U.S. stock futures were flat to lower Thursday morning following the senate approval of its version of the $700 billion bailout package. Meanwhile, the Federal Reserve said it was considering a rate cut. Following all the economic data released Wednesday indicating the U.S. is in a recession, this isn't surprising. The ECB is also meeting today to consider its move. Today, the Labor Department will report weekly initial jobless claims and the Commerce Department will release August factory orders. Regulators also extended the ban on short-selling shares of some 800 financial companies.
UBS (NYSE: UBS), which has been hard hit by the credit crisis, said Thursday it expects to return to profit in the third quarter after four quarters of losses. The bank has substantially reduced its exposure to U.S. commercial and residential mortgages. The bank wrote down more than $40 billion and raised close to $30 billion.
Mosaic (NYSE: MOS) shares are down about 20% in pre-market trading after it missed analyst estimates when it reported its fiscal first-quarter earnings.
Marriott International (NYSE: MAR) was expected to report earnings of 32 cents a share in the third quarter. The company reported 34 centsearnings per share excluding an 8 cents adjustment.
Here's the answer every hedge fund knows: It will not let you raise numbers in the out years.
Right now there is a tremendous struggle going on about near-term and far-term earnings growth and what we can expect to see. Everyone knows when Mosaic and Potash report next week that the numbers will be beaten and the estimates raised.
But so what? If you scrap the ethanol mandate or if people even think that it will be scrapped, you will see grains collapse just as quickly as oil collapsed when we found a level we didn't need it -- remember, we don't "need" ethanol, but it is mandated.
Once again it's ugly out there today. The Dow Jones Industrial Average dropped below 11,000 for the first time in two years, plunging over 2%. The rest of the U.S. stocks are not far behind with both the Nasdaq composite and the S&P 500 down over 2% as well. It's depressing. But you don't have to look far to see a nicer picture, you just have to look up: up north that is.
The Toronto Stock Exchange has fared much better in what has officially become a U.S. bear market. Over the past year, while the S&P 500 sank over 19%, the S&P/TSX Composite index dropped only 3.4%. Year-to-date, while the S&P 500 declined over 16%, the TSX was barely down 1%. And if you stay away from financials on the TSX, you'd fare even better.
How so, you ask, doesn't the Canadian economy closely follows the U.S.'s? It's mostly true as the U.S. is Canada's biggest trading partner and the Canadian economy is intertwined with that of the U.S. For example, some of the layoffs at GM and Ford plants have occurred in Ontario plants, and Canada's unemployment rate edged up to 6.2% in June due to a drop in full-time jobs.
The thing is, though, that the TSX is heavily weighted in mining and oil & gas companies, sectors that have fared better than techs and financials the past year or so. Getting exposure to the Canadian market is very easy since many stocks also trade on U.S. exchanges, the famous of all may be Research in Motion (NASDAQ: RIMM). But there are others, and some of them, the U.S. investor may want to consider.
Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models that have a competitive advantage in established markets, preferably with a favorable global trend as a support. Moreover, there are few more-favorable global trends than food production, and with the above in mind, Agrium is worth a review.
Agrium (NYSE: AGU) is the No. 1 producer and seller of fertilizers in North America, including nitrogen, as well as potash and phosphate products.
The company has an 8-million-ton nutrient production capacity, but production is only half the equation: AGU also has more than 400 retail outlets in the U.S. and South America -- the back-end side of the revenue equation.
The top U.S. retailer of crop supplies, Agrium's products are also sold in Canada, Mexico, Brazil and Asia. Analysts really like AGU's plan to expand, and hopefully double, this $2 billion revenue stream within five years, stemming from emerging market demand. The Reuters F2008/F2009 EPS consensus estimates for AGU are $8.21/$9.53.
Agrium (NYSE: AGU) is a leading producer and marketer of agricultural nutrients, in North and South America. The firm's plants can produce more than eight million tons of fertilizers per year. These are sold to wholesale distributors and through more than four hundred company retail outlets. Agrium also participates in a joint venture with Repsol YPF (NYSE: REP), operating Argentina's largest nitrogen plant. Potash Corporation of Saskatchewan (NYSE: POT) is a major competitor.
The company pleased investors last week, when it raised its Q2 EPS guidance from $1.92-$2.22 to $2.80-$3.00. The Street had been expecting $2.50. Management attributed the positive outlook to strong global crop prices and the resulting solid performances by both its retail and wholesale operations. BMO Capital Markets subsequently reiterated its "outperform" rating on the shares and boosted its price target to $125.
And yet my best indicator, the Standard & Poor's oscillator, which you can order from their Web site, is saying you cannot be short here and should be doing some buying. The oscillator, when it has been at minus 5, has called a bottom almost every time in the last decade, plus or minus a day or two, and a percent or even two, and I have long since learned not to see through it.
"We think we've seen the worst and will likely see some improvement in the economy going forward," says growth stock specialist Harry Domash, editor of Winning Investing.
Among his buy recommendations, the advisor looks at two agriculture plays: Agrium (NYSE: AGU), a producer of fertilizers, and the diversified exchange-traded fund, PowerShares DB Commodity (ASE: DBC).
"Headquartered in Calgary, Alberta, Agrium is a major North American producer and marketer of fertilizers. Agrium operates plants in Canada, the U.S., and in Argentina. Its major product is nitrogen fertilizer but it also makes potash and phosphate products.
"Agrium sells to wholesalers and through more than 800 company-owned retail stores in the U.S., Canada, and South America. Its stores also sell seed and other farm supplies.
"Agrium just recently completed its acquisition of UAP Holding, which had operated 370 distribution and storage facilities North America. Everything related to agriculture is booming, and Agrium, not counting its UAP acquisition, is growing sales around 30% annually.
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
MOST NOTEWORTHY: StoneMor Partners, Suntech Power and Tesoro were today's noteworthy initiations:
Morgan Keegan initiated StoneMor Partners (NASDAQ: STON) with a Market Perform rating. The firm has a low level of confidence in STON's financial projections given its vulnerability to changes in state and local regulations, and financial reporting complexities.
Jesup & Lamont initiated Suntech Power (NYSE: STP) with a Buy based on the company's leading position in solar PV, industry growth and polysilicon supply agreements in place.
Tesoro (NYSE: TSO) was assumed with an Underweight rating at JP Morgan. The firm expects the West Coast margins to remain weak given the decline in the gasoline demand and capacity increases of the majors.
OTHER INITIATIONS:
RBC Capital initiated Agrium (NYSE: AGU) with an Outperform rating and $115 target.
Today started out as one of those positive days again as the investment climate appeared to be getting better. Then the unemployment data came out, and frankly it wasn't really as bad as one would expect. But shortly after 10:00 AM, we saw profit takers come into the market. In fact, even oil traders ran oil up after shorts covered after a good week of selling Texas Tea; oil closed up $3.82 at $116.34.
Below are the unofficial closing levels for major US index levels:
DJIA 13,051.36 (+41.36; +0.32%)
S&P500 1,413.96 (+4.62; +0.33%)
NASDAQ 2,476.14 (-4.57; -0.18%)
10YR-TBond 3.845% (+0.096)
Agrium Inc. (NYSE: AGU) was a winner with shares up almost 5% at $82.25 in the last minutes of the day. The agricultural nutrients supplier beat earnings, and this gave some pause to the selling in the potash and fertilizer stock selling that had been seen this week.
Readers of this space know that the preferred tack is to look for well-capitalized companies with competitive advantages in sectors with secular, long-term growth trends. One select sector has been oil/oil services, and another right near the top has been fertilizer producers, primarily Potash, Mosaic, and Agrium, first reviewed in December 2007-January 2008.
To be sure, the sector has been bid-up, as a wider community discovers the value of fertilizer and companion products amid the likely substantial increase in global food demand in the decade ahead.
Too late to get in on a fertilizer play? Hardly. P/Es are higher, so entry point is key, but with the above in mind, here's a revised review of the fertilizer producers, with the updated Sell/Stop Loss levels. They're ranked by risk, with the top stock, POT, being the lowest risk.
TheStreet.com's Jim Cramer says the bull story here has more causes than just a weak greenback.
Better seeds and more fertilizer. That's it. Those are the technology weapons in the war against food shortages caused in the short term by a worldwide obsession with biofuels (we are the worst offender, of course) and in the long term by the increased affluence in China and India, which leads to more nutritious, protein-filled diets.
Both forces, when combined with worldwide droughts and failed harvests, not augmented by the U.S. -- we are late to start with our corn season -- are driving prices up to ridiculous levels. I have no doubt that if tomorrow the president of the United States said he was suspending the biofuel mandates for ethanol that we would see a collapse in food pricing. But I also have no doubt that this inept administration could never figure that out.
So, the solution comes to all of the stocks that were crushed yesterday: Monsanto (NYSE: MON) (Cramer's Take), Potash (NYSE: POT) (Cramer's Take), Mosaic (NYSE: MOS) (Cramer's Take) and Agrium (NYSE: AGU) (Cramer's Take). Without better seeds that produce higher yields, without more fertilizer that increases yields, we are going to be facing a long-term continuation of these price increases and the attendant inflation and food riots. Inflation, by the way, that has nothing to do with the Fed, unless the Fed is also a big granary hoarding wheat and corn.
All it takes is some news to make you realize the risk involved in smallcap investing. That news came in the form of a horrific earnings report last night from Origin Agritech (NASDAQ: SEED), showing revenues and margins decreasing along with guidance that was more than 50% below the estimates of the one analyst that covers the company.
I often advise against trusting any company whatsoever, but it's rare that one lets investors down so greatly. I had no position in the stock, but along with Converted Organics (NASDAQ: COIN) and Titan Machinery (NASDAQ: TITN), I profiled Origin back in January as an up and coming agriculture stock. Since then, two of those three stocks have broken out to new highs in a similar fashion to this hot sector's leaders like Potash Corp. of Saskatchewan (NYSE: POT), Mosaic (NYSE: MOS), Monsanto (NYSE: MON) and Agrium Inc. (NYSE: AGU).
Performance aside, those billion dollar behemoths are established companies, with global investors and brands, while these new kids on the block are the exact opposite. Plagued by having few products, fund raising problems and debt issues, this 50% shortfall exemplifies just one of the many issues with which small-cap companies struggle. I mean they are really fighting for lives! And that's why they are priced the way they are and derided by Wall Street.
While you may be thinking the stock market's fallen off a cliff, it's really only a couple of percentage points off its highs. There could be a lot more downside, and while the Dow has some support at 12,000, what if that doesn't hold? That's when the real pain begins and what you should be prepared for. You're really going to have to avoid most of the hotly debated names because they've proven themselves unworthy of your hard-earned cash.
When I warned you that the trouble in the financial and housing sectors would pressure the stock market, I underestimated how quickly the pain would begin. Then, I threw out 10 names I was considering buying if they showed signs of either bottoming or some good old-fashioned panic -- neither has happened yet, so I'm still watching and waiting.
In particular, Apple (NASDAQ: AAPL) and Intel (NASDAQ: INTC) really disappoint me. I haven't been an Apple fan ever since its stock became too pricey, but the muted reaction to Macworld really proves my point that expectations were too high. And Intel -- well, thanks to its pathetic excuse for a quarter, it's forced the Semiconductor HOLDRs (AMEX: SMH) to take out some hugely important multi-year support, which tells me to avoid all the semiconductor stocks. Just say no to potential buys like NVIDIA (NASDAQ: NVDA), Broadcom (NASDAQ: BRCM), Texas Instruments (NYSE: TXN) and Altera (NASDAQ: ALTR).
U.S. stock futures were flat to lower Thursday morning following the senate approval of its version of the $700 billion bailout package. Meanwhile, the Federal Reserve said it was considering a rate cut. Following all the economic data released Wednesday indicating the U.S. is in a recession, this isn't surprising. The ECB is also meeting today to consider its move. Today, the Labor Department will report weekly initial jobless claims and the Commerce Department will release August factory orders. Regulators also extended the ban on short-selling shares of some 800 financial companies.
Once again it's ugly out there today. The Dow Jones Industrial Average dropped below 11,000 for the first time in two years, plunging over 2%. The rest of the U.S. stocks are not far behind with both the Nasdaq composite and the S&P 500 down over 2% as well. It's depressing. But you don't have to look far to see a nicer picture, you just have to look up: up north that is.
Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models that have a competitive advantage in established markets, preferably with a favorable global trend as a support. Moreover, there are few more-favorable global trends than food production, and with the above in mind, Agrium is worth a review.
Agrium
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All it takes is some news to make you realize the risk involved in smallcap investing. That news came in the form of a 
While you may be thinking the stock market's fallen off a cliff, it's really only a couple of percentage points off its highs. There could be a lot more downside, and while the Dow has some support at 12,000, what if that doesn't hold? That's when the real pain begins and what you should be prepared for. You're really going to have to avoid most of the hotly debated names because they've proven themselves unworthy of your hard-earned cash.
NYU's Roubini: 'All fronts' approach necessary to end global financial crisis 
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GE matches reduced expectation and people cheer
