Category: Articles

Remember the DuPont (DD) “settlment” with the State of Rhode Island that at the time allowed them to be dropped from further litigation and left Sherwin Williams (SHW) and NL Industries (NL) the target of a billion(s) dollar lawsuit? Yeah, the one in which the “settlement” money when to the RI AG’s Alma Mater, The International Mesothelioma Program at Brigham and Women’s Hospital in Boston and a DuPont controlled charity?

I know what you are saying, “I didn’t know lead paint caused Mesothelioma!” It doesn’t, read more about it here.

Anyway, after all is said and done and the RISC tossed to case out on its ear, said it never should had been brought and all but questioned the legitimacy of the trial judge, guess who is the only one paying for lead abatement in Rhode Island? Yup, DuPont!!

Now onto Tantrums:
Jane Genova reports “Attempting to rebut a legal ruling with non-legal arguments is insulting to the readers of THE PROVIDENCE JOURNAL. Brashly, it underestimates the ability of the residents of RI to discern points of law from other realities of life. The High Court in RI said the lead paint public nuisance litigation had no merit. That is a point of law.

Yes, the realities of life tend to be that justice is not always kind. In addition, large corporations tend to have more resources to invest in litigation than does a government entity like the RI Attorney General’s office. That’s exactly why the authors of this op-ed – Motley Rice attorneys – were brought in on a contingency basis to assist with the litigation. Had the state prevailed, Motley Rice would have earned 16+ percent of abatement funds. Since the plaintiff’s abatement proposal was in the billions, Motley Rice had plenty to earn. Also, no newsflash, low-income children tend to live in older residential units. I was one of the children in a downtown Jersey City, New Jersey tenement. My grandmother and mother intervened. They had the property owner paint over the blue flaking paint I was chewing. That took care of that.

Last Friday, at the RI Superior Court hearing before Judge Michael Silverstein on reimbursement of certain costs to the defendants, Assistand Attorney General Neil Kelly also decried the RI SC decision. In an interview on that hearing with AP reporter Eric Tucker, so did Jack McConnell.

Odd that those with law licenses would argue legal points by introducing everything but points of law. All attorneys, not just government and plaintiff ones, might feel a sense of shame that members of the bar are behaving in what I perceive to be an unprofessional manner.”

Disclosure (“none” means no position):Long SHW, None

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Fuld Done? What’s Taking So Long?

Post author By ToddSullivan
Post date August 19, 2008

CNBC go around to addressing why Lehman (LEH) CEO Dick Fuld still has a job.

Lehman is dumping assets faster than deck chair off the Titanic and CEO Fuld still has a job. How????

He hung CFO Erin Callan out to dry instead focusing his time and energy on blaming short sellers for Lehman’s plight. Those short sellers it has to be noted seemed to have had a better grip on his company’s financials a year ago that Fuld did or even seems to now.

Video:

It is only a matter of time before Fuld in mercilessly let go, or allowed to commit corporate “hari kari” and exit on his own. I would guess the latter. The only reason I think that is simply do to his hanging on for this long.

Fuld will join execs at Citi (C), Wachovia (WB), Merrill Lynch (MER) and Bear Sterns (BSC) who told investors one things, delivered quite the opposite and were then allowed to “pursue other opportunities”.

I do wonder though. Since banks seem to recycle these guys like left handed starting pitchers, where will they resurface and how long will it take?

Disclosure (“none” means no position):Long C, WB, None

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Wells Fargo CEO Stumpf (Video)

Post author By ToddSullivan
Post date August 19, 2008

Okay, let’s just forget Cramer uses my Wells Fargo in 1990 analogy from 2 weeks ago in the interview. What is more important is what Stumpf has to say.

There is a commercial break in the middle of the video so do not tune out, there is more after.

Cramer actually said, “I like to challenge my own thesis when I am bullish on a stock because these are just pieces of paper.” Doesn’t that go against everything you are ever taught about investing and buying “pieces of great companies”?

Anyway, on to Stumpf.

Stumpf addresses and I think does a fantastic job refuting Meridith Whitney’s take on the company that it was playing with loan write offs to increase earnings. Stumpf points out that they took a $3 billion charge in Q2 and only $1.5 billion was write-downs ($1.5 billion increased reserves). Had they not changed to way they account for charge-offs, the difference would have been $254 million and covered in the reserves they took.

Best line. “We didn’t miss every bad party but we missed most of them”.

Video:

Wells Fargo’s (WFC) largest shareholder is Warren Buffett’s Berkshire Hathaway (BRK.A)

Disclosure (“none” means no position):Long WFC, None

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Hurricane = Danger

Post author By ToddSullivan
Post date August 19, 2008

Nothing to do with investing, human nature I guess….but I have to ask. Why, why is it every time there is a hurricane, we see something like this?

This guy thought a hurricane would be a good time to windsurf….really…

It just goes to show people will never learn. It also means in investing there will always be bubbles and panics as some folks will never learn despite irrefutable proof from the past. After all, investors and wind surfers are both human…

It like those who invested in housing (or gave loans to those) with “liar loans”. Either they were just dopes who thought nothing could go wrong, or, they were smart folks who knew the risks but just miscalculated. Like our wind surfer below, he could be a dope or, a smart guy who just miscalculated the wind speed.

Either way the result is the same, not understanding your risk in anything could be tragic. People are losing their homes and the windsurfer is in critical condition.

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Tuesday’s links

SEC vs Short Sellers, Brazil, Twitter, MBIA

– Just stop with all the new rules, just enforce the ones you actually have

– Is there anyone not rushing to get in there?

– I can’t believe they do not have an app for the Blackberry

– Tom Brown makes the case for MBIA

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AutoNation CEO Mike Jackson on Domestic Auto Makers

Post author By ToddSullivan
Post date August 18, 2008
1 Comment on AutoNation CEO Mike Jackson on Domestic Auto Makers

Things are not looking good for Ford (F), GM (GM) and Chrysler….

Mike Jackson says that the decision to stop leasing is hurting US makers in a bad way. Shareholders ought to rejoice he began reducing AutoNation’s (AN) exposure to US brands last year.

Disclosure (“none” means no position):Long AN, none

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Wilbur Ross on Credit Markets, Interest Rates and Politics (video)

Post author By ToddSullivan
Post date August 18, 2008

Here is a three part series with Wilbur Ross

Part 1: Credit Markets: Fannie (FNM), Freddie (FRE),

Part 2: Interest Rates

Part 3: Ross on Politics

Disclosure (“none” means no position):none

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Report: Lehman to Lose$1.8 billion, Is Einhorn Still Wrong?

Post author By ToddSullivan
Post date August 18, 2008

Do you think Lehman Brothers (LEH) will ever admit David Einhorns know more about their business than they do? Me either…….

The WSJ is reporting that Lehman will announce:

“a loss of $1.8 billion or more, instead of the modest profit they previously expected. If the dour projections come true, Lehman’s losses since the start of March would total at least $4.5 billion — or more than the firm churned out in profit during fiscal 2007.”

Now this means Lehman will be forced to:

1- Sell valuable real estate business
2- Sell Neuberger Berman
3- Dumped CDO’s for pennies in a Merrill Lynch (MER) like firesale
4- Raise more equity through additional common share or debt issuance
5- Some combination or all of the above

Most of this began coming to a head in June when Lehman began attacking David Einhorn, who had shorted the stock and had appeared on CNBC stating his thesis for doing so.

Only a day or so later, Lehman began buying back shares to reassure investors of the confidence in the stock.

A week later, Einhorn gave this interview after essentially everything he said came to fruition. It is important to note he said in June more losses were to come.

Three days later, CFO Erin Callan was done

Why, why is anyone investigating or threatening to investigate Einhorn or Ackman when nothing, nothing that has come out of a bankers mouth in the last year has been born out to be remotely accurate.

Shouldn’t they be the ones in front of investigators????

Is there anyone left at Lehman other than CEO Dick Fuld left to take the fall…finally?

Disclosure (“none” means no position):none

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Tags ackman, einhorn

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Monday’s Links

Value investing vs Growth Investing

– Only one thing to read today……Google searches for “value investing” vs “growth investing”

Kudos to George at Fat Pitch for this

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Ackman goes against shorts betting on Sears, Target

Post author By ToddSullivan
Post date August 16, 2008

Bloomberg article on Bill Ackman, founder of Pershing Square Capital Management. Discusses some of his investments, including Sears (SHLD) and Target (TGT).

Article points out that Sear and Target,

“.. reached record levels of short interest as a percentage of publicly traded shares in the last month. Sears led the Standard & Poor’s 500 Index with 55.9 percent as of Aug. 12, according to Bloomberg data. Target’s reached 7 percent.”

Memorable quotes by Whitney Tilson founder of T2 Partners:

“It’s easy to say when a stock has declined after you buy it that you’ve made a mistake, but there’s a big difference between being early and being wrong”

“The fact that there are so many naysayers out there,” he said, “just means that vindication will be all the sweeter”.

Disclosure (“none” means no position): Long SHLD

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Morningstar’s Ryan Says Ambac, MBIA Overcapitalized

Post author By ToddSullivan
Post date August 16, 2008

Video of Jim Ryan, analyst at Morningstar Inc., interviewed by Bloomberg’s Pimm Fox. Talks about bond insurers MBIA (MBI), Ambac (ABK) and mortgage insurers Radian Group (RDN), PMI Group (PMI).

video of interview

Disclosure (“none” means no position): Long ABK, PMI, RDN

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The Week’s Top Ten at VIN

Post author By ToddSullivan
Post date August 16, 2008

Here is the top ten as voted by readers at Value investing News

1. Who is Searching for Value Investing

(via www.fatpitchfinancials.com)

Using the new Google Insights for Search tool, I examine the global patterns and trends of online investors searching for information on value investing since 2004. The article includes maps of the distribution of value investing globally and in the United States. It also includes a list of the top related search terms and the fastest rising searches for value investing.

2. Steak N Shake Begins to change in FYQ3 : Circle of Competence

(via www.circleofcompetenceblog.com)

Steak N Shake reported Q3 numbers, their first under Sardar Biglari. A look at the numbers and how SNS might be simply valued.

3. Notes from My Conversation with Cal-Maine CFO Tim Dawson

(via collegeanalysts.com)

I recently spoke with Cal-Maine Foods CFO Tim Dawson, and here are the notes from our conversation.

4. The Mind of an Investor

(via www.retro.ms11.net)

A funny graphic depicting the thoughts running through the average investor’s head during a market dip. Make sure it doesn’t describe your thought process!

5. National Retail Properties (NNN) Dividend Analysis

(via dividendgrowth.blogspot.com)

National Retail Properties is a dividend achiever as well as a component of the S&P 1500 index. It has been increasing its dividends for the past 18 consecutive years. From 1998 up until June 30 2008 this dividend growth stock has delivered an annual average total return of 9.60 % to its shareholders.

6. Air Products and Chemicals Inc. (APD)

(via www.thediv-net.com)

Air Products and Chemicals Inc. produces industrial gases and specialty and intermediate chemicals and also has interests in environmental and energy-related businesses. Linked here is a detailed stock analysis and commentary.

7. Concentrated Risk: Pabrai and Pinnacle Airlines : Circle of Competence

(via www.circleofcompetenceblog.com)

A little look at what might have happened with Pinnacle Airlines and why Mohnish Pabrai might be selling his position.

8. Dividend Growth and Earnings Per Share versus Total Return

(via www.thediv-net.com)

Ever since I started analyzing stocks on my blog, I have been gathering information about several stocks in my data folders. I wanted to check what was the relationship between the ten year dividend growth rate and the ten year total return of the stocks that I previously covered on my blog.

9. Bruce Berkowitz Stays In The Sunshine

(via www.forbes.com)

Bruce Berkowitz must be disappointed that the current Olympic Games program doesn’t include professional money management in the competition. If it did, the veteran stock picker’s neck would be weighted down with gold right now.

10. Berkshire Hathaway 2nd Quarter 2008 13F

(via www.sec.gov)

The latest Berkshire Hathaway 13F was just filed. It appears Warren Buffett increased his position in IngersollRand, SanofiAventis and added a new position in NRG Energy. It also appears the holdings in AnheuserBusch were reduced.

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ADM Partner Has Switchgrass Breakthrough

Post author By ToddSullivan
Post date August 16, 2008

Remember that word? Switchgrass? It was touted as being able to fuel massive amounts of ethanol production because it can be planted just about anywhere, has short growing seasons, is not a food source and requires almost no fertilizer. Well, we may be getting closer…

Biomass Magazine reports
“Cambridge, Mass.-based Metabolix Inc. (MBLX) has created a variety of switchgrass that produces significant amounts of polyhydroxyalkanolate (PHA) bioplastics in leaf tissues. The company incorporated multiple genes into the switchgrass genome resulting in a new functional multi-gene pathway in switchgrass. Metabolix recently completed greenhouse trials showing that economically significant amounts of PHA and biomass could be produced by its new varieties.

“Metabolix has been developing technology to produce PHA polymer in switchgrass for over 7 years,” said Dr. Oliver Peoples, chief scientific officer for Metabolix. “This result validates the prospect for economic production of PHA polymer in switchgrass, and demonstrates for the first time an important tool for enhancing switchgrass for value-added performance as a bioenergy crop.”

Switchgrass has been identified by the U.S. DOE and USDA as a prime feedstock for producing next generation biofuels and bioproducts. The 2007 Energy Independence and Security Act mandated 16 billion gallons of ethanol must be produced by biomass crops, such as switchgrass, by the year 2022.”

Metabolix, Inc. is a biotechnology company that develops and focuses to commercialize alternatives to petrochemical-based plastics, chemicals and energy. Its first platform, which will be commercialized through a joint venture with Archer Daniels Midland Company (ADM), is a large-scale microbial fermentation system for producing a family of naturally occurring polymers known as polyhydroxyalkanoates, which was branded under the name Mirel.

The Company’s second technology platform, which is in an early stage, is a biomass biorefinery system using plant crops to co-produce both bioplastics and bioenergy. The Company is focused on developing entire production systems from gene to end. To exploit its first technology platform, the Company is working with ADM to build the Commercial Manufacturing Facility in Clinton, Iowa. This is also the home of ADM’s new ethanol expansion. Coincidence?

ADM currently hold 5.4% of Metabolix’s outstanding shares.

The news here is that switchgrass is becoming commercially viable. It will be a dirt cheap input for bioplastics and eventually biofuels.

Disclosure (“none” means no position):Long ADM, none

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