Grainger (NYSE: GWW) supplies all manner of facilities maintenance products to all types of businesses. The company just posted great 2Q numbers. Sales gained 10% to $1.8 billion. Net earnings increased 8% to $113 million and EPS turned out a healthy $1.43. Grainger posted these good numbers and gained market share in a slowing economy. Nice work.
Grainger operates in the U.S., Mexico and is beginning to establish a footprint in China. The company is expanding both its product line and its market reach in each of these markets. Sales in the U.S. grew 9% and the company opened 6 new full service locations. Sales in Mexico grew 25% and the company opened one new full service location. China sales doubled to $2 million from the company's one location, with big expansion plans for the future. Grainger has added another 100,000 products to its catalog and repurchased 800,000 shares of stock for $75 million. CEO James Ryan forecasts FY2008 EPS in the $5.80-$6.10 range, not a bad return on a stock that currently trades right around $86.
We had the internet bubble and the real estate bubble and now, there is the ethanol bubble. Recently, I ran some numbers on ethanol and to my amazement realized that it is – too use a catch phrase from the environmental world -- not sustainable. Turning food into fuel is just plain silly; and when oil prices come down the ethanol bubble could pop big.
I ran did a little research and found some numbers:
47% of the Mexician' diet is corn
it takes 2.4 pounds of corn a day to feed a hungry person
it takes 22 pounds of corn to make one gallon of ethanol
there are 42 gallons of refined gas in one barrel of oil
Now, a little basic math can be very enlightening. To replace one barrel of oil, it takes 42 gallons of ethanol or (42x22)=924 pounds of corn. That is enough corn to feed one hungry person for (924/2.4) 385 days – a little more than one year.
Food manufacturers promised Mexico's government on Wednesday they would freeze prices on more than 150 food products to help families cope with the rising cost of food, The Associated Press reported Thursday.
Mexico President Felipe Calderon said prices for goods including beans, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until December 31, 2008, The AP reported. Calderon blamed rising food prices on surging global energy prices, food demand in China, and the use of corn for ethanol production.
Good intention, wrong method
Economist Glen Langan said he agreed with the need for food assistance for Mexico's poor, but disagreed with the mechanism.
"A more effective program would be a larger cash payment or food subsidy to citizens," Langan said. "The pricing mechanism should be kept in place, because it has many benefits. Cash payments or subsidies to poor residents are much more targeted and don't provide a benefit to those who don't need it. [Mexico President] Calderon did announce a monthly subsidy, 120 pesos [$11.60], but it isn't large enough."
Anheuser-Busch (NYSE: BUD) wants to stay out of the hands of potential acquirer InBev. It seems willing to go to great lengths to do that. Shareholders of the brewery may get crushed in the process.
To get itself out of its jam, Anheuser-Busch has approached Grupo Modelo, the big Mexican brewer, about a merger. The American company already owns about half of the Modelo. According toThe Wall Street Journal, "Acquiring the rest of the Mexican brewer could make the combined company too expensive for InBev."
A Modelo deal may help the Busch family keep their jobs, but the shareholders will almost certainly get hammered.
The InBev offer for the company is $65. Looking at a chart of Anheuser-Busch shares going back to 1983, the stock has never traded anywhere near that level.
In some ways the Anheuser-Busch move looks like Yahoo!'s (NASDAQ: YHOO) rejection of the Microsoft (NASDAQ: MSFT) buy-out offer. Shareholders are never going to get this kind of premium again. The "founders" get to stay in charge.
Douglas A. McIntyre is an editor at 247wallst.com.
Oil closed slightly higher Monday, after data indicated the U.S. factory sector is slowing at a milder-than-expected pace, allaying Wall Street's concerns, at least for today, that the manufacturing sector will trigger a deeper economic slump, Bloomberg News reported.
Oil closed up 34 cents to $127.69 per barrel. The other major energy commodities also closed higher Monday. Heating oil declined jumped 6 cents to $3.73 per gallon, unleaded gasoline added 5 cents to $3.40 per gallon, and natural gas increased 25 cents to $11.96 per million BTUs.
Earlier in the day, the Institute for Supply Management's Manufacturing Index for May 2008 rose to 49.6 in May 2008 from 48.6 in April 2008, the institute announced.
"The recent pullback in commodity prices has opened up this window of opportunity," says resources expert Larry Edelson who reaffirms his long-term bullishness on gold.
In his Real Wealth newsletter, he explains, "If you think the slowdown in the U.S. economy is impacting China and other emerging markets - ground zero for the natural resources boom - think again." Here, he discusses his favorite gold plays.
"Not only are the Chinese and Indian economies expected to surge more than 9% this year, countless other economies throughout Asia, the former Soviet states and Latin American countries are also growing by leaps and bounds.
"As long as this massive new demand continues, natural resources and commodities will continue to soar And investors who use temporary pull-backs in this long-term bull market stand to multiply their money - over and over again - for years to come.
"You must own some gold in this economic environment. Gold represents the epitome of the natural resource boom because it is the world's best barometer of inflation and financial crises. When inflation is on the rise, as it is now all over the world, gold thrives.
The move came about a week after the company announced that it wouldn't be able to meet its goal of returning to profitability next year due to the current economic slowdown. A factor leading to the company's problem has been a shift in consumer preference from trucks to smaller, more fuel efficient vehicles, a move that comes in reaction to the current record high gasoline prices that have spread across America. Ford said last week it was forced to cut SUV production.
Ford has not released any specific details on the job cuts, but the details are expected to be released sometime in July. The company currently has 24,300 salaried workers in the United States, Canada and Mexico.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
"Emerging markets can dangerous waters for U.S. investors. These markets often have little to no analyst coverage and can be highly inefficient.
"As such, this is an area where expert active management can be well worth the higher price tag. And despite charging 1.55% in annual expenses, the Templeton Emerging Markets Fund certainly falls into that category.
"Given the potential pitfalls, it's reassuring to know that this fund is overseen by Dr. Mark Mobius -- a battle-tested veteran with decades of experience dealing with these uncertain stocks.
"While most funds have no discretion when it comes to making tactical decisions, Mobius and his team have the flexibility to steer clear of troubled regions or sectors -- and overweight those that look particularly promising.
"Based in Mexico, América Móvil (NYSE: AMX) is the largest wireless service provider in Latin America," notes wireless sector expert Nikhil Hutheesing.
The editor of The Forbes Wireless Stock Watch notes that the company's largest stakeholder is billionaire Carlos Slim who holds a 30% stake. Here's the advisors's bullish assessment for the company.
"AMX, which was spun out of Mexico's Telmex in 2000, operates out of Mexico City, but only about 30% of its business is actually in Mexico. It has has been growing rapidly mostly by acquiring troubled Latin American operators that took on too much debt during the telecom bubble.
"Móvil then consolidates operations, changes management as necessary, and makes operations more efficient and profitable.
"With 3G networks in place, América Móvil will be able to boost revenue and profit by selling more data services. It's already offering 3G service in Mexico and plans to spend another $4 billion to upgrade its wireless networks to 3G in five or so more countries this year.
While the chatter out of Iran could be just that, idle chatter, there was still enough of a reason to spook investors into pushing crude oil up significantly Tuesday, leading to a closing price last night of a pretty remarkable $125.80. Prices hit a high Tuesday of $126.98.
One of the main factors that has led to the current record high prices is the weak U.S. dollar. Yesterday, the dollar actually rose a bit, but traders looked past that data and instead decided that any sort of production cut rumors coming out of Iran warranted more attention.
The Feds are looking into whether drug money was laundered by Wachovia (NYSE: WB). The investigation is "part of a broad probe of alleged laundering of drug proceeds by Mexican and Colombian money-transfer companies," according to The Wall Street Journal (subscription required).
Several companies with accounts that have been seized claim to be legitimate businesses and that if they cannot get at their funds, they may go out of business.
The open question is whether Wachovia employees knew about the transactions.
It is hard to imagine a well-run bank like Wachovia would be involved in such blatant aid to drug operations from outside the U.S. Perhaps that is why its shares are down almost 50% this year.
Douglas A. McIntyre is an editor at 247wallst.com.
AP reports that Goldman Sachs Group (NYSE: GS) predicts that the price of a barrel of oil could climb from its current $120 to as high as $200. That's not too much of a stretch because since January 2001, that price has risen 400% from $24. A rise to $200 would be a mere 67% increase from the current price. Meanwhile gasoline is likely to hit $4 a gallon this summer -- and if oil hit $200 a barrel, that could drive the price to $6.67 a gallon -- up 319% from the $1.59 it cost back in January 2001.
Why is the price of oil going up so much? Experts don't seem to know and I'm not an expert. But it looks like simple supply and demand does not explain such a rapid price rise. Some cite rising energy demand -- from China and India -- combined with a reduction in supply -- e.g., production declines in Mexico, an unstable oil industry in Venezuela and possible shrinking production capacity in the Middle East -- as a partial explanation.
But then there are the other factors that seem hard to measure -- the potential decline in the dollar, political instability (such as the U.S. firing warning shots at two Iranian boats in the Persian Gulf this week), and so-called speculators. Of all these factors, the speculators explanation is the most interesting. These could be hedge funds and commodities traders who borrow huge amounts of money to bid up oil prices.
Oil prices have once again hit new highs today, trading up all the way to $118.05, before cooling off slightly, and are currently sitting at $117.85.
The main concern fueling today's move is over supplies from some of the world's major oil producing countries. Nigeria is on the list, as a joint venture of Royal Dutch Shell PLC (NYSE: RDS) stated that it would be reducing its output in April and May by around 169,000 barrels a day. This comes in response to a militant attack on one its pipelines last week.
This is really nothing new to Nigeria, which over the past two years has been the victim of multiple attacks on its oil infrastructure. The country is a major supplier to the the United States, and over the past 2 years the country has seen its oil output fall by a pretty hefty 25%. All the result of militant attacks.
Oil surged over $113 per barrel Tuesday on word of supply disruptions in Nigeria and Mexico and increasing fuel demand in China, Bloomberg News reported Tuesday.
Oil increased $1.90 to $113.66 per barrel Tuesday morning after Mexico, the third largest supplier of oil to the United States, shut its fourth export terminal Monday, while Eni SpA halted output in Nigeria, Bloomberg New reported. Meanwhile, China, which boasts world's fastest-growing major economy, said diesel oil imports increased 49% in March 2008.
The other major energy commodities also vaulted ahead on the news in early trading Tuesday. Heating oil jumped 3 cents to $3.25 per gallon, unleaded gasoline added 2 cents to $2.84 per gallon, and natural gas added about 14 cents to $10.20 per million BTUs.
Supply disruptions jolt market
Independent energy trader Jim Dietz told BloggingStocks Tuesday the supply disruptions in Mexico and Nigeria were negative datapoints the oil market did not need.
Now that it is clear that Wal-Mart's (NYSE:WMT) international operations are growing much faster than its US division, the company is searching for new frontiers. Revenue overseas is growing at a rate better than 20%
Wal-Mart has had trouble in some countries. Its operation in Japan continues to loss money and it has pulled out of Korea and Germany.
Now, the world's largest retailer is looking to Russia and eastern Europe for more growth. According to the FT, Wal-Mart "firmly signaled its intention to expand into Russia and eastern Europe, announcing that it had recruited Stephan Fanderl, a German retail executive, to explore opportunities in the region."
It will be at least a couple of years before the market can gauge whether Wal-Mart can have success in the region. It has to compete with other companies like big European retail chain Tesco. The Wal-Mart model clearly does not work in all cultures.
A break-down of Wal-Mat's track record overseas is telling. It problems in Germany, Japan, and Korea have been more than off-set by successes in China and Mexico. To some extent that may mean that countries with lower median incomes are better markets for the company. Russia and Eastern Europe are a mixed bag. Parts of Russia have done very well financially. Eastern Europe is still in a stage of economic development.
Wal-Mart may be expanding outside the US, but its success is hardly assured.
Douglas A. McIntyre is an editor at 247wallst.com.
We had the internet bubble and the real estate bubble and now, there is the ethanol bubble. Recently, I ran some numbers on ethanol and to my amazement realized that it is – too use a catch phrase from the environmental world -- not sustainable. Turning food into fuel is just plain silly; and when oil prices come down the ethanol bubble could pop big.
Food manufacturers promised Mexico's government on Wednesday they would freeze prices on more than 150 food products to help families cope with the rising cost of food, 
Some more bad news for American car maker 
Oil prices are 
Oil prices have once again hit new highs today, 
Oil surged over $113 per barrel Tuesday on word of supply disruptions in Nigeria and Mexico and increasing fuel demand in China, 
Now that it is clear that 
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