the 21st Century achieved prosperity and paid for prosperity with a steadily deteriorating credit-worthiness. Macro factors point to a less optimistic outlook for the U.S. than for, say, Hong Kong or Mainland China. In spite of this, the U.S. remains the best place in the world to invest in individual securities for a bottom-up investor such as TAVF, other things being close to equal. These other things encompass businesses having strong financial positions; prices of common stocks reflecting meaningful discounts from NAVs, and that for the long term, there exists reasonably good prospects that such NAVs will increase by no less than 10% per annum compounded."
Marin J .Whitman
Does the GM Deal Reshape Healthcare?
Getting the UAW to take control of it's healthcare may be the turning point for the US. Good for GM (GM)
GM is going to fund a $35 billion health care fund that will finally take all present and future health cost away from the auto maker. Why do you care? Right now $3,000 to $5,000 of the cost of an auto you buy from GM is the cost of it's healthcare program. Can you imagine what type of value or additional options or improved quality we may get now that the cost is gone? Is it any wonder they cannot provide the types of autos to Japanese do whose similar costs are just a fraction of that?
More importantly, GM may have started a sea-change without knowing it. What company sponsored health plans have done is taken the free market out of the equation. When that is done, waste and inefficiency reign. If GM is not footing the bill, anyone want to bet the UAW will take a much closer look at where the money is going? Do we really doubt that "concern" will inevitably trickle down to the rank and file?
Why are we not able to shop for health insurance like we are for auto insurance? Why do us healthy people who have almost no claims pay as much as those who are 300 pounds overweight, smoke, eat lousy drink too much and have astronomical medical bills? Ought it not be more correlated to the frequency of our claims? Why does a company pay as much for insurance for a couple as they do for a family of 5, just because they are both a family?
If we want to get healthcare costs down, let the market in. It works everywhere else and this GM deal may have opened that door, at least we can hope.
GM is going to fund a $35 billion health care fund that will finally take all present and future health cost away from the auto maker. Why do you care? Right now $3,000 to $5,000 of the cost of an auto you buy from GM is the cost of it's healthcare program. Can you imagine what type of value or additional options or improved quality we may get now that the cost is gone? Is it any wonder they cannot provide the types of autos to Japanese do whose similar costs are just a fraction of that?
More importantly, GM may have started a sea-change without knowing it. What company sponsored health plans have done is taken the free market out of the equation. When that is done, waste and inefficiency reign. If GM is not footing the bill, anyone want to bet the UAW will take a much closer look at where the money is going? Do we really doubt that "concern" will inevitably trickle down to the rank and file?
Why are we not able to shop for health insurance like we are for auto insurance? Why do us healthy people who have almost no claims pay as much as those who are 300 pounds overweight, smoke, eat lousy drink too much and have astronomical medical bills? Ought it not be more correlated to the frequency of our claims? Why does a company pay as much for insurance for a couple as they do for a family of 5, just because they are both a family?
If we want to get healthcare costs down, let the market in. It works everywhere else and this GM deal may have opened that door, at least we can hope.
Wal-Mart and India: Big
Events are happening in India with Wal-Mart (WMT) that folks seem to be not noticing and if you are buying shares to accumulate, that is good because once the scope of this is recognized, shares may never look back.
Bharti Enterprises and Wal-Mart are confident their Indian joint venture is supported in the country and say it will help usher in the future of Indian retail. "I think it's a big change for India, the move from mom-and-pop to organized retail," said Raj Jain, head of Wal-Mart's India operations. "I think most people understand that it is a necessary evolution which has to go through for everybody to benefit from and for the economy.
Bharti Chairman Sunil Bharti Mittal echoed those comments. "Farmers want this, the customers want a better experience and to save money. They want it -- which means the country wants it."
The joint venture called Bharti Wal-Mart Private Limited, is scheduled to open its first store by the end of next year. It will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses.
The question is, what is the potential? Consider that large retail companies make up only 3% of India's $350 billion retail market. India allows foreign single-brand retailers to hold up to 51 percent in local joint ventures, while multiple-brand retailers like Wal-Mart are limited to cash-and-carry and franchise deals.
Wal-Mart is in good company and has strong support internationally as suppliers ranging from Unilever (UL) and Procter & Gamble Co (PG) who "know the game", to small local suppliers that make only one product are eager to work with the joint venture, Mittal said.
In essence, Wal-Mart is positioning itself to be the portal for goods going into the country. Once the JV is operating, the economies of scale Wal-Mart and distribution abilities can and will employ will instantly transform them into the preferred retailer for the nation. International sales for Wal-Mart are growing 16% this year and this partnership will cause that to explode.
It is a year out which is why is not getting much notice now. The thing is, if you wait until it does, you will be paying much more for a share of that growth than you are now.
Bharti Enterprises and Wal-Mart are confident their Indian joint venture is supported in the country and say it will help usher in the future of Indian retail. "I think it's a big change for India, the move from mom-and-pop to organized retail," said Raj Jain, head of Wal-Mart's India operations. "I think most people understand that it is a necessary evolution which has to go through for everybody to benefit from and for the economy.
Bharti Chairman Sunil Bharti Mittal echoed those comments. "Farmers want this, the customers want a better experience and to save money. They want it -- which means the country wants it."
The joint venture called Bharti Wal-Mart Private Limited, is scheduled to open its first store by the end of next year. It will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses.
The question is, what is the potential? Consider that large retail companies make up only 3% of India's $350 billion retail market. India allows foreign single-brand retailers to hold up to 51 percent in local joint ventures, while multiple-brand retailers like Wal-Mart are limited to cash-and-carry and franchise deals.
Wal-Mart is in good company and has strong support internationally as suppliers ranging from Unilever (UL) and Procter & Gamble Co (PG) who "know the game", to small local suppliers that make only one product are eager to work with the joint venture, Mittal said.
In essence, Wal-Mart is positioning itself to be the portal for goods going into the country. Once the JV is operating, the economies of scale Wal-Mart and distribution abilities can and will employ will instantly transform them into the preferred retailer for the nation. International sales for Wal-Mart are growing 16% this year and this partnership will cause that to explode.
It is a year out which is why is not getting much notice now. The thing is, if you wait until it does, you will be paying much more for a share of that growth than you are now.
Thursday's Upgrades and Downgrades
UPGRADES
Tempur-Pedic TPX Stifel Nicolaus Hold » Buy
Celanese CE BB&T Capital Mkts Hold » Buy
Pixelworks PXLW Jefferies & Co Underperform » Hold
American Eagle AEO Wachovia Mkt Perform » Outperform
Office Depot ODP JP Morgan Neutral » Overweight
CIT Group CIT Credit Suisse Neutral » Outperform
CVS Corp CVS JP Morgan Neutral » Overweight
DOWNGRADES
Vonage VG Stanford Research Hold » Sell
Tesoro Petroleum TSO Credit Suisse Outperform » Neutral
Resources Connect RECN Stifel Nicolaus Buy » Hold
Health Care Ppty HCP UBS Buy » Neutral
Resources Connect RECN Robert W. Baird Outperform » Neutral
Alon USA Energy ALJ Credit Suisse Outperform » Neutral
CNOOC Ltd CEO Bear Stearns Peer Perform » Underperform
Resources Connect RECN Bear Stearns Outperform » Peer Perform
Agrium AGU CIBC Wrld Mkts Sector Outperform » Sector Perform
Statoil ASA STO JP Morgan Overweight » Neutral
Resources Connect RECN JMP Securities Mkt Outperform » Mkt Perform
Resources Connect RECN Piper Jaffray Outperform » Market Perform
Health Care Ppty HCP Friedman Billings Outperform » Mkt Perform
Under Armour UA UBS Buy » Neutral
VeriSign VRSN Credit Suisse Outperform » Neutral
Walgreen WAG JP Morgan Overweight » Neutral
Staples SPLS JP Morgan Neutral » Underweight
Wednesday, September 26, 2007
"Fast Money" for Thursday
I have changed the tracking to a simple "Success %" rather than the dollar amount since the different prices in stocks makes a simple dollar result meaningless.
Thursday's Picks
Jeff Macke said sell Bear Stearns (BSC). Open $123
Guy Adami liked NYSE Euronext (NYX). Open $78.60
Karen Finerman thought BEA Systems (BEAS) is a buy. Open $13.33
Pete Najarian preferred Isis Pharmaceuticals (ISIS). Open $15.10
Wednesday's Picks
Jeff Macke liked eBay (EBAY). Open $39.07 Close $39.18
Guy Adami recommended USEC Corp (USU). Open $10.36 Close $10.95
Karen Finerman preferred Comverse Technology (CMVT.PK). Open $20.41 Close $20.22
Pete Najarian said buy Digital River (DRIV). Open $44.73 Close $44.55
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 26-18 = 59%
Eric Bolling= 10-11 = 48%
John Najarian= 13-3 = 81%
Jeff Macke= 31-23 = 57%
Pete Najarian= 19-17 = 52%
Tim Seymore= 3-2 = 60%
Karen Finerman= 11-6 = 64%
Stacey Briere-Gilbert= 2-0 = 100%
Thursday's Picks
Jeff Macke said sell Bear Stearns (BSC). Open $123
Guy Adami liked NYSE Euronext (NYX). Open $78.60
Karen Finerman thought BEA Systems (BEAS) is a buy. Open $13.33
Pete Najarian preferred Isis Pharmaceuticals (ISIS). Open $15.10
Wednesday's Picks
Jeff Macke liked eBay (EBAY). Open $39.07 Close $39.18
Guy Adami recommended USEC Corp (USU). Open $10.36 Close $10.95
Karen Finerman preferred Comverse Technology (CMVT.PK). Open $20.41 Close $20.22
Pete Najarian said buy Digital River (DRIV). Open $44.73 Close $44.55
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 26-18 = 59%
Eric Bolling= 10-11 = 48%
John Najarian= 13-3 = 81%
Jeff Macke= 31-23 = 57%
Pete Najarian= 19-17 = 52%
Tim Seymore= 3-2 = 60%
Karen Finerman= 11-6 = 64%
Stacey Briere-Gilbert= 2-0 = 100%
Today's 52 Week Lows
It seems every biofuel producer is near a 52 week low EXCEPT ADM..
VSE Verasun Energy Corp 10.75
USBE US Bioenergy Corp 8.25
WOS Wolseley Plc 16.38
WNS Wns Holdings Ltd 16.56
WERN Werner Enterprises Inc 17.12
TMS Thomson 14.62
THRX Theravance Inc 24.90
SPLS Staples Inc 21.39
SPF Standard Pacific Corp 6.02
RHI Robert Half Internati ... 29.60
RECN Resources Connection Inc 22.36
RCRC Rc2 Corp 27.01
RAIL Freightcar Amer Inc 38.93
PTRY Pantry Inc 28.58
PEIX Pacific Ethanol Inc 8.54
MSSR Mccormick & Schmicks ... 19.69
MRLN Marlin Business Svcs Corp 14.63
MNI McClatchy Newspapers, Inc 19.71
MGPI Mgp Ingredients Inc 11.55
GPRE Green Plains Renewabl ... 10.84
BIOF Biofuel Energy Corp 5.50
CC Circuit City Stores, ... 7.92
CAO Csk Auto Corp 10.53
CALC California Coastal Cm ... 12.40
AVR Aventine Renewable Energy 10.36
BGP Borders Group, Inc 12.27
VSE Verasun Energy Corp 10.75
USBE US Bioenergy Corp 8.25
WOS Wolseley Plc 16.38
WNS Wns Holdings Ltd 16.56
WERN Werner Enterprises Inc 17.12
TMS Thomson 14.62
THRX Theravance Inc 24.90
SPLS Staples Inc 21.39
SPF Standard Pacific Corp 6.02
RHI Robert Half Internati ... 29.60
RECN Resources Connection Inc 22.36
RCRC Rc2 Corp 27.01
RAIL Freightcar Amer Inc 38.93
PTRY Pantry Inc 28.58
PEIX Pacific Ethanol Inc 8.54
MSSR Mccormick & Schmicks ... 19.69
MRLN Marlin Business Svcs Corp 14.63
MNI McClatchy Newspapers, Inc 19.71
MGPI Mgp Ingredients Inc 11.55
GPRE Green Plains Renewabl ... 10.84
BIOF Biofuel Energy Corp 5.50
CC Circuit City Stores, ... 7.92
CAO Csk Auto Corp 10.53
CALC California Coastal Cm ... 12.40
AVR Aventine Renewable Energy 10.36
BGP Borders Group, Inc 12.27
Buffett Buying Into Bear Sterns?
Bear Sterns (BSC), is spiking 10% on news Berkshire Hathaway's (BRK.A) Warren Buffett is considering a 20% stake in the broker. True or rumor?
Sounds to me like the Countrywide (CFC) rumors a month ago. IF Warren is buying into Bear, it will not be with a purchase of common stock. Now that the news is out he just cannot do it. A 10% jump already illustrates the impossibility he faces in doing anything in public. What he may do is what I postured would be (and eventually was)a potential for Countrywide, although not by Buffett. A private transaction in which he injected liquidity into the broker and in return receive a convertible security that pays a nice fat dividend, at this point probably around 7.5%.
Gone are the days we can follow Buffett before he makes his moves. If Buffett was going to buy common shares, it would have been done already and we would not know about it until the SEC filing much much later.
If I was going to bet, this is just more smoke...
Sounds to me like the Countrywide (CFC) rumors a month ago. IF Warren is buying into Bear, it will not be with a purchase of common stock. Now that the news is out he just cannot do it. A 10% jump already illustrates the impossibility he faces in doing anything in public. What he may do is what I postured would be (and eventually was)a potential for Countrywide, although not by Buffett. A private transaction in which he injected liquidity into the broker and in return receive a convertible security that pays a nice fat dividend, at this point probably around 7.5%.
Gone are the days we can follow Buffett before he makes his moves. If Buffett was going to buy common shares, it would have been done already and we would not know about it until the SEC filing much much later.
If I was going to bet, this is just more smoke...
Target Get's Into Lead Paint Recall Game, More "Thomas" Recalls
Target (TGT) announced today that it is recalling 350,000 toy lawn and garden tools and chairs due to lead paint. Unlike Mattel (MAT), they did not immediately issue the Chinese an apology.
Details are not forthcoming yet (no word on the Target website as of 3pm) but in what is shaping up to become an election year issue, is there a toy that says "Made In China" you would buy for your kid? Ironically, I was in a Target last week and witnessed mothers in the baby section (actually I was eavesdropping). They were talking and looking at toys and for these three moms, the decision to buy or not was simple. If it said "Made In China", it went back on the shelf. "Why risk it" was the consensus among them. Sooner or later a toy maker is going to make a killing bringing out the "Made In the USA" logo and running it in commercials. At this point people would easily pay a few bucks more for the products than say, burying their child?
Additionally, RC2 Corp. (RCRC) announced they are recalling an additional 200,000 Thomas the Tank Engine toys. No word yet as to whether an apology to China is coming or not.
Mattel is sure to issue an apology for both of them.............cowards
Details are not forthcoming yet (no word on the Target website as of 3pm) but in what is shaping up to become an election year issue, is there a toy that says "Made In China" you would buy for your kid? Ironically, I was in a Target last week and witnessed mothers in the baby section (actually I was eavesdropping). They were talking and looking at toys and for these three moms, the decision to buy or not was simple. If it said "Made In China", it went back on the shelf. "Why risk it" was the consensus among them. Sooner or later a toy maker is going to make a killing bringing out the "Made In the USA" logo and running it in commercials. At this point people would easily pay a few bucks more for the products than say, burying their child?
Additionally, RC2 Corp. (RCRC) announced they are recalling an additional 200,000 Thomas the Tank Engine toys. No word yet as to whether an apology to China is coming or not.
Mattel is sure to issue an apology for both of them.............cowards
Target And Thomas Recalls: Update And Links
Here is the necessary information
Thomas : click here
Target: These were actually made in Taiwan
Thomas : click here
Target: These were actually made in Taiwan
Wednesday's Links
More Charges, "Adult" kids, No need for reform?, Cheap Ethanol play
- How about they stand on their own feet when they say "I am an adult"
- Good, he cannot go away for long enough
- Why do we keep letting these clowns be in charge of our retirement?
- Ethanol companies are so cheap now, these guys have to be right
- How about they stand on their own feet when they say "I am an adult"
- Good, he cannot go away for long enough
- Why do we keep letting these clowns be in charge of our retirement?
- Ethanol companies are so cheap now, these guys have to be right
Why Dow Is Going To Saudi Arabia
How profitable could the JV in "The Kingdom" be for Dow?
The Saudi Aramco – Dow Chemical (DOW) joint venture at Ras Tanura will have a plastics processing zone, and area of petrochemical processing the Saudi's covet diversification to, hence the recent purchase of GE Plastics (GE). Saudi Arabia is one of the most sought after destinations for petrochemical investments because it offers the lowest priced ethane in the world.
According to Dev Corp International, which is involved in developing plastics projects in the Kingdom, land is not a problem and companies have a choice of setting up facilities either on the east or the west coast and options include Jubail, Yanbu and the Plastic Valley in King Abdullah Economic City near Rabigh.
How much is the savings doing business in Saudi Arabia?
Land is available for lease at $0.27/square metre/year, .
Power costs are as low as $0.03/KWh.
Funding should also not be a problem as soft loans are available from the Saudi Industrial Development Fund to cover up to 48% of the project cost. As the upcoming "white paper" from Dow will illustrate, the JV strategy enables the projects to be self-funded.
One chief concern that has been voiced was the availability of skilled labor for the facilities but the Saudi government is reported to have set up institutes to train operators. They have a goal of producing 300 skilled operators every year.
There is a worldwide rush to get into Saudi Arabia now and Dow is the first to get it's foot in the door in petrochemical processing and it is doing so on an unprecedented scale. What this will do is take the raw material costs which now stand at over 50% of Dow total cost structure and lower that dramatically, throwing more cash to the bottom line.
Based on recent history, that cash will be well taken care of for us shareholders.
The Saudi Aramco – Dow Chemical (DOW) joint venture at Ras Tanura will have a plastics processing zone, and area of petrochemical processing the Saudi's covet diversification to, hence the recent purchase of GE Plastics (GE). Saudi Arabia is one of the most sought after destinations for petrochemical investments because it offers the lowest priced ethane in the world.
According to Dev Corp International, which is involved in developing plastics projects in the Kingdom, land is not a problem and companies have a choice of setting up facilities either on the east or the west coast and options include Jubail, Yanbu and the Plastic Valley in King Abdullah Economic City near Rabigh.
How much is the savings doing business in Saudi Arabia?
Land is available for lease at $0.27/square metre/year, .
Power costs are as low as $0.03/KWh.
Funding should also not be a problem as soft loans are available from the Saudi Industrial Development Fund to cover up to 48% of the project cost. As the upcoming "white paper" from Dow will illustrate, the JV strategy enables the projects to be self-funded.
One chief concern that has been voiced was the availability of skilled labor for the facilities but the Saudi government is reported to have set up institutes to train operators. They have a goal of producing 300 skilled operators every year.
There is a worldwide rush to get into Saudi Arabia now and Dow is the first to get it's foot in the door in petrochemical processing and it is doing so on an unprecedented scale. What this will do is take the raw material costs which now stand at over 50% of Dow total cost structure and lower that dramatically, throwing more cash to the bottom line.
Based on recent history, that cash will be well taken care of for us shareholders.
Is Something Brewing With ADM?
Usually when you keep getting hints of something, there ends up being a certain level of truth to them. That what is going on with Arhcer Daniel's Midland (ADM).
Earlier this summer ADM made waves when in Brazil they announced they were "actively" seeking investment in the country's ethanol industry. Already producing bio-diesel there, a deal for ethanol would cement ADM's place as the worlds largest producer of the fuel.
A month ago ADM underwent a management reorganization that more aligned its structure in the mold of an oil company much like CEO Patricia Woertz's previous employer Chevron (CVX). How does the oil industry grow? Mergers and acquisitions.
Now we have Cosan (CZZ) Brazil's major ethanol producer saying "will start taking its first international steps, with possible investments in ethanol plants in the Caribbean, Mexico or even in the United States in the coming years". Why does this little tidbit matter, ADM is a minority shareholder in Cosan. Cosan's financial vice president, Paulo Diniz, said "it's impossible to be a global player in Brazil. You have to be present in the world's largest ethanol market, the United States,". He continued, "there's no company which is really a global renewable energy player, and at present, Cosan's condition to move into this position is unique,".
Cosan's seemingly "unlimited" capital raising capacity opens the possibility for acquisitions of "big companies," Diniz said. He added that the company could raise in the coming years up to $15 billion through subsequent stock offerings. "With our current structure we can even dream of big steps (large company acquisitions),".
HMMM.
We have the largest US player wanting to get into Brazil's market and the largest Brazilian player wanting in the US market and there is already a equity relationship between the two. What is to stop a merger of equals creating an ethanol powerhouse on a global scale?
Uh, Nothing???
Earlier this summer ADM made waves when in Brazil they announced they were "actively" seeking investment in the country's ethanol industry. Already producing bio-diesel there, a deal for ethanol would cement ADM's place as the worlds largest producer of the fuel.
A month ago ADM underwent a management reorganization that more aligned its structure in the mold of an oil company much like CEO Patricia Woertz's previous employer Chevron (CVX). How does the oil industry grow? Mergers and acquisitions.
Now we have Cosan (CZZ) Brazil's major ethanol producer saying "will start taking its first international steps, with possible investments in ethanol plants in the Caribbean, Mexico or even in the United States in the coming years". Why does this little tidbit matter, ADM is a minority shareholder in Cosan. Cosan's financial vice president, Paulo Diniz, said "it's impossible to be a global player in Brazil. You have to be present in the world's largest ethanol market, the United States,". He continued, "there's no company which is really a global renewable energy player, and at present, Cosan's condition to move into this position is unique,".
Cosan's seemingly "unlimited" capital raising capacity opens the possibility for acquisitions of "big companies," Diniz said. He added that the company could raise in the coming years up to $15 billion through subsequent stock offerings. "With our current structure we can even dream of big steps (large company acquisitions),".
HMMM.
We have the largest US player wanting to get into Brazil's market and the largest Brazilian player wanting in the US market and there is already a equity relationship between the two. What is to stop a merger of equals creating an ethanol powerhouse on a global scale?
Uh, Nothing???
Wednesday's Upgrades and Downgrades
UPGRADES
Hexcel HXL Wedbush Morgan Hold » Buy
Mattson MTSN Am Tech/JSA Research Sell » Neutral
ADTRAN ADTN Brean Murray Sell » Hold
Polycom PLCM Kaufman Bros Hold » Buy
Aaron Rents RNT Morgan Keegan Mkt Perform » Outperform
Gol Intelligent Airlines GOL JP Morgan Underweight » Neutral
Sonic Solutions SNIC JP Morgan Neutral » Overweight
1-800-FLOWERS FLWS CIBC Wrld Mkts Sector Perform » Sector Outperform
Westwood One WON Deutsche Securities Hold » Buy
Briggs & Stratton BGG Robert W. Baird Underperform » Neutral
DOWNGRADES
Sonus Pharm SNUS Punk, Ziegel & Co Buy » Mkt Perform
C-COR.net CCBL Ferris Baker Watts Buy » Neutral
Panacos Pharma PANC Caris & Company Above Average » Average
American Commercial Lines ACLI Cantor Fitzgerald Buy » Hold
Corn Products CPO BB&T Capital Mkts Buy » Hold
Arris ARRS Friedman Billings Outperform » Mkt Perform
Kellogg K Bear Stearns Outperform » Peer Perform
Dean Foods DF Bear Stearns Outperform » Peer Perform
Marsh McLennan MMC JP Morgan Overweight » Neutral
C-COR.net CCBL Friedman Billings Outperform » Mkt Perform
Michael Baker BKR Oppenheimer Buy » Neutral
Cadbury Schweppes CSG Bear Stearns Peer Perform » Underperform
Tuesday, September 25, 2007
"Fast Money" for Wednesday
Wednesday's Picks
Jeff Macke liked eBay (EBAY). Open $39.07
Guy Adami recommended USEC Corp (USU). Open $10.36
Karen Finerman preferred Comverse Technology (CMVT.PK). Open $20.41
Pete Najarian said buy Digital River (DRIV). Open $44.73
TUESDAY'S PICKS
Jeff Macke expects a pull back and recommends Short Dow30 ProShares (DOG). Open $58.03 Close $57.25 Loss $.78
Guy Adami said buy Pfizer (PFE). Open $24.42 Close $24.24 Loss $.18
Karen Finerman preferred NYMEX (NMX).Open $125.10 Close $125.70 Gain $.60
Pete Najarian liked ValueClick (VCLK). Open $22.00 Close $24.85 Gain $2.85
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 25-18 Gain $40.86
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 30-23 Gain $9.18
Pete Najarian= 19-16 Gain $27.74
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 11-5 Gain $4.71
Stacey Briere-Gilbert= 2-0 Gain $1.61
Today's 52 Week Low's
WERN Werner Enterprises Inc 17.09
WCC Wesco Intl Inc 39.64
UFPI Universal Forest Products 31.79
TUES Tuesday Morning Corp 9.36
TMS Thomson 14.76
SPLS Staples Inc 21.57
SPF Standard Pacific Corp 6.30
SHLD Sears Hldgs Corp 125.12
RAIL Freightcar Amer Inc 38.34
PTRY Pantry Inc 28.70
PEIX Pacific Ethanol Inc 8.71
MSSR Mccormick & Schmicks ... 19.30
MNI McClatchy Newspapers, Inc 19.94
LAMR Lamar Advertising Com ... 48.13
KND Kindred Healthcare Inc 17.77
DHI D.R. Horton, Inc 13.37
DF Dean Foods Co New 25.03
ISCA International Speedwa ... 45.69
IMN Imation Corp 24.06
IIIN Insteel Industries, Inc 15.27
HZO Marinemax Inc 15.02
HVTA Haverty Furniture Inc 9.85
HTLD Heartland Express Inc 14.21
CC Circuit City Stores, ... 7.93
CAO Csk Auto Corp 10.90
CALC California Coastal Cm ... 12.68
CAKE The Cheesecake Factor ... 22.96
BSET Bassett Furniture Ind ... 10.94
BOW Bowater Incorporated 14.34
AVR Aventine Renewable Energy 10.28
AN AutoNation Inc 17.39
Tuesday's Links
Leaders, Sub-Prime, UN Scandal?, The MoveOn 25
- The top ten companies for producing leaders
- Remember those "rip off" sub-prime mortgages that are just terrible? If done right, they are actually the best for you
- Another thanks for the mention I just became aware of.-
- Hillary Clinton sides with Moveon.org over the US Military, only 1 of 25 Senators (all Democrats) to do so.
- The top ten companies for producing leaders
- Remember those "rip off" sub-prime mortgages that are just terrible? If done right, they are actually the best for you
- Another thanks for the mention I just became aware of.-
- Hillary Clinton sides with Moveon.org over the US Military, only 1 of 25 Senators (all Democrats) to do so.
Is Lowe's Setting Us Up?
Did you ever read something that just did not jive with what you were witnessing?
Yesterday, Lowe’s (LOW), the second-largest home improvement chain after Home Depot (HD), said it now expected profit for the year ending in February to be at the low end or below a forecast of $1.97 to $2.01 a share it gave in August. Currently, analysts expect a profit of $1.99 a share equal to last year. The result of that warning was a 3% haircut for shares after hours yesterday and continued weakness this morning with share opening down 5%. A bit of an overreaction to a company essentially reaffirming estimates albeit at the low end?
They cited "drier" than normal conditions in much of the country that were keeping people from purchasing lawn and garden accessories. Makes sense. Except, I live in the Northeast and we have had probably 3 rainy days since July 4th and are currently under "drought" watering conditions. Yet, despite this, the local Lowe's I was at this weekend was just a busy as usual. Now obviously you cannot extrapolate the entire chain from one location but that location in experiencing the very conditions they gave for the potential shortfall. Odd. This warning is also odd in that earlier this year Lowe's told us they were seeing "improving" conditions in many areas. Just does not add up.
They also backed expectations of average growth of 12 percent to 15 percent in profit per share each year from 2008 through 2010, while total sales rise 8 percent to 11 percent a year during that time.
What to think? Lowe's is giving us the worst case scenario. What is most likely to happen is a meet or more likely beat of these lowered expectations. Between the two chains (HD & LOW) Lowe's is by far the better run and better situated to capitalize on any improvement. Having spent the last three years stealing market share from home depot every quarter, Lowe's will see result catapult when things settle.
This may be a tremendous time to buy shres...
Yesterday, Lowe’s (LOW), the second-largest home improvement chain after Home Depot (HD), said it now expected profit for the year ending in February to be at the low end or below a forecast of $1.97 to $2.01 a share it gave in August. Currently, analysts expect a profit of $1.99 a share equal to last year. The result of that warning was a 3% haircut for shares after hours yesterday and continued weakness this morning with share opening down 5%. A bit of an overreaction to a company essentially reaffirming estimates albeit at the low end?
They cited "drier" than normal conditions in much of the country that were keeping people from purchasing lawn and garden accessories. Makes sense. Except, I live in the Northeast and we have had probably 3 rainy days since July 4th and are currently under "drought" watering conditions. Yet, despite this, the local Lowe's I was at this weekend was just a busy as usual. Now obviously you cannot extrapolate the entire chain from one location but that location in experiencing the very conditions they gave for the potential shortfall. Odd. This warning is also odd in that earlier this year Lowe's told us they were seeing "improving" conditions in many areas. Just does not add up.
They also backed expectations of average growth of 12 percent to 15 percent in profit per share each year from 2008 through 2010, while total sales rise 8 percent to 11 percent a year during that time.
What to think? Lowe's is giving us the worst case scenario. What is most likely to happen is a meet or more likely beat of these lowered expectations. Between the two chains (HD & LOW) Lowe's is by far the better run and better situated to capitalize on any improvement. Having spent the last three years stealing market share from home depot every quarter, Lowe's will see result catapult when things settle.
This may be a tremendous time to buy shres...
50 Million Feebies? Not Good.
Why would you give away one of the most popular items available today? Maybe it is the only way to get people into your stores?
From Oct. 2 to Nov. 7, Starbucks (SBUX) more than 10,000 U.S. stores will hand out about 1.5 million "Song of the Day" cards each day. The cards can be redeemed at Apple's (APPL) online iTunes Store.
Thirty-seven artists with featured songs include Paul McCartney and Joni Mitchell - the first two to sign on with Starbucks' Hear Music label - along with Joss Stone, Dave Matthews, John Mayer, Annie Lennox and Band of Horses.
Starbucks and Apple recently announced they will allow users of Apple's iPhone and new iPod Touch to directly download songs playing in a Starbucks to their iPods. A Starbucks icon will light up on the iPhone or Touch whenever a user is within range of a Starbucks shop's Wi-Fi signal. Great, but, why give it away?
Why is this bad news? If you are the #1 coffee chain and are going into business with a company that has a product essentially in a category of one, why give it away? The very first thing that comes to my mind is that Starbucks has seen further deterioration of already anemic store traffic. There ought to be a natural curiosity of the new service that would cause an increase in traffic as people come in to check it out without cutting 99 cents of what they make on a cup of coffee. Unless, unless, traffic has fallen so much recently that Starbucks is in fear of an earnings miss and is pulling out all the stops to generate whatever revenue it can for the quarter.
Starbucks is already on record saying "meeting the high end of earnings expectations will be challenging" and this action illustrates that it just might be more challenging than they are even admitting.
Both Apple and Starbucks rarely give anything away, for Starbucks to do it now smells a little like desperation.
From Oct. 2 to Nov. 7, Starbucks (SBUX) more than 10,000 U.S. stores will hand out about 1.5 million "Song of the Day" cards each day. The cards can be redeemed at Apple's (APPL) online iTunes Store.
Thirty-seven artists with featured songs include Paul McCartney and Joni Mitchell - the first two to sign on with Starbucks' Hear Music label - along with Joss Stone, Dave Matthews, John Mayer, Annie Lennox and Band of Horses.
Starbucks and Apple recently announced they will allow users of Apple's iPhone and new iPod Touch to directly download songs playing in a Starbucks to their iPods. A Starbucks icon will light up on the iPhone or Touch whenever a user is within range of a Starbucks shop's Wi-Fi signal. Great, but, why give it away?
Why is this bad news? If you are the #1 coffee chain and are going into business with a company that has a product essentially in a category of one, why give it away? The very first thing that comes to my mind is that Starbucks has seen further deterioration of already anemic store traffic. There ought to be a natural curiosity of the new service that would cause an increase in traffic as people come in to check it out without cutting 99 cents of what they make on a cup of coffee. Unless, unless, traffic has fallen so much recently that Starbucks is in fear of an earnings miss and is pulling out all the stops to generate whatever revenue it can for the quarter.
Starbucks is already on record saying "meeting the high end of earnings expectations will be challenging" and this action illustrates that it just might be more challenging than they are even admitting.
Both Apple and Starbucks rarely give anything away, for Starbucks to do it now smells a little like desperation.
Gap Keeps Looking Better
With all the talk about lately, Gap (GPS) made a hire that may eventually transform the listless retailer.
The designer Todd Oldham, whose products revitalized retailers like Target and La-Z-Boy was hired to hopefully do the same for Old Navy. He has agreed to oversee clothing design and eventually create a line of merchandise for the chain sold under his name, which currently appears on items from flower arrangements at FTD to a fashion show on MTV.
Old Navy it seems has finally realized it target market and said that Mr. Oldham would focus on shoppers in their 20s, after years of the chain "trying to be all things to all people," said Dawn Robertson, the president of Old Navy.
How important is this for Old Navy? Consider Old Navy whose had sales of nearly $7 billion last year, is bigger than both Gap and Banana Republic. Ms. Robertson said Mr. Oldham’s clothing for Old Navy would be "modern and relevant," adding that "it will be an important part of our turnaround."
This is big for Gap. In an environment in which we may be seeing a slowdown, people will need a reason to go to Old Navy. Mr. Oldham, with his name recognition, will give the much coveted young shopped that very reason and given his past successes, thee is no reason to expect anything but that here. Should we rush out and buy Gap shares now? Not yet. CEO Glen Murphy has not really given us his "vision" of where he wants to take the company so for that reason, I would hold off. Gap still has too much cash on hand, too many stores, and needs to buy back more shares. Until we know what will happen there, anything is guesswork. But, and this is a big but, if this is indicative of what he plans to do on the retail front, it is a very promising development.
Gap shares are becoming extremely enticing but I just cannot pull the trigger yet with the unanswered questions I have. Just need more answers...
The designer Todd Oldham, whose products revitalized retailers like Target and La-Z-Boy was hired to hopefully do the same for Old Navy. He has agreed to oversee clothing design and eventually create a line of merchandise for the chain sold under his name, which currently appears on items from flower arrangements at FTD to a fashion show on MTV.
Old Navy it seems has finally realized it target market and said that Mr. Oldham would focus on shoppers in their 20s, after years of the chain "trying to be all things to all people," said Dawn Robertson, the president of Old Navy.
How important is this for Old Navy? Consider Old Navy whose had sales of nearly $7 billion last year, is bigger than both Gap and Banana Republic. Ms. Robertson said Mr. Oldham’s clothing for Old Navy would be "modern and relevant," adding that "it will be an important part of our turnaround."
This is big for Gap. In an environment in which we may be seeing a slowdown, people will need a reason to go to Old Navy. Mr. Oldham, with his name recognition, will give the much coveted young shopped that very reason and given his past successes, thee is no reason to expect anything but that here. Should we rush out and buy Gap shares now? Not yet. CEO Glen Murphy has not really given us his "vision" of where he wants to take the company so for that reason, I would hold off. Gap still has too much cash on hand, too many stores, and needs to buy back more shares. Until we know what will happen there, anything is guesswork. But, and this is a big but, if this is indicative of what he plans to do on the retail front, it is a very promising development.
Gap shares are becoming extremely enticing but I just cannot pull the trigger yet with the unanswered questions I have. Just need more answers...
Tuesday's Upgrades and Downgrades
UPGRADES
Jo-Ann Stores JAS KeyBanc Capital Mkts Hold » Buy
Ventana Medical VMSI Caris & Company Average » Above Average
Cousins Prop CUZ Wachovia Mkt Perform » Outperform
Maxygen MAXY Stanford Research Hold » Buy
SL Green Rlty SLG KeyBanc Capital Mkts Hold » Buy
Ariba ARBA Cowen & Co Underperform » Outperform
Motorola MOT RBC Capital Mkts Sector Perform » Outperform
Susser SUSS JP Morgan Neutral » Overweight
EMC Corp EMC Citigroup Hold » Buy
Optium OPTM Jefferies & Co Hold » Buy
DOWNGRADES
Mattson MTSN CIBC Wrld Mkts Sector Perform » Sector Underperform
Cubic CUB BB&T Capital Mkts Hold » Underweight
Dime Community DCOM Stifel Nicolaus Hold » Sell
F5 Networks FFIV Nollenberger Capital Buy » Neutral
Foundry Ntwks FDRY Nollenberger Capital Buy » Neutral
Kyphon KYPH Piper Jaffray Outperform » Market Perform
LDK Solar LDK CIBC Wrld Mkts Sector Outperform » Sector Perform
Sirtris Pharma SIRT JP Morgan Overweight » Neutral
Rockwell Automation ROK JP Morgan Overweight » Neutral
Red Hat RHT Credit Suisse Outperform » Neutral
Reliance Steel RS UBS Buy » Neutral
Monday, September 24, 2007
"Fast Money" for Tuesday
TUESDAY'S PICKS
Jeff Macke expects a pull back and recommends Short Dow30 ProShares (DOG). open $58.03
Guy Adami said buy Pfizer (PFE). Open $24.42
Karen Finerman preferred NYMEX (NMX).Open $125.10
Pete Najarian liked ValueClick (VCLK). Open $22.00
MONDAY'S RESULTS
Jeff Macke recommended selling General Motors (GM). Open $34.94 Close $34.74 Gain $.20
Karen Finerman liked NYSE Euronext (NYX). Open $76.05 Close $77.81 Gain $1.76
Pete Najarian preferred BJ Services (BJS). Open $27.81 Close $27.67 Loss $.15
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 25-17 Gain $41.04
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 30-22 Gain $9.96
Pete Najarian= 18-16 Gain $24.89
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 10-5 Gain $4.11
Stacey Briere-Gilbert= 2-0 Gain $1.61
Monday's 52 Week Low's
WOS Wolseley Plc 16.43
WERN Werner Enterprises Inc 17.30
USBE US Bioenergy Corp 9.01
SEH Spartech Corporation 16.54
RYL The Ryland Group, Inc 22.64
PLCE Childrens Pl Retail S ... 24.79
PIR Pier 1 Imports, Inc 5.41
PEIX Pacific Ethanol Inc 9.25
MTH Meritage Homes Corp 15.45
MNI McClatchy Newspapers, Inc 20.30
ISCA International Speedwa ... 46.12
CC Circuit City Stores, ... 8.11
BGP Borders Group, Inc 13.50
HHS Harte-Hanks Communica ... 21.11
HAR Harman International ... 79.85
GPRE Green Plains Renewabl ... 13.02
In Defense of Starbucks
I have spent the better part of a year now detailing the missteps of management at Starbucks (SBUX) and predicting their current predicament but, I have to come to their defense on this one.
The National Labor Relations Board has accused Starbucks of illegal anti-union activity at a store in Michigan. This is the second charge it has received in the past month and the company is currently on trial in New York on charges of union-busting efforts involving the International Workers of the World. Business Week recently took a look at Starbuck's situation and compared them to Wal-Mart (WMT). Not good for a company that has long ridden the "good corporate citizen of the world" train. Here is the thing, they actually earned that title and deserve it. While I have been a bit vehement in my criticism of their business moves (or lack thereof), Starbucks does treat its workers very well.
Should Starbucks be fighting union activity? Hell yes! Can anyone think of anything positive unions have contributed to their workers since the 1940's other than predictable layoffs, salary cuts and the eventual destruction of the businesses their "workers" are employed by? For proof one need look no further that the US Auto and Airline industries for proof. Both industries, totally unionized and strapped with impossible labor costs are perennially doomed watching one or more of its members battle with bankruptcy. The UAW has seen its ranks decimated and hundreds of thousands of its workers lose their job because they view the employer as the enemy, not a partner. In negotiations they either "win" or "lose". The problem? when they think they "win", they actually lose more long term.
So yes, Starbucks and Wal-Mart ought to fight the unions with every once of corporate soul they have. Not just for shareholders, not for management but for the soon to be unemployed workers they will layoff if the unions find their way into their businesses.
What unions today fail to realize is that management has a fiduciary duty to its shareholders. That means keeping labor costs in line. If the unions do "win" and get in to either location, they will get their salary increases to ridiculous levels, there will just be a whole lot less people getting a check each week. How is that good?
Just ask GM (GM). They will lose about $100 million a day when workers walk out today.... GO UNIONS!!!
The National Labor Relations Board has accused Starbucks of illegal anti-union activity at a store in Michigan. This is the second charge it has received in the past month and the company is currently on trial in New York on charges of union-busting efforts involving the International Workers of the World. Business Week recently took a look at Starbuck's situation and compared them to Wal-Mart (WMT). Not good for a company that has long ridden the "good corporate citizen of the world" train. Here is the thing, they actually earned that title and deserve it. While I have been a bit vehement in my criticism of their business moves (or lack thereof), Starbucks does treat its workers very well.
Should Starbucks be fighting union activity? Hell yes! Can anyone think of anything positive unions have contributed to their workers since the 1940's other than predictable layoffs, salary cuts and the eventual destruction of the businesses their "workers" are employed by? For proof one need look no further that the US Auto and Airline industries for proof. Both industries, totally unionized and strapped with impossible labor costs are perennially doomed watching one or more of its members battle with bankruptcy. The UAW has seen its ranks decimated and hundreds of thousands of its workers lose their job because they view the employer as the enemy, not a partner. In negotiations they either "win" or "lose". The problem? when they think they "win", they actually lose more long term.
So yes, Starbucks and Wal-Mart ought to fight the unions with every once of corporate soul they have. Not just for shareholders, not for management but for the soon to be unemployed workers they will layoff if the unions find their way into their businesses.
What unions today fail to realize is that management has a fiduciary duty to its shareholders. That means keeping labor costs in line. If the unions do "win" and get in to either location, they will get their salary increases to ridiculous levels, there will just be a whole lot less people getting a check each week. How is that good?
Just ask GM (GM). They will lose about $100 million a day when workers walk out today.... GO UNIONS!!!
Monday's Links
Lobbyists, UN, Killing gays ok at Columbia, Oil
- Not every time an industry lobbies congress does it work.
- Another UN scandal, who would have thought? Please detect the heavy sarcasm
- You can kill gays for being gay and get invited to Columbia University, ask them to keep quiet about it, and you get banned
- Another take similar to mine on the state of oil short term
- Not every time an industry lobbies congress does it work.
- Another UN scandal, who would have thought? Please detect the heavy sarcasm
- You can kill gays for being gay and get invited to Columbia University, ask them to keep quiet about it, and you get banned
- Another take similar to mine on the state of oil short term
Sprint Nextel Merger "Almost Done"
More than two years after the acquisition that formed Sprint Nextel (S), the now nation's third-largest wireless provider(down from #2) is about 80 percent done with integrating the two sides together, the company's CEO Gary Forsee said last week. Let's just ignore the fact that almost 3 year to complete the merger is just way too long.
"We have a big opportunity in front of us," said Forsee in the meeting with analysts. He said the company should see profit margins improve as it begins next year to pare down its two wireless networks to one.
Sprint bought Nextel in August 2005 and has struggled with merging the two systems. Technical problems and a required swap of frequencies used by Nextel's press to talk network hurt call quality and customer service fiascos lead hundreds of thousands of customers to drop the service.
This year, the company began finally selling hybrid phones that work on both the Nextel network and Sprint's regular CDMA network, and it expects to have 2 million of the devices operating by the end of the year. Next year they will begin switching Nextel customers over to the CDMA network with a new press-to-talk system called QChat, which will go into widespread testing in Q4.
"We believe there's a lot of growth opportunity in push-to-talk," he said.
Sprint says having all their customers on one network will save money on operational costs and reduce investment in new cell sites and other support infrastructure.
All this is good and well but what Sprint needs to address is the fact its current customers are just not very happy. Sprint will make more than a dime a share when the network is combined and the cost savings alone will make for an improvement in results but they have yet to stop the exodus of customers to other providers. It is not the network issue(s) making them do it, it is the treatment they get when they call Sprint that is making them flee. Sprint's firing of customers was a PR fiasco and likely gave more than a few potential customers serious pause about joining Sprint. There are plenty of providers out there for people to choose from, having an adversarial relationship with them is not the way to grow. this is the reason they have fallen far behind rivals AT&T (T) and Verizon (VZ).
Until that issue is fixed, any upside and real improvement for Sprint will be put off indefinitely.
"We have a big opportunity in front of us," said Forsee in the meeting with analysts. He said the company should see profit margins improve as it begins next year to pare down its two wireless networks to one.
Sprint bought Nextel in August 2005 and has struggled with merging the two systems. Technical problems and a required swap of frequencies used by Nextel's press to talk network hurt call quality and customer service fiascos lead hundreds of thousands of customers to drop the service.
This year, the company began finally selling hybrid phones that work on both the Nextel network and Sprint's regular CDMA network, and it expects to have 2 million of the devices operating by the end of the year. Next year they will begin switching Nextel customers over to the CDMA network with a new press-to-talk system called QChat, which will go into widespread testing in Q4.
"We believe there's a lot of growth opportunity in push-to-talk," he said.
Sprint says having all their customers on one network will save money on operational costs and reduce investment in new cell sites and other support infrastructure.
All this is good and well but what Sprint needs to address is the fact its current customers are just not very happy. Sprint will make more than a dime a share when the network is combined and the cost savings alone will make for an improvement in results but they have yet to stop the exodus of customers to other providers. It is not the network issue(s) making them do it, it is the treatment they get when they call Sprint that is making them flee. Sprint's firing of customers was a PR fiasco and likely gave more than a few potential customers serious pause about joining Sprint. There are plenty of providers out there for people to choose from, having an adversarial relationship with them is not the way to grow. this is the reason they have fallen far behind rivals AT&T (T) and Verizon (VZ).
Until that issue is fixed, any upside and real improvement for Sprint will be put off indefinitely.
Goldman Sachs Pragmatism
Another day of digestion of Goldman Sachs (GS) blowout quarter sheds some light.
When the world was running around talking of the "subprime meltdown" and the "freezing of credit markets" Goldman quietly looked at the situation and placed their bets accordingly. Rather than dumping positions or just sitting tight and riding out the storm and taking huge losses like Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC), Goldman jumped on, rode the wave down and collected the profits.
The question for shareholders of these companies might not be "why is Goldman so good" but "what the heck were you guys doing?"
Now, the media has pumped up Goldman's move as "stunning", "bold" and "breathtaking" and implied they bet the farm on this. The reality is just the opposite. One of the metrics investment banks use to estimate the market risk on a their balance sheet is called Value at Risk, or VaR. This indicator for Goldman moved up only 5% in Q3 vs Q2. If Goldman was placing huge bets in volatile markets like the short trade in mortgages, VaR would have been expected to move up by much more. Since it didn't, we must conclude that these bets were neither "bold" or "breathtaking", just simply "savvy".
Now the latest report out is that Goldman has $69 billion in short term debt it must rollover in relatively soon and the new debt it takes on will invariably be more expensive, hurting earnings. Here is the thing though, if the analyst who wrote this knows this, and now we know it, is there a chance in hell Goldman doesn't? Also, if we know this now do we really think Goldman has not been aware of it for a whole lot longer? Based on their history, do we really think they have not already taken steps to offset that increase? Me either...
This is one group of people I am not willing to bet against.
When the world was running around talking of the "subprime meltdown" and the "freezing of credit markets" Goldman quietly looked at the situation and placed their bets accordingly. Rather than dumping positions or just sitting tight and riding out the storm and taking huge losses like Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC), Goldman jumped on, rode the wave down and collected the profits.
The question for shareholders of these companies might not be "why is Goldman so good" but "what the heck were you guys doing?"
Now, the media has pumped up Goldman's move as "stunning", "bold" and "breathtaking" and implied they bet the farm on this. The reality is just the opposite. One of the metrics investment banks use to estimate the market risk on a their balance sheet is called Value at Risk, or VaR. This indicator for Goldman moved up only 5% in Q3 vs Q2. If Goldman was placing huge bets in volatile markets like the short trade in mortgages, VaR would have been expected to move up by much more. Since it didn't, we must conclude that these bets were neither "bold" or "breathtaking", just simply "savvy".
Now the latest report out is that Goldman has $69 billion in short term debt it must rollover in relatively soon and the new debt it takes on will invariably be more expensive, hurting earnings. Here is the thing though, if the analyst who wrote this knows this, and now we know it, is there a chance in hell Goldman doesn't? Also, if we know this now do we really think Goldman has not been aware of it for a whole lot longer? Based on their history, do we really think they have not already taken steps to offset that increase? Me either...
This is one group of people I am not willing to bet against.
Monday's Upgrades and Downgrades
UPGRADES
Diamond Foods DMND BB&T Capital Mkts Hold » Buy
Buckeye Partners BPL Deutsche Securities Hold » Buy
PMI Group PMI Piper Jaffray Market Perform » Outperform
The Mosaic Co. MOS Citigroup Sell » Hold
Diana Shipping DSX Bear Stearns Peer Perform » Outperform
Mattel MAT Oppenheimer Neutral » Buy
Targa Resources NGLS Wachovia Mkt Perform » Outperform
PNM Resources PNM Jefferies & Co Hold » Buy
DOWNGRADES
SCP Pool POOL Wedbush Morgan Buy » Hold
SCP Pool POOL Morgan Keegan Outperform » Mkt Perform
Topps TOPP Morgan Joseph Buy » Hold
Sanderson Farms SAFM Stifel Nicolaus Buy » Hold
Canadian Natl Rail CNI Stifel Nicolaus Buy » Hold
Diamond Offshore DO Calyon Securities Buy » Add
Transocean RIG Calyon Securities Buy » Add
Weatherford WFT Calyon Securities Buy » Add
ExpressJet XJT Soleil Hold » Sell
Buckeye GP Hldgs BGH Deutsche Securities Buy » Hold
Circuit City CC Bear Stearns Outperform » Peer Perform
Family Dollar FDO JP Morgan Neutral » Underweight
Sunday, September 23, 2007
"Fast Money" for Monday
MONDAY'S PICKS
Jeff Macke recommended selling General Motors (GM). Open $34.94
Karen Finerman liked NYSE Euronext (NYX). Open $76.05
Pete Najarian preferred BJ Services (BJS). Open $27.81
FRIDAY'S PICKS
Jeff Macke recommended Activision (ATVI). Open $20.96 Close $20.93 Loss $.03
Guy Adami said Oracle (ORCL) is a raging buy. Open $21.04 Close $21.97 Gain $.93
Pete Najarian preferred Sohu.com (SOHU). Open $38.76 Close $40.01 Gain $1.25
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 25-17 Gain $41.04
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 29-22 Gain $9.76
Pete Najarian= 18-15 Gain $25.04
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-5 Gain $3.25
Stacey Briere-Gilbert= 2-0 Gain $1.61
Saturday, September 22, 2007
The Weeks Top Stories At Value Investing News
Please visit these links at this great site...
2. Altria After The Spin. What Can Investor's Expect?
(via valueplays.blogspot.com)
3. David Dreman on Consuelo Mack WealthTrack
(via www.wealthtrack.com)
Mattel Bends Over For The Chinese
Thank You Sir, May I Have Another!!! Kevin Bacon, Animal house
"Mattel (MAT) takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys," said Mattel executive Tom Debrowski. Oh do you?
I would personally love to see the "design flaw" that said "cover toys with deadly levels of lead paint". When I first heard it I thought it was a sarcastic joke. How much pressure are the Chinese putting on Mattel to cause them to publicly cane themselves? How high were the lead levels? Tests had found that lead levels in paint in recalled toys were as high as 110,000 parts per million, or nearly 200 times higher than the accepted safety ceiling of 600 parts per million. Now, it has been pointed out that only 13% of the 21 million toys were recalled due to lead paint but, the question must be asked, why did Mattel apologize for that?
This has to be without a doubt one of the most pathetic acts a corporation has ever done in the name of the almighty dollar. China, getting sick of being bashed most likely told Mattel to apologize or get your toys somewhere else. Rather than pay a few bucks more for a Elmo doll from Thailand, Mattel promptly caved.
It is nice to see that the apology they gave the producers of the toxic toys the same sincerity they gave us consumers whose children may have played with and been damaged by them. Sweet huh? This act really does mitigate the effects of any previous ones, doesn't it. This is like a beaten spouse saying "I deserved it, dinner is a 5pm not 5:15". Pathetic
At least to date the other company effected, RC2 (RCRC) has yet to ask forgiveness from the Chinese for the lead coated Thomas the Tank Engine toys they sent them earlier this summer.
Mattel, world's largest toy maker has been in China for 25 years and about 65 percent of its products are made in China. This summer it recalled 21 million toys made in China for various reason.
If you do not believe my reasoning for the apology take a look at this exchange.
Chinese product safety chief Li Changjiang publicly reminded Debrowski that "a large part of your annual profit ... comes from your factories in China. He then added, "I really hope that Mattel can learn lessons and gain experience from these incidents," adding that Mattel should "improve their control measures."
Or, grow some stones...
"Mattel (MAT) takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys," said Mattel executive Tom Debrowski. Oh do you?
I would personally love to see the "design flaw" that said "cover toys with deadly levels of lead paint". When I first heard it I thought it was a sarcastic joke. How much pressure are the Chinese putting on Mattel to cause them to publicly cane themselves? How high were the lead levels? Tests had found that lead levels in paint in recalled toys were as high as 110,000 parts per million, or nearly 200 times higher than the accepted safety ceiling of 600 parts per million. Now, it has been pointed out that only 13% of the 21 million toys were recalled due to lead paint but, the question must be asked, why did Mattel apologize for that?
This has to be without a doubt one of the most pathetic acts a corporation has ever done in the name of the almighty dollar. China, getting sick of being bashed most likely told Mattel to apologize or get your toys somewhere else. Rather than pay a few bucks more for a Elmo doll from Thailand, Mattel promptly caved.
It is nice to see that the apology they gave the producers of the toxic toys the same sincerity they gave us consumers whose children may have played with and been damaged by them. Sweet huh? This act really does mitigate the effects of any previous ones, doesn't it. This is like a beaten spouse saying "I deserved it, dinner is a 5pm not 5:15". Pathetic
At least to date the other company effected, RC2 (RCRC) has yet to ask forgiveness from the Chinese for the lead coated Thomas the Tank Engine toys they sent them earlier this summer.
Mattel, world's largest toy maker has been in China for 25 years and about 65 percent of its products are made in China. This summer it recalled 21 million toys made in China for various reason.
If you do not believe my reasoning for the apology take a look at this exchange.
Chinese product safety chief Li Changjiang publicly reminded Debrowski that "a large part of your annual profit ... comes from your factories in China. He then added, "I really hope that Mattel can learn lessons and gain experience from these incidents," adding that Mattel should "improve their control measures."
Or, grow some stones...
ValuePlays: Most Read Posts
Here are the most read posts for the last 30 days...
1- What Is Verizon Up To?
2- Barron's Piece on Cramer: Be Wary of Those Defending Him
3- Marlboro Smokeless on Sale in October
4- Harley Davidson: "Below MSRP" Was A Bad Harbinger
5- Altria After The Spin: What Investor's Can Expect
1- What Is Verizon Up To?
2- Barron's Piece on Cramer: Be Wary of Those Defending Him
3- Marlboro Smokeless on Sale in October
4- Harley Davidson: "Below MSRP" Was A Bad Harbinger
5- Altria After The Spin: What Investor's Can Expect
This Week's Dividend Hikes
This Weeks Insider Buys
Friday, September 21, 2007
Friday's 52 Week Lows
A small list today.
TWC Time Warner Cable Inc 31.83
TRBN Trubion Pharmaceutica l 11.30
SVN Sun-Times Media Group Inc 2.56
KFY Korn Ferry Intl 16.35
JBSS John B Sanfilippo & Sons 7.92
FFHS First Franklin Corp 12.93
FFFD North Central Bancsha re 38.00
POOL Pool Corporation 24.85
PLCE Childrens Place Retail S 25.02
PEIX Pacific Ethanol Inc 9.80
TWC Time Warner Cable Inc 31.83
TRBN Trubion Pharmaceutica l 11.30
SVN Sun-Times Media Group Inc 2.56
KFY Korn Ferry Intl 16.35
JBSS John B Sanfilippo & Sons 7.92
FFHS First Franklin Corp 12.93
FFFD North Central Bancsha re 38.00
POOL Pool Corporation 24.85
PLCE Childrens Place Retail S 25.02
PEIX Pacific Ethanol Inc 9.80
1 Million Cribs Recalled Due To Infant Deaths
A stunning announcement for owners of GRACO & Simplicity cribs
WASHINGTON, D.C. - The U.S. Consumer Product Safety Commission (CPSC) is announcing today a voluntary recall with Simplicity Inc., of Reading, Pa., of about 1 million cribs. The drop-side can detach from the crib, which can create a dangerous gap and lead to the entrapment and suffocation of infants. CPSC is aware of two deaths in Simplicity manufactured cribs with older style hardware, including a 9-month-old child and a 6-month-old child, where the drop-side was installed upside down. CPSC is also aware of seven infant entrapments and 55 incidents in these cribs.
CPSC is also investigating the death of a 1-year-old child in a Simplicity crib with newer style hardware, in which the drop-side was installed upside down. CPSC is warning parents and caregivers to check all Simplicity cribs to make sure the drop-side is installed right side up.
The drop-side failures result from both the hardware and crib design, which allow consumers to unintentionally install the drop-side upside down. This, in turn, can weaken the hardware and cause the drop-side to detach from the crib. When the drop-side detaches, it creates a gap in which infants can become entrapped.
CPSC is also aware of two incidents that occurred when the drop-side was correctly installed with older style hardware, though the upside down installation greatly increases the risk of failure.
The recalled Simplicity crib models include: Aspen 3 in 1, Aspen 4 in 1, Nursery-in-a-Box, Crib N Changer Combo, Chelsea and Pooh 4 in 1. The recall also involves the following Simplicity cribs that used the Graco logo: Aspen 3 in 1, Ultra 3 in 1, Ultra 4 in1, Ultra 5 in 1, Whitney and the Trio.
The recalled cribs have one of the following model numbers, which can be found on the envelope attached to the mattress support and on the label attached to the headboard: 4600, 4605, 4705, 5000, 8000, 8324, 8800, 8740, 8910, 8994, 8050, 8750, 8760, and 8996.
The cribs, which were made in China, were sold in department stores, children’s stores and mass merchandisers nationwide from January 1998 through May 2007 for between $100 and $300.
As an immediate precaution, consumers should check to see if the drop-side is installed right side up. To do this, check to see that the slightly rounded rail with the decorative groove is installed at the top and the plain rail is on the bottom. Next, consumers should make sure the drop-side is securely attached to the tracks in all four corners
WASHINGTON, D.C. - The U.S. Consumer Product Safety Commission (CPSC) is announcing today a voluntary recall with Simplicity Inc., of Reading, Pa., of about 1 million cribs. The drop-side can detach from the crib, which can create a dangerous gap and lead to the entrapment and suffocation of infants. CPSC is aware of two deaths in Simplicity manufactured cribs with older style hardware, including a 9-month-old child and a 6-month-old child, where the drop-side was installed upside down. CPSC is also aware of seven infant entrapments and 55 incidents in these cribs.
CPSC is also investigating the death of a 1-year-old child in a Simplicity crib with newer style hardware, in which the drop-side was installed upside down. CPSC is warning parents and caregivers to check all Simplicity cribs to make sure the drop-side is installed right side up.
The drop-side failures result from both the hardware and crib design, which allow consumers to unintentionally install the drop-side upside down. This, in turn, can weaken the hardware and cause the drop-side to detach from the crib. When the drop-side detaches, it creates a gap in which infants can become entrapped.
CPSC is also aware of two incidents that occurred when the drop-side was correctly installed with older style hardware, though the upside down installation greatly increases the risk of failure.
The recalled Simplicity crib models include: Aspen 3 in 1, Aspen 4 in 1, Nursery-in-a-Box, Crib N Changer Combo, Chelsea and Pooh 4 in 1. The recall also involves the following Simplicity cribs that used the Graco logo: Aspen 3 in 1, Ultra 3 in 1, Ultra 4 in1, Ultra 5 in 1, Whitney and the Trio.
The recalled cribs have one of the following model numbers, which can be found on the envelope attached to the mattress support and on the label attached to the headboard: 4600, 4605, 4705, 5000, 8000, 8324, 8800, 8740, 8910, 8994, 8050, 8750, 8760, and 8996.
The cribs, which were made in China, were sold in department stores, children’s stores and mass merchandisers nationwide from January 1998 through May 2007 for between $100 and $300.
As an immediate precaution, consumers should check to see if the drop-side is installed right side up. To do this, check to see that the slightly rounded rail with the decorative groove is installed at the top and the plain rail is on the bottom. Next, consumers should make sure the drop-side is securely attached to the tracks in all four corners
The Steve Jobs Subpoena: A Minefield
Apple's (APPL) CEO Steve Jobs has been subpoenaed to testify in a stock option backdating case brought by the SEC against Apple's former general counsel Nancy Heinen. Mr. Jobs and his lawyers will no doubt brush this news aside as "old news", but it is a perilous situation for him.
Jobs has danced around Apple's backdating mess, despite it being determined that he helped select the dates. Defenders have said he is innocent because he "didn't appreciate the accounting implications" of backdating. However, Apple's former CFO, Fred Anderson has said that Jobs misled him about board actions on stock option grants. This means that one of Jobs' former confidants is accusing him of lying on this issue. The company's official investigation pardoned him only because of his mindset about what he did (surprise!!!). It was the old "I did it but did not know it was wrong" excuse. Hard to believe it but it worked.
The subpoena creates a minefield for Jobs. Even though he is only a witness and not a target, the SEC's and Heinen's lawyers are sure to ask him questions that will require him to revisit previous statements and this time it will be under sworn testimony. I am guessing that the tone of the conversation this time will be a bit more contentious than the Apple "investigation" was.
Since Apple's defense of his conduct relies on the distinction between what he knew and thought, Jobs' testimony will be dissected for any discrepancies related to prior statements and what Heinen's lawyers believe to be the truth as told to them by their client.
The SEC is no doubt unhappy that a CEO was able to admit to backdating of options and still walk on the action. Does anyone think that this subpoena is not making them very happy to get more testimony from Jobs on the record?
Since Jobs is Apple and without him Apple is just another company, shareholders are going to want to keep close tabs on events here. It looks a bit to me like a set-up but, if Jobs is able to walk away from this unscathed, and he very well may, it will only serve to elevate his "God" like status in the cult that is Apple shareholders.
Either way, it will be interesting..
Jobs has danced around Apple's backdating mess, despite it being determined that he helped select the dates. Defenders have said he is innocent because he "didn't appreciate the accounting implications" of backdating. However, Apple's former CFO, Fred Anderson has said that Jobs misled him about board actions on stock option grants. This means that one of Jobs' former confidants is accusing him of lying on this issue. The company's official investigation pardoned him only because of his mindset about what he did (surprise!!!). It was the old "I did it but did not know it was wrong" excuse. Hard to believe it but it worked.
The subpoena creates a minefield for Jobs. Even though he is only a witness and not a target, the SEC's and Heinen's lawyers are sure to ask him questions that will require him to revisit previous statements and this time it will be under sworn testimony. I am guessing that the tone of the conversation this time will be a bit more contentious than the Apple "investigation" was.
Since Apple's defense of his conduct relies on the distinction between what he knew and thought, Jobs' testimony will be dissected for any discrepancies related to prior statements and what Heinen's lawyers believe to be the truth as told to them by their client.
The SEC is no doubt unhappy that a CEO was able to admit to backdating of options and still walk on the action. Does anyone think that this subpoena is not making them very happy to get more testimony from Jobs on the record?
Since Jobs is Apple and without him Apple is just another company, shareholders are going to want to keep close tabs on events here. It looks a bit to me like a set-up but, if Jobs is able to walk away from this unscathed, and he very well may, it will only serve to elevate his "God" like status in the cult that is Apple shareholders.
Either way, it will be interesting..
Friday's Links
A Monsterous Cramer flip flop, No way, The Juice, A Tear Jerker
- First Jim Cramer says a 1/2 point cut would be disastrous in this video, then after the 1/2 point cut, says it is wonderful. He is rapidly becoming irrelevant and just a side show.
- This can never happen
- And I thought Micheal Vick was the dumbest person on earth
- If this does not bring a tear to your eyes, you have no soul.
- First Jim Cramer says a 1/2 point cut would be disastrous in this video, then after the 1/2 point cut, says it is wonderful. He is rapidly becoming irrelevant and just a side show.
- This can never happen
- And I thought Micheal Vick was the dumbest person on earth
- If this does not bring a tear to your eyes, you have no soul.
Wal-Mart's New Ads: Simple and Brilliant
I have read a whole lot on Wal-Mart's (WMT) new ad campaign but until this morning had yet to see the ads. Personally, I thought they were perfect.
Before we start the conversation, you can view one of the ads here.
What Wal-Mart does with the ads is remind you what you can do with the money you save at their stores. Rather than the previous ad campaign that only told you they had "low prices" they are now saying "look at the fun things you can do with the money you save". The images of a family vacation with the kids is sure to spur memories in people of their childhood and the desire to create similar memories with their kids.
It also is going to inspire people to want to save a little cash to enable them to do one or two more things on that vacation. Wal-Mart is telling us that if we shop there we can do just that.
What they have done is turned a logical ad campaign that said shop here because it "makes sense to save money" into an emotional one. Now the message is shop here so you can have "more fun and do more with your kids" with the money you save. I found myself smiling during the commercial and that is exactly what Wal-Mart needs. When it comes to money, emotion controls the overwhelming majority of peoples spending habits, not logic.
That is why this campaign will be a winner..
Before we start the conversation, you can view one of the ads here.
What Wal-Mart does with the ads is remind you what you can do with the money you save at their stores. Rather than the previous ad campaign that only told you they had "low prices" they are now saying "look at the fun things you can do with the money you save". The images of a family vacation with the kids is sure to spur memories in people of their childhood and the desire to create similar memories with their kids.
It also is going to inspire people to want to save a little cash to enable them to do one or two more things on that vacation. Wal-Mart is telling us that if we shop there we can do just that.
What they have done is turned a logical ad campaign that said shop here because it "makes sense to save money" into an emotional one. Now the message is shop here so you can have "more fun and do more with your kids" with the money you save. I found myself smiling during the commercial and that is exactly what Wal-Mart needs. When it comes to money, emotion controls the overwhelming majority of peoples spending habits, not logic.
That is why this campaign will be a winner..
Best Buy's International Exposure Boosts Results
Best Buy (BBY) released results Wednesday and a reoccurring theme popped up in them.
If you do not international exposure in today's world, you are in trouble. We saw it this week with the investment bank as Goldman Sachs (GS) and Lehman (LEH) were able to beat estimates and Morgan Stanley (MS), whose exposure is far less than the other two did not. Now we have the electronics retailers showing this to us as Best Buy (BBY beats while Circuit City (CC) did not. Although, to be honest, Circuit City may have just missed by more if they had more international exposure but that is another story.
Anyway, Best Buy's revenue jumped 15% and earnings 8.7% for the most recent quarter and it was lead by a 54% increase in international results. This enabled Best
Buy to predict it will meet the high end of estimates of $3.15 a share.
Another interesting item was that for the first time they broke out service (The Geek Squad) and that division saw a 5.3% increase. A note here, Best Buy is doing a lousy job of telling people what the Geek's do. Until I saw a 60 minutes piece on them last week, I had no idea of the spectrum of help they provide people. This division could explode for Best Buy if they only better informed people of what they do and how reasonably they do it for. This would work because Best Buy just does not have any competition in this area other than smallerlocal people who just cannot match the scale and scope of services the Geek's offer. It is a hugely underutilized asset.
How important are the Geek's and overseas for Best Buy? If you strip them out then Best Buy sales increased 3.6%.
Another lesson for us on the need to be a player all over the world.
If you do not international exposure in today's world, you are in trouble. We saw it this week with the investment bank as Goldman Sachs (GS) and Lehman (LEH) were able to beat estimates and Morgan Stanley (MS), whose exposure is far less than the other two did not. Now we have the electronics retailers showing this to us as Best Buy (BBY beats while Circuit City (CC) did not. Although, to be honest, Circuit City may have just missed by more if they had more international exposure but that is another story.
Anyway, Best Buy's revenue jumped 15% and earnings 8.7% for the most recent quarter and it was lead by a 54% increase in international results. This enabled Best
Buy to predict it will meet the high end of estimates of $3.15 a share.
Another interesting item was that for the first time they broke out service (The Geek Squad) and that division saw a 5.3% increase. A note here, Best Buy is doing a lousy job of telling people what the Geek's do. Until I saw a 60 minutes piece on them last week, I had no idea of the spectrum of help they provide people. This division could explode for Best Buy if they only better informed people of what they do and how reasonably they do it for. This would work because Best Buy just does not have any competition in this area other than smallerlocal people who just cannot match the scale and scope of services the Geek's offer. It is a hugely underutilized asset.
How important are the Geek's and overseas for Best Buy? If you strip them out then Best Buy sales increased 3.6%.
Another lesson for us on the need to be a player all over the world.
Friday's Upgrades / Downgrades
UPGRADES
Danaher DHR William Blair Mkt Perform » Outperform
Motorola MOT Cowen & Co Neutral » Outperform
Oceanfreight OCNF Oppenheimer Neutral » Buy
Nokia NOK Cowen & Co Neutral » Outperform
Audiocodes AUDC Cantor Fitzgerald Hold » Buy
General Mills GIS Credit Suisse Neutral » Outperform
Buckeye Partners BPL Deutsche Securities Hold » Buy
DOWNGRADES
Topps TOPP Wedbush Morgan Buy » Hold
FMC Tech FTI CapitalOne southcoast Buy » Hold
SY BANCORP SYBT FTN Midwest Buy » Neutral
BioCryst Pharm BCRX Caris & Company Above Average » Average
Signature Bank SBNY Oppenheimer Buy » Neutral
VASCO Data Security VDSI RBC Capital Mkts Sector Perform » Underperform
China Medical Tech CMED Brean Murray Buy » Hold
Analogic ALOG Brean Murray Buy » Hold
VeraSun Energy VSE Friedman Billings Outperform » Mkt Perform
Pacific Ethanol PEIX Friedman Billings Mkt Perform » Underperform
Aventine Renewable Energy AVR Friedman Billings Outperform » Underperform
Thursday, September 20, 2007
"Fast Money" for Friday
FRIDAY'S PICKS
Jeff Macke recommended Activision (ATVI). Open $20.96
Guy Adami said Oracle (ORCL) is a raging buy. Open $21.04
Karen Finerman liked BEA Systems (BEAS). Open $13.54
Pete Najarian preferred Sohu.com (SOHU). Open $38.76
Thursday's Picks
Jeff Macke liked Oracle (ORCL).Open $20.84 Close $21.04 Gain $.20
Karen Finerman recommended Limited Brands (LTD).Open $23.47 Close $22.33 Loss $1.14
Pete Najarian preferred Titanium Metals (TIE). Open $32.22 Close $33.54 Gain $1.32
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 24-17 Gain $40.11
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 29-21 Gain $9.79
Pete Najarian= 17-15 Gain $23.79
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-5 Gain $3.25
Stacey Briere-Gilbert= 2-0 Gain $1.61
Thursday's 52 Week Lows
Circuit City On The Bankruptcy Express
As good as Goldman's (GS) earning were, Circuit City's (CC) were just as momentous but for the opposite reason.
Back in May I posted "CC has appealing stores in good locations with a nice product mix, they are just abysmally run."
The most recent quarter's earnings release Thursday saw that same management turn what had been a $.06 profit this time last years to a whopping $.38 loss, easily beating the street's expectations of a $.12 loss. Nice job boys, got it backwards.
In June I did an update on Circuit City and said "As a trade, any good news could vault shares up immediately. But, I do not see the conditions that could create that good news anytime soon. Maybe they could get bought out and that would cause shares to jump, but, I am reluctant to invest on the prayer someone rescues them. An Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now. Why pay a premium to the current price when in bankruptcy he could get it for a fraction of it?
At their current rate CC will be out of cash before Thanksgiving and then the fun really starts. This assumes they do not start ramping up debt to pay for operations and also assumes no further economic slowdown. Should the economy slide even more, see ya..."
As of today cash, cash equivalents and short-term investments decreased by $175.2 million from a year earlier to $424.4 million (sill 1/2 of May's levels), driven by $320.4 million in purchases of property and equipment and $194.3 million in stock repurchases and dividend payments. These uses of cash were partially offset by cash provided by operations, including a $143.5 million improvement in net-owned inventory, and cash provided by the issuance of common stock.
What to do? Stay away, far away. Circuit City has made blunder after blunder and as long as current management is still at the helm, there is no reason to expect anything different and that means things are not going to get better anytime soon.
The real shame here if you are a shareholder is that you could have received twice today's price in 2005 in a private equity offer for the company. You will not see shares at that level for a very long time... if ever
Back in May I posted "CC has appealing stores in good locations with a nice product mix, they are just abysmally run."
The most recent quarter's earnings release Thursday saw that same management turn what had been a $.06 profit this time last years to a whopping $.38 loss, easily beating the street's expectations of a $.12 loss. Nice job boys, got it backwards.
In June I did an update on Circuit City and said "As a trade, any good news could vault shares up immediately. But, I do not see the conditions that could create that good news anytime soon. Maybe they could get bought out and that would cause shares to jump, but, I am reluctant to invest on the prayer someone rescues them. An Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now. Why pay a premium to the current price when in bankruptcy he could get it for a fraction of it?
At their current rate CC will be out of cash before Thanksgiving and then the fun really starts. This assumes they do not start ramping up debt to pay for operations and also assumes no further economic slowdown. Should the economy slide even more, see ya..."
As of today cash, cash equivalents and short-term investments decreased by $175.2 million from a year earlier to $424.4 million (sill 1/2 of May's levels), driven by $320.4 million in purchases of property and equipment and $194.3 million in stock repurchases and dividend payments. These uses of cash were partially offset by cash provided by operations, including a $143.5 million improvement in net-owned inventory, and cash provided by the issuance of common stock.
What to do? Stay away, far away. Circuit City has made blunder after blunder and as long as current management is still at the helm, there is no reason to expect anything different and that means things are not going to get better anytime soon.
The real shame here if you are a shareholder is that you could have received twice today's price in 2005 in a private equity offer for the company. You will not see shares at that level for a very long time... if ever
Thursday Links
Iphlop?, Immature Parents, "Made in the USA", Talking Bulls
- Here is a take on the iPhone that does an excellent job of raising many of the issues I have espoused here.
- If parents are too immature to deal with their differences, how can we expect children to be? Maturity unfortunately does not come with age.
- Save your kids life, buy "Made IN The USA" toys
- This is funny and very true
- Here is a take on the iPhone that does an excellent job of raising many of the issues I have espoused here.
- If parents are too immature to deal with their differences, how can we expect children to be? Maturity unfortunately does not come with age.
- Save your kids life, buy "Made IN The USA" toys
- This is funny and very true
Goldman Crushes
WOW, this quarter by Goldman (GS) has to go down as one of its most impressive quarters considering both the environment it operated under and the results of it's peers.
With Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC) all posting lowered results, Goldman not only beat last years $3.26 but sprinted past it at $6.13 which is about a full $2 more than estimates.
Here is the breakdown:
* Investment Banking produced record quarterly net revenues of $2.15 billion, driven by results in Financial Advisory which were 64% higher than the previous record.
* Goldman Sachs ranked first in worldwide announced mergers and acquisitions for the calendar year-to-date.
* Fixed Income, Currency and Commodities (FICC) generated record quarterly net revenues of $4.89 billion, reflecting strength across most businesses.
* Equities generated record quarterly net revenues of $3.13 billion, including record commissions.
* Asset Management generated record management and other fees of $1.15 billion. Assets under management increased 27% from a year ago to a record $796 billion, with net inflows of $50 billion during the quarter.
* Securities Services achieved record quarterly net revenues of $762 million, reflecting continued strength in the prime brokerage business.
Lloyd C. Blankfein, Chairman and Chief Executive Officer said, "Given the difficult environment of the third quarter, many of our businesses were challenged,".
Challenged? I would love to see what he considered an "easy" quarter. These results blew everyone away and with Goldman some $20 off it's all time high and trading at a single digit PE ratio, expect a sharp run up in shares today.
In my earnings preview post I expected two key factors to enable Goldman to beat estimates, trading and international operation. Revenue in the trading and principal investments division soared 70% to $8.23 billion. The segment was led by its bond, currencies and commodities business, where net revenue climbed 71% to a record $4.89 billion amid "significantly" higher revenue in the currencies and interest-rate segments.
Did Goldman suffer mortgage write down like the other brokerage houses did? Sure, but unlike the others, these write downs "where more than offset by gains in short mortgage positions". Duh...apparently they were the only ones who thought of this..
Much was mockingly said about Goldman and their reputation as being the "smartest guys in the room" after they injected $3 billion into one of their funds recently.
This quarter ought to make those same folks eat their words...
With Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC) all posting lowered results, Goldman not only beat last years $3.26 but sprinted past it at $6.13 which is about a full $2 more than estimates.
Here is the breakdown:
* Investment Banking produced record quarterly net revenues of $2.15 billion, driven by results in Financial Advisory which were 64% higher than the previous record.
* Goldman Sachs ranked first in worldwide announced mergers and acquisitions for the calendar year-to-date.
* Fixed Income, Currency and Commodities (FICC) generated record quarterly net revenues of $4.89 billion, reflecting strength across most businesses.
* Equities generated record quarterly net revenues of $3.13 billion, including record commissions.
* Asset Management generated record management and other fees of $1.15 billion. Assets under management increased 27% from a year ago to a record $796 billion, with net inflows of $50 billion during the quarter.
* Securities Services achieved record quarterly net revenues of $762 million, reflecting continued strength in the prime brokerage business.
Lloyd C. Blankfein, Chairman and Chief Executive Officer said, "Given the difficult environment of the third quarter, many of our businesses were challenged,".
Challenged? I would love to see what he considered an "easy" quarter. These results blew everyone away and with Goldman some $20 off it's all time high and trading at a single digit PE ratio, expect a sharp run up in shares today.
In my earnings preview post I expected two key factors to enable Goldman to beat estimates, trading and international operation. Revenue in the trading and principal investments division soared 70% to $8.23 billion. The segment was led by its bond, currencies and commodities business, where net revenue climbed 71% to a record $4.89 billion amid "significantly" higher revenue in the currencies and interest-rate segments.
Did Goldman suffer mortgage write down like the other brokerage houses did? Sure, but unlike the others, these write downs "where more than offset by gains in short mortgage positions". Duh...apparently they were the only ones who thought of this..
Much was mockingly said about Goldman and their reputation as being the "smartest guys in the room" after they injected $3 billion into one of their funds recently.
This quarter ought to make those same folks eat their words...
Thanks T. Boone
Just before T. Boone spoke on CNBC yesterday I made some comments on oil and was please to see he agreed.
He is still very bullish on oil noting that oil production is now 85 million barrels a day and there is a 88 million production goal for Q4, "so production is going up." He also noted that as some fear oil could go to $100, but he doesn't think that will happen this year and he thinks that would take a "cataclysmic" event.
He did say that in the very near term he thinks we should get a pullback here to maybe $78 a barrel but long term the trend is up as demand is up and production is flat. He said demand in second quarter of 2008 will fall, but he did not expect supply to increase. If the global economy stays "as robust" as it is now, he said $90 a barrel could be seen next year (10% higher than now). This essentially mirrors the sentiment I wrote about yesterday and does cement my decision to hold my USO position but to not expect much more out of in the short term.
One of his favorite stocks? Suncor (SU)
The interview can be seen here.
He is still very bullish on oil noting that oil production is now 85 million barrels a day and there is a 88 million production goal for Q4, "so production is going up." He also noted that as some fear oil could go to $100, but he doesn't think that will happen this year and he thinks that would take a "cataclysmic" event.
He did say that in the very near term he thinks we should get a pullback here to maybe $78 a barrel but long term the trend is up as demand is up and production is flat. He said demand in second quarter of 2008 will fall, but he did not expect supply to increase. If the global economy stays "as robust" as it is now, he said $90 a barrel could be seen next year (10% higher than now). This essentially mirrors the sentiment I wrote about yesterday and does cement my decision to hold my USO position but to not expect much more out of in the short term.
One of his favorite stocks? Suncor (SU)
The interview can be seen here.
Inflation Down Again: Bernanke's Move Makes Perfect Sense Now
Tuesday's Fed rate cut and explosion upward in both the Dow and S&P has been dissected already more than it really need to be. It all goes back to what Bernanke has been saying all long. Inflation was worry number one, when that was contained, the rest follows.
The inflation gauge, the consumer price index came out (CPI) and it fell for the second straight month after being essentially flat for the summer. Conclusion? Inflation, at least for now at 2% is in a comfortable zone for the Fed. since that has been accomplished, despite skyrocketing oil prices, Bernanke and Co. turned their attention to economic growth.
Now, has this information been release yesterday, the 1/2 point cut would have made much more sense and perhaps we could have avoided to 7,000 posts on it (here included). It did make for good reading though.
It is becoming more apparent with every move Bernanke does or does not make that he is going to lead the Fed is a relatively transparent manner. If growth slows and inflation remains high,rates do not move, if it growth slows and inflation falls, rate cut time. Simple. I think part of the problem is that people are still trying to view Bernanke through Greenspan's Vaseline covered glasses that obscured everything people thought they understood in his proclamations. A more transparent Fed is a better this for us all, if for no other reason it will not be the dominant news story consistently. A relatively predictable Fed is far more desirable that one that keeps people guessing all the time. Greenspan enjoyed the mystery of the game, Bernanke seems to have no use for it. Good.
Bernanke really is making this simple for us, as soon as we just sit back and listen and stop trying to interpret.
The inflation gauge, the consumer price index came out (CPI) and it fell for the second straight month after being essentially flat for the summer. Conclusion? Inflation, at least for now at 2% is in a comfortable zone for the Fed. since that has been accomplished, despite skyrocketing oil prices, Bernanke and Co. turned their attention to economic growth.
Now, has this information been release yesterday, the 1/2 point cut would have made much more sense and perhaps we could have avoided to 7,000 posts on it (here included). It did make for good reading though.
It is becoming more apparent with every move Bernanke does or does not make that he is going to lead the Fed is a relatively transparent manner. If growth slows and inflation remains high,rates do not move, if it growth slows and inflation falls, rate cut time. Simple. I think part of the problem is that people are still trying to view Bernanke through Greenspan's Vaseline covered glasses that obscured everything people thought they understood in his proclamations. A more transparent Fed is a better this for us all, if for no other reason it will not be the dominant news story consistently. A relatively predictable Fed is far more desirable that one that keeps people guessing all the time. Greenspan enjoyed the mystery of the game, Bernanke seems to have no use for it. Good.
Bernanke really is making this simple for us, as soon as we just sit back and listen and stop trying to interpret.
Thursday's upgrades / Downgrades
UPGRADES
Pennsylvania Commerce Bancorp COBH Janney Mntgmy Scott Neutral » Buy
LandAmerica Fin LFG Ferris Baker Watts Neutral » Buy
Xenoport XNPT Punk, Ziegel & Co Accumulate » Buy
MFA Mortgage MFA Bear Stearns Peer Perform » Outperform
Robbins & Myers RBN Robert W. Baird Neutral » Outperform
Intersections INTX JMP Securities Mkt Outperform » Strong Buy
Plexus PLXS JP Morgan Neutral » Overweight
Webster Financial WBS Lehman Brothers Underweight » Equal-weight
Assoc Banc-Corp ASBC Lehman Brothers Underweight » Equal-weight
Pacific Capital Bancorp PCBC Lehman Brothers Underweight » Equal-weight
Ruby Tuesday RT JP Morgan Neutral » Overweight
DOWNGRADES
Micrus Endovascular MEND Punk, Ziegel & Co Buy » Mkt Perform
Suncor Energy SU CIBC Wrld Mkts Sector Outperform » Sector Perform
Blue Nile NILE William Blair Outperform » Mkt Perform
Alnylam Pharmaceuticals ALNY Caris & Company Above Average » Average
Zions Bancorp ZION Sun Trust Rbsn Humphrey Buy » Neutral
Furniture Brands FBN Morgan Keegan Mkt Perform » Underperform
Hancock Holding HBHC Stifel Nicolaus Buy » Hold
Silicom Limited SILC WR Hambrecht Buy » Hold
Vonage VG Soleil Hold » Sell
Tongjitang Chinese Medic TCM Brean Murray Buy » Hold
Coca-Cola Ent CCE Deutsche Securities Buy » Hold
Illumina ILMN GARP Research Buy » Neutral
Benchmark Elec BHE JP Morgan Overweight » Neutral
SVB Financial Group SIVB Lehman Brothers Equal-weight » Underweight
Texas Capital TCBI Lehman Brothers Overweight » Equal-weight
Cullen/Frost Bnkrs CFR Lehman Brothers Overweight » Equal-weight
CheckFree CKFR Citigroup Buy » Hold
XM Satellite XMSR UBS Buy » Neutral
Sirius Satellite SIRI UBS Buy » Neutral
Wednesday, September 19, 2007
"Fast Money" for Thursday
Thursday's Picks
Jeff Macke liked Oracle (ORCL).Open $20.84
Karen Finerman recommended Limited Brands (LTD).Open $23.47
Pete Najarian preferred Titanium Metals (TIE). Open $32.22
Wednesday's Picks
Jeff Macke said Macy’s (M) is a buy. Open $32.44 Close $33.72 Gain $1.28
Guy Adami liked Nucor (NUE). Open $58.90 Close $58.77 Loss $.23
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 24-17 Gain $40.11
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 28-21 Gain $9.59
Pete Najarian= 16-15 Gain $22.47
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-4 Gain $4.39
Stacey Briere-Gilbert= 2-0 Gain $1.61
Karen Finerman preferred Altria (MO). Open $68.06
Pete Najarian recommended Companhia Vale do Rio Doce (RIO). Open $29.60
Jim Cramer's Flip Flop of the Century
This is really just too hard to believe.
At 7:10 on Fed decision day CNBC's Jim Cramer have an interview and said a 50 point Fed rate cut would "be catstrophic" and signal "things are much worse than they have lead us to believe" See the full interview here
Then, after the 50 point cut later that day Cramer was on CNBC the same day acting like a 17 year old virgin in a whore house with a suitcase of cash. Watch this video here. To quote him “This is what we wanted". "It is good, these guys get it", he continued.
What? What is it Jim? "Catastrophic? or "just want we wanted" or did we want a catastrophe?
He has lost all credibility after this one. He has been famous before for his flip flops and has been called out on them but was alway able to explain it away by saying "things have changed since then". The question now has to be, what the hell changed this time in the 7 hours between this interview, the Fed action and your exuberant "Stop Trading" segment? Answer? Nothing.........
We just cannot take him serious anymore as person we should listen to for advice. As a freakishly spastic TV persona that my kids laugh at he has value, but as someone who's advice we should heed, not anymore...
This is the problem when you stop trying to be an honest analyst and enter into the entertaining character mode, you cross the line from saying what you may really believe into doing stunts for ratings like his famous "they know nothing" rant about the Fed.
PS Jim, We were laughing at you, not with you on that one. I give it 6 months before he is on the next "WWF Smackdown"with Vince McMahon, the only difference between the two is their topics covered.
At 7:10 on Fed decision day CNBC's Jim Cramer have an interview and said a 50 point Fed rate cut would "be catstrophic" and signal "things are much worse than they have lead us to believe" See the full interview here
Then, after the 50 point cut later that day Cramer was on CNBC the same day acting like a 17 year old virgin in a whore house with a suitcase of cash. Watch this video here. To quote him “This is what we wanted". "It is good, these guys get it", he continued.
What? What is it Jim? "Catastrophic? or "just want we wanted" or did we want a catastrophe?
He has lost all credibility after this one. He has been famous before for his flip flops and has been called out on them but was alway able to explain it away by saying "things have changed since then". The question now has to be, what the hell changed this time in the 7 hours between this interview, the Fed action and your exuberant "Stop Trading" segment? Answer? Nothing.........
We just cannot take him serious anymore as person we should listen to for advice. As a freakishly spastic TV persona that my kids laugh at he has value, but as someone who's advice we should heed, not anymore...
This is the problem when you stop trying to be an honest analyst and enter into the entertaining character mode, you cross the line from saying what you may really believe into doing stunts for ratings like his famous "they know nothing" rant about the Fed.
PS Jim, We were laughing at you, not with you on that one. I give it 6 months before he is on the next "WWF Smackdown"with Vince McMahon, the only difference between the two is their topics covered.
Wednesday's Links
Buffett, Lead and Mortgages
- I have made the same argument in regards to mortgages. You bought the house, you took out the mortgage, you deal with it.
- Now they find lead in cookware
- Buffett speaks of the insignificance of Fed decisions on investment choices
- I have made the same argument in regards to mortgages. You bought the house, you took out the mortgage, you deal with it.
- Now they find lead in cookware
- Buffett speaks of the insignificance of Fed decisions on investment choices
Dell, We Finally Get It Straightened Out
After a week of complaining, when the problem finally gets solved, I ought to give the recognition for it.
After reading my blog posts at Dell's(DELL) HQ in Texas, I was contacted by a "Dell Customer Advocate". After several emails back and forth as she tried to locate my order (I was giving her our current address and Dell had apparently still not changed this) she found the order. She also managed to find the printer I was promised by the Customer Service Manager who "promised" to get in touch with me the day after we talked (the day of first blog post)to give me the details and as of today, has not bothered despite having my home and cell and office numbers and email. Maybe he is trying to get me at my mom's house? I'll be there next 4th of July, talk to you then Mr. Supervisor. The nice part was that unlike the computer, the printer was actually delivered to our office and we did not have to "go pick it up" at the shipper.
So, when all is said and done the Customer Service Advocate, Marie did the job it took a team of folks and 4-5 hours to do on the phone in about an hour's work. Thank you, I have to give a commendation where it is due. Thank you for your help.
On another note, I was contacted today by a second advocate who read the blog posts also and offered to help. Hmmm.
Here is the thing. I said this in a previous post but I think its importance bears its repeating. If I did not have a megaphone to voice my displeasure, I have to wonder how this would have ended. Without the fear of of a couple hundred thousand people reading about my "experience", would there have been the rush to make it right? I have to wonder since the urgency did not seem to be there prior to the posts hitting. I just don't know and hate to assume the worst but the evidence is what it is. At least it is solved now.
I do know this, do not take things like this lying down. If you let them get away with it, the impetus to improve and avoid these situation is gone. Don't take it and be sure to give credit where it is due, it means just as much.
After reading my blog posts at Dell's(DELL) HQ in Texas, I was contacted by a "Dell Customer Advocate". After several emails back and forth as she tried to locate my order (I was giving her our current address and Dell had apparently still not changed this) she found the order. She also managed to find the printer I was promised by the Customer Service Manager who "promised" to get in touch with me the day after we talked (the day of first blog post)to give me the details and as of today, has not bothered despite having my home and cell and office numbers and email. Maybe he is trying to get me at my mom's house? I'll be there next 4th of July, talk to you then Mr. Supervisor. The nice part was that unlike the computer, the printer was actually delivered to our office and we did not have to "go pick it up" at the shipper.
So, when all is said and done the Customer Service Advocate, Marie did the job it took a team of folks and 4-5 hours to do on the phone in about an hour's work. Thank you, I have to give a commendation where it is due. Thank you for your help.
On another note, I was contacted today by a second advocate who read the blog posts also and offered to help. Hmmm.
Here is the thing. I said this in a previous post but I think its importance bears its repeating. If I did not have a megaphone to voice my displeasure, I have to wonder how this would have ended. Without the fear of of a couple hundred thousand people reading about my "experience", would there have been the rush to make it right? I have to wonder since the urgency did not seem to be there prior to the posts hitting. I just don't know and hate to assume the worst but the evidence is what it is. At least it is solved now.
I do know this, do not take things like this lying down. If you let them get away with it, the impetus to improve and avoid these situation is gone. Don't take it and be sure to give credit where it is due, it means just as much.
Morgan Stanley Misses For Bad Reasons
This is what happens today when you do not have the international exposure you need
Morgan Stanley (MS) posted 17% drop in fiscal third-quarter net income, weaker than expected. Morgan reported net income of $1.54 billion, or $1.44 a share vs. $1.85 billion, or $1.75 a share, a year earlier. On a continuing operations measure, the company reported third-quarter earnings of $1.38 a share, versus $1.50 a year before.
Why? The firm had write downs that reduced earnings by 33 cents a share. The losses consisted of its institutional securities unit having sales and trading losses of $877 million related to loans it made to companies making acquisitions, the oft mentioned "bridge loans". They said the losses were the result of its writing down the value of loans on its books by a total of $940 million saying that the "losses of approximately $940 million (were) due to the marking-to-market of loans as well as closed and pipeline commitments."
Now, it should be pointed out that Morgan did have a record quarter for revenues as they increase 13% to just shy of $8 billion. However, Morgan's earning profile is clearly to levered toward the US M&A markets which are currently hitting the brakes. Unlike Lehman (LEH) and Goldman (GS) who reports tomorrow, not enough of their earnings are coming from international activity.
In 2006's letter to shareholders CEO John Mack said one of his goals was "Leveraging our global franchise to build out key growth areas, including businesses where we already have strong leadership positions, such as commodities and prime brokerage, as well as other areas where we have started to close the gap with our peers, such as leveraged finance, residential mortgages and equity derivatives.
This effort for growth look like it resulted in a lack of discipline that lead to the almost $1 billion in write downs in these very areas.
Goldman reports tomorrow, expect write down in the fixed income securities like the other brokers have reported to date. Also expect international activity and trading activities to offset that and surprise more than a few folks.
Morgan Stanley (MS) posted 17% drop in fiscal third-quarter net income, weaker than expected. Morgan reported net income of $1.54 billion, or $1.44 a share vs. $1.85 billion, or $1.75 a share, a year earlier. On a continuing operations measure, the company reported third-quarter earnings of $1.38 a share, versus $1.50 a year before.
Why? The firm had write downs that reduced earnings by 33 cents a share. The losses consisted of its institutional securities unit having sales and trading losses of $877 million related to loans it made to companies making acquisitions, the oft mentioned "bridge loans". They said the losses were the result of its writing down the value of loans on its books by a total of $940 million saying that the "losses of approximately $940 million (were) due to the marking-to-market of loans as well as closed and pipeline commitments."
Now, it should be pointed out that Morgan did have a record quarter for revenues as they increase 13% to just shy of $8 billion. However, Morgan's earning profile is clearly to levered toward the US M&A markets which are currently hitting the brakes. Unlike Lehman (LEH) and Goldman (GS) who reports tomorrow, not enough of their earnings are coming from international activity.
In 2006's letter to shareholders CEO John Mack said one of his goals was "Leveraging our global franchise to build out key growth areas, including businesses where we already have strong leadership positions, such as commodities and prime brokerage, as well as other areas where we have started to close the gap with our peers, such as leveraged finance, residential mortgages and equity derivatives.
This effort for growth look like it resulted in a lack of discipline that lead to the almost $1 billion in write downs in these very areas.
Goldman reports tomorrow, expect write down in the fixed income securities like the other brokers have reported to date. Also expect international activity and trading activities to offset that and surprise more than a few folks.
Oil: It Isn't Really That Expensive Currently
As the price of a barrel of crude marches higher each day it makes headlines, but is not really effecting our day to day lives all that much. In fact where oil to approach the 1980 recession levels, its price would need to rise another 25% to $100 a barrel (adjusted for inflation).
Now, do not get me wrong, the 41% gain we are sitting on in our US Oil (USO) investment since January is great, but I do not see another 25% coming soon. Gas prices have come down and heating oil prices are not much higher than last year at this time when oil was in the high $60's and low $70's. Why?
The price of crude is being influenced by traders, not necessarily supply and demand. Currently, that sentiment is towards the upside. When that sentiment changes, coupled with the demand reduction that is inevitable when the US economy slows, prices ought to fall, and fast. It has been another benign (non existent)hurricane season and for now, middle east tensions have subsided. Yes, I know there is a war going on but, isn't there always? It will take more that a few gunshots over there to make a difference.
Demand from China and India is surging and this is a long term story, but, not 41% in 8 months. The Us ethanol industry lead by ADM (ADM), Bill Gates backed Pacific Ethanol (PEIX) and Verasun (VSE) will produce an additional 1 billion gallons of the stuff this year and that is cutting into demand for gasoline. Which is why despite oil prices surging, the price you pay at the pump has been stagnant or dropping. Further, as people have paid more for food, and other items and fear an economic slowdown, they have chosen closer vacation and are driving rather than paying for plane tickets. no matter what you may think, 250 people packing up and driving on vacation uses a fraction of the oil it takes to make enough jet fuel for the same number of people to get into a plane and fly there.
Now, Boone Pickens will be on CNBC soon and he will tell us the price is going up. Well, Boone is an oil man and high prices are very good for him. I am sure they will go up over time, it is inevitable barring a cellulostic ethanol breakthrough in the next few months that triples our ethanol yield overnight from 7 billion to 21 billion gallons making E85 an immediately viable option. This scenario will happen but it time frame is a few years, not months away.
Am I selling out of my USO position? No, but I do not see much upside from here for a while. Why not sell then? After 8 months I will pay short term capital gains taxes and lose 28% of that gain. Is oil stays flat and I sell in 4 months, that drops to 15% so I can gain 13% even if the price does nothing. Neat...
Long term oil is going up, it just is not the huge story it is made out to be now..
Now, do not get me wrong, the 41% gain we are sitting on in our US Oil (USO) investment since January is great, but I do not see another 25% coming soon. Gas prices have come down and heating oil prices are not much higher than last year at this time when oil was in the high $60's and low $70's. Why?
The price of crude is being influenced by traders, not necessarily supply and demand. Currently, that sentiment is towards the upside. When that sentiment changes, coupled with the demand reduction that is inevitable when the US economy slows, prices ought to fall, and fast. It has been another benign (non existent)hurricane season and for now, middle east tensions have subsided. Yes, I know there is a war going on but, isn't there always? It will take more that a few gunshots over there to make a difference.
Demand from China and India is surging and this is a long term story, but, not 41% in 8 months. The Us ethanol industry lead by ADM (ADM), Bill Gates backed Pacific Ethanol (PEIX) and Verasun (VSE) will produce an additional 1 billion gallons of the stuff this year and that is cutting into demand for gasoline. Which is why despite oil prices surging, the price you pay at the pump has been stagnant or dropping. Further, as people have paid more for food, and other items and fear an economic slowdown, they have chosen closer vacation and are driving rather than paying for plane tickets. no matter what you may think, 250 people packing up and driving on vacation uses a fraction of the oil it takes to make enough jet fuel for the same number of people to get into a plane and fly there.
Now, Boone Pickens will be on CNBC soon and he will tell us the price is going up. Well, Boone is an oil man and high prices are very good for him. I am sure they will go up over time, it is inevitable barring a cellulostic ethanol breakthrough in the next few months that triples our ethanol yield overnight from 7 billion to 21 billion gallons making E85 an immediately viable option. This scenario will happen but it time frame is a few years, not months away.
Am I selling out of my USO position? No, but I do not see much upside from here for a while. Why not sell then? After 8 months I will pay short term capital gains taxes and lose 28% of that gain. Is oil stays flat and I sell in 4 months, that drops to 15% so I can gain 13% even if the price does nothing. Neat...
Long term oil is going up, it just is not the huge story it is made out to be now..
Altria: Now Farmers Will Help Shareholders
So much focus on the upcoming Altria (MO) spin (here included) has obscured a trend folks need to be aware of. Farmers are planting tobacco on almost 50% more acres than just 2 years ago.
The US Gov't ended it's tobacco subsidy system in 2004 that set price levels and dictate where and how much of the crop could be grown. As a result, there has been an explosion of planting of tobacco since then. Why? Profits. Let's compare tobacco to the other oft talked about crop, corn. Despite the higher labor cost involved with tobacco farming (it is harvested by hand), one can expect about $1800 profit per acre of tobacco, compared with $250 for corn even at the current high price of corn. Farms are sprouting in Illinois (from almost zero to 1,000 acres) and planted acres in Pennsylvania have doubled since 2004, not exactly the places one thinks of when they think of tobacco.
So why does this matter for Altria? Economics 100. The US supply of tobacco is exploding and shows no sign of slowing down. This will bring the cost of the product down dramatically and here is the best part (for investors), because it is still so profitable, the increase in acreage shows no sign of decrease. In fact, the majority of farms currently have plans underway to increase their current levels next year. Why? The previous subsidy system prohibited farmers from taking advantage of the price they could receive for the product by expanding production capabilities. Now, with tobacco selling for $1.60 a pound, it is still enormously profitable at almost 1/2 that. Tobacco is still the most profitable crop to grow and US acreage can double or even triple from current level without the danger of farmers abandoning it for other crops because despite smoking rates in the US going down, they are growing internationally and this enables any slack in the system to easily be exported. In fact US exports of the products have grown almost 50% since 2002.
This is really big news for shareholders. The price decrease in US tobacco costs for Altria should be more than offset by any decrease in use of their products for smoking. This of course does not take into account the expected results of their new smokeless products, just cigarettes.
The US Gov't ended it's tobacco subsidy system in 2004 that set price levels and dictate where and how much of the crop could be grown. As a result, there has been an explosion of planting of tobacco since then. Why? Profits. Let's compare tobacco to the other oft talked about crop, corn. Despite the higher labor cost involved with tobacco farming (it is harvested by hand), one can expect about $1800 profit per acre of tobacco, compared with $250 for corn even at the current high price of corn. Farms are sprouting in Illinois (from almost zero to 1,000 acres) and planted acres in Pennsylvania have doubled since 2004, not exactly the places one thinks of when they think of tobacco.
So why does this matter for Altria? Economics 100. The US supply of tobacco is exploding and shows no sign of slowing down. This will bring the cost of the product down dramatically and here is the best part (for investors), because it is still so profitable, the increase in acreage shows no sign of decrease. In fact, the majority of farms currently have plans underway to increase their current levels next year. Why? The previous subsidy system prohibited farmers from taking advantage of the price they could receive for the product by expanding production capabilities. Now, with tobacco selling for $1.60 a pound, it is still enormously profitable at almost 1/2 that. Tobacco is still the most profitable crop to grow and US acreage can double or even triple from current level without the danger of farmers abandoning it for other crops because despite smoking rates in the US going down, they are growing internationally and this enables any slack in the system to easily be exported. In fact US exports of the products have grown almost 50% since 2002.
This is really big news for shareholders. The price decrease in US tobacco costs for Altria should be more than offset by any decrease in use of their products for smoking. This of course does not take into account the expected results of their new smokeless products, just cigarettes.
Wednesday's Upgrades / Downgrades
UPGRADES
Ventas VTR Stifel Nicolaus Hold » Buy
Apollo Group APOL Stifel Nicolaus Hold » Buy
Healthcare Realty HR Stifel Nicolaus Hold » Buy
LTC Properties LTC Stifel Nicolaus Hold » Buy
Cache CACH Brean Murray Hold » Buy
Greenfield Online SRVY Lehman Brothers Equal-weight » Overweight
RSC Holdings RRR Lehman Brothers Equal-weight » Overweight
ON Semiconductor ONNN Wachovia Mkt Perform » Outperform
Enbridge ENB CIBC Wrld Mkts Sector Perform » Sector Outperform
DOWNGRADES
EDO Corp EDO BB&T Capital Mkts Buy » Hold
FMC Tech FTI Wachovia Mkt Perform » Underperform
Veeco Instruments VECO Am Tech/JSA Research Buy » Neutral
Health Care Ppty HCP Stifel Nicolaus Buy » Hold
Conns CONN Morgan Joseph Buy » Hold
Medical Properties Trust MPW Stifel Nicolaus Buy » Hold
Getty Images GYI Kaufman Bros Hold » Sell
Advanced Analogic Tech AATI Needham & Co Strong Buy » Buy $11
Kellwood KWD Broadpoint Capital Buy » Neutral
Cameron CAM Wachovia Outperform » Mkt Perform
Wimm-Bill-Dann Foods WBD Credit Suisse Outperform » Neutral
Tuesday, September 18, 2007
"Fast Money" for Wednesday
Wednesday's Picks
Jeff Macke said Macy’s (M) is a buy. Open $32.44
Guy Adami liked Nucor (NUE). Open $58.90
Karen Finerman preferred Altria (MO). Open $68.06
Pete Najarian recommended Companhia Vale do Rio Doce (RIO). Open $29.60
TUESDAY'S RESULTS
Guy Adami recommended buying Microsoft (MSFT). Open $28.72 Close $28.93 Gain $.21
Pete Najarian said Rambus (RMBS) is a buy. Open $18.22 Close $18.80 Loss $.22
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 24-16 Gain $40.34
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 27-21 Gain $8.21
Pete Najarian= 16-15 Gain $22.47
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-4 Gain $4.39
Stacey Briere-Gilbert= 2-0 Gain $1.61
Fed Day's 52 Week Low's
Bernanke Rips Off The Band-aid
Bernanke wasted little effort today in cutting the funds rate & the discount rate 50 basis points. The statement said:
"Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth."
Big deal? Not so much. Remember the effective Fed Funds Rate has been below 5% for some time now and this action simply brings the stated rate in line with what is happening out there in the market. Stocks surged on the news but what else is new. The odd thing here is we are at a state where bad news is good. If the economy was not slowing down, no need for a rate cut. Since it is (that is not real good), we are cutting rates. Odd..
Too be honest, this concerns me. To me, it implies that things are weaker out there than we believe, either that or Bernanke isn't playing games and the threat of weakness is just going to be stamped out. I hope the later is the case. It would mean that Bernanke accomplished what he wanted with the credit issue and now sees the possibility of this turning. Rather than pull off the band-aid slowly to see what happens down the road, he is just jumping ahead to be in front of any weakness and head it off.
Bernanke indicated as much in the statement when he said, "forestall some of the adverse effects on the broader economy that might otherwise arise". This tells me he is heading off what "might" happen now that inflation has moderated and somewhat under control.
I like this guy, no games or teaser cuts. Just action.
"Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth."
Big deal? Not so much. Remember the effective Fed Funds Rate has been below 5% for some time now and this action simply brings the stated rate in line with what is happening out there in the market. Stocks surged on the news but what else is new. The odd thing here is we are at a state where bad news is good. If the economy was not slowing down, no need for a rate cut. Since it is (that is not real good), we are cutting rates. Odd..
Too be honest, this concerns me. To me, it implies that things are weaker out there than we believe, either that or Bernanke isn't playing games and the threat of weakness is just going to be stamped out. I hope the later is the case. It would mean that Bernanke accomplished what he wanted with the credit issue and now sees the possibility of this turning. Rather than pull off the band-aid slowly to see what happens down the road, he is just jumping ahead to be in front of any weakness and head it off.
Bernanke indicated as much in the statement when he said, "forestall some of the adverse effects on the broader economy that might otherwise arise". This tells me he is heading off what "might" happen now that inflation has moderated and somewhat under control.
I like this guy, no games or teaser cuts. Just action.
Tuesday's Links
- While I am not a fan of Greenspan, for Paul Krugman to question to moral honesty of any human being is laughable. Krugman is quite possibly the most dishonest person who has every walked the earth (the Clinton's aside obviously).
- An economist gives empirical evidence that the Bush administrations troop surge is indeed working. It should be noted that this is an MIT professor so the chance of a "political bias" in favor of the administration is indeed remote..
- Still more on Greenspan
- You reap what you sow
Lehman's Earnings Give Me More Confidence In Goldman's
Lehman Brothers (LEH) release earnings this morning and their results, and especially the configuration of them bolstered my confidence and expectations for Goldman's (GS)on Thursday.
First the details. Lehman beat expectation by seven cents a share coming in at $1.54 vs the $1.47 estimates. Fixed income took the expected write-downs (revenues were off 47%) due to the current mortgage market "instability" but several other areas bolstered the firm and they are the very reasons I was so optimistic yesterday about Goldman.
Strong investment banking and retail brokerage fees pushed revenue up 3.1 percent to $4.31 billion and offset the $700 million hit from "substantial valuation reductions" in mortgage-backed bonds and other investments. In addition, the firm now gets 53% of it revenues from overseas operation, further insulating it from US housing.
The configuration of these results were the very ones I gave yesterday for my opinion that the current estimates for Goldman were too low, trading and overseas. There does seem to be an inability or refusal to see many of our international firms for what they are, international. Companies are seeing the prices of their shares decimated due to the US housing situation and in many cases, the effects of the housing market are not a significant determinant of earnings for them. When more than 1/2 of your revenues come from overseas, the conversation regarding earnings ought to be what is happening there, not in Peoria. This is also is true for the S&P that now gets over 50% of it's earning from overseas.
Why is this important? Even though we may (that is a big may but for arguments sake let's assume) be slowing down it the US, overseas is still booming. That means that 51% of earnings will be increasing and offsetting any potential decrease here. It is also important to note that this 51% is increasing so the international economy will begin to take on more importance. This is the reason the last few quarters estimates have been below reality. Folks are not quantifying international operations properly, or giving them enough weight..
This is ok though, it gives us more time to accumulate under-priced shares..
First the details. Lehman beat expectation by seven cents a share coming in at $1.54 vs the $1.47 estimates. Fixed income took the expected write-downs (revenues were off 47%) due to the current mortgage market "instability" but several other areas bolstered the firm and they are the very reasons I was so optimistic yesterday about Goldman.
Strong investment banking and retail brokerage fees pushed revenue up 3.1 percent to $4.31 billion and offset the $700 million hit from "substantial valuation reductions" in mortgage-backed bonds and other investments. In addition, the firm now gets 53% of it revenues from overseas operation, further insulating it from US housing.
The configuration of these results were the very ones I gave yesterday for my opinion that the current estimates for Goldman were too low, trading and overseas. There does seem to be an inability or refusal to see many of our international firms for what they are, international. Companies are seeing the prices of their shares decimated due to the US housing situation and in many cases, the effects of the housing market are not a significant determinant of earnings for them. When more than 1/2 of your revenues come from overseas, the conversation regarding earnings ought to be what is happening there, not in Peoria. This is also is true for the S&P that now gets over 50% of it's earning from overseas.
Why is this important? Even though we may (that is a big may but for arguments sake let's assume) be slowing down it the US, overseas is still booming. That means that 51% of earnings will be increasing and offsetting any potential decrease here. It is also important to note that this 51% is increasing so the international economy will begin to take on more importance. This is the reason the last few quarters estimates have been below reality. Folks are not quantifying international operations properly, or giving them enough weight..
This is ok though, it gives us more time to accumulate under-priced shares..
Altria After The Spin. What Can Investor's Expect?
Some thoughts on what Altria (MO) investors can hope for after PMI is spun off.
The Dividend:
CEO Louis Camilleri said when the upcoming breakup was announced that the dividend of the two companies "would at least" equal the current one which after the recent 8.7% increase sits at $3.00 per share (4.5% yield). The key is his use of the term "at least". Camilleri has in the past telegraphed the future intentions of Altria while not committing the company to anything extraordinary. This is one of those occasions. Camilleri said "Going forward, I would anticipate that Altria and PMI would have net earnings payout ratio targets of around 75% and 65%, respectively." 2006, PMI generated operating cash flow of $6.2 billion, while remaining Altria (excluding Kraft) generated $3.7 billion and both will enjoy very strong balance sheets. What could happens to the dividend? See below after share repurchase section.
Cost Savings
Currently Altria is a bloated pig here. Their cost per 1,000 cigarettes produced is 10% higher that rival Reynolds American (RAI). Altria is taking steps to alleviate that with the closing of their NY city headquarters. The company estimates an annual savings from the move of about $250 million. The separation of the two entities (PMI and PMUSA) also eliminates an additional bureaucratic layer that Reynold's, who has no international operations is currently without creating additional savings.
Share Repurchases / Debt
Camilleri said one of the advantages of the breakup would be, "A more optimal and efficient capital allocation to enhance shareholder value coupled with greater financial flexibility resulting from an increase in the combined debt capacity of both entities.." and "both companies will have the flexibility and capacity to further enhance shareholder value through share repurchases." Great but how much? As of June 30th, Altria sits on $6 billion in cash, $4 billion of debt and should generate almost $15 billion in cash from operations this year, meaning as things stand now, debt is irrelevant. How much could it take on? Currently Altria has a long term debt to equity ration of .27 vs 1.25 for the industry. If we bring Altria up to the industry average, we get to a combined debt level of almost $30 billion dollars which would enable the company to repurchase 20% of the outstanding shares.
Here is the kicker. If they do that, and keep the total dividend payout at it's current $6.3 billion annual level (which would be fully supported by operations), this would enable them to distribute approximately an additional 75 cents per share to shareholders, just from the number of outstanding share reduction. This would bring the combined yield of the two entities to a whopping 5.6%.
Now, none of this takes into consideration share appreciation that is inevitable due to the EPS increase associated with the repurchases. Will all of this happen? Not right away of course but rest assured, Altria has been waiting to reward shareholders for some time, I expect all of the following to happen to some degree early next year .
The Dividend:
CEO Louis Camilleri said when the upcoming breakup was announced that the dividend of the two companies "would at least" equal the current one which after the recent 8.7% increase sits at $3.00 per share (4.5% yield). The key is his use of the term "at least". Camilleri has in the past telegraphed the future intentions of Altria while not committing the company to anything extraordinary. This is one of those occasions. Camilleri said "Going forward, I would anticipate that Altria and PMI would have net earnings payout ratio targets of around 75% and 65%, respectively." 2006, PMI generated operating cash flow of $6.2 billion, while remaining Altria (excluding Kraft) generated $3.7 billion and both will enjoy very strong balance sheets. What could happens to the dividend? See below after share repurchase section.
Cost Savings
Currently Altria is a bloated pig here. Their cost per 1,000 cigarettes produced is 10% higher that rival Reynolds American (RAI). Altria is taking steps to alleviate that with the closing of their NY city headquarters. The company estimates an annual savings from the move of about $250 million. The separation of the two entities (PMI and PMUSA) also eliminates an additional bureaucratic layer that Reynold's, who has no international operations is currently without creating additional savings.
Share Repurchases / Debt
Camilleri said one of the advantages of the breakup would be, "A more optimal and efficient capital allocation to enhance shareholder value coupled with greater financial flexibility resulting from an increase in the combined debt capacity of both entities.." and "both companies will have the flexibility and capacity to further enhance shareholder value through share repurchases." Great but how much? As of June 30th, Altria sits on $6 billion in cash, $4 billion of debt and should generate almost $15 billion in cash from operations this year, meaning as things stand now, debt is irrelevant. How much could it take on? Currently Altria has a long term debt to equity ration of .27 vs 1.25 for the industry. If we bring Altria up to the industry average, we get to a combined debt level of almost $30 billion dollars which would enable the company to repurchase 20% of the outstanding shares.
Here is the kicker. If they do that, and keep the total dividend payout at it's current $6.3 billion annual level (which would be fully supported by operations), this would enable them to distribute approximately an additional 75 cents per share to shareholders, just from the number of outstanding share reduction. This would bring the combined yield of the two entities to a whopping 5.6%.
Now, none of this takes into consideration share appreciation that is inevitable due to the EPS increase associated with the repurchases. Will all of this happen? Not right away of course but rest assured, Altria has been waiting to reward shareholders for some time, I expect all of the following to happen to some degree early next year .
Tuesday's Upgrades / Downgrades
UPGRADES
Logitech Intl SA LOGI Avondale Partners Mkt Perform » Mkt Outperform
Fresh Del Monte FDP BB&T Capital Mkts Hold » Buy
Lexington LXP Stifel Nicolaus Hold » Buy
Equinix EQIX Needham & Co Hold » Buy
China Mobile CHL HSBC Securities Neutral » Overweight
Nokia NOK HSBC Securities Neutral » Overweight
Brocade BRCD Citigroup Hold » Buy
Tween Brands TWB Susquehanna Financial Neutral » Positive
Ford Motor F Bear Stearns Peer Perform » Outperform
Temple-Inland TIN UBS Neutral » Buy
DOWNGRADES
Maguire Properties MPG Stifel Nicolaus Hold » Sell
Ryanair Hldgs RYAAY UBS Buy » Neutral
Applebee's APPB Oppenheimer Neutral » Sell
Aventine Renewable Energy AVR Soleil Buy » Hold
Alcatel-Lucent ALU UBS Buy » Neutral
British Amrcn Tobacco BTI Lehman Brothers Equal-weight » Underweight
Marsh McLennan MMC Citigroup Buy » Hold
Monday, September 17, 2007
Monday's 52 Week Low's
More ethanol producers make the list. Will there be an industry consolidation coming?
VSE Verasun Energy Corp 11.21
VAR Varian Med Sys Inc 38.07
THC Tenet Healthcare Corp ... 3.17
SPA Sparton Corporation 5.10
SIG Signet Group Plc 16.82
SCVL Shoe Carnival Inc 15.53
RAIL Freightcar Amer Inc 39.72
PGR The Progressive Corpo ... 18.91
PEIX Pacific Ethanol Inc 10.43
PBH Prestige Brands Hldgs Inc 10.09
MNI McClatchy Newspapers, Inc 21.23
MMC Marsh & McLennan Comp ... 24.67
MGPI Mgp Ingredients Inc 12.23
MGLN Magellan Health Svcs Inc 38.07
MCO Moodys Corp 43.05
CRUS Cirrus Logic Inc 6.30
CRAY Cray Inc 6.10
COT Cott Corp Que 9.76
CNTY Century Casinos Inc 6.41
CLDN Celadon Group Inc 13.52
CHUX O'Charley's Inc 14.56
AVR Aventine Renewable Energy 11.27
VSE Verasun Energy Corp 11.21
VAR Varian Med Sys Inc 38.07
THC Tenet Healthcare Corp ... 3.17
SPA Sparton Corporation 5.10
SIG Signet Group Plc 16.82
SCVL Shoe Carnival Inc 15.53
RAIL Freightcar Amer Inc 39.72
PGR The Progressive Corpo ... 18.91
PEIX Pacific Ethanol Inc 10.43
PBH Prestige Brands Hldgs Inc 10.09
MNI McClatchy Newspapers, Inc 21.23
MMC Marsh & McLennan Comp ... 24.67
MGPI Mgp Ingredients Inc 12.23
MGLN Magellan Health Svcs Inc 38.07
MCO Moodys Corp 43.05
CRUS Cirrus Logic Inc 6.30
CRAY Cray Inc 6.10
COT Cott Corp Que 9.76
CNTY Century Casinos Inc 6.41
CLDN Celadon Group Inc 13.52
CHUX O'Charley's Inc 14.56
AVR Aventine Renewable Energy 11.27
Goldman Sach's Earnings Preview
Goldman (GS) reports on Thursday and for a stock trading at only 8 times earnings, a blowout number could cause the stock to vault upward.
Fortunately for shareholders (I am one) the recent market turmoil that has dragged Goldman down with it, will be the very thing that enables them to exceed expectations. Financial's have been hit hard due the "subprime meltdown" (have you heard anything about it?) and rather that search for those companies that are most exposed to this market, the whole group, including Lehman (LEH), Bear Sterns (BSC) and Morgan Stanley (MS) got whacked.
Why not Goldman? Let's start with 51% of Goldman's earnings and get them out of the way. They come from overseas (and that percentage may actually be increasing) and will not be affected at all by the US mortgage market. These earnings will increase as activity abroad is surging.
The majority of Goldman's US revenues are derived from trading activities, for which the current volatility in the markets is advantageous. Consider this: Much had been made of Goldman's decision to invest $2 billion in one of it's funds in August as there was a run on hedge funds. Word is that to date that investment has seen a 30% return for Goldman. Current earnings estimates are for $4.30 to $4.50 a share.
I am looking at much closer to $5 a share ($4.80 and above). People have placed way too much emphasis on the mortgage market and it's relation to Goldman. In all reality, Goldman is a play on the global economy, not a segment of the US economy. There is good news though. Let's say they only hit the $4.30 estimate. Trading at only 8 times earnings, where is the stock going? It is practically being given away now. We recently picked up more at $176 and any additional fall from here would be anther buying opportunity. Alas, I doubt it will happen.
What is much more likely is that several months from now a whole lot of people are going to be cursing themselves wishing the had bought shares in this company at these ludicrously low prices..
Fortunately for shareholders (I am one) the recent market turmoil that has dragged Goldman down with it, will be the very thing that enables them to exceed expectations. Financial's have been hit hard due the "subprime meltdown" (have you heard anything about it?) and rather that search for those companies that are most exposed to this market, the whole group, including Lehman (LEH), Bear Sterns (BSC) and Morgan Stanley (MS) got whacked.
Why not Goldman? Let's start with 51% of Goldman's earnings and get them out of the way. They come from overseas (and that percentage may actually be increasing) and will not be affected at all by the US mortgage market. These earnings will increase as activity abroad is surging.
The majority of Goldman's US revenues are derived from trading activities, for which the current volatility in the markets is advantageous. Consider this: Much had been made of Goldman's decision to invest $2 billion in one of it's funds in August as there was a run on hedge funds. Word is that to date that investment has seen a 30% return for Goldman. Current earnings estimates are for $4.30 to $4.50 a share.
I am looking at much closer to $5 a share ($4.80 and above). People have placed way too much emphasis on the mortgage market and it's relation to Goldman. In all reality, Goldman is a play on the global economy, not a segment of the US economy. There is good news though. Let's say they only hit the $4.30 estimate. Trading at only 8 times earnings, where is the stock going? It is practically being given away now. We recently picked up more at $176 and any additional fall from here would be anther buying opportunity. Alas, I doubt it will happen.
What is much more likely is that several months from now a whole lot of people are going to be cursing themselves wishing the had bought shares in this company at these ludicrously low prices..
Monday's Upgrades and Downgrades
UPGRADES
ISIS Pharm ISIS BWS Financial Hold » Buy
Fifth Third FITB Keefe Bruyette Underperform » Mkt Perform
Breitburn Energy BBEP AG Edwards Hold » Buy
John Wiley JW.A Stifel Nicolaus Hold » Buy
United Tech UTX Bernstein Mkt Perform » Outperform
Weyerhaeuser WY Banc of America Sec Neutral » Buy
Calamos Asset CLMS Credit Suisse Neutral » Outperform
Georgia Gulf GGC Credit Suisse Underperform » Neutral
DOWNGRADES
Forest City FCEA RBC Capital Mkts Outperform » Sector Perform
Vimpel Comms VIP Bear Stearns Outperform » Peer Perform
Business Objects BOBJ First Albany Buy » Neutral
Roper Inds ROP Friedman Billings Outperform » Mkt Perform
Imclone IMCL Friedman Billings Outperform » Mkt Perform
Fluor FLR Citigroup Buy » Hold
Monday's Links
- Hysterical
- Here is a great post that compares Greenspan to Bernanke. I agree with it totally.
- If you follow commodity markets, here is a great joke
- Greenspan admits his "missed" subprime situation
R.I's AG Patrick Lynch Has Been Eating Paint Chips
When I first was alerted to this I thought the person was pulling my leg. Sadly for Rhode Island Attorney General Patrick Lynch, common sense and the image of Rhode Island, it is true.
Lynch is proposing that the three paint companies (Sherwin Williams (SHW), Millenium Holdings and NL Industries (NL)) who lost the public nuisance trial last year (it is now under appeal to the RI Supreme Court)spend $2.4 billion removing lead paint from more than half the houses and apartments in Rhode Island. It is important to note that of the dozen similar cases out there, this is the only loss to date and essentially happened because the Judge, Micheal Silverstein directed a verdict for the plaintiffs with jury instruction so biased against the defense jurors later said "there was no other way but to find but for the plaintiffs". there are also the trivial little matters of evidence being withheld by the state and the basic rules of law being pushed to the side. This verdict will not only be over turned on appeal, but I would expect public admonishments of both the judge and prosecutors when all is said and done.
The 132 page sophomoric abatement plan (here), if approved, would lead to the single biggest construction job in the history of the state. Perhaps Lynch is trying to one up the success of Boston's "Big Dig"? Please tell me you understand that is dripping with sarcasm?!?
Lynch’s office wants the three paint companies to clean up paint in 240,000 houses and apartments, 12,969 seasonal housing units, 419 child care centers and 339 elementary schools over a four-year period. It should be noted that at least in the 339 schools, the State of Rhode Island requested lead paint be used "for it's durability". No matter to Lynch.
Why is he doing this? PR for jobs in a sagging Rhodie Island economy. He is proposing 10,000 workers be hired to complete the work in an "expeditious" manner. The job of replacing over half the windows and doors in the state would require a “substantial training and outreach effort . . . to attract the needed workforce,” Lynch said.
So there we are. Let's not forget that DuPont (DD) was left off the hook here. Why? They made a nice contribution to Brown, Lynch's alma mater via their "settlement". Oh yeah, they also made another contribution to a charity they control. I blogged on how much this DuPont thing reeks before, please read it.
Now we can move on to the lunacy of the plan. When it lead paint dangerous? When it is sitting on a windowsill or door? No. It is dangerous when it is release into the air and digested. What Lynch wants to do is essentially cause the most massive release of lead into the air in history. There is no "100% effective" way to remove lead paint without releasing particles into the air. Every remediation expert will tell you the safest way is to "encapsulate it" (paint over) but that will not cost $2.4 billion, create 10,000 jobs or any headlines, so, screw it. Lynch now wants to ramp up hiring those folks who are unemployed to do the job? Will they at least be given a videotape to watch first on how to do it?
Says the report "numerous studies have shown that the monetary benefits of controlling lead far outweigh the costs". Really? does this mean Sherwin Williams will sell more paint there? I am sure it does outweigh them Patrick, especially when you consider they are not your "costs". Is this guy serious? The plan will also create some cushy $75,000 a year "supervisory" positions for some folks, maybe some friends of Lynch need more work?
The best view of it? Scott Smith, an attorney for Millennium Holdings said, "We believe the state plan is, in a word ridiculous. It is completely unprecedented, it's unworkable and it will, indeed, be harmful to the state." You mean releasing unprecedented amounts of lead into the air over Rhode Island may be harmful? Who could Lynch sue then? The workers?
For more up to date info, visit Jane Genova's Law and More
Lynch is proposing that the three paint companies (Sherwin Williams (SHW), Millenium Holdings and NL Industries (NL)) who lost the public nuisance trial last year (it is now under appeal to the RI Supreme Court)spend $2.4 billion removing lead paint from more than half the houses and apartments in Rhode Island. It is important to note that of the dozen similar cases out there, this is the only loss to date and essentially happened because the Judge, Micheal Silverstein directed a verdict for the plaintiffs with jury instruction so biased against the defense jurors later said "there was no other way but to find but for the plaintiffs". there are also the trivial little matters of evidence being withheld by the state and the basic rules of law being pushed to the side. This verdict will not only be over turned on appeal, but I would expect public admonishments of both the judge and prosecutors when all is said and done.
The 132 page sophomoric abatement plan (here), if approved, would lead to the single biggest construction job in the history of the state. Perhaps Lynch is trying to one up the success of Boston's "Big Dig"? Please tell me you understand that is dripping with sarcasm?!?
Lynch’s office wants the three paint companies to clean up paint in 240,000 houses and apartments, 12,969 seasonal housing units, 419 child care centers and 339 elementary schools over a four-year period. It should be noted that at least in the 339 schools, the State of Rhode Island requested lead paint be used "for it's durability". No matter to Lynch.
Why is he doing this? PR for jobs in a sagging Rhodie Island economy. He is proposing 10,000 workers be hired to complete the work in an "expeditious" manner. The job of replacing over half the windows and doors in the state would require a “substantial training and outreach effort . . . to attract the needed workforce,” Lynch said.
So there we are. Let's not forget that DuPont (DD) was left off the hook here. Why? They made a nice contribution to Brown, Lynch's alma mater via their "settlement". Oh yeah, they also made another contribution to a charity they control. I blogged on how much this DuPont thing reeks before, please read it.
Now we can move on to the lunacy of the plan. When it lead paint dangerous? When it is sitting on a windowsill or door? No. It is dangerous when it is release into the air and digested. What Lynch wants to do is essentially cause the most massive release of lead into the air in history. There is no "100% effective" way to remove lead paint without releasing particles into the air. Every remediation expert will tell you the safest way is to "encapsulate it" (paint over) but that will not cost $2.4 billion, create 10,000 jobs or any headlines, so, screw it. Lynch now wants to ramp up hiring those folks who are unemployed to do the job? Will they at least be given a videotape to watch first on how to do it?
Says the report "numerous studies have shown that the monetary benefits of controlling lead far outweigh the costs". Really? does this mean Sherwin Williams will sell more paint there? I am sure it does outweigh them Patrick, especially when you consider they are not your "costs". Is this guy serious? The plan will also create some cushy $75,000 a year "supervisory" positions for some folks, maybe some friends of Lynch need more work?
The best view of it? Scott Smith, an attorney for Millennium Holdings said, "We believe the state plan is, in a word ridiculous. It is completely unprecedented, it's unworkable and it will, indeed, be harmful to the state." You mean releasing unprecedented amounts of lead into the air over Rhode Island may be harmful? Who could Lynch sue then? The workers?
For more up to date info, visit Jane Genova's Law and More
Sunday, September 16, 2007
"Fast Money" for Monday
Jeff Macke recommended eBay (EBAY). Open $37.81
Guy Adami said he wanted own the Short Dow30 ETF (DOG). Open $59.31
Karen Finerman still wanted to hang on to American Standard (ASD). Open $34.83
Pete Najarian liked Rambus (RMBS). Open $17.92
FRIDAY'S RESULTS
Jeff Macke recommended shorting General Motors (GM). Open $33.29 CLOSE $34.22 Gain $.93
Guy Adami said buy the Short Dow30 ETF (DOG). Open $59.46 CLOSE $59.31 Loss $.15
Karen Finerman said buy ConocoPhillips (COP). Open $85.11 CLOSE $85.27 Gain $.16
Pete Najarian liked Sun Microsystems (JAVA) Open $5.80 CLOSE $5.73 Loss $.07
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 22-16 Gain $39.86
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 27-20 Gain $8.71
Pete Najarian= 15-14 Gain $22.39
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-3 Gain $4.69
Stacey Briere-Gilbert= 2-0 Gain $1.61
Lead Paint Litigation Update
The following is courtesy of Jane Genova's Law and More, the leading Lead Paint Litigation blog in existence.
Companies effected Sherwin Williams (SHW), DuPont (DD) and NL Industries (NL)
These are excerpts from Lexis Nexis Mealey's Litigation Report, Volume 16, Issue #11, September 2007. Documents associated with the legal matters discussed are available from Mealey's or by contacting James Cordrey, Editor, Lexis Nexis Legal News, James.cordrey@lexisnexis.com, 610-205-1125.
DISTRICT OF COLUMBIA ATTORNEY GENERAL SUES LANDLORDS
On August 16, Linda Singer, Attorney General for the District of Columbia, filed the last of 12 lawsuits in D.C. Superior Court against landlords for failure to abate lead-based paint hazards. These sought injunctive relief. Those health hazards had been discovered during Health Department inspections.
Enforcing laws against landlords has been what the former lead paint industry has been advocating for about two decades. Most states and cities already have those laws on the books. However, they are frequently not enforced. It could be effective for tort reformers to create a formal study of what factors mitigate against enforcement.
SANTA CLARA COUNTY, CALIFORNIA CONTINGENCY ARGUMENTS CONTINUE
Santa Clara County, which is appealing Judge Jack Komar's April 4th ruling against the use of contingency in public nuisance litigation, argues that federal law doesn't mandate that government attorneys be absolutely neutral, even in criminal matters. It goes further in contending that attorneys participating in public nuisance should be held to the same standard as a criminal prosecutor. According to California law, it claims, criminal prosecutors are not recused, absent showing actual bias which could deprive defendant of a fair trial.
In addition, the county on August 14 filed an opposition to defendant ARCO's request for judicial notice. The county contends that ARCO failed to follow rules of procedure in doing so.
Meanwhile, amicus curiae briefs are being filed by organizations supporting Judge Komar's ruling. Those organizations include the U.S. Chamber of Commerce, the American Tort Reform Association and, most recently, the American Chemistry Council. Essentially the amici argue that contingency arrangements with government entities are "suspect," unconstitutional and violate legal ethics. In addition, those arrangements often cause conflicts of interest, excessive fees and a "revolving door" which reduces the public's faith in government.
Since California is a trend-setting state which has an activist attorney general Jerry Brown this contingency battle is being closely watched. If the plaintiff wins its appeal then the door is opened for other public nuisance litigation, such as global warming, to move forward on a contingency basis.
OHIO SUPREME COURT AMENDS AUGUST 1 RULING ON "117," ALLOWING FILING OF REFERENDUM AGAINST EXTENSION OF PUBLIC NUISANCE TO LEAD-PAINT LITIGATION
A divided Ohio Supreme Court allowed opponents of "117" to try to obtain enough signatures on a petition to put the matter to the voters in 2008 as a referendum. The deadline for those signatures in October 30th. If voters eventually say no to this tort-reform measure, then the former lead-paint industry can be sued by the state for causing a public nuisance. This could again give momentum to such suits in other states and cities. The "117" opponents are positioning their campaign as one for consumer rights.
CITY OF MILWAUKEE PRESENTS ORAL ARGUMENTS FOR CHANGE OF DEFENSE VERDICT OR NEW TRIAL
On September 6th, the plaintiff City of Milwaukee gave oral arguments that the defense verdict should be changed or a new trial granted. One primary argument focused on jury instructions. Defendant NL Industries (NL), of course, argued against this, contending that the court properly instructed the jury that Milawukee was required to prove that its conduct was intentional and unreasonable.
A decision is anticipated by the end of September. If the judge does not grant the city's request, sources say an appeal is certain.
This litigation, though, is small doings compared to the upcoming "Thomas" trial which can set traditional liability concepts on their ear. All business, not only the former lead paint industry, is watching how this plays out. Opening arguments start October 4. A combination of Wisconsin Supreme Court rulings and Governor Doyle's veto of tort reform had made this state as potentially a hot zone for anti-business litigation as California. Some contend "Thomas" could be more significant in its implications for business as well as the lead paint industry than has been the infamous Rhode Island Lead Paint Trial II.
Other items from Mealey's Lead Litigation Report will be discussed in later posts on this blog. I wish to thank James Cordrey, Editor of LexisNexis Legal News, for this information. He can be reached at James.Cordrey@lexisnexus.com or 610-205-1125.
Companies effected Sherwin Williams (SHW), DuPont (DD) and NL Industries (NL)
These are excerpts from Lexis Nexis Mealey's Litigation Report, Volume 16, Issue #11, September 2007. Documents associated with the legal matters discussed are available from Mealey's or by contacting James Cordrey, Editor, Lexis Nexis Legal News, James.cordrey@lexisnexis.com, 610-205-1125.
DISTRICT OF COLUMBIA ATTORNEY GENERAL SUES LANDLORDS
On August 16, Linda Singer, Attorney General for the District of Columbia, filed the last of 12 lawsuits in D.C. Superior Court against landlords for failure to abate lead-based paint hazards. These sought injunctive relief. Those health hazards had been discovered during Health Department inspections.
Enforcing laws against landlords has been what the former lead paint industry has been advocating for about two decades. Most states and cities already have those laws on the books. However, they are frequently not enforced. It could be effective for tort reformers to create a formal study of what factors mitigate against enforcement.
SANTA CLARA COUNTY, CALIFORNIA CONTINGENCY ARGUMENTS CONTINUE
Santa Clara County, which is appealing Judge Jack Komar's April 4th ruling against the use of contingency in public nuisance litigation, argues that federal law doesn't mandate that government attorneys be absolutely neutral, even in criminal matters. It goes further in contending that attorneys participating in public nuisance should be held to the same standard as a criminal prosecutor. According to California law, it claims, criminal prosecutors are not recused, absent showing actual bias which could deprive defendant of a fair trial.
In addition, the county on August 14 filed an opposition to defendant ARCO's request for judicial notice. The county contends that ARCO failed to follow rules of procedure in doing so.
Meanwhile, amicus curiae briefs are being filed by organizations supporting Judge Komar's ruling. Those organizations include the U.S. Chamber of Commerce, the American Tort Reform Association and, most recently, the American Chemistry Council. Essentially the amici argue that contingency arrangements with government entities are "suspect," unconstitutional and violate legal ethics. In addition, those arrangements often cause conflicts of interest, excessive fees and a "revolving door" which reduces the public's faith in government.
Since California is a trend-setting state which has an activist attorney general Jerry Brown this contingency battle is being closely watched. If the plaintiff wins its appeal then the door is opened for other public nuisance litigation, such as global warming, to move forward on a contingency basis.
OHIO SUPREME COURT AMENDS AUGUST 1 RULING ON "117," ALLOWING FILING OF REFERENDUM AGAINST EXTENSION OF PUBLIC NUISANCE TO LEAD-PAINT LITIGATION
A divided Ohio Supreme Court allowed opponents of "117" to try to obtain enough signatures on a petition to put the matter to the voters in 2008 as a referendum. The deadline for those signatures in October 30th. If voters eventually say no to this tort-reform measure, then the former lead-paint industry can be sued by the state for causing a public nuisance. This could again give momentum to such suits in other states and cities. The "117" opponents are positioning their campaign as one for consumer rights.
CITY OF MILWAUKEE PRESENTS ORAL ARGUMENTS FOR CHANGE OF DEFENSE VERDICT OR NEW TRIAL
On September 6th, the plaintiff City of Milwaukee gave oral arguments that the defense verdict should be changed or a new trial granted. One primary argument focused on jury instructions. Defendant NL Industries (NL), of course, argued against this, contending that the court properly instructed the jury that Milawukee was required to prove that its conduct was intentional and unreasonable.
A decision is anticipated by the end of September. If the judge does not grant the city's request, sources say an appeal is certain.
This litigation, though, is small doings compared to the upcoming "Thomas" trial which can set traditional liability concepts on their ear. All business, not only the former lead paint industry, is watching how this plays out. Opening arguments start October 4. A combination of Wisconsin Supreme Court rulings and Governor Doyle's veto of tort reform had made this state as potentially a hot zone for anti-business litigation as California. Some contend "Thomas" could be more significant in its implications for business as well as the lead paint industry than has been the infamous Rhode Island Lead Paint Trial II.
Other items from Mealey's Lead Litigation Report will be discussed in later posts on this blog. I wish to thank James Cordrey, Editor of LexisNexis Legal News, for this information. He can be reached at James.Cordrey@lexisnexus.com or 610-205-1125.
Top Stories This Week at Value Investing News
Saturday, September 15, 2007
Weekend Reading
- Adam Warner is rapidly creating the number one "Best of The Blogsphere" column out there with his "Doing it Bloggystyle" aggregation at Minyanville.com . I read it every time he publishes and recommend you do too. He also has his own blog here.
- Jim Kingsland has a great article here
- Slavery's effect on Africa
- Eric Chesire has a great take on McDonald's with links to some very informative sites, great job Eric
This Weeks Insider Buys
This Weeks Dividend Hikes of Note
Friday, September 14, 2007
Friday's 52 Week Low List
Ethanol makers are showing up now...
WOS Wolseley Plc 18.66
VSE Verasun Energy Corp 11.92
PEIX Pacific Ethanol Inc 10.77
PAGI Pemco Aviation Inc 5.50
SIG Signet Group Plc 17.37
SHOO Steven Madden Ltd 18.76
NLS Nautilus Inc 8.28
HOG Harley-Davidson, Inc 46.50
FUN Cedar Fair, L.P. 23.84
CLDN Celadon Group Inc 13.73
BRN Barnwell Industries, Inc 14.95
BOW Bowater Incorporated 14.70
AVR Aventine Renewable Energy 12.10
WOS Wolseley Plc 18.66
VSE Verasun Energy Corp 11.92
PEIX Pacific Ethanol Inc 10.77
PAGI Pemco Aviation Inc 5.50
SIG Signet Group Plc 17.37
SHOO Steven Madden Ltd 18.76
NLS Nautilus Inc 8.28
HOG Harley-Davidson, Inc 46.50
FUN Cedar Fair, L.P. 23.84
CLDN Celadon Group Inc 13.73
BRN Barnwell Industries, Inc 14.95
BOW Bowater Incorporated 14.70
AVR Aventine Renewable Energy 12.10
Dow / Monsanto Announcement Call
"Today's announcement is one of many more to come". Andrew Liveris
Here are the key traits from Smartrax:
Durability.
-Combining multiple genes in a single package helps ensure sustainable insect protection and weed control year after year:
-Combined modes of action for insect protection guard against the development of insect resistance
-Combined herbicide tolerant traits that offer multiple modes of action for weed control
Performance.
-The complementary nature of the trait platforms converge to offer superior, season-long performance to farmers, notably:
-Enhanced control of a broader spectrum of above-and below-ground insects
-Most comprehensive protection against established and emerging secondary pests
-The industry’s best weed control system
US Corn Market Goal
Dow (DOW) looks to become the #3 US corn player with this deal. Currently they have 1% of the US market and Monsanto (MON) has 25% currently. DuPont's (DD) Pioneer is #2 with 10%. For Dow to become #3, this would take their market share from the current 1% to well over 5% of the US market (minimum 4.5 million acres of corn planting based on 2007 planting figures). Liveris did say he "has no doubt" Dow Agro has the ability to "be better than #3".
Dow did say they "are disproportionally strong in our technology vs our market share in the seed business." They expect this agreement with change that. Dow said "this will be the ultimate technology in corn."
Dow sees no competitors coming to market with anything similar before them.
Liveris was asked about Q3 earnings for the company as a whole and did touch on it. His answer was rather "cautiously optimistic" as he said. He did say that US energy policy is hurting the US competitive position in the world. There is enough natural gas off the US shore to power the US economy for 100 years yet current policies prohibits it's extraction.
Wonder why jobs are going overseas?
A full PDF. of the presentation is available here
Here are the key traits from Smartrax:
Durability.
-Combining multiple genes in a single package helps ensure sustainable insect protection and weed control year after year:
-Combined modes of action for insect protection guard against the development of insect resistance
-Combined herbicide tolerant traits that offer multiple modes of action for weed control
Performance.
-The complementary nature of the trait platforms converge to offer superior, season-long performance to farmers, notably:
-Enhanced control of a broader spectrum of above-and below-ground insects
-Most comprehensive protection against established and emerging secondary pests
-The industry’s best weed control system
US Corn Market Goal
Dow (DOW) looks to become the #3 US corn player with this deal. Currently they have 1% of the US market and Monsanto (MON) has 25% currently. DuPont's (DD) Pioneer is #2 with 10%. For Dow to become #3, this would take their market share from the current 1% to well over 5% of the US market (minimum 4.5 million acres of corn planting based on 2007 planting figures). Liveris did say he "has no doubt" Dow Agro has the ability to "be better than #3".
Dow did say they "are disproportionally strong in our technology vs our market share in the seed business." They expect this agreement with change that. Dow said "this will be the ultimate technology in corn."
Dow sees no competitors coming to market with anything similar before them.
Liveris was asked about Q3 earnings for the company as a whole and did touch on it. His answer was rather "cautiously optimistic" as he said. He did say that US energy policy is hurting the US competitive position in the world. There is enough natural gas off the US shore to power the US economy for 100 years yet current policies prohibits it's extraction.
Wonder why jobs are going overseas?
A full PDF. of the presentation is available here
Dow & Monsanto Venture: Finally!
On May 25th I posted "Dow has long coveted Dupont's (DD) seed business an the offer was an attempt to get it. Since that seems to have failed, could a Monsanto (MON) joint venture be coming? It would be a way for Dow (DOW) to get heavily into the seed business and provide Monsanto cheaper building blocks for its products" The answer is apparently ..YES.
Andrew Liveras announced this morning on CNBC that Dow's (DOW) AgroScience Division and Monsanto (MON) have collaborated to create SmartStax™, the most complete yield protection ever made available in a corn hybrid It features eight different Dow AgroSciences and Monsanto herbicide tolerance and insect-protection genes and is expected to be available to corn growers by the end of the decade (next year and a half). The multi-gene product will protect the corn crop against above- and below-ground insects and also guards the crop from being damaged by certain weed control chemicals. It will be the only seed on the market with this level of protection.
Dow and Monsanto also reached a 10-year agreement to exchange lines of corn in the United States, which will allow the companies to create additional hybrid seeds. The agreement is particularly beneficial to Dow, which is a relatively small but rapidly growing player in the corn seed market. Dow AgroSciences head Jerome Peribere said, "As we do have small market share, this is aiming at boosting essentially our part of the hybrid market share," said
Dow will generate new royalty income from the agreement and this provides an important platform for future business growth. SmartStax will be incorporated into new, higher-yielding hybrid seed combinations and Dow will stack it with the other cutting-edge trait technologies currently under development.
The world's demand for is almost unquenchable currently. Any seed that provides additional yield for farmers will be hugely profitable for the farmer and is practically guaranteed success. Monsanto's recent 71% earnings groth the last quarter ought to proof enough of that. By partnering with the #1 seed company, Monsanto, Dow has assured success with this venture.
Then Liveris did say something that made me laugh..."This agreement provides a further endorsement of our strategy: we're being patient, we're being disciplined and we're investing in both organic opportunities and targeted acquisitions as we deliver on our commitment to become .a predictable, long-term earnings growth company."
Why did I laugh, he could have said that for everything they have done the past year and a half... gotta love it
There is a call today at 10:30. I will post any additional notables..
Andrew Liveras announced this morning on CNBC that Dow's (DOW) AgroScience Division and Monsanto (MON) have collaborated to create SmartStax™, the most complete yield protection ever made available in a corn hybrid It features eight different Dow AgroSciences and Monsanto herbicide tolerance and insect-protection genes and is expected to be available to corn growers by the end of the decade (next year and a half). The multi-gene product will protect the corn crop against above- and below-ground insects and also guards the crop from being damaged by certain weed control chemicals. It will be the only seed on the market with this level of protection.
Dow and Monsanto also reached a 10-year agreement to exchange lines of corn in the United States, which will allow the companies to create additional hybrid seeds. The agreement is particularly beneficial to Dow, which is a relatively small but rapidly growing player in the corn seed market. Dow AgroSciences head Jerome Peribere said, "As we do have small market share, this is aiming at boosting essentially our part of the hybrid market share," said
Dow will generate new royalty income from the agreement and this provides an important platform for future business growth. SmartStax will be incorporated into new, higher-yielding hybrid seed combinations and Dow will stack it with the other cutting-edge trait technologies currently under development.
The world's demand for is almost unquenchable currently. Any seed that provides additional yield for farmers will be hugely profitable for the farmer and is practically guaranteed success. Monsanto's recent 71% earnings groth the last quarter ought to proof enough of that. By partnering with the #1 seed company, Monsanto, Dow has assured success with this venture.
Then Liveris did say something that made me laugh..."This agreement provides a further endorsement of our strategy: we're being patient, we're being disciplined and we're investing in both organic opportunities and targeted acquisitions as we deliver on our commitment to become .a predictable, long-term earnings growth company."
Why did I laugh, he could have said that for everything they have done the past year and a half... gotta love it
There is a call today at 10:30. I will post any additional notables..
FRIDAY'S LINKS TO VISIT
- This is great. Value Investing is so hard because is chiefly depends on doing, nothing, and that is against human nature
- It is unfortunate that such a brilliant mind has turned into such a partisan hack, it is what he will be remembered for.
- These folks should be embarrassed , telling us what we already know.
- Quite possibly the dumbest article ever written.
- Buybacks vs. dividends. This is a good article. It should also be noted Buffett has always favored buybacks
Dow Continues Acquisitions
Dow Chemical(DOW) said on Thursday that its Dow Epoxy unit agreed to acquire three companies to expand its epoxy systems business.
The company agreed to buy UPPC AG in Germany, and POLY-CARB Inc and GNS Technologies here in the US. Terms of the transactions were not disclosed each acquisition is expected to close within 30 to 45 days. These acquisitions are perfectly consistent with Dow's announced strategy to invest in its downstream performance businesses to further distance itself from the cyclical commodity chemicals business. For Dow Epoxy, the acquisitions will accelerate the growth and geographic expansion of its new Dow Epoxy Systems business unit, launched earlier this year.
About the companies(from their websites)
GNS Technologies: Specializes in providing high performance products and customized systems to thermoset polymer markets with a focus on cross-linking polymers such as epoxies, polyurethanes, polyureas, etc. used for civil engineering, industrial maintenance and steel structure coating applications. Additional info about GNS Technologies at www.gnstechnologies.com.
POLY-CARB Inc.: Provides epoxy products and systems in the following industries: highway bridge restoration and waterproofing, parking structures restoration and waterproofing, pavement striping and delineation, industrial floor surfacing and maintenance, corrosion control and tank linings, structural adhesives, and coatings and grouts. Additional info about POLY- CARB at www.poly-carb.com.
UPPC AG: UPPC AG is a leading systems and hardeners supplier deeply seated in the civil engineering, specialty coatings and composites industries, as well as select specialty markets. The company is headquartered in Baltringen, Germany and was established in 1986. Additional info about UPPC AG at www.uppc.de.
Big deal? Not huge but continued affirmation that Dow is on a very disciplined path.
Oh yeah, in case you did not hear it, Dow also declared a dividend of 42 cents per share today (384th consecutive), payable October 30, 2007, to shareholders of record on September 28, 2007. This gives Dow an annual yield at this rate of a solid 4%, nice. Since 1912, Dow has paid its shareholders cash dividends every quarter and has either maintained or increased the quarterly dividend amount throughout that time.
The company agreed to buy UPPC AG in Germany, and POLY-CARB Inc and GNS Technologies here in the US. Terms of the transactions were not disclosed each acquisition is expected to close within 30 to 45 days. These acquisitions are perfectly consistent with Dow's announced strategy to invest in its downstream performance businesses to further distance itself from the cyclical commodity chemicals business. For Dow Epoxy, the acquisitions will accelerate the growth and geographic expansion of its new Dow Epoxy Systems business unit, launched earlier this year.
About the companies(from their websites)
GNS Technologies: Specializes in providing high performance products and customized systems to thermoset polymer markets with a focus on cross-linking polymers such as epoxies, polyurethanes, polyureas, etc. used for civil engineering, industrial maintenance and steel structure coating applications. Additional info about GNS Technologies at www.gnstechnologies.com.
POLY-CARB Inc.: Provides epoxy products and systems in the following industries: highway bridge restoration and waterproofing, parking structures restoration and waterproofing, pavement striping and delineation, industrial floor surfacing and maintenance, corrosion control and tank linings, structural adhesives, and coatings and grouts. Additional info about POLY- CARB at www.poly-carb.com.
UPPC AG: UPPC AG is a leading systems and hardeners supplier deeply seated in the civil engineering, specialty coatings and composites industries, as well as select specialty markets. The company is headquartered in Baltringen, Germany and was established in 1986. Additional info about UPPC AG at www.uppc.de.
Big deal? Not huge but continued affirmation that Dow is on a very disciplined path.
Oh yeah, in case you did not hear it, Dow also declared a dividend of 42 cents per share today (384th consecutive), payable October 30, 2007, to shareholders of record on September 28, 2007. This gives Dow an annual yield at this rate of a solid 4%, nice. Since 1912, Dow has paid its shareholders cash dividends every quarter and has either maintained or increased the quarterly dividend amount throughout that time.
Friday's Upgrades / Downgrades
UPGRADES
FTD Group FTD Matrix Research Buy » Strong Buy
Unilever PLC UL Lehman Brothers Underweight » Equal-weight
Gateway GTW Citigroup Sell » Hold
MeadWestvaco MWV Credit Suisse Neutral » Outperform
Prudential PRU Credit Suisse Neutral » Outperform
Merck MRK Banc of America Sec Neutral » Buy
Thornburg Mortg TMA Piper Jaffray Underperform » Market Perform
Infineon IFX Lehman Brothers Equal-weight » Overweight
Thornburg Mortg TMA Deutsche Securities Sell » Hold
DOWNGRADES
Syntax-Brillian BRLC Canaccord Adams Buy » Hold
American Community Bancshares ACBA Stifel Nicolaus Buy » Hold
Syntax-Brillian BRLC Collins Stewart Buy » Market Perform
STMicroelectronics STM Lehman Brothers Overweight » Underweight
PepsiAmericas PAS HSBC Securities Neutral » Underweight
Buckeye Tech BKI Citigroup Buy » Hold
Biogen Idec BIIB UBS Neutral » Sell
"Fast Money" for Friday
FRIDAY'S PICKS
Jeff Macke recommended shorting General Motors (GM). Open $33.29
Guy Adami said buy the Short Dow30 ETF (DOG). Open 59.46
Karen Finerman said buy ConocoPhillips (COP). Open $85.11
Pete Najarian liked Sun Microsystems (JAVA) Open $5.80
THURSDAY'S RESULTS
Jeff Macke recommended Short Dow30 ProShares (DOG) as a bet against The Dow. Open $59.92 Close $59.46 Loss $.46
Guy Adami likes Zimmer Holdings (ZMH). Open $81.02 Close $82.49 Gain $1.47
Karen Finerman prefers Johnson & Johnson (JNJ). Open $62.51 Close $63.11 Gain $.60
Pete Najarian says St. Jude Medical (STJ) is a buy. Open $46.83 Close $45.94 Loss $.89
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 22-15 Gain $40.01
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 26-20 Gain $7.78
Pete Najarian= 15-13 Gain $22.46
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 8-3 Gain $4.54
Stacey Briere-Gilbert= 2-0 Gain $1.61
Thursday, September 13, 2007
Thursday's 52 Week lows
WMAR West Marine Inc 11.35
WCC Wesco Intl Inc 41.75
SEH Spartech Corporation 17.51
SEED Origin Agritech Limited 6.76
RYL The Ryland Group, Inc 24.31
RT Ruby Tuesday, Inc. (G ... 20.44
NT Nortel Networks Corp New 16.45
LCRY LeCroy Corporation 7.10
LANC Lancaster Colony Corp ... 36.59
LAB Labranche & Co Inc 4.62
KKD Krispy Kreme Doughnut ... 3.10
HOG Harley-Davidson, Inc 46.77
DF Dean Foods Co New 25.32
ALU Alcatel-Lucent 9.16
Thursday's Links To Visit
- Absolutely, no free rides...
- Goldman goes bargain hunting
- Very Interesting take on YouTube's impact on Google
- More folks who see through the fog out there
- Like I said
The Greenspan Myth: A Must Read By Luskin
Please read Donald Luskin's op-ed here. For those who do wish to leave, it is reprinted below.
"What would the Maestro do?"; As nervous markets hang on every word of Federal Reserve Chairman Ben Bernanke, trying to divine whether he will lower interest rates in response to the current turmoil in credit markets, comparisons to his illustrious predecessor Alan Greenspan are inevitable.
Such comparisons can also be invidious, and shouldn't influence what Mr. Bernanke does now. Mr. Greenspan is fondly remembered for his role in stewarding markets through the stock crash of 1987, the Long Term Capital Management crisis of 1998, the collapse of the tech bubble in early 2001, and the aftermath of the terrorist attacks of September 2001. Today he enjoys a reputation for having moved swiftly and decisively -- "pre-emptively" it is often said now -- to help the markets out of those crises.
But the truth is quite different. Mr. Greenspan is fortunate indeed to be remembered as such a decisive leader, because in fact his reactions to some of those crises were quite tardy, and were seen by most market participants at the time as being too little, too late.
Let's look at the Long Term Capital Management crisis of 1998, an event in many ways analogous to today's situation. Then the markets were thrown into turmoil by emerging market currency devaluations and Russia's default on its sovereign debt, much as markets have recently been rocked by defaults in subprime mortgages. As a consequence, then as now, the solvency of hedge funds and the investment banks that sponsored them were threatened.
By the time LTCM had collapsed -- and had to be bailed out by a private consortium of banks brought together by the New York Fed's William McDonough, not Mr. Greenspan -- the S&P 500 had already fallen by almost 20%, and staged a modest recovery from there. Mr. Greenspan had done precisely nothing with interest rates.
The Federal Open Market Committee made a 25 basis-point rate cut the day after the LTCM bailout was announced in late September. Markets were not impressed. Credit markets remained frozen much as they have been in the current crisis, and stocks fell to new lows over the first 10 days of October.
Laurence Meyer, a Federal Reserve Board governor at the time, recalls in his 2004 book, A Term at the Fed, that "Rather than calming the markets, the small size of the rate cut raised doubts that the Fed appreciated the severity of the problem . . . Greenspan was now under attack."
In mid-October, Mr. Greenspan cut rates another 25 basis points in a surprise inter-meeting move. According to Bob Woodward in his Greenspan biography Maestro, Mr. Greenspan was reluctant to make that move but was pressured by Mr. McDonough and then Fed Vice Chairman Alice Rivlin.
By the end of 1998 there was another 25 basis-point cut at a regular FOMC meeting, the market turmoil passed and Mr. Greenspan ended up on the cover of Time as chairman of the "Committee to Save the World." That's how he's remembered today.
Mr. Greenspan is also remembered for cutting interest rates aggressively as the tech bubble burst in early 2001, starting on Jan. 3 with a surprise inter-meeting cut of 50 basis points. In his book, Mr. Meyer writes that Mr. Greenspan "had decided that the Fed should be seen making a deliberately anticipatory move -- one that would not be viewed as a late response to a rapidly deteriorating situation."
Alan Greenspan got his wish in terms of how history would remember him, but the reality is that the economy had already rolled over. By the time Mr. Greenspan made his "anticipatory" cut, the S&P 500 had already fallen almost 16% from its highs the previous September.
And when the cut was announced, the relief in the markets was fleeting. Stocks stabilized for several weeks, but fell to new lows in mid-February. They were destined to fall nearly an additional 40% from there, despite no less than 11 more rate cuts -- with even more to come after stocks bottomed in late 2002. So much for "anticipatory."
Mr. Greenspan indeed did cut rates quickly in the aftermath of the stock crash of 1987 and the terrorist attacks of September 2001. That's because both those extraordinary and highly public events were seen by the Fed as being very likely to depress overall economic activity, not because distressed markets themselves needed to be bailed out.
To help the markets in those crises, the Fed opened its checkbook to provide the liquidity necessary for transactions to clear and credit to endure despite the chaos. That's precisely what Mr. Bernanke has already done in the present turmoil, both through a very high volume of ordinary open market transactions and a liberalized discount-window lending policy.
In that sense, Mr. Bernanke has already acted more pre-emptively than Mr. Greenspan did in 1998, and similarly to the way Mr. Greenspan did in 1987 and September 2001. And he has done so despite the fact that, judging by the stock market's sturdy performance through the current turmoil -- now down only about 5% from all-time highs -- today's crisis is less threatening than those earlier ones.
It's noteworthy that the enormous volume of Fed open-market operations in the fed funds markets over the last month has been completed at the current rate target of 5.25%. This suggests that no lower rate is required to meet the needs of the banking system. And the discount window has scarcely been used at all, which suggests that the system is not in quite the state of distress that has been advertised.
So why would Mr. Bernanke cut the fed funds rate, unless he became convinced that the overall economy was highly likely to be damaged by the present market turmoil? That was the call Mr. Greenspan made quickly after the 1987 crash and the 2001 attacks, and slowly in 1998 and early 2001. Where's the evidence to support Mr. Bernanke making such a call today? Almost all the evidence is that the economy is remarkably robust, credit crisis or no credit crisis, housing slowdown or no housing slowdown.
Yes, we've had one disappointing jobs report. But with jobs at a level historically regarded as "full employment," must we hurry to cut rates? By historical standards, rates are already low. Since the 1970s, no easing cycle, and no recession, has ever begun when the real funds rate was as low as it is today.
Yet Mr. Bernanke remains under tremendous pressure from markets to cut rates. The prices observed in short-term fixed-income and interest-rate futures markets clearly imply that the markets expect a cut -- and the balance of pundit commentary is calling for one.
If the principled case can be made that a robust economy is significantly at risk, then Mr. Bernanke should do what the markets and the pundits demand -- provided that he sees a rate cut as consistent with his mission to preserve price stability.
But the idea that he must act immediately, in order to be seen as a worthy successor to the "Maestro," is unfair to Mr. Bernanke and too generous to Mr. Greenspan. The current Fed chief deserves our admiration for having acted quickly and appropriately so far, and resisted the temptation to over-react.
"What would the Maestro do?"; As nervous markets hang on every word of Federal Reserve Chairman Ben Bernanke, trying to divine whether he will lower interest rates in response to the current turmoil in credit markets, comparisons to his illustrious predecessor Alan Greenspan are inevitable.
Such comparisons can also be invidious, and shouldn't influence what Mr. Bernanke does now. Mr. Greenspan is fondly remembered for his role in stewarding markets through the stock crash of 1987, the Long Term Capital Management crisis of 1998, the collapse of the tech bubble in early 2001, and the aftermath of the terrorist attacks of September 2001. Today he enjoys a reputation for having moved swiftly and decisively -- "pre-emptively" it is often said now -- to help the markets out of those crises.
But the truth is quite different. Mr. Greenspan is fortunate indeed to be remembered as such a decisive leader, because in fact his reactions to some of those crises were quite tardy, and were seen by most market participants at the time as being too little, too late.
Let's look at the Long Term Capital Management crisis of 1998, an event in many ways analogous to today's situation. Then the markets were thrown into turmoil by emerging market currency devaluations and Russia's default on its sovereign debt, much as markets have recently been rocked by defaults in subprime mortgages. As a consequence, then as now, the solvency of hedge funds and the investment banks that sponsored them were threatened.
By the time LTCM had collapsed -- and had to be bailed out by a private consortium of banks brought together by the New York Fed's William McDonough, not Mr. Greenspan -- the S&P 500 had already fallen by almost 20%, and staged a modest recovery from there. Mr. Greenspan had done precisely nothing with interest rates.
The Federal Open Market Committee made a 25 basis-point rate cut the day after the LTCM bailout was announced in late September. Markets were not impressed. Credit markets remained frozen much as they have been in the current crisis, and stocks fell to new lows over the first 10 days of October.
Laurence Meyer, a Federal Reserve Board governor at the time, recalls in his 2004 book, A Term at the Fed, that "Rather than calming the markets, the small size of the rate cut raised doubts that the Fed appreciated the severity of the problem . . . Greenspan was now under attack."
In mid-October, Mr. Greenspan cut rates another 25 basis points in a surprise inter-meeting move. According to Bob Woodward in his Greenspan biography Maestro, Mr. Greenspan was reluctant to make that move but was pressured by Mr. McDonough and then Fed Vice Chairman Alice Rivlin.
By the end of 1998 there was another 25 basis-point cut at a regular FOMC meeting, the market turmoil passed and Mr. Greenspan ended up on the cover of Time as chairman of the "Committee to Save the World." That's how he's remembered today.
Mr. Greenspan is also remembered for cutting interest rates aggressively as the tech bubble burst in early 2001, starting on Jan. 3 with a surprise inter-meeting cut of 50 basis points. In his book, Mr. Meyer writes that Mr. Greenspan "had decided that the Fed should be seen making a deliberately anticipatory move -- one that would not be viewed as a late response to a rapidly deteriorating situation."
Alan Greenspan got his wish in terms of how history would remember him, but the reality is that the economy had already rolled over. By the time Mr. Greenspan made his "anticipatory" cut, the S&P 500 had already fallen almost 16% from its highs the previous September.
And when the cut was announced, the relief in the markets was fleeting. Stocks stabilized for several weeks, but fell to new lows in mid-February. They were destined to fall nearly an additional 40% from there, despite no less than 11 more rate cuts -- with even more to come after stocks bottomed in late 2002. So much for "anticipatory."
Mr. Greenspan indeed did cut rates quickly in the aftermath of the stock crash of 1987 and the terrorist attacks of September 2001. That's because both those extraordinary and highly public events were seen by the Fed as being very likely to depress overall economic activity, not because distressed markets themselves needed to be bailed out.
To help the markets in those crises, the Fed opened its checkbook to provide the liquidity necessary for transactions to clear and credit to endure despite the chaos. That's precisely what Mr. Bernanke has already done in the present turmoil, both through a very high volume of ordinary open market transactions and a liberalized discount-window lending policy.
In that sense, Mr. Bernanke has already acted more pre-emptively than Mr. Greenspan did in 1998, and similarly to the way Mr. Greenspan did in 1987 and September 2001. And he has done so despite the fact that, judging by the stock market's sturdy performance through the current turmoil -- now down only about 5% from all-time highs -- today's crisis is less threatening than those earlier ones.
It's noteworthy that the enormous volume of Fed open-market operations in the fed funds markets over the last month has been completed at the current rate target of 5.25%. This suggests that no lower rate is required to meet the needs of the banking system. And the discount window has scarcely been used at all, which suggests that the system is not in quite the state of distress that has been advertised.
So why would Mr. Bernanke cut the fed funds rate, unless he became convinced that the overall economy was highly likely to be damaged by the present market turmoil? That was the call Mr. Greenspan made quickly after the 1987 crash and the 2001 attacks, and slowly in 1998 and early 2001. Where's the evidence to support Mr. Bernanke making such a call today? Almost all the evidence is that the economy is remarkably robust, credit crisis or no credit crisis, housing slowdown or no housing slowdown.
Yes, we've had one disappointing jobs report. But with jobs at a level historically regarded as "full employment," must we hurry to cut rates? By historical standards, rates are already low. Since the 1970s, no easing cycle, and no recession, has ever begun when the real funds rate was as low as it is today.
Yet Mr. Bernanke remains under tremendous pressure from markets to cut rates. The prices observed in short-term fixed-income and interest-rate futures markets clearly imply that the markets expect a cut -- and the balance of pundit commentary is calling for one.
If the principled case can be made that a robust economy is significantly at risk, then Mr. Bernanke should do what the markets and the pundits demand -- provided that he sees a rate cut as consistent with his mission to preserve price stability.
But the idea that he must act immediately, in order to be seen as a worthy successor to the "Maestro," is unfair to Mr. Bernanke and too generous to Mr. Greenspan. The current Fed chief deserves our admiration for having acted quickly and appropriately so far, and resisted the temptation to over-react.
Citi Working On A Big Deal?
Last December, CITI (C) CEO Charles Prince admitted his frustration with the lack of movement in the bank’s share price and defended his strategy of organic growth and targeted international acquisitions. Public dissatisfaction from shareholders including the bank’s largest investor, Saudi Arabia’s Prince Alwaleed bin Talal, to improve the bank’s performance had many speculating Prince would soon be "free to pursue other opportunities".
In July, Citi created unit to search the market for potential targets after striking several deals in Europe and elsewhere in recent months to reduce its dependence on the US consumer business.
In the past year Citi acquired UK internet bank Egg and investment manager Quilter, as well as a 20% stake in Turkey’s Akbank. Outside the UK, Citi acquired Old Lane, the US hedge fund run by former Morgan Stanley banker Vikram Pandit, and Nikko Cordial, the Japanese brokerage.
Now word comes that Lewis Kaden, former vice-chairman and chief administrative officer at Citi, has been given a new role to “work closely” with Prince on strategic opportunities as the bank steps up its focus in this area. Kaden joined Citi in 2005 from law firm Davis Polk & Wardwell, where he was a partner whose practice included corporate governance and mergers and acquisitions.
Rumors are that Citi is working on larger international deals and the Kaden move only gives more validity to them. This would be the time to get deals done. Valuations of financial firms of all types have been decimated the past month and a half and valuations are ripe for deals in all sectors of the industry as witnessed by Bank of America's (BAC) investment in Countrywide (CFC).
Citi's share price has been stagnant for over a year now and Prince needs to do something soon or he will be "free" so to speak. He is on borrowed time.
In July, Citi created unit to search the market for potential targets after striking several deals in Europe and elsewhere in recent months to reduce its dependence on the US consumer business.
In the past year Citi acquired UK internet bank Egg and investment manager Quilter, as well as a 20% stake in Turkey’s Akbank. Outside the UK, Citi acquired Old Lane, the US hedge fund run by former Morgan Stanley banker Vikram Pandit, and Nikko Cordial, the Japanese brokerage.
Now word comes that Lewis Kaden, former vice-chairman and chief administrative officer at Citi, has been given a new role to “work closely” with Prince on strategic opportunities as the bank steps up its focus in this area. Kaden joined Citi in 2005 from law firm Davis Polk & Wardwell, where he was a partner whose practice included corporate governance and mergers and acquisitions.
Rumors are that Citi is working on larger international deals and the Kaden move only gives more validity to them. This would be the time to get deals done. Valuations of financial firms of all types have been decimated the past month and a half and valuations are ripe for deals in all sectors of the industry as witnessed by Bank of America's (BAC) investment in Countrywide (CFC).
Citi's share price has been stagnant for over a year now and Prince needs to do something soon or he will be "free" so to speak. He is on borrowed time.
Wal-Mart's Cutback Curious
Lost in the chatter about the recent Wal-Mart (WMT) announcement that August sales results exceeded its forecast as well as those of most analysts was that they now aim to spend less than the $15.5 billion it put aside for this year's capital spending on building and expanding stores.
In June, Wal-Mart cut the capex forecast to $15.5 billion from $17 billion as it slashed by about 1/3 the number of stores it expects to add this year. Investors had pressured Wal-Mart to cut back on its relentless expansion in favor of bolstering the performance of its existing stores, buying back stock and increasing the dividend.
There is the albeit very brief backround. Why is this interesting? Recent rumors have had Wal-Mart possibly shopping for acquisitions in the US. By further cutting the current capex plans, this may be a move to retain cash for an upcoming purchase of another retailer either in the food or clothing arena. Last month I posted a few thoughts on the subject.
Also, Wal-Mart has committed to a $15 billion share repurchase program and the last quarter completed roughly $1 billion of that neither thrilling or disappointing investors. With the stock at near decade lows, the company may be cutting spending in order to purchase shares by the truckload at these prices to "thrill" the same investors at the next earnings release.
Now, what would we rather have? For me the best scenario here would be further cutting of the capex plans and a bunch more of the repurchase plans. There are few targets out there that Wal-Mart could not easily swallow should they desire, the question is will they? I am inclined to think not. If I had to bet (and being a recent shareholder I guess I am), I would wager that Wal-Mart is buying every share it can get it's hands on at these prices and to be honest, I am fine with that. After the last earnings release I lamented that Wal-Mart had the cash to buy more shares and did not, turning what could have been a great release into a bit of a disappointment.
My guess is they will not make the same mistake twice...
In June, Wal-Mart cut the capex forecast to $15.5 billion from $17 billion as it slashed by about 1/3 the number of stores it expects to add this year. Investors had pressured Wal-Mart to cut back on its relentless expansion in favor of bolstering the performance of its existing stores, buying back stock and increasing the dividend.
There is the albeit very brief backround. Why is this interesting? Recent rumors have had Wal-Mart possibly shopping for acquisitions in the US. By further cutting the current capex plans, this may be a move to retain cash for an upcoming purchase of another retailer either in the food or clothing arena. Last month I posted a few thoughts on the subject.
Also, Wal-Mart has committed to a $15 billion share repurchase program and the last quarter completed roughly $1 billion of that neither thrilling or disappointing investors. With the stock at near decade lows, the company may be cutting spending in order to purchase shares by the truckload at these prices to "thrill" the same investors at the next earnings release.
Now, what would we rather have? For me the best scenario here would be further cutting of the capex plans and a bunch more of the repurchase plans. There are few targets out there that Wal-Mart could not easily swallow should they desire, the question is will they? I am inclined to think not. If I had to bet (and being a recent shareholder I guess I am), I would wager that Wal-Mart is buying every share it can get it's hands on at these prices and to be honest, I am fine with that. After the last earnings release I lamented that Wal-Mart had the cash to buy more shares and did not, turning what could have been a great release into a bit of a disappointment.
My guess is they will not make the same mistake twice...
Dell: Still Treating Me Like The New Guy In The Cell Block
Ok, I am a sucker I admit it. I thought Dell (DELL) finally got it together, what a chump.
When we left off yesterday, Dell was going to tell DHL they could actually deliver the computer they had to me. Easy, right? Nope. If you are not familiar with the saga to date, begin here.
DHL, who has been excellent by the way called us this afternoon and said that Dell still has not sent them the authorization to deliver the computers. This is after the sales rep, a supervisor, and two customer service reps promised they would. so guess what we did today. PICKED IT UP OURSELVES!!!!
Not only that, the supervisor also promised me an email regarding the printer they were sending me to make up for this fiasco. Does anyone want to make a guess whether or not I received the email? Anyone?
You got it, nothing!! What is the problem Dell? I am only asking you to do what you promised me to do. Why is that so difficult? I just do not understand. Can anyone else explain it to me? Is this just the way it is done? I doubt it...
I have to contrast this to DHL in this scenario that has called us constantly and kept us in the loop in this situation. Here is the kicker, even they have been asking Dell to send them an email to give them the written authorization they need to deliver. Nothing...
Is there any good news in all of this? I guess we finally got the computer? I am trying to make lemonade out of lemons here gang.
Hewlett Packard (HPQ) should by happy though, they got a new customer...
When we left off yesterday, Dell was going to tell DHL they could actually deliver the computer they had to me. Easy, right? Nope. If you are not familiar with the saga to date, begin here.
DHL, who has been excellent by the way called us this afternoon and said that Dell still has not sent them the authorization to deliver the computers. This is after the sales rep, a supervisor, and two customer service reps promised they would. so guess what we did today. PICKED IT UP OURSELVES!!!!
Not only that, the supervisor also promised me an email regarding the printer they were sending me to make up for this fiasco. Does anyone want to make a guess whether or not I received the email? Anyone?
You got it, nothing!! What is the problem Dell? I am only asking you to do what you promised me to do. Why is that so difficult? I just do not understand. Can anyone else explain it to me? Is this just the way it is done? I doubt it...
I have to contrast this to DHL in this scenario that has called us constantly and kept us in the loop in this situation. Here is the kicker, even they have been asking Dell to send them an email to give them the written authorization they need to deliver. Nothing...
Is there any good news in all of this? I guess we finally got the computer? I am trying to make lemonade out of lemons here gang.
Hewlett Packard (HPQ) should by happy though, they got a new customer...
Thursday's Upgrades / Downgrades
UPGRADES
Flow FLOW Northland Securities Market Perform » Outperform
EMC Corp EMC Caris & Company Above Average » Buy
Dionex DNEX Matrix Research Sell » Hold
Synovus SNV Bernstein Mkt Perform » Outperform
Adolor ADLR Brean Murray Sell » Hold
Cognizant Tech CTSH Bernstein Mkt Perform » Outperform
GSI Commerce GSIC Jefferies & Co Hold » Buy
Skechers USA SKX BB&T Capital Mkts Hold » Buy
Gentiva Health Svcs GTIV BB&T Capital Mkts Hold » Buy
DOWNGRADES
Investors Bancorp ISBC Janney Mntgmy Scott Buy » Neutral
Smith Intl SII CapitalOne southcoast Buy » Hold
Macrovision MVSN Jefferies & Co Buy » Hold
Industrias Bachoco SA IBA Citigroup Buy » Hold
Agnico-Eagle Mines AEM UBS Buy » Neutral
Wimm-Bill-Dann Foods WBD UBS Buy » Sell
Wednesday, September 12, 2007
"Fast Money" For Thursday
THURSDAY'S PICKS
Jeff Macke recommended Short Dow30 ProShares (DOG) as a bet against The Dow. Open $59.92
Guy Adami likes Zimmer Holdings (ZMH). Open $81.02
Karen Finerman prefers Johnson & Johnson (JNJ). Open $62.51
Pete Najarian says St. Jude Medical (STJ) is a buy. Open $46.83
WEDNESDAY RESULTS
Jeff Macke recommended buying Dick’s Sporting Goods (DKS) (Open $66.80,Close $67.74 Gain $1.94) and Under Armour (UA). Open $62.17 Close $63.83 Gain $1.66
Guy Adami preferred GlaxoSmithKline (GSK). Open $54.01 Close $53.72 Loss $.29
Karen Finerman thought American Standard (ASD) is good. Open $35.20 Close $35.74 Gain $.54
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 21-15 Gain $38.54
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 26-19 Gain $8.24
Pete Najarian= 15-12 Gain $23.43
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 7-3 Gain $3.94
Stacey Briere-Gilbert= 2-0 Gain $1.61
Wednesday's 52 Week Low's
SHOO Steven Madden Ltd 20.09
SEH Spartech Corporation 17.88
SEED Origin Agritech Limited 7.10
RYL The Ryland Group, Inc 24.71
RVI Retail Ventures Inc 10.16
RT Ruby Tuesday, Inc. (G ... 20.51
RSTO Restoration Hardware ... 2.87
PLCE Childrens Pl Retail S ... 25.55
PGR The Progressive Corpo ... 19.40
PFCB P F Changs China Bist ... 31.47
PEIX Pacific Ethanol Inc 11.10
OCR Omnicare, Inc 29.75
MWA Mueller Wtr Prods Inc 11.77
KG King Pharmaceuticals Inc 12.35
KFY Korn Ferry Intl 17.24
CENT Central Garden & Pet Co 10.57
CBOU Caribou Coffee Inc 5.78
ARII American Railcar Inds Inc 21.45
WEDNESDAY'S LINKS TO VISIT
- This is true and banks ought to be first on your list
- Do not pay this too much attention. People selling everything to cover other areas, Lampert is buying more, all that matters
- I agree, I just think the current market pessimism may give you a much better price, $40ish
- Bueller, Bueller, and the only person making sense out there currently about subprime
More Bernake Musings
So will Bernanke cut The Fed Fund Rate .25 or .50? Maybe... neither?
Bernanke has shown that unlike his predecessor, Alan Greenspan, he is not going to bail out those in business who make poor decisions. While this may cause a bit of pain now and make for some splashy headlines, once people finally get this, in the long run we will all be better off. Greenspan's antics (and enormous miscalculations) cause excessive risk to enter the system. This risk now has us where we are today. Hoping the Fed steps in to help lenders who made loans to people who could not pay them back, to home owners who bought homes they could not afford, and for home builders who built more homes that they could sell just will not happen.
Here is the thing. Every party, no matter how good it is or how bad you want it to continue, eventually ends. They all do, it is just a fact. The housing party is ending and like all parties, those who are the last to arrive wish they got there much earlier. Too bad.
When money is virtually free (Greenspan had rates to 1%), people will do very dumb things with it. Bernanke is under no obligation or "moral" dictate to bail these folks out. None. Despite what Democrats trying to win publicity points in congress may say, he has to this point correctly refused. He has no desire to bail out the Countrywide's (CFC), Washington Mutual's (WM) of the world who made billions in bad loans. He will, however, provide liquidity to the system so that the Citi's (C), Bank of America's (BAC) or Wells Fargo's (WFC) can keep the wheels greased though and isn't that what his job is?
What will he do then? I for one think he may actually do nothing at all. If he does give the street a bone, it will only be 1/4 point. Now, it should be noted that based on the bond market's recent activity currently the effective Fed Funds Rate has been below 5% for some time now. So even is Bernanke does do a 1/4 point drop, it's reality is meaningless. Bernanke should be given credit for essentially making the meetings rate decision meaningless and creating an situation where the market is setting the rate. Obviously the Fed will guide the markets by capping it but when you have the effective rate below the actual rate, what are people clamoring for a cut for?
What is more important that the Fed's actions next week is what they say. Bernanke has been very transparent as to his goals to this point has stuck to them despite the market trying to read something else into them. What he says his priority is should determine the market's reaction to the meeting. That, and only that will determine the Fed's next move, if any.
Bernanke has shown that unlike his predecessor, Alan Greenspan, he is not going to bail out those in business who make poor decisions. While this may cause a bit of pain now and make for some splashy headlines, once people finally get this, in the long run we will all be better off. Greenspan's antics (and enormous miscalculations) cause excessive risk to enter the system. This risk now has us where we are today. Hoping the Fed steps in to help lenders who made loans to people who could not pay them back, to home owners who bought homes they could not afford, and for home builders who built more homes that they could sell just will not happen.
Here is the thing. Every party, no matter how good it is or how bad you want it to continue, eventually ends. They all do, it is just a fact. The housing party is ending and like all parties, those who are the last to arrive wish they got there much earlier. Too bad.
When money is virtually free (Greenspan had rates to 1%), people will do very dumb things with it. Bernanke is under no obligation or "moral" dictate to bail these folks out. None. Despite what Democrats trying to win publicity points in congress may say, he has to this point correctly refused. He has no desire to bail out the Countrywide's (CFC), Washington Mutual's (WM) of the world who made billions in bad loans. He will, however, provide liquidity to the system so that the Citi's (C), Bank of America's (BAC) or Wells Fargo's (WFC) can keep the wheels greased though and isn't that what his job is?
What will he do then? I for one think he may actually do nothing at all. If he does give the street a bone, it will only be 1/4 point. Now, it should be noted that based on the bond market's recent activity currently the effective Fed Funds Rate has been below 5% for some time now. So even is Bernanke does do a 1/4 point drop, it's reality is meaningless. Bernanke should be given credit for essentially making the meetings rate decision meaningless and creating an situation where the market is setting the rate. Obviously the Fed will guide the markets by capping it but when you have the effective rate below the actual rate, what are people clamoring for a cut for?
What is more important that the Fed's actions next week is what they say. Bernanke has been very transparent as to his goals to this point has stuck to them despite the market trying to read something else into them. What he says his priority is should determine the market's reaction to the meeting. That, and only that will determine the Fed's next move, if any.
Dell: Just When I Think It Is OK, They Do It To Me Again!!
Talk about counting your chickens before they hatch. I should have learned by now. Dell (DELL) does it to me again.
When we left off yesterday, Dell was going to notify DHL to send the packages to my correct address and credit me the shipping i paid for but did not get. Now, in order to appreciate what comes next, please read yesterday's post on this here.
I am going about my day playing catch up after they robbed me of 2 hours of it when I get a call at 4:30 pm that DHL is still waiting for Dell to allow them to release the package. I notify them to just forget it and at this point I will just goi pick it up. "No, you can't" is the reply. What? It seems Dell put a "hold" on the order and it cannot move until they send another email releasing it. I do not blame DHL, they are doing what they legally have to do, I blame you know who!!
Now, another hour on the phone. This time it takes that long because I have to relate the entire days conversations to yet another person who does the 3 minute hold boogie with me while they "look at the file" and then he swears he emailed DHL. Now that the DHL person and I on a first name basis, I call her 20 minutes later and she at that point had not heard from Dell. She says (I actually believe her) she will call me tomorrow "if there is an issue", talk to you tomorrow Sara...
Now, all this started with the sales process. I gave the new address to both the salesperson and the "payment specialist". During the course of the day my wife emailes the salesperson for help and get this response..
From: Brett_Engle@Dell.com [mailto:Brett_Engle@Dell.com]
Sent: Tuesday, September 11, 2007 5:23 PM
To: nicoles@VVVVVV.VVV
Subject: RE: Dell Order Has Been Canceled for Dell Purchase ID: XXXXXXXXXX
I have submitted to have the shipping address changed so you can pick it up. I transferred the call to a payment specialist who placed the order so I guess I won’t take credit for this mistake.
Hey, Bud. Way to take the bull by the horns and step up to help a customer!! Notice how he says we "can go pick it up". It is nice to see Dell tells it's folks to go the extra mile. Hey Brett, is it coming in pieces so "I can put it together"?
We emailed a reply and simply asked why we had to go pick it up, why can't DHL deliver it to us?
Our reply from Brett at Dell?
From: Brett_Engle@Dell.com [HYPERLINK mailto:Brett_Engle@Dell.com mailto:Brett_Engle@Dell.com]
Sent: Tuesday, September 11, 2007 5:48 PM
Subject: Read: Dell Order Has Been Canceled for Dell Purchase ID: XXXXXX
Your message
To: Engle, Brett
Cc: 'Todd Sullivan'
Subject: RE: Dell Order Has Been Canceled for Dell Purchase ID: XXXXXXXXx
Sent: Tue, 11 Sep 2007 16:40:37 -0500
was read on Tue, 11 Sep 2007 16:48:03 -0500
Nothing. Nothing at all. Just a read receipt. I guess they are waiting for DHL to come through for them? Go DELL!!!
I am surprised but think I am a bit of a sucker for being so. If Micheal Dell wants to fix his broken company, stop thinking about ways to sell cheaper products through Wal-Mart (WMT) and maybe keep the ones you have? Stuff like this not only makes you lose people but is a great story to tell at dinner, the bar, a ballgame, hockey practice, everywhere and makes your company look real lousy.
Another thing. I have a family member who works for a large customer of Dell's who read my in initial post and said to me "just call us next time, we could have had it fixed immediately". Here is the thing though. Dell ought to treat us all the same. Right? I should not have to go "above someone's head" to get their own admitted mistake fixed, should I?
Some people will get treated this way and keep it to themselves, others, like me, have a megaphone to tell everyone. You never know who is on the other end of that phone folks....
When we left off yesterday, Dell was going to notify DHL to send the packages to my correct address and credit me the shipping i paid for but did not get. Now, in order to appreciate what comes next, please read yesterday's post on this here.
I am going about my day playing catch up after they robbed me of 2 hours of it when I get a call at 4:30 pm that DHL is still waiting for Dell to allow them to release the package. I notify them to just forget it and at this point I will just goi pick it up. "No, you can't" is the reply. What? It seems Dell put a "hold" on the order and it cannot move until they send another email releasing it. I do not blame DHL, they are doing what they legally have to do, I blame you know who!!
Now, another hour on the phone. This time it takes that long because I have to relate the entire days conversations to yet another person who does the 3 minute hold boogie with me while they "look at the file" and then he swears he emailed DHL. Now that the DHL person and I on a first name basis, I call her 20 minutes later and she at that point had not heard from Dell. She says (I actually believe her) she will call me tomorrow "if there is an issue", talk to you tomorrow Sara...
Now, all this started with the sales process. I gave the new address to both the salesperson and the "payment specialist". During the course of the day my wife emailes the salesperson for help and get this response..
From: Brett_Engle@Dell.com [mailto:Brett_Engle@Dell.com]
Sent: Tuesday, September 11, 2007 5:23 PM
To: nicoles@VVVVVV.VVV
Subject: RE: Dell Order Has Been Canceled for Dell Purchase ID: XXXXXXXXXX
I have submitted to have the shipping address changed so you can pick it up. I transferred the call to a payment specialist who placed the order so I guess I won’t take credit for this mistake.
Hey, Bud. Way to take the bull by the horns and step up to help a customer!! Notice how he says we "can go pick it up". It is nice to see Dell tells it's folks to go the extra mile. Hey Brett, is it coming in pieces so "I can put it together"?
We emailed a reply and simply asked why we had to go pick it up, why can't DHL deliver it to us?
Our reply from Brett at Dell?
From: Brett_Engle@Dell.com [HYPERLINK mailto:Brett_Engle@Dell.com mailto:Brett_Engle@Dell.com]
Sent: Tuesday, September 11, 2007 5:48 PM
Subject: Read: Dell Order Has Been Canceled for Dell Purchase ID: XXXXXX
Your message
To: Engle, Brett
Cc: 'Todd Sullivan'
Subject: RE: Dell Order Has Been Canceled for Dell Purchase ID: XXXXXXXXx
Sent: Tue, 11 Sep 2007 16:40:37 -0500
was read on Tue, 11 Sep 2007 16:48:03 -0500
Nothing. Nothing at all. Just a read receipt. I guess they are waiting for DHL to come through for them? Go DELL!!!
I am surprised but think I am a bit of a sucker for being so. If Micheal Dell wants to fix his broken company, stop thinking about ways to sell cheaper products through Wal-Mart (WMT) and maybe keep the ones you have? Stuff like this not only makes you lose people but is a great story to tell at dinner, the bar, a ballgame, hockey practice, everywhere and makes your company look real lousy.
Another thing. I have a family member who works for a large customer of Dell's who read my in initial post and said to me "just call us next time, we could have had it fixed immediately". Here is the thing though. Dell ought to treat us all the same. Right? I should not have to go "above someone's head" to get their own admitted mistake fixed, should I?
Some people will get treated this way and keep it to themselves, others, like me, have a megaphone to tell everyone. You never know who is on the other end of that phone folks....
Mcdonald's: This Is How You Do It Howard
No press conferences pronouncing the "dominance", "super-premium product" or saying they have the "market bought", just a neat little thing called estimate crushing results. Got to love McDonald's (MCD)
McDonald's delighted investors with much stronger than expected same store sales in August.
Asia/Pacific/Mideast/Africa: + 12.4%
Europe: +6.1%
US +7.4%
Company-wide: +8.1%
How good are those results? Consider Goldman Sachs (GS) had projected US same store sales to be up only 4% and Bear Stearns (BS) had estimated just a 5% increase. CEO Jim Skinner said, "Our worldwide sales momentum continues, thanks to our customer-focused emphasis on menu variety and value, convenient service, innovative marketing and contemporary restaurants." That is it, a one sentence release and their results speak for themselves. No chest thumping or bashing of the competition, when you are in first place, there is no need.
Starbucks (SBUX) could learn a thing or two here. Rather than running around telling everyone how great you are, just go out and prove it. Stop giving press conferences saying "we have bought all the super-premium beans" or that "we have no competition", you do and whether you know it or not they are whipping your butt good.
McDonalds reminds me of watching Earl Campbell run as a kid. He never said a word, just went out and did his job, running over opposing defenders. Everyone knew he was getting the ball and they could not stop him. He would get up after each tackle looking old and tired as if he was on his last breath and then the ball would be snapped and he would outrun everyone 80 yards to the endzone and then just drop the ball. No fancy dance, no spike, just results. McDonald's is the same way, we never hear anything from them until they blow the door off another estimate and the stock keeps increasing to ever higher levels.
No show, just results....
McDonald's delighted investors with much stronger than expected same store sales in August.
Asia/Pacific/Mideast/Africa: + 12.4%
Europe: +6.1%
US +7.4%
Company-wide: +8.1%
How good are those results? Consider Goldman Sachs (GS) had projected US same store sales to be up only 4% and Bear Stearns (BS) had estimated just a 5% increase. CEO Jim Skinner said, "Our worldwide sales momentum continues, thanks to our customer-focused emphasis on menu variety and value, convenient service, innovative marketing and contemporary restaurants." That is it, a one sentence release and their results speak for themselves. No chest thumping or bashing of the competition, when you are in first place, there is no need.
Starbucks (SBUX) could learn a thing or two here. Rather than running around telling everyone how great you are, just go out and prove it. Stop giving press conferences saying "we have bought all the super-premium beans" or that "we have no competition", you do and whether you know it or not they are whipping your butt good.
McDonalds reminds me of watching Earl Campbell run as a kid. He never said a word, just went out and did his job, running over opposing defenders. Everyone knew he was getting the ball and they could not stop him. He would get up after each tackle looking old and tired as if he was on his last breath and then the ball would be snapped and he would outrun everyone 80 yards to the endzone and then just drop the ball. No fancy dance, no spike, just results. McDonald's is the same way, we never hear anything from them until they blow the door off another estimate and the stock keeps increasing to ever higher levels.
No show, just results....
Wednesday's Upgrades and Downgrades
UPGRADES
Comverse Tech CMVT Canaccord Adams Hold » Buy
Cognos COGN BMO Capital Markets Market Perform » Outperform
Imclone IMCL Bear Stearns Peer Perform » Outperform
American Railcar Industries ARII Longbow Sell » Neutral
Ruby Tuesday RT KeyBanc Capital Mkts Underweight » Hold
Alnylam Pharmaceuticals ALNY Cantor Fitzgerald Hold » Buy
Western Digital WDC Bear Stearns Peer Perform » Outperform
Thornburg Mortg TMA UBS Neutral » Buy
DOWNGRADES
United Retail URGI Merriman Curhan Ford Buy » Neutral
Omnicare OCR Matrix Research Buy » Hold
Smart Modular Tech SMOD Needham & Co Buy » Hold
RAIT Invtmt Trust RAS RBC Capital Mkts Outperform » Underperform
Smart Modular Tech SMOD JMP Securities Strong Buy » Mkt Outperform
VASCO Data Security VDSI Friedman Billings Outperform » Mkt Perform
Tuesday, September 11, 2007
"FAST MONEY" FOR WEDNESDAY
Macke did a real nice piece on Dicks...
WEDNESDAY PICKS
Jeff Macke recommended buying Dick’s Sporting Goods (DKS) Open $66.80, and Under Armour (UA). Open $62.17
Guy Adami preferred GlaxoSmithKline (GSK). Open $54.01
Karen Finerman thought American Standard (ASD) is good. open $35.20
TUESDAY'S RESULTS
Jeff Macke said short the Retail HOLDRS (RTH). Open $96.45 Close $98.40 Gain $.05
Guy Adami recommended buying NYMEX (NMX). Open $129.02 Close $127.63 Loss $1.39
Karen Finerman preferred ConocoPhillips (COP). Open $82.19 Close $83.53 Gain $1.34
Pete Najarian liked Dendreon (DNDN). Open $8.13 Close $8.04 Loss $.09
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 21-14 Gain $38.85
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 24-19 Gain $4.64
Pete Najarian= 15-12 Gain $23.43
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 6-3 Gain $3.40
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84
WEDNESDAY PICKS
Jeff Macke recommended buying Dick’s Sporting Goods (DKS) Open $66.80, and Under Armour (UA). Open $62.17
Guy Adami preferred GlaxoSmithKline (GSK). Open $54.01
Karen Finerman thought American Standard (ASD) is good. open $35.20
TUESDAY'S RESULTS
Jeff Macke said short the Retail HOLDRS (RTH). Open $96.45 Close $98.40 Gain $.05
Guy Adami recommended buying NYMEX (NMX). Open $129.02 Close $127.63 Loss $1.39
Karen Finerman preferred ConocoPhillips (COP). Open $82.19 Close $83.53 Gain $1.34
Pete Najarian liked Dendreon (DNDN). Open $8.13 Close $8.04 Loss $.09
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)
Guy Adami= 21-14 Gain $38.85
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 24-19 Gain $4.64
Pete Najarian= 15-12 Gain $23.43
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 6-3 Gain $3.40
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84
Tuesday's 52 Week Lows
NYT New York Times Company 20.33
NP Neenah Paper Inc 32.64
NAHC National Atlantic Hld ... 9.00
KG King Pharmaceuticals Inc 13.25
KFY Korn Ferry Intl 17.57
ITIC Investors Title Company 37.92
MTEX Mannatech Inc 6.43
MRLN Marlin Business Svcs Corp 15.89
CTX Centex Corporation 26.00
CRFT Craftmade Internation 13.00
AVR Aventine Renewable Energy 12.73
AVID Avid Technology Inc 28.58
ASFN Atlantic Southern Fin 24.84
Tuesday's Links to Visit
- Just go away please
- This must mean our guidance counselors were correct
- Not everyone lost money on subprime, some folks made a killing
- I just love it when one of my favorite sites mentions me...
- Read this
Dell Customer Service: Nicer Than Sprint. Just As Incompetant
Just when I thought I could not get any more frustrated with a customer service department, than Sprint's (S), Dell (DELL) steps into the batters box. We ordered a new computer for the office and needed it ASAP. Since Dell only does ground delivery (no big deal) we said we would pay the $119 to get it overnighted to us. Then, since we moved the office last year, changed both the billing and the shipping address. Easy right? Don't be foolish.......
We get the confirmation email for the order and realize that the shipping info was not changed. So we do the 10 minute wait on hold to make the change and think we are all set, BUT, Dell has other plans for us.
Our follow up shipping email promptly comes and the address is still wrong and good news, the damn thing has shipped to the wrong address!! So I call DHL, who I do have to say was very good and they make the address change on their end and inform me that they cannot deliver to another address unless Dell tells them to. Back to where I began.
It should be noted that it has now taken more of my time to get the correct ship to address taken care of that it did to order (and pay for) the computer. It also bears mentioning that we still have not figured out what shipping type was used yet (overnight vs. ground). So after another 20 minutes I am told it will be a few more days until I get the computer and the offer me a $100 COUPON for my troubles which is nice but still leaves me short on what I originally paid for the overnight shipping I am apparently not getting! This is when I informed the lady what she could do with her coupon and said I expect "more than less than what I paid for overnight shipping for a computer that will not get here for two more days". Maybe they can pay us for the Admin person who I will just ask to sit around with her thumb up her ass for two more days? I am still on hold so we'll see...
So the nice lady comes back and informs me that the computers are at DHL and if I want them today "I can go pick them up". WHAT!!!!! "If they are at the local DHL, why the hell can't they deliver them to me, it is what they do you know?" I reply. She nicely says that she sent them an email for the address change and it take 24 for 48 hours for them to reply. I just gave her their phone number and requested she call them to make the change (like I did). She says ok. Back on hold.
Now I am searching through my drawer looking for anything sharp I can jab into my eye. The reason? I have to be dreaming. This cannot be happening. I have spent to better part of an hour dealing with this now. "You can go pick it up?" Holy Christ, I thought she was joking at first! If I was smart I would have taped this and made a YouTube video, I could have been on Letterman next week. Never fear, I am sure I will have to call them again and boy will I be ready then.
It's been 3 more minutes and still waiting for her to get back. I am starting to cry now, if I had just left when she told me to "go get it" I would be on my way. Of course she could not tell me for sure if it actually at DHL or on a truck (just that "they have it") so my guess is I would have got there and been told "it is out for delivery". At least this way some poor DHL person will not get assaulted today.
She just checked back "to see if I was still there". "Yup" I replied. She sounded disappointed. Back to sleep. She is like my snooze alarm, every 3 minutes. The timer on my phone says I have been on it for 53:06 now. Running out of things to type....
Waiting... waiting...Back to let me know DHL has her on hold. Yea... how does it feel m
We get the confirmation email for the order and realize that the shipping info was not changed. So we do the 10 minute wait on hold to make the change and think we are all set, BUT, Dell has other plans for us.
Our follow up shipping email promptly comes and the address is still wrong and good news, the damn thing has shipped to the wrong address!! So I call DHL, who I do have to say was very good and they make the address change on their end and inform me that they cannot deliver to another address unless Dell tells them to. Back to where I began.
It should be noted that it has now taken more of my time to get the correct ship to address taken care of that it did to order (and pay for) the computer. It also bears mentioning that we still have not figured out what shipping type was used yet (overnight vs. ground). So after another 20 minutes I am told it will be a few more days until I get the computer and the offer me a $100 COUPON for my troubles which is nice but still leaves me short on what I originally paid for the overnight shipping I am apparently not getting! This is when I informed the lady what she could do with her coupon and said I expect "more than less than what I paid for overnight shipping for a computer that will not get here for two more days". Maybe they can pay us for the Admin person who I will just ask to sit around with her thumb up her ass for two more days? I am still on hold so we'll see...
So the nice lady comes back and informs me that the computers are at DHL and if I want them today "I can go pick them up". WHAT!!!!! "If they are at the local DHL, why the hell can't they deliver them to me, it is what they do you know?" I reply. She nicely says that she sent them an email for the address change and it take 24 for 48 hours for them to reply. I just gave her their phone number and requested she call them to make the change (like I did). She says ok. Back on hold.
Now I am searching through my drawer looking for anything sharp I can jab into my eye. The reason? I have to be dreaming. This cannot be happening. I have spent to better part of an hour dealing with this now. "You can go pick it up?" Holy Christ, I thought she was joking at first! If I was smart I would have taped this and made a YouTube video, I could have been on Letterman next week. Never fear, I am sure I will have to call them again and boy will I be ready then.
It's been 3 more minutes and still waiting for her to get back. I am starting to cry now, if I had just left when she told me to "go get it" I would be on my way. Of course she could not tell me for sure if it actually at DHL or on a truck (just that "they have it") so my guess is I would have got there and been told "it is out for delivery". At least this way some poor DHL person will not get assaulted today.
She just checked back "to see if I was still there". "Yup" I replied. She sounded disappointed. Back to sleep. She is like my snooze alarm, every 3 minutes. The timer on my phone says I have been on it for 53:06 now. Running out of things to type....
Waiting... waiting...Back to let me know DHL has her on hold. Yea... how does it feel m