Demystifying South America's AMAZONIA

The Amazon BASIN:

* The Amazon Basin is the Largest drainage basin in the World and covers over 2.7 million square miles (6.9 million square kilometers or 1.7 Billion acres)...an Area over 10 times the size of Texas

* Per Wikipedia, the Basin covers approx 40% of South America...most of which (about 54%) is located in Brazil but it also extends to Peru and several other South American countries

The Amazon RIVER:

* The Amazon River stretches over 4,000 miles long and according to National Geographic, may be longer than Africa's Nile River thus making it the World's Longest River...see the link at the bottom of the post for more info

* The Amazon River is the World's Largest River by Volume and is responsible for about 1/5 of the Total Volume of Fresh Water entering the World's Oceans (1/5 of the World's total 'river flow')

* At its widest point the Amazon River can be 7 miles (11 km) wide during the DRY season, but during the RAINY season when the Amazon floods the surrounding plains it can be up to 28 miles wide (45 km)

The Amazon RAINFOREST:

* South America's Amazon Rain Forest is the World's Largest Rain Forest and covers approx 3.4 million square miles (5.5 million square km or 1.4 Billion acres)...if 'Amazonia' were a country it'd be the 9th Largest country in the World

* The Rain Forest is located within 9 countries: Brazil (with approx 60% of the rainforest), Peru (with 13%...2nd after Brazil), Colombia, Venezuela, Ecuador, Bolivia, Guyana, Suriname, and French Guiana

* Per Wiki, "...the Amazon Rainforest is the most species-rich tract of tropical rainforest in the WORLD as the region is home to about 2.5 million insect species, tens of thousands of plants, and some 2000 birds and mammals...To date, at least 40,000 plant species, 3,000 fish, 1,294 birds, 427 mammals, 428 amphibians, and 378 reptiles have been scientifically classified in the region"

* According to the January 2007 edition of National Geographic, given the Amazon Rainforest's current DEforestation Rate, the Rainforest will be reduced by 40% within the next 20 Years...Per annual deforestation data provided by Brazil's INPE (Instituto Nacional de Pesquisas Espaciais - 'National Institute of Space Research'), about 83% of the Rainforest now remains relative to its size prior to 1970 (100%). Most rainforests are cleared by chainsaws, bulldozers and fires for its timber value and then occupied by new farming and ranching operations. Per the below diagram, a disproportionate majority of the deforestation activity seems to have occurred in Brazil -

* As of 2006, about 1.05 million square miles (1.73 million square km or 430 million acres) of the Amazon Rainforest was marked for Conservation or protection

http://en.wikipedia.org/wiki/Amazon_Basin

http://news.nationalgeographic.com/news/2007/06/070619-amazon-river.html

Data Courtesy: Wikipedia, National Geographic, BBC, WWF + INPE

Barack OBAMA's Presidential ENERGY Plan !

During his 2008 Democratic National Convention speech, United States Presidential nominee Barack Obama unveiled some intriguing details belonging to his Presidential ENERGY Plan. Considering the FACT that this man has a 50/50 shot at becoming the next President of the United States of America, I decided to summarize some of his key ENERGY policy initiatives below for my future reference :


Curbing CRUDE OIL:
* 10 year Goal to END America's dependence on Crude Oil imported from the Middle East
* Domestic Crude Oil drilling is only a 'stop gap', it is not a long term solution


Tapping + Investing in Non-Renewable Alternatives:
* Will 'tap' Natural Gas reserves
* Will invest in Clean Coal technologies (government subsidies)
* Will "find ways to safely harness Nuclear Energy" (RTOB: not sure if that jargon means anything as U.S. Democrats have historically HATED the environmental risks posed by nuclear)


Investing in Renewable Energy Alternatives:
* Will invest $150 Billion over the next 10 years on affordable, Renewable Energy sources including 'Wind power, Solar power and the next generation of Biofuels'


Government Subsidies to the AUTO Companies:
* Will help (U.S.) Auto companies "retool so that the fuel efficient cars of the future are built at home in America."


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* Anecdotally thinking, I very much liked what I heard from Obama tonight on Energy. I especially appreciated the fact that he provided NUMBERS..and not just small numbers but pretty SOLID sized numbers (10 years...$150 Billion, etc.). I wonder what Republican nominee John McCain will have to say about his own Energy plan during next week's Republican National Convention. More specifically, I wonder if he'll provide NUMBERS like his Democratic counterpart. If NOT then you've got to read between the lines and believe that Obama will be the Higher Spender/Subsidizer of Alternative Energies vs. McCain. FORGET Beijing, Let the U.S. ENERGY games begin.



Data Courtesy: Barack Obama's 2008 DNC Speech (8/28/08).

IBM's #1 2Q08 SERVER MarketShare

According to industry survey group IDC, U.S.-based IBM ranked #1 Worldwide in overall SERVER MarketShare during the 2nd Quarter of 2008.

During 2Q08, 'Big Blue' captured about 33% of the GLOBAL Servers market...or almost 6% more SHARE than #2 ranked Hewlett Packard (HPQ) who possessed 27% of the market. Dell came in at #3 with 13%, followed by Sun Microsystems (JAVA) at #4 with 11%. All together, the 'Big 4' accounted for approx 84% of total global Server sales during the second quarter of 2008 (can you say oligopolgy?).




http://money.cnn.com/news/newsfeeds/articles/marketwire/0428768.htm


* IBM ranked #1 across the following 2Q08 Server Sales categories:

1.) All Unix Servers - 36% Share

2.) Servers Costing $250,000 or more ('High-End' Servers) - 62% Share

3.) Servers Costing $10,000 or more ('Low-End' Servers) - 48% Share


* Related + also according to IDC, let it be noted that IBM is growing its overall Server revenues faster than anyone else in the industry as IBM's 2Q08 Server sales were 27% higher vs. 1Q08. Overall WW Server shipments rose 11% during 2Q08.


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* Lastly + also Related to IBM, check out the below fascinating Wikipedia link that provides a pretty comprehensive (although NOT complete) List of Acquisitions and Spinoffs completed by 'Big Blue' since its foundation in 1889 (needless to say but IBM wasn't built in a day):


http://en.wikipedia.org/wiki/List_of_IBM_acquisitions_and_spinoffs






Data Courtesy: CNNMoney + IDC + Wikipedia
Full Disclosure: I own shares of IBM.

RTOB: Six Reasons To BANK On Goldman

Six Fundamental LONG TERM Reasons to Own Goldman Sachs (GS) :


1.) The IN$IDE Boys :
Please refer to my 7/21/08 post titled 'Goldman Sachs - Inside Boys To The Rescue' for more information on this (use the ETB 'Archive Keyword Reference' on the right to search for this post using keyword 'Goldman Sachs'). Bottom line, GS is on the INSIDE...and EVERYONE else seems to be on the OUTSIDE.


2.) The UNSCATHED (What Credit Crisis ??) :
GS is one of the select FEW financial players that have, thus far, been relatively UNSCATHED by the ongoing U.S. Credit Crisis. Because of disciplined, proprietary RISK MANAGEMENT and execution Goldman has NOT had to take on significant 'write downs' on shoddy assets...UNLIKE the majority of global financial peers including: Lehman Brothers (LEH), Citigroup (C), Bank of America (BAC), Merrill Lynch (MER), Wachovia (WB), Wells Fargo (WFC), UBS, etc.


3.) ONCE In A Lifetime MARKETSHARE Opportunity :
Because Goldman has been relatively UNSCATHED by the recent Credit Crisis (see point #2 above), GS is in an IDEAL position of being able to use its assets MUCH more productively than its peers. Instead of having to use its assets and existing capital to internally 'patch holes'/shore up the soundness of its Balance Sheet, GS is able to use its capital more productively and actually take advantage of the market's current Asset 'Fire Sale' (kinda like a 'clearance' shopping event...just about all of GS's peers are unloading assets in a 'Everything must GO!' fashion) to GROW its business. The departure of Bear Sterns (BSC) ALONE is a great reason to own Goldman. Throw in the CARNAGE currently being suffered by competitors Lehman Brothers, Merrill Lynch, etc. and Goldman Sachs is in PRIME position to soak up some Attractive LONG TERM brokerage MarketShare (whether its in Asset Management, Equity/Bond Underwriting, Commodities Trading, Mergers and Acquisitions, etc.).


4.) The Massive Stock Buyback :
While most U.S. financials are scrambling to RAISE Capital (mostly by diluting the shares of stock owned by existing shareholders), Goldman is doing the exact opposite via BUYING BACK ITS OWN STOCK and returning Capital to its shareholders. Which financial would you rather own - An investment that is RETURNING you money vs. One that is DILUTING/reducing your money?! For the record and per my 6/22/08 post titled 'GS 2Q08 Earnings Recap', Goldman has 62 million shares remaining in its authorized share repurchase program...this represents about $9.5 Billion or 16% of the company's total FLOAT/shares outstanding.


5.) DEMONSTRATED Competence of Management :
The executive management team of Goldman Sachs is often referred to as 'the Smartest Guys in the Room'...regardless of WHO's in the room. With all due respect to Google (GOOG), Goldman is probably the smartest company in the WORLD. For validation's sake, look NO further than how GS has executed its brokerage business during arguably one of the country's most HISTORICALLY trying times for financial institutions. Save The 1990 U.S. Savings and Loans Crisis (fyi + for more info on this ERA you can refer to my 7/14/08 post titled 'The U.S. Savings and Loans Crisis'), most banks have never seen a market environment THIS difficult. For empirical evidence of GS's track record of execution during the ongoing Credit Crisis, please refer to the ETB 'Archive Keyword Reference' under 'Earnings' or 'Goldman Sachs'...in there you will find the details behind a couple of impressive, recent GS quarterly reports courtesy of my proprietOHRI GS quarterly 'Earning Recap' posts.


6.) The CHEAP, Single Digit P/E Multiple :
While 'cheap' is of course relative, it should be noted that Goldman Sachs is trading at just 7.5 x 2008's expected earnings. Goldman's Forward 2009 P/E is currently 10. Despite its EXECUTION BRILLIANCE as a company, GS as a stock has been taken down like the rest of its financial cohorts...the company's stock is currently Down 28% year to date (GS is down 13% year over year). Anecdotally saying, If you're looking to build a CORE investment position in GS then you gotta believe that 10 x 2009 Earnings (or $150/share) represents an attractive entry point.


Full Disclosure: I own shares of GS.

OPEC's Worldwide SHARE of Crude OIL

According to Bloomberg, OPEC's (The Organization of Petroleum Exporting Countries) Share of WW Crude Oil Production is about 42%.

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Somewhat Related (and also according to the below Bloomberg link) :

* The GULF of Mexico is responsible for producing about 14% of the United States' total Oil + Gas PRODUCTION

* The U.S. Gulf coast along Louisiana and Texas is home to about 42% of the U.S.'s total Crude Oil REFINING CAPACITY


bloomberg.com/apps/news?pid=20601087&sid=awi3JTmcVadg&refer=home

Data Courtesy: Bloomberg

CHART - U.S. House Prices To Family Income

For Reference's sake and some perspective - Observe the below 40+ year chart graphing U.S. Existing Home Prices to Median Family Income (double-click the below image for a much needed larger view) :

thestreet.com/tsc/common/images/storyimages/marcin0827_cht1_big.gif

* Over the past 40 years, the historical MEDIAN House Price : Annual Family Income Ratio is approx 2.80

* Today's Ratio is around 3.35...this is about 18% off the recent 2006 Housing Bubble induced-high of 4.10)

* A Ratio of 3.35 remains about 20% above the median historical ratio of 2.80

Data Courtesy: Robert Marcin + Realmoney.com

The U.S. FDIC's 2Q08 Bank 'PROBLEM List'

The U.S. Federal Deposit Insurance Corp 'PROBLEM' List of Financial Institutions is arguably the WORLD's Most important list that doesn't actually list or name ANYthing. Nitpicky 'list' issue aside, the report provides some valueable 'numeric' PERSPECTIVE on the current (sorry) state of the U.S.financial industry. The FDIC is a Washington-based bank regulator that insures deposits at 8,451 financial institutions with $13.3 TRILLION in assets. Today the FDIC presented its quarterly 'Problem List' and disclosed that it was actively monitoring/overseeing 117 U.S. financial institutions it deemed as troubled for the quarter ended 6/30/08. In other words, the FDIC believes that there are at least 117 financial institutions (mostly banks) in the United States facing a credible risk of insolvency (bankruptcy).



FDIC 2Q08 'Problem List' Stats (paraphrased from the Bloomberg link below):

bloomberg.com/apps/news?pid=20601087&sid=afbiu

* Regulators rate FDIC-insured banks on a numerical scale (1 being the highest and 5 the lowest) using their CAMELS system evaluating: Capital, Asset quality, Management, Earnings, Liquidity, Sensitivity to interest-rate or market risk - and other fiscal measures. Banks are ranked on a numerical scale, with 1 being the highest and 5 the lowest. A rating of 4 or 5 places a bank on the 'Problem List'.


* Out of 8,451 U.S. members, the FDIC was carefully monitoring 117 'problem' institutions as of 6/30/08 (1.4% of ALL member institutions are 'problem' institutions)...117 'problem' FDIC-insured lender institutions represent the highest amount in 5 years


* The FDIC 'Problem List' grew by 30% over the past quarter (from 90 at the end of 1Q08 to 117)


* FDIC-insured lenders reported 2Q08 profit of $4.96 Billion vs. $36.8 Billion in the same quarter a year ago. (FDIC Member Bank Profits were Down 87% year over year !)...2Q08's profit of $4.96 Billion was the second-lowest net income reported since the fourth quarter of 1991 (throwback to the 1990's Savings and Loans Crisis ERA...speaking of which, feel free to check my related 7/14/08 post titled 'The U.S. Savings and Loans Crisis')...behind the $600 million reported in the fourth quarter of 2007


* FDIC-insured lenders reported 1Q08 profits of $19.3 Billion (2Q08 profits were down $14.34 Billion or 74% quarter over quarter/'sequentially')


* Funds set aside by banks to cover loan losses/writedowns more than quadrupled to $50.2 Billion from $11.4 Billion in 2Q07...A year over year loan loss/writedown provision increase of 340% !


* Loans 90 Days or more Overdue, deemed troubled by the FDIC, jumped 20% to $162 Billion from $136 Billion in the first quarter. Real-Estate Loans accounted for almost 90% of the rise in the past three quarters !


* To date, Nine U.S. financial institutions have FAILED/Collapsed in 2008...California-based mortgage lender IndyMac Bank's recent failure will cost the U.S. deposit insurance fund about $8.9 Billion, exceeding a $4 Billion to $8 Billion estimate, said Diane Ellis (the associate director of financial- risk management).


* The FDIC's deposit insurance fund fell 14% to $45.2 Billion and the Reserve Ratio (the FDIC's balance divided by insured deposits) was 1.01%...The FDIC is required to shore up the fund when the ratio falls below 1.15%... In order to 'shore up' the fund, the FDIC will consider a plan in October to replenish the account that will likely require an increase in the premiums charged to banks


* Lenders on the 'Problem List' had total assets of $78.3 Billion at the end of the second quarter, triple the $26.3 Billion in the first quarter...The FDIC said IndyMac's assets represented $32 Billion of the increase.


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* FYI + per Wikipedia, The FDIC is a United States 'government corporation' that was created by the Glass-Steagall Act of 1933 during The Great Depression. The FDIC's function is to provide deposit insurance which guarantees the safety of checking and savings deposits in member banks...currently the FDIC provides insurance protection of up to $100,000 per member-bank depositor.



Data Courtesy: Bloomberg

Steel/Coal Con$olidation Thesis Re-Validated

Another day, Another Takeover in Coking Coal. If you're a regular reader of ETB then you're probably already aware of my Steel industry CONSOLIDATION investing thesis impacting both Coking Coal and Iron Ore producers. Despite a relatively weak 2008 Merger and Acquisition backdrop, I've found and highlighted several recent examples of GLOBAL Steel industry consolidation following this theme via my blog. (For reference's sake you can check out some of my more recent posts on the topic via the Archive..they include: 8/20/08's 'ArcelorMittal: Gobbling Up Share In Brazil'...7/29/08's 'Coal Played - Another Day, Another T-O'...7/17/08's 'Steelmaking Coal Play Gets A Bid', etc.). To quickly recap the Long term, Secular Investing Thesis...In order to gain control on the soaring prices of raw materials (iron ore, coking coal), STEEL manufacturers are moving quickly to vertically integrate their businesses by aggressively purchasing producers of both Coking Coal and Iron Ore.

With that said, BEHOLD the latest REAL World example echoing my steel industry consolidation thesis...Russia-based Severstal's $1.3 Billion purchase of U.S. based PBS Coals Corp.


reuters.com/article/marketsNews/idUSLM58701520080822?pageNumber


Deal Facts Quoted from the above Reuters link:
* PBS operates six underground and six opencast mines in Pennsylvania. It produced 2.4 million tons of coal, including 1.5 million of coking coal, in the year to March 31, 2008. Total annual metallurgical coal capacity is 4 million tons.

* PBS has 133.5 million tons of in-place coal reserves and 228.3 million tons of in-place coal resources, Severstal Resources said in the statement.

* PBS would supply Severstal's North American unit with about 40% of its Coking Coal needs, said Roman Deniskin, chief executive of Severstal Resources, the firm's mining division.

* "The acquisition looks a bit expensive compared with Russian coking coal producers. But compared with North American coals, it's a bit cheaper," Alfa Bank analyst Maxim Semenovykh said...He estimated Severstal was paying about $450 per ton of raw coal capacity for PBS and compared this with $350 per ton for Raspadskaya, Russia's largest pure-play coking coal miner, and an average of around $500 for U.S. coal miners.

* The acquisition of PBS by its mining division, Severstal Resources, represents the company's first venture into the raw materials sector in North America...Severstal, Russia's largest steel maker, has already spent over $1.7 billion in the last year acquiring steel mills in the United States, where Russian companies with record profits to burn have snapped up around a tenth of steel melting capacity.

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* Anecdotally thinking, perhaps the most interesting facet of this global theme as its relates to the STEEL industry is the TIMING and therefore pricing of these deals. Steel companies are aggressively pursuing raw material acquisitions during times of RECORD HIGH commodity prices. While that fact on the surface may seem like a sucker's game, if you TRUST that the steel companies know what they're doing then in effect you have to believe that these companies INTERNALLY view their business fundamentals very favorably moving forward (not just out 1 year but perhaps out 5 years, 10 years, etc.).


Data Courtesy: Reuters.

U.S. House Speaker Pelosi Backs Natty Gas

Just one day prior to the 2008 Democratic National Convention, Tom Brokaw interviewed the current Speaker of the United States House of Representatives, Nancy Pelosi (Democrat - California) on NBC's Meet The Press.

I found her below 'transcript-ed' ENERGY related comments on U.S. Offshore Oil Drilling + Natural Gas to be the most interesting and noteworthy/worthy of taking note (I especially perked UP when I heard her state she's a believer in natural gas as a viable alternative energy transition fuel..oh yeah, she also disclosed a $50-100K position in natty gas stocks!) :

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NBC's Meet The Press Transcript (8/24/08):


http://www.msnbc.msn.com/id/26377338/page/2/


Tom Brokaw: But the bottom line is, as speaker, you're prepared to preside over legislation that would reactivate offshore oil drilling ?


Nancy Pelosi: I'm prepared to preside over legislation that will take a comprehensive approach to it, include that, let it compete, and see where we come down on it. And if that, in fact, is a, a, a, a good alternative, then that is something that we should do. But not to misrepresent to the hard-strapped American people for gas prices and other reasons in our economy that if we do that, it's going to reduce the price at the pump. It simply will not.


Mr. Brokaw: Well, I think most people understand that, but at the same time, if we work our way off carbon-based fuels, in the meantime, this is not going to happen overnight.


Rep. Pelosi: No, it isn't, but you could--again, you could reduce the price at the pump immediately with...(unintelligible). You can have a transition with natural gas. You can have a transition with natural gas. That, that is cheap, abundant and clean compared to fossil fuels. So, so there is a way to transition this instead of doing more of the same. The Bush administration, two oil men in the White House, they want us to believe that the status quo is what we should do and more of it--and more of it, when it will just only keep us in the same place that we are now.


Mr. Brokaw: You just mentioned natural gas, and you emphasized it as well in your last radio address...talking about the energy plan. And then we read in The Wall Street Journal that you and your husband have made a substantial investment in the plan that T. Boone Pickens has put forward, which has a heavy emphasis on natural gas as well.


Rep. Pelosi: But let me see if you call substantial 03 three percent of our investments.


Mr. Brokaw: Oh, it's what, between 100 and $200,000?


Rep. Pelosi: No, no, it was between $50 and $100,000, and it's part of an, you know, entrepreneurial package. This is the package we sign up for, this is what they invest in. But that's not the point. I'm investing in something I believe in. I believe in natural gas as a clean, cheap alternative to fossil fuels.


Mr. Brokaw: But you're also in a position to influence where the emphasis will be in where we're moving.


Rep. Pelosi: Well, that's not--that is, that is the marketplace. The fact is, the supply of natural gas is so big, and you do need a transition if you're going to go from fossil fuels, as you say, you can't do it overnight, but you must transition. These investments in wind, in solar and biofuels and focus on natural gas, these are the real alternatives. You have to ask yourself why, why is the administration not doing this? This is the challenge of our generation. It's a national security issue. President Nixon said we must end our dependence on foreign oil. President Carter said it's a moral equivalent of war. It's a national security issue, it's an economic issue, it's an environmental health issue, and it is a moral issue to protect this environment.


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* FYI, California will vote in November ('California Proposition 10' aka the California Alternative Fuels Initiative) on spending $5 Billion worth of government bonds to fund the replacement of 70,000 trucks and 150,000 cars with vehicles that run on natural gas and other clean energies


Data Courtesy: MSNBC.com

ArcelorMittal - Gobbling Up Share In BRAZIL

ArcelorMittal (MT), the World's Largest STEEL company, continues to grow its IRON ORE reserves and steel-related operations in Brazil. Two weeks ago, the company announced that it was spending $1.6 Billion in order to increase its long carbon steel production in Brazil by 2/3 (from 3.9 million tons per year to 6.5 million tons per year). Today the aggressive company announced another deal in Brazil...this time its an $810 million (includes the assumption of debt) acquisition of Brazilian IRON ORE miner, London Mining Brasil. To summarize, over the past 2 weeks ALONE ArcelorMittal has allocated $2.5 Billion in spending to Brazil.

bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=MT

Per the Bloomberg link above :
* London Mining's Brazilian unit, London Mining Brasil, is located in the state of Minas Gerais and was acquired by the U.K. company in May 2007 for $89 million

* LMB expanded production of 'concentrate' and 'lump' ore to 3.2 million metric tons a year from 1.4 million tons...ArcelorMittal is expected to invest as much as $700 million to raise output to more than 10 million tons

* London Mining said May 7 that IRON ORE Reserves at its mine in Brazil were 598.8 million tons, compared with a previous estimate of 266.3 million tons

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Anecdotally thinking, this recent IRON ORE acquisition is absolutely consistent with MT's long term 'vertical integration' business strategy of reaching 80% IRON ORE self-sufficiency by 2014. Currently the company's internal iron ore 'attach rate' is around 45%. ArcelorMittal is actively acquiring producers of both IRON ORE and COKING COAL (metallurgical coal) in order to have greater control over its soaring raw material costs. For more information on MT's recent strategic raw material plan, please refer to my 7/27/08 post titled 'ArcelorMittal's $6 Billion Iron Ore Plan'.


Data Courtesy: Bloomberg
Full Disclosure: I own shares of MT.

Will EA FINALLY Take (Two) It Up A NOTch ?

Video game software developer Electronic Arts (ERTS) today FINALLY agreed to drop its HOSTILE $2.0 Billion Takeover bid ($25.74/share) for smaller industry peer Take Two Interactive (TTWO). With that move FINALLY out of the way (Take Two has had to reject EA's uncompromising bid as too LOW for 5 times already!!!), I'm thinking Electronic Arts may FINALLY be giving the management of Take Two Interactive some respect by enabling takeover discussions to go the FRIENDLY (as opposed to hostile) route.


While some interpret today's development as meaning EA is ready to move on and abandon its bid ALTOGETHER for Take Two...

1.) So be it, I think TTWO can do fine as an independent company given its recent momentum and 'out-year' earnings visibility courtesy of blockbuster successes GTA 4 (TTWO will be selling extra content for the Best Selling video game of ALL TIME later this year) and the COMBO Movie/video game title, BIOSHOCK.

2.) In the scenario that EA leaves the table, I HOPE the shares tank so that I can load up because I truly believe another company (Activision...Viacom...Microsoft...Sony, etc.) will come into the fold and bid on TTWO.

3.) In the event EA leaves the table, who's not to say they don't come back within 3 months, 6 months, one year or 2 years ?

4.) Oh yeah, TTWO has ALREADY casually mentioned its in formal takeover talks with an interested party not named Electronic Arts.


... I do NOT agree (keep up..and make sure you say NOT like Borat). I believe Electronic Arts NEEDS Take Two (with that said...and as subtly hinted above, I should point out that Take Two does NOT need Electronic Arts). EA needs TTWO because there's absolutely NO WAY Electronic Arts makes good on its own recently highlighted Company GROWTH Goals (sales, profits, units, marketshare, etc.) without adding a primetime video game software developer like Take Two. It's quite simple really...EA canNOT grow its video game business fast enough organically to accomplish its goals (the industry doesn't grow on trees...well not for a MATURE $15 Billion video game BEHEMOTH like Electronic Arts anyways)...they need to tap into the power of the All-Mighty ACQUISITION. Sitting on its heals would do nothing but compromise EA's already fragile + less than stellar integrity with shareholders. Bottom line - I continue to be a fan of Take Two Interactive..whether it ends up receiving a higher bid from EA or NOT (say it in that Borat voice again).

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* TRACKING 2008 GTA 4 Sales by Month courtesy NPD (rounded):

APRIL: 2,850,000 units

MAY: 1,310,000 units

JUNE: 396,000 units

JULY: 132,000 units


Full Disclosure: I own shares of TTWO.

El Mutun - Bolivia's IRON ORE 'Gold MINE'

The World's Largest Iron Ore deposit, El Mutun, is located in South America and is estimated to hold about 5% of the world's total Iron Ore Reserves. Iron Ore is an essential raw material required for the manufacture of STEEL. The remote mountain range deposit, also commonly referred to as El Cerro Mutun and/or Serrania Mutun, remains largely UNtapped and stretches an area of about 75 square kilometers across Bolivia and Brazil.


Numerically speaking, El Mutun's total estimated Reserves are approx 40 Billion tons containing about 20 Billion tons of Iron (50% iron). FYI, the World's total estimated ore reserves are about 800 Billion tons containing about 230 Billion tons of Iron (about 30% iron).

Lastly, while the world's largest iron ore deposit remains largely UNexplored, it should be noted that India's 3rd largest steel manufacturer, Jindal Steel and Power Limited, signed a $2 Billion Mutun production deal with Bolivia's government in July 2007. Per the link below, Jindal was granted rights for exploring and developing a 30 kilometer section of the deposit for 40 years.

in.reuters.com/article/companyNews/idINN1839136120070719

Data Courtesy: Wikipedia + Reuters

Is BEST BUY Shopping 4 A Future In RUSSIA ?

Best Buy INC. (BBY), the largest consumer electronics Retailer in the United States and Canada, appears to be taking a good look at RUSSIA (the 'R' in BRIC) as a possibility for expanding its current GLOBAL footprint (BBY currently operates over 1,300 retail locations throughout the United States, Canada, Puerto Rico, China, Mexico and Turkey). Earlier this month, the $20 Billion MULTInational corp received Russian government approval for trademark rights belonging to the 'Future Shop' brand in Russia. While Best Buy has yet to publicly voice any formal expansion plans regarding entry into the former Soviet Union, one (and by 'one' I mean 'I') has (and by 'has' I mean 'have') to believe that the large Russian market offers both attractive Sales GROWTH and excellent Geographic Sales DIVERSIFICATION opportunities to the largely North American business.

FYI, In addition to operating 'Best Buy' branded stores throughout North America, Best Buy INC. wholly owns and operates more than 150 'Future Shop' retail locations...most of which (over 130 stores) are located in Canada.

http://www.reuters.com/article/ousiv/idUSLF59351520080815

According to the Reuters link above, Best Buy filed its trademark applications with Russia's government patent agency, Rospatent, back in 2006. While trademark protection for 'Future Shop' has been received, BBY is still awaiting Rospatent's decision on the company's more well known trademark/brand name - 'Best Buy'.

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* Best Buy INC. wholly owns several SUBSIDIARIES including: Future Shop...Geek Squad...Magnolia Audio Video...Pacific Sales (Kitchen and Bath Centers)...Speakeasy, etc.

* In addition to the above listed wholly owned subsidiaries, BBY also owns sigificant stakes in both Best Buy Mobile (a joint venture with London-based Carphone Warehouse - Europe's largest independent cell phone retailer) and China's Five Star. Best Buy owns a 75% majority interest in Five Star, one of China's largest appliance and consumer electronics retailers. As of March 1st 2008, Best Buy operated 160 Five Star retail locations in China.

* Best Buy acquired Vancouver-based Future Shop in March 2001 for 500 million Canadian dollars.

* As mentioned above..In total, Best Buy currently operates around 1,300 retail locations throughout the United States, Canada, Puerto Rico, China, Mexico and Turkey.


Data Courtesy: Reuters + Wikipedia
Full Disclosure: I own shares of BBY.

DE 2Q08 Earnings Recap

John Deere's 2Q08 Earnings Report Stats:

Beat ? --> NO (reported $1.32/share vs. estimates of $1.37/share...year over year EPS growth was 12% from 2Q07's $1.18/share)

Profits --> Up 7% to $575 million (from $537 million)
Sales --> Up 17% to $7.7 Billion (from $6.6 Billion)

WW Equipment Sales: Up 18% to $7.1 Billion (from $6.0 Billion in 2Q07...currency effect was +5%)

U.S + Canada Equipment: Sales up 6% to $4.6 Billion...Operating profits down 3% to $602 million (from $621 million in 2Q07)
International Equipment Ex Canada: Sales up 38% to $3.1 Billion (currency effect of +13%)...Operating profits up 45% to $332 million (from $229 million in 2Q07)

WW Equipment Sales by DIVISION:
1. Agriculture Equip Sales: Up 35% to $ 4.5 Billion (from $3.4 Billion)
Ag Equip Operating Profit: Up 47% to $634 million (from $431 million)

2. Commercial + Consumer Sales: Down 1% to $ 1.33 Billion (from $1.35 Billion)
C + C Operating Profit: Down 28% to $91 million (from $127 million)

3. Construction + Forestry Sales: Down 7% to $1.2 Billion (from $1.3 Billion)
C + F Operating Profit: Down 38% to $93 million (from $150 million)

Trade Receivables + Inventories: 30% of prev 12 month sales vs. 2Q07's 30% ($7.5 Billion)
Research + Development: Up 16% vs 2Q07
Effective Tax Rate: 36% (vs DE's previous guidance of 35%)

Other Highlights + Guidance:

* DE's 3Q08 Raw Material Costs increased by $140 million vs. 2Q07 due mostly to higher costs for freight and STEEL (this is the reason for DE's 3Q08 earnings miss...DE missed analyst profit expectations by about $25 million)

* DE expects 'U.S. Farm Cash Recepits' (total U.S. farm industry revenues from sales of livestock, crops and government subsidies) to increase from $296 Billion in 2007 to $347 Billion in 2008 (growth of 17%...DE previously expected 2008 recepits of $330 Billion)...DE expects U.S. Farm Cash Receipts to increase from $347 Billion in 2008 to $355 Billion in 2009 (growth of 2%...DE previously expected 2009 receipts of $329 Billion)

* 4th Quarter Guidance: DE guided 4Q08 profits LOWER than analyst estimates ($490 million) to $425 million. DE expects 4Q08 equipment sales to increase by 29% vs. 4Q07.

* DE's Stock Buyback Program --> In 2008 DE has bought back a total of 16.4 million shares at an avg purchase price of $79.27 per share. During 2008 DE has purchased $1.3 Billion worth of stock or about 4.5% of the company's marketcap/outstanding shares. In the just completed quarter (2Q08) DE repurchased 4.5 million shares at an average price of $66.67 per share. In 2007 DE repurchased 25.7 million shares at avg price of $58.37/share ($1.5 Billion worth of stock). 18.5 million shares remain under DE's current 40 million share buyback authorization.

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Deere's 2008 + 2009 Commodity Price Estimates (per bushel/pound) :

CORN - 2008 estimate: $4.45 (prev = $4.35)...2009: $5.50 (p = $5.00)

WHEAT - 2008: $6.92 (p = $7.70)...2009: $7.74 (p = $5.80)

SOYBEAN - 2008: $10.60 (p = $10.25)...2009: $13.50 (p = $10.00)

COTTON - 2008: $0.58 (p = $0.55)...2009: $0.65 (p = $0.60)

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Deere's 2008 Full Year Company Outlook:

- DE expects full year 2008 WW Equipment Sales to increase by 21% over 2007 assuming a 5% currency impact (vs. their May 2008 projection of 20% growth)

- AG Equipment Sales are forecast to increase by about 38% for full-year 2008 (assuming a positive 8% currency impact)...DE's previous expectation was up 35%
- DE's 2008 AG industry expectations: Industry Sales in the U.S. should be up 20-25% vs. 2007 (vs. DE's earlier expectation of up 20%)...Industry sales in Western Europe are forecast to be up 5% (vs. DE's earlier expectation of up 3-5%)...South America should grow 40% (vs. DE's earlier expectation of up 30%)...DE also expects Asia sales to grow but no guidance was given

- Commerical + Consumer Sales are expected to increase by about 4% in 2008

- Construction + Forestry Sales are expected to decline by about 5% in 2008 due to weakness in U.S. residential construction as U.S. housing starts are expected to reach 60 year lows...DE previously believed C+F sales would fall 3% in 2008 vs. 2007



Conference Call Quotes:
* Deere VP of I-R Marie Ziegler on Offsetting Rising Material Costs: "In terms of pricing all of the orders that we have for 2009 will have some price increases in them and it would vary depending on the time of when the order was placed. We did take an interim increase on many of those orders, you would be looking for at least a 5% or more increase and again we’re specifically talking AG here and the combines that Susan mentioned, those are 9% to 10.5%...Of course we are aggressively pursuing cost reduction activities to mitigate the affects of rising costs as well. But this is a near-term issue as we have taken several pricing actions globally. Here are a few examples from the US. On large tractors, we took a 3% increase in April of this year and earlier this week we announced another 7% increase on large wheeled tractors. On 2009 combines, we took a 95 to 10.5% increase. In commercial and consumer, prices increased from zero to 6% in late May. In construction and forestry we raised prices zero to 5% in July and yesterday announced increases from 4% to 9% affective November 1st, 2008. The bottom line is our backorder position limited the revenue impact of price increases in 2008. However, with the pricing actions we have taken and our cost reduction efforts, it is our intention to restore our cost price ratio and you should begin to see evidence of this in the first quarter of 2009."

* DE I-R Susan Karlix on Outlook for U.S. Farm Cash Receipts: "The strong markets for crops are driving good levels of farm cash receipts and income globally...note that our forecast for total US farm cash receipts for 2008 and 2009 are considerably higher than our outlook from just one quarter ago and at dramatically increased levels from those of just a few years ago. We ran yesterday’s US DA numbers through our model and the result is a less than 1% difference in 2008 and 2009 cash receipts. All of this translates into an excellent outlook at John Deere not only for tractors and combines, but also for products like sprayers and seeding equipment, and strongly supports our outlook for industry sales of agricultural equipment in the US and Canada as shown on slide 13 which is now up 20% to 25% from last year."

* Marie Ziegler on Brazil and South America Outlook: "We are less then a year into full operation of the new tractor facility in Brazil, and so we are reaping the benefits of having that additional capacity as well as having broadened our product line. We’ve added five new tractor models last year. Some higher horsepower, some in the lower horsepower ranges. So we are much better positioned to provide product to our Brazilian customers then we ever have historically. Ramp up of that facility occurred much earlier in the year and so we’re really reaping the year-over-year benefits of having that facility fully operational, having moved tractor production out of our factory in [Orezontina] which produced combines will also over time as that factory goes through its adjustments, provide for additional opportunity there as well. So we’re feeling very good about our ability on the manufacturing side and we have a very strong dealer network, very solid and traditionally our issues have been that we were capacity constrained as we could not provide them with enough product, so (now) we’ve got the product in place. We’ve got the distribution and the market conditions and fundamentals in Brazil and really throughout South America look very promising."

* Marie Ziegler on Eastern and Central Europe Outlook: "Absolutely we are investing in distribution; in fact about a quarter ago we announced that we were investing in the distribution center in Russia that would help us in the parts side and training. So we have a dealer network. We are investing in dealer development in that part of the world. In terms of specific sales numbers we will provide that for you geographically on an annual basis but you saw in 2007 that our sales were over a billion in that specific part of the world, central Europe and Commonwealth of Independent States and the growth rate was I think about 60%. So we definitely have seen the growth and we are investing in infrastructure to continue to support that part of the world."


Full Disclosure: I own shares of DE.