Yael Pipano

Dow in Cautious Mode

sorry that was k+s (german co that took over Morton's Salt from DOW).

Dow in Cautious Mode

Sorry, that was Germany's K+S

Dow in Cautious Mode

Also, does anyone know any further details on Dow's sale of one of its units to BASF (the German chemical company) in order to raise money?

Dow in Cautious Mode

Todd-
I got started in investing in DOW in large part because you sparked my interest in it. Only bad news since I bought it in early 2008 for about $35/shr. Redundant to mention the bad economic news which only compounded the damage. Is this worth holding on to, I know it's a great company but now that the dividend was cut from $0.375 per quarter in mid 2006 to $0.15 as of now (translating to 6.1% dividend yield) holding on to it over a long period of time has a higher opportunity cost, not to mention the risk with all the uncertainties (mergers, JVs, acquisitions/sales, etc).

Interesting Items in Dow Chemical's Earnings Call

Floyd Brown quote: My money is on Dow Chemical (NYSE: DOW).

This giant of the chemical business is trading at a PE of 12.6 and pays a fat yield of 4.6%. So not only does it pay more than CDs, you get a capital gains reward, too, when this bellwether heads higher after the slowdown.

Dow Chemical's Bright Future

From 1Q 08 conf call:
discussions are going very well on our announced joint venture with Petrochemical Industries Company of Kuwait, and we remain on schedule to close, by latest end of the year. As an alliance between a world-class chemical company and one of the world's leading oil producers, this new company will be well-positioned to capture growth in key geographic regions such as China, India and the Middle East.
the close of our Kuwait deal increases the probability that share buyback will become a reality. we will have buyback programs in place to... at a minimum, cover dilution and of course subject to board approval, we will regularly be in the market buying back our stock.

Dow: Investors are Waiting for Liveris' News

I agree that a waiting game for Dow would be well worth it. Financial Times of 12/20/07 stated there is talk of Johnson Matthey being a takeover target for Dow now that Dow is flush with cash from its JV with Kuwait's state oil company (as commodity prices are on the rise, it would be wise for DOW to become a more vertically integrated company). It is likely that Johnson-Matthey [LSE:JMAT] has been a supplier of platinum group metals to Dow for a very long time, and Metals group Johnson Matthey said in its interim review in November 2007 that platinum could trade as high as $1,575 an ounce in the next six months, especially if the dollar remained weak (DOW prepares platinum group metal catalysts from scratch for its own use). A Dow-Johnson-Matthey subsidiary would sell the Dow Kuwait Plastics (and future fine chemicals) operations, the platinum, palladium, rhodium and rhenium it needs to make its proprietary cracking and reforming catalysts as well as fine chemical processing catalysts. Dow-Johnson-Matthey-Ku... would be the world’s major player in non automotive and perhaps even automotive uses of platinum, palladium and rhodium, and the world’s major player in the rhenium market (quote from Jack Lifton). If you want to top that off, Johnson-Matthey’s announcement in early December that it will “make a market” in rhenium means they want to be recognized as the virtual market maker in rhenium; this will enable them to attract suppliers and to, most importantly, set the market price and selling price for rhenium (please see short background on rhenium/Dow* below). The buying price that they will pay will be a matter of negotiation. Even if that acquisition (Johnson Matthey by DOW) doesn't materialize, I estimate DOW can increase to $48 per share this year with less than ideal economic conditions.

*The mandatory catalytic converter for auto emission control required the use of undesirable tetraethl lead. When lead could be removed utilizing catalytic cracking, thereby improving gasoline's chemistry, DOW's chemists formulated a platinum/rhenium catalyst converting crude oil into an ideal standard form of Octane thereby removing lead from the mix (as per Jack Lifton).
Jack Lifton is the Founder of Jack Lifton, a consultancy focusing on the sourcing of nonferrous strategic metals, minerals, and chemicals used both as raw materials and for component manufacturing. Mr. Lifton has more than 30 years of experience in the global OEM automotive and heavy equipment industries. His background includes the sourcing, related manufacturing and sales of platinum group metal products and ceramic specialties used to make catalytic converters, oxygen sensors, batteries, fuel cells, and sensors.

Dow Chemical CEO Delivers a 'Transformational Year', Plans to Invest in China

Yesterday (12/20/07) the rumour went around that one of the specialty companies that Dow is looking to acquire with its Kuwaiti filled coffer is Johnson-Matthey. Why? Does it have anything to do with rhenium? The answers are: 1) It’s a good fit and a good idea, and; 2) Yes, but that’s not the whole story.

Producers of oil, like the Kuwait State Oil Company, lament on their way to the bank, that their precious resource in really wasted by being burned inefficiently to produce energy to carry one person or a six-pack of Coca Cola (this is the Kuwaitis talking remember) in a three tonne vehicle over a distance that a person could easily walk. They would feel a lot better, and make a lot more money yet, if that oil could all have the value added to it by producing plastics and pharmaceuticals.

Suddenly several political and economic agendas have coalesced to make their dream possible:

The Chinese and Indian markets for plastics and pharmaceuticals have exploded and demand for these high value added oil based consumer products is skyrocketing in places that have no domestic supply of oil.
Middle East oil producers have no ax to grind with either China or India and are acceptable politically to both.
China and, more and more, India have enormous amounts of capital to be invested and to be spent to acquire, more and more, domestic goods for consumer economies rather than surplus aircraft carriers and planes for them from bankrupt or downsizing militaries of former empires.
American technology, the best in the world, and unbelievably undervalued by ignorant American politicians and businessmen is on the market.
The environmental activism of the industrial world may well reduce that world’s gasoline consumption significantly from now on, and, in fact, reduced dependence on imported oil anyway is now an official American policy.
The ideal situation for both the Kuwait State Oil Company and The Dow Chemical Company is that both put into a deal their core competency and that the outcome is synergistic. In fact that is exactly what has happened.

If the BRIC economies adopt gasoline and diesel fuelled small cars with pollution control by catalytic converter they will need the technology to make the correct types of fuel hydrocarbons from their own oil, in the case of Russia and, apparently, Brazil, one day soon, and from imported oil in the case of India and China. The Dow Kuwait company will be able to sell that technology to Russia and Brazil and to utilize it in Kuwait to give Kuwait an enormous competitive advantage. Further the Dow-Johnson-Matthey subsidiary will be able to sell the Dow Kuwait Plastics (and future fine chemicals) operations the platinum, palladium, rhodium and rhenium it needs to make its proprietary cracking and reforming catalysts as well as fine chemical processing catalysts.

And, if the BRIC economies need automotive emission catalyst technology and raw materials it is likely that they will simply choose to deal with Dow-Johnson-Matthey Kuwait as a, to them, one stop shop. It will be interesting to see how Dow’s shopping spree for high tech specialty chemical companies meshes with the future demands from the BRIC economies.

To me the most interesting outcome of the above non obvious connections between Johnson-Matthey and the copper producers, Dow Chemical and Johnson-Matthey and the Dow Chemical-Kuwait State Oil Company is how they are building a foundation for a minor metals market that is not just a temporary sideshow for those who came to commodities too late for the big fast run-up party. I am certain that Dow-Johnson-Matthey-Ku... will be the world’s major player in non automotive and perhaps even automotive uses of platinum, palladium and rhodium, and the world’s major player in the rhenium market.

The Dow Chemical Company has a great track record in chemical and metallurgical (magnesium) innovation. If its management gets control of product development for the automotive emission control industry, the fuel cell industry, and the adding of value to petroleum products through the Kuwait State Oil and the Johnson-Matthey merger and acquisition it could turn all of those industries on their global heads.

One last connection: I once met the man who put Dow on its current path, the former Chairman, Mr. William Stavropoulos, along with the late Detroit Tiger great, Earl Wilson. Earl had played with Carl Yastrzemski for Boston in the 1960s. Bill Stavropoulos told us that he had played college baseball at Princeton and thought of going pro until he played against Carl Yastrzemski and realized that he should continue his studies in chemical engineering instead. When it comes to pass in the next generation that the Dow Chemical Company becomes the world’s largest and most profitable of its type, I wonder if they will remember their debt to Yaz.

If the mergers and acquisitions mentioned above go through, the play in rhenium may well turn out to be Dow Chemical, but even, if not, be aware that much of the future of the rhenium market depends on the health and growth of the Dow Chemical Company.