Apple's $1 Billion iPhone 'Differentiator'

According to CEO Steve Jobs, Apple's new iPhone software business, 'The App Store', is off to a rather remarkable start. One month following Apple's (AAPL) concurrent launches of the innovative 3G iPhone and software 'App store', users have downloaded more than 60 million software programs for their iPhone/iPod Touch devices. While most of those software applications were downloaded for free, Apple's App store sales averaged $1 million a day for a total of about $30 million in sales during July. Assuming $30 million a month in sales, Apple is on pace to rack up App store sales of about $360 million over the course of a year.

Per a Wall Street Journal interview with Steve Jobs, the Apple CEO seems to be pretty excited about the current success and potential business opportunity the new App store represents. According to Mr. Jobs, "This ting's going to crest a half a Billion, soon...Who knows, maybe it will be a $1 Billion marketplace at some point in time...I've never seen anything like this in my career for software...Phone differentiation used to be about radios and antennas and things like that, we think the phone of the future will be differentiated by software."

* FYI - Apple's current App store earnings-sharing model allows for the company to keep 30% of the total profits made from App store sales...the other 70% goes to the independent software application creators. According to Steve Jobs, the developers' share of iPhone application sales in July was about $21 million...the top 10 iPhone software developers accounted for roughly $9 million in sales during this time (or about 43% of the total developers' share of July sales).

online.wsj.com/article/SB121842341491928977.html?mod

Data Courtesy: Wall Street Journal

Full Disclosure: I own shares of AAPL.

Alan Greenspan On Fannie and Freddie

Former Federal Reserve Chairman Alan Greenspan was recently interviewed by CNBC and commented on the U.S. federal government's 'rescue' of the country's Government Sponsored Entities, Fannie Mae (FNM) and Freddie Mac (FRE) :


" You cannot have a type of organization which is half public, half private. Essentially the profit turns out to be for the private sector and the losses are socialized. That is NOT capitalism. That is NOT the way our system functions and Fannie and Freddie are a major accident waiting to happen. "


* FYI + According to U.S. Treasury Secretary Hank Paulson, Fannie Mae and Freddie Mac together finance about 70% of ALL U.S. residential mortgages (70% MarketShare in the U.S. mortgage financing industry)

Data Courtesy: CNBC

CRAMER - Wind Is Future...Nat Gas Is Now

FYI, I found Jim Cramer's 8/06/08 Realmoney.com blog entry titled 'Wind Is The Future, but Nat Gas Is Here Now' to be both well-written and tremendously insightful..thus I'm including it below in its entirety for reference's sake.

For the record (and just in case you haven't picked up on it by now), I'm a strong believer in the below Natural Gas investing thesis because research shows the fuel to be the U.S.'s most practical and feasible solution for replacing/reducing dependence on crude oil-derived gasoline. Relative to gasoline, natural gas fuel is cheaper, cleaner, domestic and more abundant...what ELSE could we, as a people, ask for ??

---------------------------------------------------------------------------

Jim Cramer Blog
Wind Is the Future, but Nat Gas Is Here Now
RealMoney.com Columnist
8/6/2008 12:21 PM EDT
URL: http://www.thestreet.com/p/rmoney/jimcramerblog/10432123.html

" The attacks on T. Boone Pickens' plans -- everything from his integrity and self-interest to his quixotic nature -- just make no sense whatsoever. They hold no water at all. They are just wrong-headed. The people against him, the ones that call him a dreamer, are the ones who have done no homework and are deeply cynical. And if they don't keep their mouths shut, we will forever be addicted to foreign oil.

While much of what he has been saying is that wind power can be substituted for a lot of other power sources, the fundament of his plan is to get autos to be using natural gas. Put aside his interests -- believe me, he cares about them, but only so far as he has been the investor in alternative energy for years and thinks it can be profitable -- Pickens' true motivation is that the technology for what he wants to have happen is occurring right now. In fact, he reminds me of the visionaries at Intel (INTC) who saw that the power of a mainframe IBM (IBM) computer could be put in the size of a pen -- a legendary presentation by Intel founder Robert Noyce that was widely scoffed at but all came true.

Let's review the alleged pie-in-the-sky elements of Pickens' plan. First, wind power, which is clean and efficient and able to be integrated to the grid much more easily than the critics say -- ask Quanta (PWR) , which does it -- and can be used in far more than just Texas. We are blessed with windy areas that have no use otherwise, and you can build cheap towers, turbines and blades without much opposition. That's the opposite of the now darling technology -- nuclear -- which really has no hope in this country because of siting difficulties and NIMBY. We have the technology, we have the raw ingredients, we have the abilities, we could take wind to 20% of our power by 2030, as the Department of Energy says, but we could cut 10 years from that with subsidies.

It is natural gas, though, that is the great conundrum, the great game-changer that few politicians and most pundits just don't get at all. The critics, like this Holman Jenkins in The Wall Street Journal, simply haven't done any research. They are using data and facts from 2003 and the industry has changed, changed to the point that the information from five years ago is valueless.

This is where the Noyce analogy comes in.

Every nat gas oil engineer and exec in the world knows that we have had 100 years' worth of natural gas underground in this country domestically -- not off the coasts, but within our borders.

And it has been totally inaccessible until five years ago. That's when drillers basically invented a new way to drill that makes it easy to get this gas out. It gets easier to get at every day, which is why you keep hearing about all of these "shales" that have gigantic finds -- just go look at Devon's (DVN) numbers today if you don't believe me. Look at the drilling! Look at the drilling that Chesapeake (CHK) is doing. I believe 100 years of nat gas -- which is two-thirds cleaner than oil including on the CO2 side, which is the most toxic pollutant -- is conservative.

So when you look at this fuel, you realize it should be used instead of gasoline as soon as possible. It is abundant, cheap, there are pipelines everywhere, it doesn't need to be refined, and it burns clean. What's lacking? Filling stations and cars. But not the technology for either, just the infrastructure.

Because of its newfound abundance, nat gas would be about half of the price of gasoline, which means that the payback for these new cars is quick. The opposite of SUVs.

Now, consider this positive that isn't being talked about enough: In Argentina, one-seventh of the cars run on natural gas. GM (GM) developed nat gas-compatible cars years ago, but because there were no filling stations and questionable reserves, the cars didn't take off. Remember, reserve worries, before horizontal drilling, were so great that Alan Greenspan held hearings on nat gas availability not that long ago.

Since then, though, we have solved the "questionable reserves" issue in spades. We have the distribution capacity, just not the filling stations. If you were Exxon (XOM) or BP (BP) you would build in the filling stations anticipating the coming surge here. If you were one of these ridiculous automakers, you would quickly put these cars on the drawing board -- right now there are kits to do it, and fleets already use it for buses and taxis in cities -- to meet the anticipated demand.

Of course, the politicians don't even know we have the abundance, hence the frustrating appearance by Chesapeake's Aubrey McClendon on Capitol Hill last week, where most lawmakers were amazed about the newfound abundance, one that doesn't need government subsidies or divisive votes by Democrats and Republicans.

In fact, the only real opponents of this fuel are the chemical companies that fear nat gas price increases, something pretty ridiculous given the abundance and the ability to import the stuff. That's the least of the problems we should worry about.

Wind and nat gas are the ways of the future, with nat gas the important bridge fuel for the next 20 years. We are so much closer to energy independence with cleaner energy than we have any time ever, but nobody cares, except the visionaries, the Noyces of this business: Boone Pickens and Aubrey McClendon.

I think it is only a matter of time before the cynics understand this (and I am not even including the peak power possibilities of thin-filmed base solar energy from First Solar (FSLR) , which is also using an Intel model to drive down the cost of industrial panels).

This future is here. It is investible and here. We can buy the nat gas companies that are drilling like mad -- Devon, Cabot Oil & Gas (hence why they missed the quarter) and Chesapeake -- and the company that makes the rigs that will make more drilling possible: National Oilwell Varco (NOV).

This is the single best theme in the market I know. It is why I stick with natural gas even as they have plummeted severely. I stick with it because I believe that under a new, more intelligent administration, this will all become obvious and the stocks will reflect this long-term thesis. "

At the time of publication, Cramer was long Cabot, National Oilwell Varco, Chesapeake, Quanta and Devon.

Data Courtesy: RealMoney.com + Jim Cramer

S+P 'Weighting' Game - Financials Vs. Energy

Over the past 15 years (since 1993), the Financial sector has enjoyed a larger 'weighting' (a larger influence) on the performance of the U.S.'s S+P 500 index relative to the Energy sector. However, per the below chart, times are changing and changing QUICKLY.

The 'modern era' PEAK difference between the weighting of the 2 sectors looks like it occurred in 2004 when Financial-based stocks made up about 21% of the S+P 500 vs. Energy's 6%. If you'll recall this so happens to coincide with the PEAK of the U.S. Housing Bubble (coincidence ? I think NOT). Since 2004 there has been a HUGE reversal in this once 15 year trend...and the influence of Energy and Financial sectors on the S+P 500 are now almost IDENTICAL !

Anecdotally thinking, I wonder if we'll eventually see a return to the 1980 scenario in which Energy stocks account for 30% of the S+P 500 vs. the 6% weight of financials (1980...not as long ago as one might think !)

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

Data Courtesy: RealMoney.com

Trinity - WIND At Its Back (or FRONT) ?

Trinity Industries (TRN), the $3 Billion marketcap entity based out of Texas, is a DIVERSIFIED industrial company by every sense of the word. Its Business Segments include :

* Rail : manufacturer of railcars + provider railcar leasing services

* Construction Products : manufacturer of highway equipment, provider of highway services, supplier of construction materials including concrete and asphalt

* Inland Barge : manufacturer of large, inland sea platforms needed for the shipping of both dry goods (grain, coal, etc.) and liquid cargo (crude oil, ethanol, fertilizer, chemicals, etc.)

* Energy Equipment : manufacturer of structural WIND towers + propane tanks



While its Largest business unit by FAR is RAIL (per the below, 'Rail-related' operations accounted for over 70% of the company's total 2Q08 sales), I find the company's Energy Equipment business to be the most promising and exciting. Trinity is the country's largest manufacturer of structured WIND Towers. Per their 2Q08 earnings report, the company's WIND Tower division DOUBLED its Sales year over year and now accounts for approx 11% of the company's total revenues. Perhaps more significant is the fact that the company's Wind Tower order backlog grew 88% year over year (to $1.5 Billion) and Trinity now expects total 2008 WIND division sales of about $425 million.


For my future reference, below are some more interesting TRN 2Q08 Earnings Report #'s :


* Total 2Q08 Sales: Up 6% to $945 million (from 2Q07's $892 m)
Rail Related Sales: Down 11% to $677 m (from $762)
Construction: Up 11% to $219 m (from $197)
Energy Equipment: Up 58% to $157 m (from $99)
Inland Barge: Up 25% to $151 m (from $121)
WIND Tower Division: Up 100% to $106 m (up from $53)


* Total 2Q08 Operating Profits: Up 35% to $150 million ($111 m)
Rail Related Profits: Down 21% to $108 m ($137)
Construction: Up 31% to $21 m ($16)
Energy Equipment: Up 117% to $25 m ($12)
Inland Barge: Up 286% to $27 m ($7)
WIND Tower Divison: Not disclosed


* Total 2Q08 Operating Margins: 15.9% (12.4% a year ago)
Rail Related: 15.9% (18.0)
Construction: 9.6% (8.1)
Energy Equipment: 16.1% (12.1)
Inland Barge: 17.9% (5.8)

* 'Rail-related' sales and profits above are derived from combining the results of two of TRN's Rail-Related business units - 'Rail Group' and 'Railcar Leasing and Management Services'
* TRN's 'Wind Tower' sales and profit results are seperately broken out above but are actually included in the company's 'Energy Equipment Services' business unit

* Wind Tower BACKLOG grew 88% yoy to $1.5 Billion (from 2Q07's $800 million)

* Wind Tower Sales as a % of Total Energy Equipment revenues grew from 54% in 2Q07 to 68% in 2Q08

* Wind Tower Sales as a % of Total Company Sales grew from 6% of TRN's total 2Q07 to 11% in 2Q08 (in other words, the sales impact of TRN's WIND tower business doubled year over year in terms of influence to the company's Top Line)

* Energy Equipment Sales as a % of Total Company Sales grew from 11% of TRN's total 2Q07 to 17% in 2Q08

* Rail-related Sales as a % of Total Company Sales decreased from 85% in 2Q07 to 72% in 2Q08

* Rail-related Profits as a % of Total Company Profits decreased from 91% in 2Q07 to 72% in 2Q08

* Energy Equipment Profits as a % of Total Company Profits increased from 11% in 2Q07 to 17% in 2Q08

------------------------------------------------------------------------

* TRN expects Railcar (not including Rail leasing services) margins to decline from 12.3% in 2Q08 to 6-8% in 3Q and 3-5% in 4Q due to higher commodity costs ('plate' steel) and a more competitive pricing environment...TRN's 2Q07 railcar margin was 16.1%...TRN's previous provided railcar margin guidance for the 2nd half of 2008 was 6-9%

* TRN's railcar order backlog of $2.4 Billion (28,600 railcars) comprise 46% of the Industry's TOTAL

----------------------------------------------------------------------------

* CEO Timothy Wallace on TRN's WIND division: "I remain very optimistic about our structural Wind Towers business. We continue to explore additional ways to expand our participation in the wind energy market. We are very pleased with the Texas Public Utility Commission’s decision to fund additional transmission lines for wind energy. Texas is at the heart of our market and we expect the TUC’s action will encourage our customers to pursue additional wind farms. We have targeted Mexico and the central part of the United States, as our key markets. Order enquiries remain very strong and we expect our backlog to grow, as we progress through the year. A large backlog enables us to stage our growth and maximize our efficiencies. Later this year, we will start converting two existing railcar facilities to Wind Tower production. This is part of an expansion plan that we have in progress to satisfy the growing demand for wind towers. Our ability to convert a facility from one product to another is a key strength in our company. It allows us to aggressively pursue orders for a variety of products. We can select products, which provide the best returns and then quickly ramp up facilities. Our highly skilled workforce makes this possible...We do know though that, We are the Largest Producer of Wind Towers in the Country."

Full Disclosure: I own shares of TRN.

Massey Energy's ACCELERATING Growth

During its 2Q08 Earnings Report today, Massey Energy (MEE), the 4th largest coal producer in the United States, provided some pretty EYE-opening guidance related to its Coal Sales and Production Targets for 2008, 2009 and 2010.

The one HUGE takeaway for me is the impressive ACCELERATION in COAL Prices this company sees through all the way into 2010...clearly Massey is 'banking' on continued growth in demand for the commodity (specifically metallurgical or coking coal as MEE is one of North America's Largest suppliers of the coal required for the manufacture of steel).

Let it be known that I also greatly respect Massey's TRANSPARENCY and the fact that they're able to be SO transparent given the current state of the U.S economy. It's not too often you see public companies in a RECESSION backdrop providing AGGRESSIVE GROWTH forecasts three years out...An impressive sign of management confidence if you ask me.

http://www.reuters.com/article/rbssEnergyNews/idUSN3137963420080731

---------------------------------------------------------------

MEE's 2008 Forecast:
* Production: 41.5 to 43 million tons

* Avg Price: $65 to $66 per ton

* Estimated Coal Sales: $2.8 Billion



MEE's 2009 Forecast:
* Production: 46 to 48 million tons

* Avg Price: $84 to $92 per ton (34% price increase over 2008)

* Estimated Coal Sales: $4.1 Billion (46% Growth over 2008)



MEE's 2010 Forecast:
* Production: 50 million tons

* Avg Price: $115 to $132 per ton (40% price increase over 2009)

* Estimated Coal Sales: $6.2 Billion (50% Growth over 2009)

-----------------------------------------------------------------------

Other Misc. Notes from MEE's 2Q08 Results:

* MEE's total coal exports increased by 83% and sales of metallurgical coal were up over 36%.

* Massey's produced tons sold was up 8% year over year to 10.8 million tons

* MEE's avg 2Q08 coal price sales realization was $65.78 per ton...$14.38 per ton higher vs. 2Q07 (a 28% price increase)

* Metallurgical coal prices increased by 52% year over year (2Q08's prices were higher by $37.42 per ton)

* Metallurgical coal made up 28% of 2Q08 MEE coal shipments (vs. 2Q07's 22%) and contributed to 46% of total coal revenues

* About 1/3 of MEE's total 2.3 billion tons of coal reserves are metallurgical (coking) coal

Data Courtesy: Reuters
Full Disclosure: I own shares of MEE.

Highly NUKED - A Glowing France

While ELECTRICITY in the U.S. is 20% Nuclear, France relies on NUCLEAR energy to power 80% of its total country's electricity needs !

Electricite De France (...not listed in the U.S. but trades publicly in France on the Paris Stock Exchange with a $100 Billion marketcap...), manages all 59 nuclear power plants in the country and is France's largest electricity generation and distribution company. 'EDF' was founded/formed by the government in 1946 and then made public nearly 50 years later as a limited liability company in 2004. Per year end 2007 company filings, France's government still owned a majority 85% stake in the energy company. According to Wikipedia, Electricite De France'a grasp is far-reaching and not just restricted to France..in 2003 the company produced about 22% of the total electricity consumed by the European Union (The EU).

* Anecdotally thinking, I'm not the biggest fan of nuke energy because I'm STILL not convinced We (as a PEOPLE) have found ourselves a safe, clean, fea$ible and repeatable way to permanently dispose of its RadioActive WASTE (by-products of the process used to create/generate nuclear energy). FYI, reading Wiki's entry below did NOTHING to assuage my recently coined condition of 'nuke nervousness' :

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

With that being said, clearly the NUKE story has some traction and fundamentals in its favor..and not just record high Crude Oil prices (although that is HUGE). Nuclear energy is THE cleanest burning major alternative fuel. According to the June 2008 issue of The Economist, "Nuclear reactors are the One PROVEN way to make carbon dioxide-FREE electricity in large and reliable quantities that does not depend (as hydroelectric and geothermal energy do) on the luck of the geographical draw."

---------------------------------------------------------------------------

* Also, just for the record + in another concerted effort to mention something else unique/notable about France's economy, France is the #1 Tourist destination in the WORLD. According to the World Tourism Organization (UNWTO), France entertained 82 million unique tourists in 2007. The 2nd and 3rd most popular international tourist destinations were Spain (60 million) and the U.S. (50 million).

----------------------------------------------------------------------------

* FYI, COAL is the Largest source of Electricity for the United States, fueling about 50% of the country's total power needs. Per my 6/25/08 post titled 'U.S. Electricity Consumption By Source' :

1. COAL -- 50.0%

2. NATURAL GAS -- 20.3%

3. NUCLEAR -- 20.1%

4. HYDROELECTRICITY -- 6.0%

5. OIL (PETROLEUM) -- 3.6%

Data Courtesy: The Economist, Wikipedia and The UNWTO

Natty Gas Buses-A-Move

According to the CEO of Chesapeake Energy (CHK), Aubrey McClendon, 20% of All buses operating in the United States are fueled by Natural Gas.

Looking Overseas, currently 1/7 of all cars in Argentina and 1/4 of all cars in Italy run on natural gas. According to T. Boone Pickens, there are a total of 8 million vehicles in the world that run on Natural Gas but only 142,000 of these are in the U.S. (Can you say 'GROWTH market appeal' ?)

Anecdotally thinking..Maybe the Pickens Plan has a chance AfterALL ? (Or at the very least give US something resembling an ENERGY PLAN focused on switching OUR country's transit fuel of choice to something Cheaper, Cleaner, Domestic and More Abundant like Natty Gas.)

* For more info on the Pickens Plan you can visit: http://www.pickensplan.com/ (...Also feel free to check out my 7/18/08 post titled 'REF - The (Revolutionary) Pickens Plan...)

The 1/2 TRILLION $ Energy Services Industry

For Reference's sake + According to Lehman Brothers, OIL and GAS companies will spend $420 BILLION on Energy Exploration and Production activities worldwide in 2008.

This represents a 20 percent increase over 2007 E+P spending.

Members of the Oil + Gas Services Industry (the 'investible' beneficiaries of the above $pending) : National Oilwell Varco (NOV), Transocean (RIG), Halliburton (HAL), Schlumberger (SLB), Baker Hughes (BHI), Noble Corp. (NE), Diamond Offshore Drilling (DO), Pride International (PDE), ENSCO International (ESV), Rowan (RDC), Hercules Offshore (HERO), Nabors Industries (NBR), Atwood Oceanics (ATW), FMC Technologies (FTI), etc.


Data Courtesy: Lehman research
Full Disclosure: I own shares of RIG.

The U.S - PROOF Steel Industry (A New ERA)

WHAT Recession ?!? WHAT Slowdown ?! The numbers speak for THEMSELVES. Despite a fragile and declining U.S. economy (...shout out to the Alan Greenspan-induced housing bubble...), STEEL companies are earning record Profits selling into the demands of Emerging economies seeking basic INFRASTRUCTURE (exp's of emerging economies = the 'BRIC' countries - Brazil, Russia, India and China). As market commentator Jim Cramer rightfully pointed out a year or so ago, we have entered a brand new ERA for these once massively U.S. demand-dependent steel companies. An ERA that allows steel manufacturers to maintain break-neck profitability and handily 'beat' wall street earning expectations during a U.S. recession.

Time to talk numbers + unveil the Empirical evidence..According to the U.S. Commerce Department, shipments of Steel to the United States declined 11% year over year during the first 5 months of 2008 to about 12 million metric tons. DESPITE the slowdown in the U.S., the worldwide Steel industry continues to GROW.

Witness the below presented EVIDENCE courtesy of the 2Q08 earnings results just recently reported by Globally-diversified steel manufacturers, U.S. Steel (X) and ArcelorMittal (MT). FYI, U.S. Steel is the Largest U.S. steel company by marketcap while ArcelorMittal is the WORLD's largest steel manufacturer by just about any measure you and I can think of (production, marketcap, profits, etc.) :


Highlights from U.S. Steel's 2Q08 (X) :
* U.S. Steel recorded a 123% year over year growth in PROFIT and beat wall street earnings estimates by 50% ! (Stripping out non-recurring items, 'normalized' earnings per share profit was $5.67 or $668 million, topping the $3.82 average estimate of 14 analysts in a Bloomberg survey...this compares to X's 2Q07 earnings of $2.54/share or $302 million)

* Total Company Sales rose 60% to a quarterly record of $6.74 billion vs. 2Q07's $4.23 Billion

* U.S. Steel, which can produce about 27 million tons of the metal a year, has three main units: North American flat-rolled steel; Europe, where it supplies central and Western Europe from mills in Serbia and Slovakia; and tubular products, which sells metal to the oil industry for pipelines...Profit in the flat-rolled unit climbed more than fivefold to $478 million, the company said. Earnings at U.S. Steel Europe increased 22 percent to $298 million, while profit from the tubular business rose 82 percent to $177 million.

* U.S. Steel said it expects results from sales of flat-rolled steel to "improve substantially'' in 3Q08 and for profit from the tubular unit (levered to the oil + gas industry) to rise as prices increase. 3Q08 earnings from the European unit will decrease because of higher raw material costs and planned maintenance, the company said.

* U.S. Steel CEO John Surma on Outlook: "We expect another excellent quarter with continued earnings improvement as price increases implemented during the second quarter and early in the third quarter are expected to improve average realized prices for each of our reportable segments."


Highlights from ArcelorMittal's 2Q08 (MT) :
* Profits increased by 114% year over year to $5.84 Billion and beat analysts expectations by 50% ! (analysts surveyed by Reuters predicted a 2Q08 profit of $3.97 Billion...MT's 2Q07 profits were $2.72 Billion or $1.97/share)

* Total Company Sales were up 39% vs. 2Q07 to $37.8 BILLION (analysts expected $34.7 Billion)

* Total steel shipments for 2Q08 were 29.8 million metric tons as compared with steel shipments of 28.7 million metric tons in 2Q07 (2% increase in shipments)

* ArcelorMittal CFO Aditya Mittal on Outlook: "We are operating at high levels of capacity, we are close to capacity and can't produce much more steel...The strongest growth is coming from newly industrializing economies, such as Brazil, Russia, China and Eastern Europe...In contracts which have been renegotiated and closed, we have achieved significant (price) increases and we expect that trend to continue until the end of the year and in 2009."

Sources:

bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=X
uk.reuters.com/article/companyNews/idUKL055720920080730?
bloomberg.com/apps/news?pid=20601085&sid=aum3d.CtKKGY&refer=europe


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

COAL PlayED - Another Day, Another T - O !

Another Day, Another gigantic Takeover in the COAL space. This time the deal's worth about $14 BILLION ! The Canadian Acquirer is Teck Cominco (TCK) and the Target is Fording Canadian Coal Trust (FDG). The deal's PREMIUM is only 12% but that's of course on TOP of Fording's year over year and year to date stock price appreciation of 180% and 130%, respectively.

bloomberg.com/apps/news

* Per Bloomberg, while the worldwide bear market slowed mergers and acquisitions activity by 35% in the first half of the year, Takeovers of Energy and Mining companies jumped 33% DESPITE record high prices for both Coal and Crude Oil

* Fording is currently the World's 2nd Largest seller of seaborne Metallurgical/Coking Coal...Australia's BHP Biliton (BHP) is the World's Largest seller of seaborne Metallurgical Coal

* After consummating the transaction, Teck will become North America's Largest Exporter of COKING Coal (aka Metallurgical Coal)

* Teck Cominco is currently the World's 2nd Largest Zinc producer...with this transaction, Teck will reduce its reliance on the commodity as Zinc prices have plunged 46% in the past year (prices for coal have more than doubled over that same time horizon)

* The deal will be transacted with a combination of cash ($9.8 Billion) and Teck Cominco stock...Fording Canadian shareholders will receive $82 in cash and 0.245 Teck share per each share of Fording they hold...Teck plans to issue 36.9 million new shares of stock to help finance the purchase

* The Fording sale to Teck comes ahead of changes to Canada's tax rules regarding income trusts, which are high-yield securities that pay out almost all of their cash flow each month to investors. Finance Minister James Flaherty said on Oct. 31, 2006, that Canada would tax income trusts for the first time starting in 2011 to limit government revenue losses and halt more companies from adopting the structure...Teck estimates the total tax savings following the deal at about $22 a share, he said.

* The bid for Fording tops Cleveland-Cliffs recent $10 billion takeover offer for Alpha Natural Resources, which was the biggest in the industry when it was announced just two weeks ago...FYI + for more info on the recent $10 Billion Cleveland Cliffs takeover, please search the Archive for my 6/17/08 post titled 'Steelmaking Coal Play Gets A Bid'.

Data Courtesy: Bloomberg

An Interview with the President of IRAN

On July 28th, 2008, the President of Iran, Mahmoud Ahmadinejad, sat down for a television interview in Tehran with NBC's Brian Williams. I highly recommend accessing the transcript of the pretty fascinating interview using the MSNBC link below...(if you're looking for the REAL thing - a webcast of the TV interview - you should also be able to find it using the below link).


http://www.msnbc.msn.com/id/25887437/


* M.A. on Iran's Relations with the U.S. --> "Well, this question which I am asking from American statesmen, when it comes to the Iranian people, what road do they want to choose? What approach? For more than 50 years now the policy of American statesmen has been to confront the Iranian people. And our people, to a large extent, have become acclimated with this situation, and we have tried to work around it. Today, we see new behavior shown by the United States and the officials of the United States. My question is: Is such behavior rooted in a new approach; in other words, mutual respect, cooperation, and justice? Or this approach is a continuation in the confrontation with the Iranian people but in a new guise? If this is the continuation of the old process, well, the Iranian people need to defend its right, its interests as well. But if the approach changes, we will be facing a new situation. And the response by the Iranian people will be a positive one...I think that if this process is continued by the American government in the not-so-distant future, the situation will change. This means for the Americans to recognize the rights of the Iranian nation, recognize the rule of law, and also recognize a fair and just situation which needs to prevail. These are not difficult demands. I believe that American politicians, statesmen, should not be very much affected by the prevailing media environment. If they want to change their policy towards Iran, well, they have to announce that and take actual steps towards that. I think that this benefits the American government, and it serves the interests of all of us. We'll welcome such an effort."


* Iran's Nuclear Enrichment Program --> "What is there for us to bargain over? Over our own right? The rights of other peoples? Our own independence? No. We can cooperate in an environment which benefits all. All will benefit from such a environment. And there is no need for any party to lose out. In a fair setting, everyone will benefit...we are not working to manufacture a bomb. We don’t believe in a nuclear bomb. We also think it will not effect political relations. The Zionist regime (referring to the U.S.) which you refer to earlier has an arsenal of hundreds of nuclear warheads. Has this arsenal helped the Zionists to prevail inside the conflict inside Lebanon? No. Again, did nuclear arms help the Soviet Union from falling and disintegrating. For that matter, did a nuclear bomb help the U.S. to prevail inside Iraq or Afghanistan, for that matter. Nuclear bombs belong to the 20th century. We are living in a new century. We think that when it came to the nuclear issue, an inappropriate measure or action was taken. Nuclear energy must not be equaled to a nuclear bomb. This is a disservice to the society of man. Nuclear energy is very beneficial and very clean, by the way. All nations must use it. A bomb, obviously, is a very bad thing. Nobody should have such a bomb. If there are parties that claim a bomb is a bad thing, it’s only appropriate for them, as a first step, to destroy their stockpiles. Destroy their bombs and allow clean energy to be utilized by all. I ask you if today, 1,000 nuclear power plants were up and running, would we have seen an increase in the price of oil? I am sure we wouldn’t have had such high prices which is affecting the economies of all countries. It has created problems for their economies. Nuclear energy is a renewable energy. It’s clean. It’s environmentally friendly and all nations must possess it. And there should be a very concrete, if I can use the word, set of regulations, a fair set of regulations which will control the activities of all nations to supervise things, without discrimination. To supervise without discrimination. Allow nations to have access to such clean energy. There are parties, which have bombs themselves, and they have nuclear energy as well and unfair basis and on a discriminatory basis, they are preventing other people — other parties, from utilizing clean nuclear energy."


* The WW Price of OIL --> " Well, a fair price — this has to be determined inside the environs, if I can use the word, of economy. We think that the market should be free and — these commodities should compete in a free setting or conditions. At the moment, the situation is not realistic. It is rather manufactured and the prices are not realistic as a result. Well, I can’t give you an exact figure right now (for the 'Fair' price of Crude Oil) because the market is not a real market. Some powers are manipulating the prices inside the market. Do you really think that the price of oil is the end result of a healthy competition inside the market? It’s not."


* The Future of Iraq --> "Well, in a long-term approach, I believe that the Iraqi people will overcome, prevail over, in other words, their present problems. But in the immediate future, everything depends on the behavior as shown by the American government. If the American government and officials take up a rational, a humanitarian approach, the conditions inside Iraq will improve very quickly. But if not, if they want to impose their will on the nation of Iraq, historical precedence tells them that they will not abide by this. And they will resist. Under such conditions, obviously the Iraqi people will incur some damages. But by the end of the day, they will prevail. They will succeed. But the main damages will be incurred by those parties which decided to disrespect the Iraqi nation."


* Mahmoud Ahmadinejad is running for Re-election in 2009


* Iran is currently experiencing inflation of about 20%

--------------------------------------------------------------------------------

RTOB on the Significance of GEOpolitics :

While this is not a political blog(site), it is a fact that Politics and related decision-making from those in Power can often directly impact the prosperity and investing climate of a region. In today's increasingly Globalized (and therefore vulnerable/sensitive) world, some geopolitical issues can become derisive enough to threaten the collective relations and prosperity of SEVERAL regions.

If the U.S. were to go to war with Iran (Pick A Reason, Any Reason - 1. Iran won't quit its nuclear enrichment program and is probably developing nuclear bombs, 2. the President of Iran is a sworn enemy of Israel and has stated many times that he plans to 'wipe Israel off the map', 3. Iran continues to fund Anti-American violence in Iraq and Afghanistan, etc.), expect the Global Economy to suffer some Painful and Widespread 'SHOCKS'. Given the fact that Iran is one of the world's largest CRUDE OIL producers (and given the fact that Crude Oil is one of the World's most common and relied upon input materials), a WAR between the 2 countries would create a pretty large mess in terms of disrupting the current functioning of our Global markets (Can you say Economic HeadWIND ?!...More like Economic HeadHURRICANE !).

While I do not believe the U.S. is headed to war with Iran anytime soon (Pick a Reason, Any Reason - 1. that little war in Iran, 2. that little war in Afghanistan, 3. that little housing recession in the U.S., 4. that little deficit, etc.), the possibility still exists and for that reason I chose to reference the recent television interview with Mr. Ahmadinejad above.


Data Courtesy: MSNBC and NBC

The WCI's Coal Hard Facts

Coal-related Facts courtesy of the World Coal Institute:


worldcoal.org/assets_cm/files/PDF/

* Global Coal Useage: Coal supplies 25% of the World's primary energy needs and generates 40% of the World's Electricity (per cited 2005 data)

* Global Coal Production: 2006's Estimated Global Coal Production was 5,370 Metric Tons...an 8.8 % increase over 2005's 4,934 MT

* Coal and STEEL: About 13% of Total hard Coal production is currently used by the STEEL industry (about 717 Mt)...About 70% of TOTAL Global Steel production is DEPENDENT on Coal (Coking Coal/Metallurgical Coal)...Australia is the World's Largest Exporter of Coking Coal + exported an estimated 121 MT in 2006

* Reserve Lives of Coal, Oil + Gas: At current production levels, proven coal reserves are estimated to last 147 years. In contrast, proven oil and gas reserves are equivalent to around 41 and 63 years at current production levels respectively

* Over 68% of the World's Crude Oil reserves are concentrated in the Middle East and Russia

* Over 67% of the World's Natural Gas reserves are concentrated in the Middle East and Russia

* Germany is the World's Largest 'Brown Coal' producer and produced an estimated 914 Mt in 2006 (a 1% increase over their 2005 production) ...Brown Coal (aka Lignite) is the lowest grade of coal and is used almost exclusively as a fuel for steam-electric power generation

Data Courtesy: World Coal Institute.

CAT 2Q08 Earnings Recap

Caterpillar's 2Q08 Earnings Report Stats:

Beat ? --> Yes (reported $1.74/share vs estimates of $1./share...Year over year EPS growth of 40% vs. 2Q07's $1.24/share)

Profits --> Up 34% to $1.1 Billion (from $823 million)
Sales --> Up 20% to $13.62 Billion (from $11.36 Billion)

* Currency Effect --> the weaker U.S. dollar added $384 million to Sales (or 3%)...it also negatively impacted operating profits by about $62 million (or 5.5%)

Machine Sales: Up 17% to $8.5 Billion
Engine Sales: Up 28% to $4.3 Billion
Financial Product Sales: Up 11% to $827 million

* Sales Breakdown By GEO:
1.) Asia Pacfic sales grew by 52%:
AP Machinery sales: Up 50% to $1.4 Billion
AP Engine sales: Up 57% to $745 million

2.) Europe-Africa-Middle East (EMEA) sales grew by 22%:
EMEA Machinery sales: Up 15% to $2.6 Billion
EMEA Engine sales: Up 34% to $1.7 Billion

3.) Latin America sales grew by 27%:
LA Machinery sales: Up 23% to $1.0 Billion
LA Engine sales: Up 42% to $371 million

4.) North America sales grew by 7%:
NA Machinery sales: Up 8% to $3.5 Billion
NA Engine sales: Up 9% to $1.5 Billion

Other Highlights + Guidance:
* CAT's 2008 FY Guidance: CAT expects Total 2008 Company Sales of $50 Billion and EPS of about $6.00 per share (fyi, this means CAT is currently trading at a 12 P/E to its 2008 Earnings)

* CAT's 2008 Material Cost Guidance: CAT expects total 2008 material costs to increase by about 2.5-3.0% vs. 2007...this comes out to about $600 million

* International Sales made up 60% of total company sales (compared to 55% last year)
* International sales grew 30% year over year

* 2Q08 Machine + Engine Sales Operating Profit: $1.43 Billion or 11.2% of Sales (vs. 2Q07's $1.12 Billion or 10.7% of Sales)* 2Q08 Manufacturing Costs: Up 1.4% or $143 million vs. 2Q07 (material costs for inputs like steel were 2/3 of the total cost increase...freight/fuel costs made up the other 1/3)

* Labor Base: CAT ended 2Q08 with 105,322 employees (up 9% or 9,000 from 2Q07)

Conference Call Quotes:

* CAT Director of I-R Mike Dewalt on International Growth: "This quarter, 60% of our sales and revenues were outside North America. A year ago in the second quarter, that number was 55%. But I think to really appreciate the magnitude of the shift in geographic mix, we need to go back and look at what happened over the past two years, when North America was coming off of its peak. Compared with the second quarter of 2006, Asia Pacific is up 84%, Europe, Africa, Middle East is up 60%, and Latin America is up 55%. And during that same period, sales and revenues in North America were down 3% and actually closer to 13 if you adjust for Progress Rail which we acquired at the end of the second quarter of 2006...China has been very good growth. Actually I do not see any signs of declining demand in China. It looks pretty good. Now again, our sales to a degree are limited by production."

* Mike Dewalt on the Mining Industry + Related Equipment Sales: "Mining is doing well, particularly for coal. Coal prices are up substantially from last year and U.S. exports of coal are rising. Sales to coal customers were well up from the same period a year ago."

* Mike Dewalt on a Weakening Western Europe Outlook: "We have, however, lowered our expectations for European machine sales. Like other companies, you have heard from, we have seen declines in Europe. We expect those declines to continue through 2008. We have adjusted our outlook accordingly and we expect to lower production schedules somewhat in Europe, particularly for smaller machines."

* CAT CEO Jim Owens on Commodities + Impact to Material Costs: "Commodity prices, as we have indicated several times, could drop fairly significantly. I am talking 30 percentish and still be at levels that would be attractive to drive investment in the mining and oil and gas industries because there has been such a prolonged period of under investment...I am a little concerned, very specifically, about the steel industry because there is more concentration globally in the steel industry. The energy costs are clearly up quite a bit. Iron ore pellet prices are up quite a bit. And they have a pretty strong position to push a lot of that through to the market...I think if there is a significant decline in commodity prices, from current levels, then you will still see pretty strong demand because of the, again, very prolonged under investment that occurred in global mining and in global energy. And that would be coal, oil, gas, power distribution, et cetera. Those things play to our strengths. And I think even with the commodity price decline, which is likely in my view, we will see continued strong demand in those sectors."

* CAT (Mike Dewalt + Jim Owens) on timing of a U.S. Economic Recovery: "You know, it would be extraordinarily unusual for the U.S. not to be in a fairly significant recovery by 2010 in my view...you know, there is frequently this glass half-empty view that North America, the U.S. is declining and is going to get worse. I mean, it has been going down now for over two years. It is way off the peak. It is down order of magnitude new machine sales to users 40%, so you know, it has already seen quite a fall...It has dropped as much as it did in the last two recessions, the '91-'92 and the 2001-02 recession already, and will probably get a little worse. Then I think it will begin to recover. I do not know when that recovery is going to start as we get out to '09. We will give you the '09 outlook , but whether it is early '09, mid-'09, late '09, we'll see, but I would be very surprised if it isn't underway before we get to 2010."

* Mike Dewalt Summarizing CAT's 2Q08 Results: "Six key points here, just to summarize: first, we had a good quarter, our best ever for sales and revenues and profit. Despite severe weakness in the U.S., a weaker Europe, a negative product mix and a negative impact related to currency. Second, our costs are up from last year. But when you consider overall inflation, we are doing fairly well. In fact, manufacturing costs in the second quarter were only up 1.4%, and that includes labor, overhead and material costs. And considering where inflation has been, particularly for material costs, that is not too bad. That said, we still have a lot of room to improve. And we think we are doing the right things to drive that improvement. Okay, third point, in terms of the outlook, we do see a weakening picture in North America, Western Europe and Japan and they are all included in our full year outlook. Fourth point, our order backlog continues to be very strong. Commodity-related end markets are doing very well and from a geographic standpoint, the developing world continues with good growth. Point five, sales of many of our products are production constrained. For most large machines and engines, we are selling as much as we can make. And finally, we have a diverse business in terms of products, services, end-markets, and geographies. We have some that are doing very well and that are helping to offset very negative impacts from others. "

Full Disclosure: I own shares of CAT.

COP 2Q08 Earnings Recap

Conoco Phillips 2Q08 Earnings Report Stats:

Beat ?: Yes (reported $3.50 cents/share vs estimates of $3.33/share...21% earnings per share growth over 2Q07's normalized $2.90 per share)

Profits --> Up 13% to $5.4 Billion (from a normalized $4.8 Billion)
Sales --> Up 51% to $71.4 Billion (from $47.4 Billion)

-------------------------------------------------------------------

COP's Earnings by Business Segment:

1.) ENERGY EXPLORATION + PRODUCTION OPS:

E+P Profits: Up 90% to $4.0 Billion (from 2Q07's $2.1 Billion)

E+P Profit Per BOE: Up 273% to $25.12 per BOE (vs. 2007's Avg of $6.73)...BOE or Barrel of Oil Equivalent: a unit of energy based on the approx amount of energy released by burning One Barrel of Crude Oil)

Avg Realized International Oil Price: Up 83% to $119 per barrel (from 2Q07's $65)
Avg Realized International Nat Gas Price: Up 45% to $10.94 per BTU (from 2Q07's $7.55)

Total Energy Production: Down 8% to 2.2 million BOE per day from 2Q07's 2.38 million BOE per day

Energy Production Ex Lukoil: 1.75 million BOE (vs. 2Q07's 1.91 million BOE...a year over year drop of 8%...decrease in yoy production mainly due to the Venezuelan government's expropriation of the company's Venezuelan oil projects - this resulted in COP taking a $4.5 Billion charge in 2Q07)

Natural Gas Sales: 4.8 Billion cubic feet per day during 2Q08 (vs. 2Q07's 5.1 Billion)

Exploration Expenses: $288 million (vs. $259 million in 2Q07)

2.) MIDSTREAM OPS:

Midstream Profits: Up 59% to $162 million (from 2Q07's $102 million)

3.) REFINING + MARKETING OPS:

R + M Profits: Down 72% to $664 million (from 2Q07's $2.4. Billion)

R+M Profits Per Barrel: Down 53% to $2.33 per BOE (from 2007's Avg of $5.00)

U.S. Refinery Margins: $10.29 per barrel

International Refinery Margins: $6.70 per barrel

WW Refinery Capacity Utilization Rate: 93% (vs. 2Q07's 93%)

U.S. Domestic Refinery Capacity U-Rate: 94%

International Refinery Capacity U-Rate: 88%

R+M Expenses: $170 million (up 193% from 2Q07's $58 million)

4.) LUKOIL OPS:

Lukoil Profits: Up 47% to $774 million (from 2Q07's $526 million)

COP's Lukoil Daily Production: 448,000 BOE per day (equivalent to 215K Barrels of Crude Oil per day)...20% of COP's 2Q08 Energy Production came from Lukoil

* COP's 2Q08 Lukoil earnings include a $120 million adjustment in costs to reflect lower than estimated Lukoil earnings during the previous quarter (1Q08)

5.) CHEMICALS OPS:

Chemicals Profits: Down 74% to $18 million (from 2Q07's $68 million)

-------------------------------------------------------------------

Other Highlights + Guidance:

* 2008 Production Guidance: Excluding Lukoil, full year 2008 Production will average about 1.8 million BOE per day...Conoco's 3Q08 E+P Expenses will be around $375 million

* Free Cash Flow: COP generated $5.4 Billion in Cash during 2Q08...With this money COP: 1.) Repurchased $2.5 Billion of Conoco Phillips company stock, 2.) Funded $3.6 Billion of its capital spending program, and 3.) Paid $0.7 Billion back to shareholders in dividends.

* Stock Buyback Program: As part of its $10 Billion authorized Stock Repurchase program for 2008, COP plans to spend about $5 Billion buying back company stock during the 2nd half of 2008 (the company has already spent $5 Billion buying back stock during the first half of 2008)

* Shares Outstanding: COP's 'Float' or Shares Outstanding decreased by 6% year over year to 1.56 Billion shares (from 2Q07's 1.66 Billion shares)...Conoco's repurchase of company stock contributed 33% or 20 cents to 2Q08's year over year EPS growth of 60 cents. Since the beginning of 2008 COP has spent $5 Billion purchasing its own stock.

* Effective Tax Rate: 44% (vs. 2Q07's 41%)

* Cash On Hand: $787 million

* Return On Capital: 20%

* Debt To Capital Ratio: COP ended 2Q08 with $21.9 Billion in Debt and a 19% Debt to Capital Ratio

--------------------------------------------------------------

Conference Call Quotes:

* COP CEO on 2008 Capital Spending + Stock Buyback Plan: "On share repurchase...(the) market can expect we are going to do $10 Billion share repurchase in 2008 and going at a rate of $2.5 Billion a quarter. Capital spending is going to be around $15 billion, maybe a little bit more, but $15 billion, $16 billion."

* COP CEO Jim Mulva on COP's International Projects: "See now, we recently signed interim agreement with Abu Dhabi National Oil Company (ADNOC) to develop the Shah gas field in Abu Dhabi and elsewhere in the Middle East, we approved the continued funding, moving forward for the development of the Yanbu Export Refinery project with Saudi Aramco. We’re pleased to be working with both ADNOC and Saudi Aramco on these world-class projects. It helps meet the growing demand for energy not only in the old Middle East but also around the world. We recently signed a MoU ('Memorandum of Understanding') with Petrobras (PBR), as you know the largest Brazilian Energy company, and with this agreement we hope to sort through opportunities to work together in our core businesses, upstream and downstream, as well as energy opportunities such as ethanol in Brazil."

* COP CEO on COP's North American Pipeline Project (Keystone): "In North America, our joint venture with TransCanada, we plan to expand the Keystone crude oil pipeline system, providing additional capacity of 500,000 barrels per day from Western Canada to the U.S. Gulf Coast...we expect to use it by taking Canadian crude all the way down to the Gulf Coast because there's good optionality to be in our refineries in Mid-Continent and Gulf Coast, both from Canada as well as from say Venezuela and other crudes that we can get from Mexico and other places around the world.

* COP CEO on Partnership with Brazil's Petrobras: "We’re merely looking at the opportunities on how we can participate in exploration and production both in Brazil as well as outside Brazil and then we also, with our large refining segment in North America, we kind of explore and ultimately, we’re having more crude oil production when there is an opportunities for us to be working with each other in the downstream part of the company and then for both companies...We need a lot of ethanol ultimately to blend into our gasoline and so we’re looking at the opportunities of being such large ethanol producer in Brazil and how Petrobras participates in that and whether there’s opportunities for us to be working with each other. So to go any further than that, we are really in initial phases of this study work of the MoU but we‘re really pleased to be working with Petrobras.

----------------------------------------------------------------------

Additional Misc. Conoco Phillips Info:

* COP is currently the 3rd Largest U.S. Oil Producer by marketcap

* Conoco purchased Burlington Resources in 2006 for $35 Billion to become the U.S.'s Largest Natural Gas Producer

* In addition to being the U.S.'s largest natural gas producer, COP is also the 2nd Largest Oil Refiner in the country (Valero or VLO owns the largest refining capacity in the United States)

* COP owns and operates 12 Refineries in the U.S. - 2 of which are part of a joint venture with Canada's Encana (ECA)...COP also owns refineries in Europe (Germany and the United Kingdom)

* COP has previously stated it earns $130 million, or 8 cents a share, for EACH $1 increase in Oil prices, and $33 million, or 2 cents, for EACH 25 cent gain in Natural Gas prices per thousand cubic feet.

Full Disclosure: I own shares of COP.