Dow Chemical To Raise Prices 20%

Global chemical producer Dow Chemical Co. (DOW) announced Wednesday that it would raise prices on all 3,200 of its products – some by as much as 20% – beginning at the start of the third quarter.

Bloomberg News said it's the single-biggest price increase in the Michigan-based company's 111-year history. But Dow Chief Executive Officer Andrew Liveris said the price hike was made necessary by "unparalleled" increases in the costs of energy, transportation and raw materials, which together boosted Dow's expenses 42% in the first quarter.

Does anyone actually believe the US Governments 3% inflation numbers?

Food Inflation At Record Levels

According to USA Today, Food inflation is the highest in almost two decades, driven by record prices for oil, gas and mounting global demand for staples such as wheat and corn, and for proteins such as chicken. And that's reaching into Americans' backyards.

Basic economics account for most of the increase: Bad weather has hurt crops, economic prosperity has driven up demand in developing countries, and surging fuel prices have raised transportation costs.

Economists and food scientists have argued that biofuel production is also a major factor in rising food costs, particularly corn, and that it should be scaled back. Meat and poultry executives have come out against federal ethanol mandates, which they say is driving the cost of corn higher.

Carol Tucker-Foreman, food policy expert at Consumer Federation of America, said high-fructose corn syrup can be found in just about anything you'd find at a cookout or picnic.

"The backyard barbecue is where you'll see the most impact from the government's decision to subsidize the use of food to put fuel in our cars," she said."
This year, the price for a pack of hot dogs has climbed almost 7% to $4.29. A 2-liter bottle of soda and a 16-ounce bag of potato chips both jumped more than 10% to $1.33 and $3.89, respectively, while a package of eight hamburger buns costs $1.61, 17% more.

Attractive Brazilian Stocks To Consider

According to Martin Hutchinson, there are more than 30 Brazilian companies with full American Depository Receipt (ADR) listings on the New York Stock Exchange, plus 40-50 more that are traded in the over-the-counter market. Here are a few attractive examples to consider:

* Banco Itau Holding Financeira SA, referred to usually as Banco Itau (ADR: ITU), has a Price/Earnings ratio of 14 and dividend yield of 2.4%. Brazilian banks earn very high returns, primarily from domestic market lending in reals. Including Banco Itau, there are three large ones listed on the Big Board in New York; the other two are Banco Bradesco SA (ADR: BBD) and Uniao Bancos Brasile SA (Unibanco) (ADR: UBB). However, Itau is the cheapest of the three, though only slightly.

* Companhia Vale do Rio Doce, now referred to only as Vale (ADR: RIO), is one of the true global blue chips, with a market capitalization of almost $200 billion. An iron-ore company with ancillary operations in gold, nickel, copper and other metals, its shares trade at a reasonably valued 13 times earnings, though its dividend yield is only 1.2%.

* Petrobras (ADR: PBR) is one of the few emerging market oil companies with access to modern technology - and the willingness to work with the oil majors. Its shares are up 168% in the past year, but the stock’s P/E still is only 16. It has a 1.3% yield. The possible upside: It finds another gigantic offshore oilfield. The possible downside: Oil drops back to $50 a barrel. If the world’s monetary authorities get serious about imposing higher interest rates to fight inflation, PBR and RIO would probably suffer as commodities prices fall back to earth.

* Companhia de Saneamento Basico (Sabesp) (ADR: SBS) is the water and sewage system provider for Sao Paulo. Now that’s a growth business, and not dependent on commodity prices. With a P/E of only 9.2 and a yield of 2.7%, this is one stock I have to say I love.

* TNE (ADR: TNE) There are a bunch of Brazilian cell phone companies, but TNE appears to be the cheapest. It’s concentrated in the populous southeast and northeast regions of Brazil, with a P/E ratio of only 7 and yield of 4.25%.

* Telecomunicacoes de Sao Paulo SA, or Telesp (ADR: TSP) provides the fixed line telephone system for Sao Paulo. Before you sneer, consider this: the company has a dividend yield of 9.8% and a P/E ratio of 10 (which means the dividend is only just covered). And it’s majority owned by Spain’s Telefonica.

* Voturantim Cellulose (ADR: VCP) is a pulp and paper company, with a P/E ratio of 14 and a dividend yield of 2.8%. Trees grow fast in the tropics and VCP definitely benefits from that!

Investing In Japanese REITs

Here' a few good reasons why Japanese real estate is a great place for our money:

• Japanese real estate investment trusts (REITs) are a great bargain, down 29% since June 1.

• Dividend yields are the highest income plays in Japan, in the 4% range.

• There's a huge incentive to borrow and buy real estate, as "cap rates" (essentially the rent minus the costs of upkeep) are 4%-6%, while the cost of borrowing money is only 1.5%.

• Rents in Tokyo are up 30% in the past two years.

• The city is crawling with investment bankers looking to buy properties... companies like Goldman Sachs, which has already spent billions investing in Tokyo real estate.

• There is no supply... vacancy rates in Tokyo real estate are tight at 2.6% and there isn't much new building taking place.

The opportunity is enormous. Japanese real estate is literally selling at 1980s prices which leads many people to belive that its a really safe investment.

Brazil Still Booming

Petroleo Brasileiro SA, Brazil's state- controlled oil company, plans to add 14,000 engineers, geologists and drillers within three years as it develops the biggest crude discovery in the Western Hemisphere since 1976.

Petrobras, as the company is known, plans to expand its workforce 23 percent to about 74,000, surpassing Chevron Corp., the second-largest U.S. oil producer. The hiring binge is part of a $112.7 billion expansion that may allow Brazil to overtake the output of all OPEC members except Saudi Arabia.
Petrobras lacks the roughnecks, or rig workers, and other staff needed to tap billions of barrels that lie in the offshore oil finds. The company is trying to hire more than a dozen people a day amid intensifying competition for skilled oil workers after crude prices surged to a record.

– Bloomberg

TransOcean's First Quarter Profit Doubles

Transocean Inc., the world's largest offshore oil driller, said first-quarter profit more than doubled as record crude prices increased exploration for new reserves.

Net income rose to $1.19 billion, or $3.71 a share, from $553 million, or $2.62, a year earlier, the Houston-based company said today in a statement.

Oil producers are expanding the search for untouched oil reserves from India to the Canadian Arctic as record prices make previously uneconomic fields worth drilling. Companies will spend $380 billion boring 20,000 offshore wells during the next five years, according to analysts at Douglas-Westwood Ltd.

Sales more than doubled to $3.11 billion from $1.33 billion. The average first-quarter rent for Transocean's ultra-deepwater floating rigs was $380,800 a day, up 26 percent from a year earlier.

The company tripled its cash and cash equivalents to $1.57 billion.
– Bloomberg

Charlie Munger On Cash Generating Businesses

“We like businesses that drown in cash,” Charlie Munger said at the Berkshire Hathaway shareholder meeting over the weekend, uttering the Munger-Buffett Mantra. When asked what kind of business they would buy during this “credit crisis,” Munger said businesses with tangible assets that “sweat” cash.

“We like ideas where you don’t have to carry to three decimal places,” Buffett chimed in, “simple ideas in which the bargains are apparent.”

Berkshire bought PetroChina back in 2002, for example, when it was a $35 billion company that Buffett thought was worth $100 billion. Buffett bought the stock having done nothing more than read the annual report. With that big a gap, it doesn’t matter whether the company was worth $80 billion or $120 billion. There was a wide margin of safety. The best ideas are obvious, and great precision is not required.

“If someone walked in here and weighed 350 pounds,” Buffett suggested, “I might not know he weighed 350 pounds, but I would know he was fat.”

Time To Buy Taiwan Real Estate?

According the Wall Street Journal,

Anticipation that a wave of cash from mainland China will eventually reach Taiwan is helping to turn its real estate into a hot property.

Markets in Taiwan, one of Asia's worst laggards as an investment destination in recent years, were livened up by the Nationalist Party's victory in the March 22 presidential election. On May 20, winner Ma Ying-jeou will be inaugurated, succeeding Chen Shui-bian of the Democratic Progressive Party.

Billy Yen, general manager for property brokerage DTZ Taiwan, estimates that home prices have risen as much as 30% since the voting. And he thinks that by the end of 2008, prices could be 60% higher than they were March 22.

The sharp change in sentiment is rooted in Mr. Ma's pledge to open Taiwan's property market to Chinese investors as part of a broader effort to more closely tie the economies of the mainland and Taiwan.

I guess Morgan Stanley missed it, else they would've jumped up with a newly created Taiwan Property ETF. Looks like it worth looking into.

Job Losses Mount on Wall Street

According to Bloomberg:

Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

Citigroup Inc., Lehman Brothers Holdings Inc. and Morgan Stanley are among the firms that have disclosed headcount reductions so far.

After the Internet bubble burst, 39,800 jobs were eliminated during the same period; the number climbed to 90,000 in the next two years, according to the Securities Industry and Financial Markets Association.

Lehman's home-loan unit, BNC Mortgage LLC, employed 1,600 people before the firm closed it down in August. Mortgage lender First Franklin Financial had 2,300 employees when it was acquired by Merrill Lynch & Co. in January 2007. Merrill shuttered the business this month. All told, at least 100 mortgage companies have suspended operations, closed or been sold since the start of 2007.

It's been widely speculated that when the dust finally settles, Banks will end up losing $700 Billion dollars in this subprime mortgage fiasco. If that happens, wall street will lose over 100,000 jobs!

Bear Stearns Biggest Loser

Joseph Lewis, the billionaire investor who bought 9.4 percent of Bear Stearns Cos. last year, lost $1.16 billion on his stake after the firm agreed to sell itself to JPMorgan Chase & Co. yesterday for $2 a share.

Lewis, the New York-based firm's second-largest holder, paid an average of about $107 apiece for 11 million shares, according to a filing submitted last year to the U.S. Securities and Exchange Commission. Bear's biggest investor at year-end was money manager Barrow Hanley Mewhinney & Strauss Inc., whose 9.7 percent holding has fallen by $991 million.

Mutual funds run by investment bank Morgan Stanley were the third-largest Bear Stearns holder with a 5.4 percent stake and may have lost about $546 million since Dec. 31. James Cayne, Bear's former chief executive officer and fourth-largest holder with a 4.9 percent stake, saw the value of his holding drop by $504 million.
Bear's fifth-largest shareholder, Baltimore-based Legg Mason Capital Management, a unit of Legg Mason Inc. run by Bill Miller, may be down $493 million.

Still No Inflation?

NYT reports that government figures, released Friday, showed that grocery costs had jumped 5.1 percent in 12 months, the latest in a string of increases. In fact, the nation is undergoing its worst grocery inflation since the early 1990s.

With a few exceptions, nearly every grocery category measured by the Labor Department, which compiles the official inflation numbers, has increased in the last year. Milk is up 17 percent, as are dried beans, peas and lentils. Cheese is up 15 percent, rice and pasta 13 percent, and bread 12 percent.

No food product has gone up as much as eggs, jumping 25 percent since February 2007 and 62 percent in the last two years.

"It's a great time to be an egg farmer," said Paul Sauder, a third-generation farmer in Lititz, Pa. His farm ships eggs to food service customers and grocery stores, including Stop & Shop. "We've never encountered this kind of run like we've had right now."

Lead Prices At Historically High Levels

Concerns about the U.S. economy couldn't keep many commodities down in the second quarter.

Lead jumped 37% to $2,645 a ton on the London Metal Exchange. One factor is continued strong demand in Asia for lead-acid batteries for cars and industrial equipment. Prices also jumped in the wake of shipment delays from a major Australian port and a change in China's tax policy that could decrease its lead exports.

With historically low metal inventories, when a supply shock comes, "prices don't know much of a limit," said Catherine Virga, a CPM senior research analyst.

Lead consumption slowed in the 1980s and 1990s amid links to health risks and substitution of other ingredients for it in paints and pipes. "Lead consumers that are left, especially the battery producers, which account for 80% of all lead consumption, have very few alternatives," according to a report by the Barclays Capital unit of Barclays PLC.

-Wall Street Journal

Copper Rises While the US Dollar Falls

According to Bloomberg, Copper rose in New York to the highest in six weeks on speculation a decline in the value of the dollar will boost demand for the metal used in wiring and plumbing as inventories dwindle.

Copper stockpiles monitored by the London Metal Exchange fell 1.8 percent to an eight-month low of 112,600 metric tons. Copper has risen 22 percent this year as inventories fell 38 percent and the U.S. currency fell 2.6 percent against a basket of six major world currencies. Meanwhile, the dollar today touched the lowest level in more than a month against the euro.

Investors in FCX and PCU have done very well in the past year. Too bad I sold my FCX early and missed out on a 50% runnup less than 2 months later!

Anyone Know A Good Saudi Construction Company

All trends point to massive investments in Saudi Arabia's construction sector, with billions of dollars of investment still to come in real estate, industry and the hydrocarbons sector.

Oil revenue surpluses are boosting the government budget and overall spending. In 2007, the Saudi government allocated more than $42 billion for various projects and programs in its 2007 budget.

In the private sector, investments in the industrial sector, especially in petrochemicals, will require construction investments reaching more than $500 billion over the next 10 years depending on the project and construction time frame. Like the rest of the Gulf, the kingdom's construction boom has reached unprecedented levels in 2006 and expected to gain more momentum in 2007 and beyond.

-Export.gov

Anyone know a Saudi construction company that trades on the US stock exchage?

How To Save Half A Million Dollars?

According to the U.S. Commerce Department, 40% of American households believe they could accumulate $500,000 more easily through the lottery than by savings.

If only you could save $12,000 per year and invested it at 12% in a tax-defferred account, you'd get there about 14 years! Sounds like a more fool-proof way than playing the lottery!

Sleeper Stocks Of 2007

RadioShack Corp. and Amazon.com Inc. have defied short sellers and Wall Street analysts this year by posting the top gains in the Standard & Poor's 500 Index.

Shares of RadioShack, the third-largest U.S. electronics chain, and Amazon, the world's biggest online retailer, were among the 10 most-shorted in the S&P 500 as of June 15, according to data from the New York Stock Exchange and the Nasdaq Stock Market. Short sellers try to profit from stock declines by selling borrowed shares and buying them back at a lower price.

RadioShack has almost doubled since December on buyout speculation and earnings that beat analysts' projections. Amazon jumped 71 percent as the company increased its 2007 profit forecast and introduced a new music download service.

-Bloomberg

Sub-prime CDOs Dressed Up In Hooker Heels!

Holders of investment-grade portions of collateralized debt obligations may lose all of their money in the securities, which have been dressed up in "six-inch hooker heels," according to Bill Gross, manager of the world's biggest bond fund.

Subprime mortgage bonds made up about $100 billion of the $375 billion of CDOs sold in the U.S. in 2006, Moody's Investors Service and Morgan Stanley data show.

CDOs are created by bankers and money managers who bundle together securities and divide them into slices with credit ratings as high as AAA from Standard & Poor's and Aaa by Moody's.

Gross maintains his prediction the Federal Reserve will cut its target interest rate in the next six months as a slowdown in the housing market causes risk premiums to rise and the U.S. economy to slow. Gross said in October that slowing U.S. growth would prompt the Fed to lower rates in the first half of this year. The Fed has kept the benchmark rate at 5.25 percent for the past year.

-Bloomberg

Demand For Diamonds About To Rise?

There will soon be derivatives based on diamonds. A few outfits are coming out soon with some kind of diamond futures. This is only my personal opinion, but I believe we're going to see a major bull market in larger diamonds (three carets and up). Any diamond over ten carets is now considered rare.

A few years ago the Sotheby's and Christie auction catalogues were filled with larger size diamonds for sale. Now, nobody seems to want to part with their large diamonds. The catalogues have very few for sale. I believe the price for larger stones is headed considerably higher.

-Richard Russell

Diamonds are forever – or so investors in the latest alternative investment to hit the London Stock Exchange will be hoping.

Diapason Commodities Management is aiming to raise $400m for the first listed fund to invest in gemstones, buying only large polished diamonds worth more than $1m.

The fund is the latest in a series of offbeat investments aimed at satisfying booming demand for "alternative" returns that are not directly linked to stock and bond markets. Many commodities have already become mainstream, and the search for new investment frontiers has seen investors pile money into hedge funds specialising in reinsurance, wine, art, shipping, and even football players.

Diapason argues that diamond prices have lagged behind the boom in other commodities and are due for a further cyclical upswing – helped by a rise in numbers of wealthy individuals willing to buy extremely expensive jewellery, supply constraints and low stockpiles.

-Financial Times

Hmm....didn't someone put together a hedge fund for antique violins too?

Mortgage Defaults To Worsen

Losses in the U.S. mortgage market may be the `tip of the iceberg` as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said.

Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note today. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said.

Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported.

`The large volume of subprime ARMs scheduled to reset at higher rates in '07 and '08 will pressure already-stretched borrowers,` putting more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds `could be the tipping point of a broader fallout from subprime mortgage credit deterioration,` they said.

-Bloomberg

I wouldn't be surprized if companies like LEND sank back down again!

Buy Asian REITs

Morgan Stanley raised $8 billion to create the world's largest global property fund and tap increased demand for real estate in Asia and emerging markets.

Morgan Stanley will invest almost half of the money in Japan and about 25 percent in countries including China and India.

-Bloomberg

Anyone know how to buy Asian REITs?