ValuePlays

I have been contacted and have agreed to be interveiwed for a Podcast (my first Podcast). I was contacted by Dennis Olson, the editor for Wall St. Radio.

Wall St. Radio is a part of WallSt.net. Dennis has been doing interviews of financial bloggers since April and has already interviewed some of my favorite bloggers like George at Fat Pitch and Paul Kedrosky at Infectious Greed. It is a great series as it gives insight into financial bloggers and their thought process.

The interveiw will take place tomorrow and I will post a link to it when I get an air date.

Here is hoping I do it justice.

Politics influences your investments. At the Democratic Debate in New Hampshire Sunday the candidates were united in their attacks on insurance companies, oil companies and pharmaceuticals. The notable quotes were:

Insurance and Pharmaceuticals:

EDWARDS: And I believe you cannot cover everybody in America, create a more efficient health care system, cover the cracks, you know, getting rid of things like pre-existing conditions and making sure that mental health is treated the same as physical health, I don’t think you can do all those things for nothing. That’s not the truth.

OBAMA: So my emphasis is on driving down the costs, taking on the insurance companies, making sure that they are limited in the ability to extract profits and deny coverage; that we make sure the drug companies have to do what’s right by their patients instead of simply hording their profits.

CLINTON: What’s important, and what I learned in the previous effort is you’ve got to have the political will — a broad coalition of business and labor, doctors, nurses, hospitals — everybody standing firm when the inevitable attacks come from the insurance companies and the pharmaceutical companies that don’t want to change the system because they make so much money out of it.

Oil:

DODD: Well, what we’ve offered already, in fact, and that is, of course, we ought to be saying here that when the price of a barrel of oil gets beyond $40 a barrel, where there’s plenty of profit here, that those dollars ought to be returned to the consumers in a rebate or plowed back into the research that would allow us to develop alternative technologies.

EDWARDS: The first thing we got to do is find out what’s happening with these oil and gas companies. Because we know they’re making record amounts of money. We know that the same people that are refining the oil are selling it at the gas pump. So there’s a huge vertical integration in this operation.

I think there ought to be an investigation of the oil and gas companies by the Justice Department. I think if the laws that presently exist don’t deal with this problem and price manipulation, there should be some change in the anti-trust laws. I think we need states to enforce clean air laws against these refineries.

BIDEN: Take away the subsidy which I’ve introduced legislation to do. It’s about $6 billion, $2.7 directly to the oil companies, number one.

Number two, investigate, as president of the United States; use the Justice Department to go in an investigate this whole issue of price-gouging.

RICHARDSON: Here’s my answer: What would help in the short term, give us — the states — the authority to engage in serious price-gouging investigation.

This means that if Dems take the White house your investment in Exxon (XOM), Chevron (CVX), Cigna (CI), Aetna (AET)), AIG (AIG), Pfizer (PFE), Merk (MRK) and other in their industries will be under attack. Whether you agree with these policies or not is irrelevant. The facts seem to remain that Dems have their eyes on oil profits and the regulation that have allowed insurance companies to realize record return the past few years. Pharma, already seeing margins being crushed by generics looks to have their pricing power further eroded if a Dem enters 1600 Pennsylvania Ave.

Now, this could also be just sound bites that play nice to the choir but once in office, the tune may change. One never really knows. But, if you are making investment decision for the next few years, you have to pay attention to what these folks are saying.

Most likely the only true statement of the night that we can be sure of?

CLINTON: … when I become president, Bill Clinton, my dear husband, will be one of the people who will be sent around the world…

Sunday morning I picked up my newspaper and one thing instantly stood out. The coupon sections where excellent. The P&G (PG) stand alone coupons were for amounts I have not seen before. There were coupons there for $3 off Pampers, $4 off a razor, salad dressing coupons that were usually 50 cents off are up to $1 to $2 off now.

This matters because these discounts are for everyday items, not “father’s day” special sales event items. When you are a consumer products company like P&G or Church and Dwight (CHD) and have slowing sales, if you want to generate more of them, you have two options, advertise them more, or discount. When the discounts are this large, and the sections contain so many products, it tell me that sales are really slowing and they feel the need to slash prices to drive sales. Last summer, when things were humming along too fast and the Fed was raising rates to slow us down, not only were these discounts not as large, they were non existent. There were several weeks in which there were no coupon sections in the paper and if one did show up, it was minescule and only a new products were featured. Currently almost everything we shop for weekly has a substantial coupon for it in the paper. I have not seen discointing on such a wide aray of items in a long time.

Now, this may be a regional effect, but when you live in the heavily populated northeast like I do, that effect on producers bottom line is substantial. It is also important to note that these are not items that are being discounted on perishable items at a supermarket like Whole Foods (WFMI) where discounting is usually due to a shelf life determination. These are items that can sit on shelves, and apparently they are, for too long.

It will interesting to see what happens when this quarters results are released for these companies. If I had too bet, I would anticipate either falling profits, or if the deep discounting works and it drives sales, margin shrinkage.

Either way, the only people who come out ahead here are you and me.

Here is something I though I would share (with the authors permission of course). I received it from Jane Genova and it depicts her journey in live blogging the lead paint trials. It is an interesting read for all bloggers, just substitute your blog subject for “lead paint” and you can get something out of this.

Jane blogs at Law and More

CASE STUDY OF LIVE-BLOGGING RI LEAD-PAINT TRIAL:

Insights into Applications of Digital Technology

Developed and Submitted by Jane Genova, Genova Writing & More, New Haven, CT, Mgenova981@aol.com, 860-280-5613 (cell)

From late October 2005 until the present, Jane Genova has been blogging about aspects of lead-paint litigation, including live-blogging the landmark Rhode Island lead paint trial.

She undertook this project in order to learn more about how to use digital technology as a real-time tool in event-coverage, advocating a point of view, developing new business for her communications boutique, enhancing her brandname, expanding her network, and integrating social media with mainstream media (MSM).

The four-month RI lead paint trial was conducted in downtown Providence, which was within commuting distance from her Connecticut residence. The four defendants – Sherwin-Williams (SHW), NL Industries (NL), Millennium Holdings (MNHG0 and Atlantic-Richfield – were corporations she believed were unjustly accused of creating a public nuisance. Her original stance was to be an objective Greek Chorus. But within about a week, she began to argue in favor of the defense’s position.

Her many dimensional approach to covering the trial – e.g. mixing legal analysis with gossip – came from her study of the techniques of Dominick Dunne. He had chronicled a number of high-profile trials such as the O.J. Simpson one.

Details:

During the 15 months Jane Genova has blogged about lead-paint issues, particularly litigation and threats of litigation, there have been over 1000 posts so far. About 490 of them were done during the four-month trial and so far about 510 more post-verdict.

This relative large number of posts – during the trial, about three to six daily – not only kept readers totally informed. It also functioned as a search engine optimization (SEO) tactic to attract high rankings on Google and other search engines. Search engines tend to be attracted to frequent postings each day.

In response to the posts, there have been about 3500 emails to her from security analysts, hedge-fund operators, employees at the defendants’ companies, shareholders, attorneys not involved in the case, attorneys who handle other legal issues for the defendants, a plaintiff attorney assisting with a similar public-nuisance trial in St. Louis, and those who wanted to comment off-the-record.

There have been about 175 phone calls. The lion’s share have been from security analysts and hedge-fund operators. Those calls were long and involved and, on the average, lasted about 35 minutes. A handful were from former Sherwin-Williams employees who wondered if the defense should have presented a case. Now and then the public relations representative from Prism Public Affairs Gregg Perry would call to alert the blogger of breaking developments. One was from media, CRAIN’S CLEVELAND, for an interview right after the verdict.

There were about 12 invitations to lunch.

Because of the legal sensitivities of the issue, there have been relatively few comments. The exception was immediately following the verdict. When the blogger registered her disagreement with that verdict, child advocates sent comments chastising her for not caring about the children. She personally responded to those making these comments through emails. That quieted things down.

Results:

On the first day of trial, that is during opening arguments, there were 1000 visitors to the blog. By the end of the week, that number of daily visitors when court was in session grew to about 3000. For the remainder of the trial, the average number of daily visitors when court was in session was about 4500. Most of these used RSS feeds, which picked up each new blog post on the trial automatically.

During the eight days of jury deliberation, daily visitors numbered about 7000. On the day of the verdict, there were 12,000 visitors. There were also a high number of visitors on each day of a posting of an interview with a juror. The total visitor count for the juror interviews was about 24,000. Several readers, including Gregg Perry, said that the jury interviews were the most helpful posts. THE PROVIDENCE JOURNAL reporter Peter Lord sent the blogger an email that he was upset that she had scooped him on the jury interviews.

Because of the large number of posts and heavy traffic into the blog, the posts made the first page of Google categories concerning the trial on a regular basis. They ranked number-one on Google about 600 times, in various categories such as “RI lead paint,” “Sherwin-Williams,” “NL Industries,” “lead poisoning.”

Wall Street bulletin boards, particularly those covering the defendants such as Sherwin-Williams and NL Industries, regularly picked up blog posts and linked to them. Insurance companies also had links on their bulletin boards, stating that the coverage was engaging on a subject that was “as boring as watching lead paint dry.”

High-profile blogs such as Overlawyered.com, Pointoflaw.com, and THE WALL STREET JOURNAL Law Blog cited coverage from her blog posts and often provided links to them. Those links further increased Google pick-up and high rankings. The Manhattan Institute’s Walter Olson provided an exclusive interview to the blog.

The mainstream media (MSM) frequently quoted from the blogs posts. It was widely noted that CRAIN’S CLEVELAND, which is based where Sherwin-Williams is headquartered, chose to interview only the blogger after the verdict. The clip from the interview had wide circulation.

Because of the blog, Jane Genova has been invited to give the keynote address at the Paint and Coatings Annual Meeting in 2007.

In addition, postings about the opposition frequently were picked up by Google and other search engines and placed in the sections of search engines covering the opposition. This gave the four defendants an opportunity to express its point of view on the opponent’s territory.

Digital Strategies:

The digital strategies which generated these results include

Frequent (three to six daily) posting of provocative material or breaking news on the blog. Use of keywords that would attract Google and other search engines. This served to scoop mainstream media and provide candid analysis of events. Readers seemed to like highly opinioned content.

Putting a human face on the trial. The blogger, before the trial started, explained her background in Jersey City, New Jersey, a political-machine town that mirrored corruption in Providence. She disclosed that as she grew up in a tenement, she chewed paint chips. Her mother and grandmother demanded the landlord supply paint to cover over the layers that were flaking. Gradually she let out details of her current life such as her intense relationship with her dog Molly Mittens. When Molly Mittens died on June 30th, there was an outpouring of condolence email from all sorts of readers, including lawyers, employees of the defendants and security analysts.

Providing drama in coverage. This was a technique the blogger from analyzing Dominick Dunne’s print coverage of court trials. Readers want the story. Therefore, she was heavy on narrative and on including tidbits of gossip such as hairstyles and sensible shoes.

Enhancing reach by copying, pasting, and emailing with a customized transmittal notes key blog posts to media, mainstream and digital, influentials in law, security analysts on Wall Street, and government representatives as well as interested parties who contacted the author about being on a “mailing list.” This was first done in late October, during jury selection, to announce the blogging effort. Then it was repeated on a regular basis.

Following up quickly to phone calls, emails and requests for lunch.

Developing and maintaining insider sources of information. This often entailed doing favors for them such as posting on her blog plugs for their special events, programs, and conferences.

Listening to readers who requested that trial coverage be split from the original communications blog and continued on a separate legally-oriented blog. Jane Genova then created the law and more blog.

Blog posts on the RI lead paint trial and post-verdict developments can be found at:

Http://janegenova.com, under “legal”
Http://lawandmore.typepad.com

Here they are, the largest increases in shareholder payouts for the week

1. Rogers Communications, 212% (RG)
2. Knight Transport, 50% (KNX)
3. Jackson Hewitt, 50% (JTX)
4. Flowers Foods, 50% (FLO)
5. Holly Corp., 20% (HOC)
6. UnionBanCal Corp, 10.6% (UB)
7. Cato Crop, 10% (CTR)
8. Heinz, 8.6% (HNZ)
9. AlnceBerns, 7.6% (AWF)
10. Bank of Nova Scotia, 7.1% (BNS)

The U.S. Department of Agriculture released the May agricultural prices report yesterday at 3 p.m. and corn prices, at $3.48 per bushel, were up 9 cents from last month, $1.31 above May 2006 and 4 cents above February and March levels. The report measures the average prices received by farmers for corn and other crops

Farmers and other agriculture experts expect corn prices to continue to rise as ethanol producers like Archer Daniels Midland Co. (ADM) and Pacific Ethanol (PEIX), Verasun (VSE) and The Andersons (ANDE) drive demand for corn. Investors had expected the high corn prices to hurt profits at ethanol producers but in fact all but Verasun correctly hedged against the spike and actually reported an improvement in corn processing results despite never before seen high corn prices. ADM actually reported a 15% improvement in corn processing operation in Q1 2007 despite the then record prices. The increase in prices seems to have actually helped corn processors as they were easily able to pass along the increase to end users of HFCS like Coke (KO) and Pepsi (PEP)
Ethanol producers are in a very unique position to hedge against input price increases. Further corn prices increase, based on results over the past year, far from hurting profits should actually helped them. It would seem the only danger ethanol producers face is rapidly falling oil prices but with an active (surprise!!) hurricane season being forecast, that is not likely to happen anytime soon.

After hovering around $2 a bushel for about a decade, corn prices have vaulted past $3. Last month the average price per bushel of corn was $3.20, up more than 50 percent from $2.11 in the same month last year. The elevated corn prices have driven up prices of other commodities as farmers dedicate fewer acres to crops like beans and grain. The USDA expects corn prices to peak at $3.75 a bushel by 2009 and then begin a steady decline after that.

About 90.5 million acres of corn are expected to be planted this year, up 15 percent from 2006 and the most in over 60 years.