7/3/03 8:05AM BofA cautious on Dow Chemical (DOW) 31.14: Banc of America remains cautious on DOW at 16.7x normalized EPS and 8.0x normalized EBITDA; while many investors seem most interested in peak earnings potential, firm is more concerned with weak cash flow and its implications for the dividend and a strained balance sheet; also, $1.63 bln in off-balance-sheet variable interest entities could come onto DOW's balance sheet in Q3, and on a combined basis DOW's debt could swell more than $2 bln, inflating net debt to 79% of capitalization as adjusted for underfunded pension, OPEB, and net asbestos liabilities. Maintains Neutral rating and $28 target.
Glad I sold all mine, I think we might see
$26-7, then rebuy
Said more than I can reply to fully. Will add few notes.
Take away overtime pay from lots of folks coming down the line, courtesy of G.B.
Growing number of permanent "temp" workers.
Know whatya mean about being middle of the roader on class issues. But have some bad gut feelings myself.
Most engineers, esp. Dow-spoon-fed Lake Jacksonites, are allied on the Repub. side because they feel on the upper side of the salary curve. They feel smugness that people who work menial labor with their hands just aren't smart enough to justify salaries that keep up with inflation but engineers mindpower is.
Man in Germany said didn't speak up when Nazis came for retards, didn't speak up when came for homos, didn't speak up when came for Jews. When Nazis came for him, nobody to speak out for him left.
Maybe when future comes and CEO can make gazillion dollars in bonus for contracting engineering work out to India for $1/hr, some engineers will finally understand why a few people out there might vote democratic. Fake caring is better than no caring.
atrocious spelling on my part--should be ACCOMPLICES. PISS ON THEM TOO!
"Every CEO embezzling money has accomplishments he tosses some of the spoils to.
Called cognitive dissonance. If my buddies take then I can't be too wrong or bad, can I?
Don't sit on a fence Squinch. We need people like you and Mrs. Watkins on our side that speak the enemy's language."
Every CEO embezzling money has accomplishments he tosses some of the spoils to.
Called cognitive dissonance. If my buddies take then I can't be too wrong or bad, can I?
Don't sit on a fence Squinch. We need people like you and Mrs. Watkins on our side that speak the enemy's language.
You company guys keep forgetting the debt. There is huge debt and it is increasing almost exponentially. When everything else is back on track (gonna take years) then Dow will still be held back by the huge lingering debt.
Keep digging - there is a lot more to be discovered.
P.S. - get the BOD buddies to get some of it back from Stav. Then give themselves a salary decrease and do away with the prolific bonuses that are still flying around in upper management.
Another over-the-horizon issue is tax structure. Without so many words, the prize is shifting the repayment of the national debt (~$7T) from the wealthy to the middle class, by flattening the tax structure. To sweeten the deal, the debt can be jacked completely out of sight to $30-50T.
The sales pitch will be "more democracy," in that if the masses want more say-so in government, they'll have to pay for it. They don't now. The rich pay most of the taxes, and so they get most of the say-so. From the rich guy's viewpoint, the big run up in debt isn't a problem, as long as the little guy will be saddled with it.
[Don't get me wrong, I'd love a flat tax. But the legal and financial communities will completely resist it. Current costs of public accounting for tax purposes alone is ~$400B, or 4% of GDP wasted on accountants. Then add half the insurance products, etc. And the loss in Congressional power to provide loop holes. No, an open and simple flat tax will not happen. It will be a stealth flat tax, if anything.]
So, what does this possibly very whacko idea mean? Well, the national debt is going to the moon. The current $5-10T will look like chump change when this is over. Prediction: debt goes to $30-50T. From the rule-of-72, the doubling period during the 1980's was 4-years. This means the current $7T will be $14T in 2007, and ~$30T in 2001.
For, upwards of 300M tax payers, that's $100K of allocated debt each, requiring only $5K/yr debt service at 5%. That's doable and easy to disguise.
Who will vote for it? The baby boomers will want it big time, as we'll need to be warehoused in senior centers. Government will pay everything for those over 65. The sales pitch will be that immigrants will pay for it. Immigrants will be told that they have to pay for political power, which makes sense.
For personal gain now: be careful with long obligations in personal money. Grabing a good long fixed mortgage may be beautiful.
Also, assets that derive benefit from explosive government spending will appreciate, e.g., military, Medicare, etc. Assets that lose will be education and R&D ("Who needs a bunch of eggheads anyway?" will be the sales pitch. Bunch a commies.)
Money producers will be senior center warehouses. That industry is growing like mad now.
Avoid businesses that are sensitive to disposable income by middle and lower income folks, as it will be transferred to tax payments. Short all retail with products more expensive than Walmart.
Invest in security services for the wealthy, e.g., more and more sophisticated products for gated communities. How about Predator drones circling the perimeter walls? Maybe Dow can get back in the Napalm business. Predators with Napalm to protect golf courses. Maybe they could go nano and fly inside the bodies of any approaching intruders, discharging the gas/Tide mix internally.
OK. Now I will go take my medicine.
Whacko UNO. Pension funds.
The enormous size of pension funds make them an obvious target for theft. (Look at the Labor Unions and the Mob in the 1960's.) Most every move will be made to transfer those funds into the pockets of upper management. For example, the legislation recently discussed on this board. Another neat tool for theft is jamming junk inflated stock into plans, instead of cash.
For example, suppose an S&P500 company owns a stake in a fairly new issue. The share price soars to unreal values. The CEO & CFO then pass this stock onto the pension plan, realizing the gain for the big company to boost earnings. The earnings gain bumps the big company's stock and triggers an option exercise and sale by the CEO and CFO, rewarding them with cash.
In the fullness of time, say months, the IPO stock in the pension plan collapses. Pension fund is screwed. Pension fund manager turns out to be CEO's buddy from college. SEC guys can't get plane fare from administration to even make a site visit. Sweet.
Lesson for us is watch corporate ownership of small companies and potential earnings short-falls. This could provide a shorting strategy in the IPO company. Get to the trough with or before the others.
Another lesson is if pension conversion opportunities arise, take them.
As a hardline middle-of-the-roader, the far left and far right have nothing for me. That said, however, the class warfare model from the left has some applications here.
One class is upper management in the U.S., and the other class is the rest of the population. Does this really matter? No, if you are thinking of making big changes and saving the world. That isn't going to happen. But, yes, if you want to belly up to the trough, or better said, to beneficially look over-the-horizon to make whacko predictions about what is coming.
Currently, both parties are in the pockets major financial interests. Not good, but reality. When in the White House, enforcement agencies are hamstrung in efforts to enforce statutes, especially financial ones.
So, what is this worth? Well, how about two predictions, each based upon following the money. One is the prize of stealing the pension funds; gotta be a few trillion there. The second is jacking the national debt to $30-50T and simultaneously flattening the tax structure. Both are beautiful, if you're on top.
Reasoning in next message; got too long.
Can't tell where the phantom stock was classified in the proxy. My best guess is as a perfomance award.
If the board and the large institutions holding Dow stock keep approving these pay packages, it will take a lot of pressure to undo them. Some may say its the fault of the CEO. He probably contirbutes to the frenzy at the trough but most of those employees above certain levels get some of the droppings too.
Why would Stav push for some of these plans if only his subordinates get them? Hmmmmm?
No wonder neither ethics nor incentive to change at the top.
only one hope. SEC mandates meaningful board election alternatives with real opposition to the crony picked single-choices currently offered.
Joseph Stalin understood. give electorate only one choice your side always wins.
American companies been on downsizing trend for two decades with worker productivity increased by forcing the same amount of work on fewer people while CEOs embezzle the extra profits into their own pockets.
A question about the Form 4 notes (5/8/2003).
Is the 225,000 shares a performance award or part of Stav's base compensation?
"3) Granted under The Dow Chemical Company 1988 Award and Option Plan, a Rule 16b-3 plan."
Sounds like a compensation plan that was established in 1988. What is unclear is if this is base compensation or a performance award.
From the 2003 Proxy Stav's 2002 direct monetary compensation was $1.8 million. He also received $1.1 million in Long-Term
Incentive Payouts for an approximate total cash compensation $2.9 million for 2002. Not sure about stock awards for 2002.