Berkshire (BRK.A) keeps adding Burlington Northern shares (BNI).
This is from a December transaction in which Buffett was paid $6.35 per share. So, even though Buffett was “put” (sold) the shares at $75, when the premium he received is subtracted, his cost basis is $68.75 or $1 below the current price.
Disclosure (“none” means no position):None
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Despite a dramatic drop in ethanol results, ADM (ADM) still pulled in a very strong quarter.
One thing of note here is the Ag Division. ADM is using the current world weakness to pick up properties at distressed prices. Global demand for food is not going to fall. It may wane in certain areas as diets change based on wealth, ADM is at the cruxt of that demand.
If the US, as President Obama says he is going to do, increases biofuel use, then this division of ADM really has nowhere to go but up.
Given what we have seen this earnings season, growing earnings 24% is just a shareholders dream…
Disclosure (“none” means no position):Long ADM
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Busy day today. Was on Fox Business this morning discussing the results, will try to post video later …
Earnings:
The Company reported a loss of $1.68 per share; excluding certain items, the loss was $0.62 per share. Earnings in the fourth quarter of 2007 were $0.49 per share; excluding certain items, earnings in the fourth quarter of 2007 were $0.84 per share. (See Supplemental Information at the end of the release for a description of these items.) In addition, earnings for the quarter were reduced by a much higher effective tax rate, which was unfavorably impacted by several items totaling $295 million, equivalent to $0.32 per share.
The Company delivered on its fourth quarter commitments related to generating cash and controlling costs as outlined in October 2008. Management interventions contributed to cash provided by operating activities of $2.2 billion and free cash flow(1) of $1.2 billion in the quarter.
Sales for the fourth quarter were down 23 percent from the same period last year to $10.9 billion. Volume declined 17 percent, and was down in all operating segments and in all geographic areas, reflecting the global economic downturn as well as the de-stocking that occurred through most value chains.
The Company reduced production to match market conditions. This resulted in historically low operating rates, particularly in December which was 44 percent. For the quarter, the operating rate was 64 percent, a rate not seen in more than 25 years.
Price was down 6 percent in the quarter, as a 4 percent increase in the Performance segments was more than offset by a 15 percent decline in the Basics segments. The decline in Basics was principally due to a 23 percent drop in feedstock and energy costs versus the same quarter last year.
(1) Free cash flow is defined as “Cash provided by operating activities” of $2,249 million less “Capital expenditures” of $692 million less “Dividends paid to stockholders” of $389 million.
2008 Full-Year Highlights
Cash provided by operating activities was $4.7 billion in 2008, an improvement of more than $200 million versus 2007, against deteriorating economic conditions.
Despite the sales decline in the fourth quarter, 2008 sales increased 7 percent compared with 2007, setting another record for the Company of $57.5 billion. Price increased 12 percent, while volume was down 5 percent.
Dow AgroSciences reported full-year sales and EBIT(2) records. Sales grew 20 percent to $4.5 billion, reflecting an 8 percent increase in volume and a 12 percent increase in price, and delivering EBIT of $761 million.
Equity earnings declined to $787 million from $1.1 billion in 2007, reflecting the global demand destruction that took place in the fourth quarter of 2008.
Dow reported full-year earnings of $0.62 per share; excluding certain items, earnings for the year were $1.82 per share. Earnings for 2007 were $2.99 per share; excluding certain items, earnings for 2007 were $3.76 per share. (See Supplemental Information at the end of the release for a description of these items.)
Comment
Andrew N. Liveris, Dow’s chairman and chief executive officer, stated:
“With a global economic crisis unfolding during the quarter, we responded with speed and urgency to get ahead of the demand destruction that continued to accelerate as we approached the end of the year. We immediately put in place a full array of aggressive cash generation and cost and capital control measures that delivered results. We remain intensely focused on those actions that we can control and will continue to do so throughout 2009.”
Here is Dow’s (DOW) Answer to Rohm and Haas (ROH)
Dow Chemical Answers Rohn & Haas
Was asked this morning if I am selling Dow. No. Would I buy more now? I would wait until more clarity in litigation. I doubt the Judge will force a merger now. That being said, one cannot take anything for granted in court.
By waiting you may pass up considerable upside to shares as a favorable court ruling will cause shares to rally, but, a negative ruling will be far worse. That being said, if it is new money, one should wait or keep position small to limit risk.
With the economic outlook for the globe, low equity prices will be here for a while, no need to rush in and buy right now.
Disclosure (“none” means no position):Long Do, none
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Up 37% last year….worth a read don’t you think?
Disclosure (“none” means no position):
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“Shuttin Detroit Down”, Obama v Simpson, Gold, Kindle, Birth of Twitter
– Song of the Year…
– So I hope the next time Obama feigns outrage over negative comments about his one of daughters, Jessica Simpsons’ father has the opportunity to remind him of these comments
– Just can’t decide about getting one
– Twitter
Disclosure (“none” means no position):
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Just got off the phone with “sources close to the situation”.
Some note:
– Dow (DOW) will answer the suit by Rohm & Hass (ROH) tomorrow
– They will be looking for the chancellor to issue a “business resolution”.
– Dow is still committed to the transaction
– Are in “active” conversations with several bidders for the previously named “K-Dow” JV with Kuwait. “Several other parties have come to the table” in bidding for the businesses.
– Dividend. Company credit rating is taking priority.
I got the impression that should a “business solution” to the litigation be required, the dividend may be safe but, it an immediate deal consummation is ordered, it is not. Now it should be noted that while Delaware Chancery Court Judge William B. Chandler III set the first day for March 9th and scheduled a trial of about five days, he said in the letter that “I strongly encourage the parties to focus on a business solution to this dispute.”
“The court will promptly rule at the trial’s conclusion,” Chandler added.
On page 24 Chandler said:
One thing that sort of strikes me — not knowing as much about this case as either of you or your colleagues — it strikes me that, A, there is a fundamental business problem here, and it is always my view that business problems are better resolved by business people; and that to the extent that the Court is called upon to resolve a legal issue, the Court will do that, of course, and will do it as promptly as possible. This Court obviously tries to accommodate parties who come and ask for expedited proceedings or accelerated proceedings because of the business necessities that a particular legal question implicates.
So, with that said, and with the hope that even after we resolve this immediate problem of how to go forward and in what manner to go forward, with the hope and trust that you will carry back — and I am sure you will — that the view of the Court is that it would be even better if the parties continue to try to figure out a way to resolve this business problem amongst the business people.
Full Filing:
Chancery Transcript
Anyone else take that to mean neither is going to get all of what they want? I have said it before, Rohm has the most to lose here, should this fail, they’ll not see $78 a share this decade, best they work with Dow.
Now, earnings are released tomorrow am and expect the news to be bad, just like the rest of the manufacturing world. Liveris & Co .will be pelted with questions on the merger, sale, dividend etc. Don’t expect concrete answers, just assurances which, in the current environment will not go very far to assuage investors.
This is one you’ll just have to wait out a few months
Disclosure (“none” means no position):Long DOW, none
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So, I read the following article today and it got me thinking. Now, I am not saying either are doomed just that technology may just sap much of the growth from them going forward.
Entrepreneur Frederick W. Smith identified a pressing business need: important documents had to reach their destinations within one or two days. He incorporated a company called Federal Express in June 1971 and began operations in 1973 from Memphis International Airport. On its first night, in April, FedEx shipped 186 packages to 25 U.S. cities.
But all was not well on the international front, and within months, several Arab states had embargoed oil exports to the United States. While this news could have been disastrous for a company that relied on petroleum-fueled transportation, Federal Express stayed alive and became profitable in July 1975, when oil prices finally leveled off.
Status today: 2008 seemed at first to be a deja-vu replay of the company’s nascent years, as soaring fuel prices hurt operating costs. But when prices retreated, FedEx faced a new whammy: The weakening economy has reduced demand for prompt shipping. Average package volume for daily ground shipping dropped 2% year-over-year for the quarter ended Nov. 30. Warning that FedEx faces “some of the worst economic conditions in the company’s 35-year operating history,” CEO Frederick Smith took a 20% pay cut for 2009 as part of a sweeping cost-cutting plan.
So, what am I talking about? Do you know what is one of the fastest growing segment of the shipping giant Amazon.com? Right now it is the Kindle, the digital book. Title are delivered digitally, no shipping. Those titles are coming at the expense of books. How many books? Consider Amazon (AMZN), Barnes & Noble (BKS) and Borders (BGP) sold nearly $6 billion of books online in 2007. Now, admittedly not all are shipped via the two carriers but most are.
To see the digital effect on “hard items” see DVD’s & iTunes. It won’t be long before the majority of overnight shipping for books and dvd’s from all of the above is replaced with “download now”.
Documents. Know a ton of lawyers. Many do Social Security Disability. The social security administration is now accepting digital delivery of the documentation for cases. Insurance companies are also accepting it for personal injury and workers compensation cases. These were previously shipped via FedEx (FDX) & UPS (UPS). Again, only my corner of the world but expand this by tens of millions of claims nationally each year and you get the picture.
There are other examples but I hope the point is getting made.
FedEx and UPS will always lead in the shipment of “things” (toys, good etc) but the shipment of information is rapidly being eliminated from their portfolio. It is a large part of it and with an economy dipping into a prolonged recession, the last thing either need is customers finding a cheaper and faster way to get large amounts of the items they now ship.
Again, this will not destroy either but it does become a bit of a permanent headwind for both.
Disclosure (“none” means no position):Long BGP, none
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AutoNation, The Case Against Keynes, PreTaxes
– Tells GM & Chrysler were to stick theirnew incentive requirements
– So, not being able to do your taxes now makes you a lock for a cabinet position in the Obama administration?
– Features
Disclosure (“none” means no position):
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Gartman is a slick trader and when it comes to commodities, there are few better to listen to.
“Gold is becoming a back-up currency”
The pure gold play is Gold (GLD) and the double daily (UGL)
Disclosure (“none” means no position):Long UGL
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Analysis by Nobuo Tanaka of International Energy Agency. For the record I am long a large chuck of il through DXO (DXO). Other plays are US Oil Fund (USO) and the DB Oil Fund (DBO).
With Israel saying that Iran nor having a nuke trumps the health of the global economy, the geo-political risk of oil is at a level not even close to being realized by the current market price of it. A single act could cause a spike we have not sen in a long time.
Disclosure (“none” means no position):Long DXO, none
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Hot off the press, Bruce Berkowitz’s Fairholme Funds (FAIRX) 2008 Annual Report. Read it and enjoy, Berkowitz is one of the best…
Disclosure (“none” means no position):None
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This is the single best video I have ever seen of Nassim Taleb. He explains in precious detail the Black Swan theory.
Here is the book:
Disclosure (“none” means no position):
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In the interest of fairness, my optimistic reader friend has sent me this. Since he make his points extremely intelligently without saying “your an idiot” for thinking different, and because of his position in the investing world, for the benefit of readers I am obliged to post his thoughts. I hope this elicits conversation on the merits of either argument. I am reprinting verbatim, there is no editing of his comments on my part.
Todd,
I am not as pessimistic as the current interest in gold as a harbor of safety. The hosts of historical precursors to market improvement are overwhelming. The fact that no one believes them at this time is typical of a market bottoming process. Positive economic change has never been accepted by investors until it has been on a clearly defined trend for some period. This is why “Value” investors hold such status in our society for being able to see through the “fog of fear” and still make successful investments.
I can say that this is a time to be very bullish, but no one wants to listen. At the moment those who are gleeful of the values they see at present are often treated negatively in the press as Buffett has recently because his investment activity and positive commentary has not relieved investor pain with an obvious market turn for the better quickly enough to satisfy the need for instant gratification.
———————————————————————————–
Both of these indicators are viewed as reflecting the investment behavior of individuals who are thought to have an above average sense of investment valuation. These indicators are believed to reflect both that future changes in the business climate are perceived to be positive and that the current levels of business valuations are attractive. In essence these indicators are believed to measure the value perceptions of individuals who are better informed than the average investor.
It is important to point out that neither tops nor bottoms are indicated precisely, nor can this information be used with precision at the individual security level. However, even without the desired precision, I view these indices as very useful in supporting a contrarian approach.
Currently, the readings from these indices remain quite bullish and are typical of the market being in a bottom formation period.
Don Hays describes the Smart Money Index as:
“This is an index that is prefaced upon the principal that the trading during the first 30 minutes of each day is very emotionally based, and depends so much upon the fresh “hype” of the morning news and media “talk.” That is considered “dumb” money. But the trading in the last one-hour of trading is not very news motivated at all, in fact it is based solely upon the overall reasoned out logic and analysis. That is considered “smart” money. So the cumulative index simply subtracts the performance of the Dow during that first 30 minutes, and adds the performance of the last one-hour. The signals come when the “Smart Money” index does not confirm the new highs or lows of the Dow Jones Industrial Average’s.”
The Gambill Insider Buy/sell Ratio (below the Smart Money Index) is a simple moving avg of insider buys/insider sells of the Russell 3000.
He finishes with the following quotes:
Warren Buffett, “Be fearful when others are greedy and greedy only when others are fearful”
Bruce Berkowitz,”Ignore the crowd!”
Disclosure (“none” means no position):
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I had to read this four times to be sure I wasn’t crazy (I may be.but not because I read this wrong).
Here it is:
Even with a down economy in 2008, United States railroad volumes for the year were the fourth highest on record behind 2005, 2006, and 2007, according to data released by the Association of American Railroads (AAR).
OR could be have just as accurately said “rail volumes were the lowest in 4 years”?
Here is the rest of the article:
The AAR said U.S. freight railroads originated 16,752,709 carloads in 2008, representing a 2.2 percent—or 380,805 carloads—decline from 2007. Intermodal loadings at 11,517,240 trailers and containers were down 4.2 percent—or 509,391 units—for the year. And combined U.S. carload and intermodal units for the year were 28.09 million.
And estimated ton-miles for 2008 came in at 1,728.7 billion, a 1.3 percent drop off from 2007.
Yearly totals would have been stronger had economic volume tailed off at such a hectic clip during the fourth quarter of 2008.“During the first nine months of the year, there were some real strong spots with certain commodities like grain, and coal which was strong all year,” said AAR Director of Editorial Services Tom White in an interview earlier today. “There were a few areas that helped make up for those that were down [like autos and housing-related commodities]. As we got into the fourth quarter, particularly in November and December, things really began to deteriorate more so than earlier in the year.”
Commodity breakdown: Motor vehicles and equipment loadings were down 219, 603—or 21.2 percent—at 817,744 for the year. And crushed stone, sand, and gravel loadings were down 95,270—or 8.8 percent. Only grain, metallic ores, coal, and “all other” carloads saw annual increases, according to the AAR.
When asked about the railroad industry’s overall health at a time when the economy is sluggish, White noted that 2007 was the industry’s best year in history in terms of revenue, and earnings, coupled with the first three quarters of 2008 being fairly strong.
“The railroad industry is much better positioned to take the negative impacts of a deep recession than it ever was in the past 50 years,” said White. “That is because over the past number of years railroads have been able to invest a great deal of money into infrastructure [and other efficiencies] and things that strengthen the industry long-term. That is all very positive, as well as the fact that balance sheets headed into the recession were very strong. This speaks well to the railroad industry’s ability to weather the recession and be in a strong position once the economy does really turn around.”
So, we now know business for rail shippers like CSX (CSX), Norfolk Southern (NSC) and Burlington Northern (BNI) is dropping, hard.
When one also adds that International Air Freight fell 22% in December we would not expect any improvement anytime soon. Air freight matter because in order to get goods to or from the airport, rails are used heavily.
This is bad news for rails (and the economy as a whole), there is no sugar coating it no matter how bad the AAR wants to try..
Disclosure (“none” means no position):None
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This is a pretty stunning move. What is even more alarming is the reasoning given.
A hedge fund has begun offering investors the chance to have their investment denominated in gold, as worries grow over governments debasing their currencies by printing money.
Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than US dollars, sterling or euros.
The move follows a surge in investor demand for small gold (GLD) bars and coins held by individuals and gold-backed exchange-traded funds that are holding a record amount of bullion.
Chris Kuchanny, Osmium chief executive and a former London ABN Amro trader, said he was putting almost all his personal wealth into the new share class: “Investors have voiced concerns that they’re overly exposed to the major fiat [paper] currencies in an environment where the fundamentals of those currencies are clearly deteriorating with governments assuming more debt and having lower revenue and more expenditure
This shows a stunning lack of confidence in currencies. It also says that the fund is anticipating inflation to rear its ugly head in a scary way. When it does, the value of the currencies will plummet and gold will rise.
What is to watch now is whether or not other funds begin to follow. If this becomes a movement rather than an individual act, the crash in currencies could be expedited in a nasty way.
Stay tuned…
Disclosure (“none” means no position):None in gold…..yet
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