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Harley Davidson

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February 12, 2009 By Leave a Comment

Dow Chemical (DOW) dropped to the single digits today. The stock is currently trading at $9.70. Dow’s market cap is down to 9 billion and is facing financial problems. Everyone agrees that Dow should renegotiate the deal with Rohm & Haas but there is no reason for Rohm & Haas to renegotiate. It appears highly likely that the courts will force Dow to go through with its 15 billion dollar purchase of Rohm & Haas. Rohm & Haas is also being paid 3 million dollars a day until the deal is completed. This may be a win for Dow but if the merger is completed it may be a losing situation for all of the employees of the combined companies.

As expected Harley Davidson (HOG) cuts its dividend from 33 cents a share to 10 cents. The 70% dividend cut should save the company about 210 million in much needed cash.

Research in Motion (RIMM) is down to $49 a share after dropping over $10 yesterday. The stock is still a little too expensive for my tastes but a decline to $36 might represent a nice buying opportunity.

Oil looks very cheap at the $35 level. I don’t think anyone knows the exact bottom for oil prices but I feel comfortable buying at this level. I have been buying the Proshares Crude Oil ETF(UCO) for a trade. I like BP for a longer term investment.

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Buffett Buys A Harley

February 3, 2009 By Leave a Comment

Warren Buffett invested 300 million dollars in 5 year bonds of Harley Davidson. The investment came at a steep price for Harley which is in the form of 15% interest. The 5% increase over earlier deals with General Electric and Goldman Sachs illustrates just how difficult it is to obtain capital right now. Buffett’s investment in Harley could not have come at a better time for the company. Harley  was facing a liquidity crisis as its cash position had dwindled to 600 million. Buffett’s vote of confidence in the company has sparked a 17.5% rise in Harley’s stock to $14. Harley Davidson is selling an additional 300 million in bonds to raise capital.

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More Dividend Cuts Coming

January 28, 2009 By 2 Comments

1. Dow Chemical

The $1.68 dividend that Dow Chemical(DOW) pays is toast. Dow Chemical CEO Andrew Liveris caved today and admitted that a dividend cut is a definite possibility. This is a change in tune from Liveris who defiantly defended the dividend after the collapse of the Kuwaiti deal. In the beginning of January, Liveris stated that, “Dow is the only company in the Fortune 200 to have paid its regular quarterly cash dividend without reduction or interruption since 1912. That is 388 consecutive quarters. I have said it before, but I want to say it again, we will not break that streak. Not Dow, not on my watch.” These words will likely cost Liveris his job.

2. CBS

CBS Corporation(CBS) has an extremely high dividend yield which is currently approaching 16.6%. This is way too high at a time when traditional media companies are experiencing significantly declines in ad revenue. CBS is seeing 25% drops in television and radio station ratio. Approximately 70 percent of CBS’s revenue is tied to advertising sales. The current dividend of $1.08 is higher than the expected earnings for 2009 of $.86.

 3. Harley Davidson

Harley Davidson(HOG) will soon be faced with paying its dividend or staying in business. The company’s dividend yield is 11.5% at a time when the company is down to less than 600 million in cash. The current payout rate is over 50% of estimated earnings for 2009. Harley can save over 300 million in cash by cutting the dividend.

4. Newell Rubbermaid

I expect that Newell(NWL) will cut the dividend when they announce earnings this week. Newell currently pays out 75% of earnings in the form of dividends to shareholders. Newell is trying to preserve cash wherever possible through layoffs, salary feezes and factory closings. With over 2 billion in debt and a few hundred million in cash, a dividend cut appears likely.

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