The stock is still a far cry from its record-high level of $83.56, but is only 0% below its 52-week high of $53.46.  Much has changed since then, as the U.S. auto industry is no longer producing the 16 million cars it produced in 2007, nor the 13 million it managed to sell last year.  This year we are looking at some 10 million units sold, according to J.D. Power and Associates, the leading forecaster in the industry.

But there is encouraging news:  The very quick restructuring of both General Motors Corp. (NYSE: GRM) and Chrysler Group LLC, the U.S. Federal Reserve’s efforts to stabilize the financial markets, and the U.S. government’s fiscal stimulus plans have helped keep the economy from falling into a depression.  The Fed’s support for the auto industry included buying auto receivables under the Term Asset-Backed Securities Loan Facility (TALF) program, in order to restart this type of securitization.

Therefore, the paralysis of sales that we saw late last year, when the financial system froze and there was no financing available, has subsided and sales are increasing.  In fact, J.D. Power expects U.S. vehicle sales to increase to 11.5 million units next year, a full 15% pickup from projected 2009 levels.

In fact, we are already seeing an increase in auto sales already, thanks in no small part to the government’s Car Allowance Rebate System (CARS), popularly known as “Cash for Clunkers.” So far, CARS has spent some $1.29 billion and Congress has expanded the original $1 billion authorization by another $2 billion.

Total light vehicle sales for July were just shy of 1 million units, a milestone the industry hasn’t topped since August 2008, mostly due to the program’s success.

This shot in the arm on the back of the general cost restructuring that Ford Motor Co. (NYSE: F) is carrying out under Allan Mulally has already prompted Ford to increase production of its Focus model.

Similarly, Chrysler has reported that it is running two plants in overtime and a third shift at another plant just to keep up with demand.  And GM, which is seeing a huge rebound in sales, will add to this by increasing advertising spending and selling new cars on eBay Inc.’s (Nasdaq: EBAY) popular online auction Web site. Most of Wall Street is in “wait-and-see” mode, which gives us more of an incentive to jump in.  But the steel story is not just about cars.

Nucor will not only profit from the remaining $1.75 billion to be deployed through the government’s cash for clunkers program and the general improvement in market conditions, but on the pick-up in government construction in the United States that will result from U.S. President Barack Obama’s massive fiscal stimulus.

Additionally, the company will benefit from the already massive stimuli being deployed in China, Brazil, India and Russia.  And let us not forget Europe, where the European Central Bank will soon consider raising its benchmark lending rate to 1.25% from its current record low of 1% in order to prevent inflationary expectations from building up.

China will achieve more than 8% growth this year, driven by public spending, especially in construction and a strong pickup in auto sales  (up 63.6% in July from a year earlier) and domestic appliances.  All of these have a very high content of steel.

Similarly, India’s gross domestic product (GDP) will grow by more than 6%, barely down from last year’s 6.7% expansion. Auto sales in India jumped 18% last month.  Remember that India’s Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world last January and this is likely to work wonders in today’s budget-conscious market.

So what about Nucor itself?

The company reported a second quarter loss of $133 million, which improved over the first quarter’s $189 million loss.  But the key is that volumes are already turning around.

Volumes increased 11% in the second quarter, which allowed the company to increase its capacity utilization from 45% to a still very low 46%.

And this is where the upside lies.

In capital-intensive industries like steel, the very high fixed costs induce very large swings in profits, depending on volumes.  And not only did Nucor see its volumes pick up in the second quarter, the trend should continue accelerating in the third quarter and beyond, thanks to the recent burst in car sales and increased government infrastructure spending.

In addition, prior to the cash for clunkers program, Nucor announced it already expected to see an improvement in its third-quarter results. The company said that many of its customers had run their inventories too low and would need to replenish them just to meet demand.

So, at reporting time, investors could be very positively surprised by Nucor and many other companies in the sector, which will provoke many analysts to increase their stock targets.

And to make the whole story even better, we are counting on increasing inflationary expectations and a weaker dollar, which will continue to drive portfolio managers to hedge this risk in commodity stocks.

That means Nucor, which has been bumping into strong resistance levels since the beginning of January, but making higher lows in every subsequent correction, is likely to break out of its current range with an explosive rally before it even reports third-quarter earnings.

Nucor stock closed down 92 cents, or 1.93%, Friday at $46.79 a share.

Source: Nucor Corporation Will Get Is Due for a Boost from Government Spending

Before any big fight, the competitors must do their homework.

Schoolyard bullies use lunchroom consultations with other bullies to learn about their intended target’s strength and ability.

Professional boxers watch hours upon hours of rival’s past fights, looking for a single weakness.

And the American government? What does Obama do?

He complains to the World Trade Organization (WTO).

For several years now I have been studying the growing trade feud between the United States and China. If both sides were not absolutely dependent on each other, I am positive they would have come to blows long before now.

But we need China’s cheap imports and it needs our cash.

Since the start of the current financial fiasco last September, China has been rightfully worried about the value of the dollar. Its economic leaders have jaunted across the globe in search of anybody willing to rid the world of a greenback-denominate economy.

Of course, Uncle Sam is not happy about the situation. But all the States can do is what it did today, file a complaint with the WTO.

That’s it… I’m telling

The Obama administration officially showed its disdain for China’s export restrictions by knocking on the door of the WTO. It is a small move, with little more than a hint of a threat behind it, but it is a surefire way to test the vast stretch of water that lies between the two traders.

If China takes the complaint seriously and comes to the table ready to loosen its grip on key commodity exports (coke, magnesium, bauxite and silicon metal), it is a sign that things may not be as bad as they are.

But it is not going to happen that way.

The last thing China needs right now is more American dollars. It has nearly a trillion greenbacks it does not know want to do with.

Beijing also wants to spur growth inside its borders. The best way to do it is to keep its raw material costs down. By distorting competition and allowing domestic producers a shot at cheaper raw materials, China can stay a step ahead of western rivals.

Of course, it is not fair and will ultimately hurt the country’s ties with its trade partners.

But at this stage, China has all the leverage it needs over a country desperate to find a partner to fund its record-setting debt.

Companies like Nucor (NYSE:NUE) and U.S. Steel  (NYSE:X) are trading in positive territory today, as the market contemplates the value of a positive outcome to the filing. But do not expect the action to last too much longer.

Team Obama is doing little more than formally vocalizing a complaint and checking to see how China reacts. If the country refuses to comply, there is not much we can do. To use a bad, but apt cliché, there are bigger fish to fry.

Right now, I am bullish on anything China. It looks much healthier than its trade rivals.

Commodities are the key to playing the situation. That makes the Commodity Carry Trade more valuable than ever.

Source: Obama Tattles on China

The next three weeks are going to be very important ones for investors. Nearly a trillion dollars is up for grabs. Smart investors will do all they can to ensure they get their hands on a piece of the action.

On Monday, President-elect Obama and Nancy Pelosi are scheduled to meet and start formally discussing their plans for a massive stimulus plan. Their goal is to have legislation waiting for Obama when he takes over the Oval Office on January 20.

Current estimates have the total package worth about $675 to $775 billion in taxpayer money. Nearly every industry in the country is lobbying with all its might to ensure they get a mention in the massive measure.

It is time to repay the voters

The next few weeks will look like pigs feeding at a slop bucket. Industry leaders will be pushing through the mud and the waste jockeying for a top spot in the handout line. Already, the steel and the newspaper industries are turning up the volume of their cries for help.

After spending nearly $20 billion to “save” Detroit and $350 billion to “rescue” the banking industry, the nation’s newspaper publishers want to get their hands on a few billion bucks.

Instead of proving that they are vital to the nation’s manufacturing sector and national security, news outlets claim without them, a strong source of free speech and a voice of dissent would be eliminated. Therefore, they are crucial to the health of the country.

Once again, the nation’s newspapers overlook the power of the Internet.

Steelmakers are taking a different route. Knowing that an infrastructure based stimulus would send their revenues skyward, the steel industry is not asking for a check from Uncle Sam. Instead, they demand that Obama’s package have a “buy America” clause is a virtual tariff that forces builders to buy American steel (regardless of the fact that it will be more expensive).

Over the last four months, steel demand throughout the United States has fallen by about 50%, dragging prices down an equal amount. So far this year, the steel industry has fired thousands of American workers. If the situation does not get better, executives promise (or is it threaten) that more cuts are on the way.

Might as well get your share

No matter what Pelosi and Obama hammer out, hundreds of billions of dollars in taxpayer money will be spent over the next 24 months. Much of the cash will flow through the steel industry, making it a prime investment opportunity.

Look at companies like Nucor (NYSE:NUE), United States Steel (NYSE:X), and ArcelorMittal (NYSE:MT) to be amongst the leaders as the stricken industry returns to its feet and runs ahead of the pack.

The steel industry has typically been a strong leading indicator for the American economy. Thanks to help from Washington, it will gain a leadership position once again, whether it deserves it or not.

Source: Who Is Next For The Easy Money

• Google Inc. (GOOG) said yesterday (Thursday) that profit climbed 26% to $1.35 billion, or $4.24 per share in the third quarter, up from $1.07 billion, or $3.38 per share, at the same time last year. Revenue soared 31% to $5.54 billion.

• Initial claims for unemployment insurance last week fell 16,000 to a seasonally adjusted level of 461,000 the Labor Department reported yesterday (Thursday). However, the four-week average, which is less volatile, increased slightly to 483,250 – a seven-year high. The number of people continuing to receive jobless benefits rose 40,000 to 3.7 million.

• Peabody Energy Corp. (BTU), the St. Louis-based company that fuels about one-tenth of all U.S. electricity generation and more than 2% worldwide reported net income of $369 million, or $1.36 cents per share, in the third quarter. That compares with $32.3 million, or 12 cents per share, a year ago.

• Nucor Corp.’s (NUE) third-quarter profit nearly doubled, the Charlotte, N.C.-based steelmaker said yesterday (Thursday). The company reported profit of $734.6 million, or $2.31 per share, compared to $381.2 million, or $1.29 per share, in 2007. Quarterly sales jumped 75 percent to a record $7.45 billion.

• Nokia Corp. (ADR: NOK) announced yesterday (Thursday) that third quarter net profit dropped to $2.7 billion (1.09 billion euros) from 1.56 billion euros a year earlier. Net sales for the Finland-based cell phone maker declined 5% to $16.6 billion (12.2 billion euros) from 12.9 billion euros, BusinessWeek reported.

• Advanced Micro Devices Inc. (AMD) yesterday (Thursday) announced a third quarter loss of $67 million, or 11 cents per share. For the same period the year prior, the memory-chip maker lost $396 million, or 71 cents per share, MarketWatch reported.

• The Hershey Co. (HSY) yesterday (Thursday) announced that its third quarter profit was $124.5 million, or 54 cents per share, up from $62.8 million, or 28 cents per share, in the third quarter of 2007. The domestic candy maker’s revenue increased 6.4% to $1.49 billion due to 25% price increases to help offset higher raw ingredient costs, The Wall Street Journal reported.

• Citigroup Inc. (C) yesterday (Thursday) announced a $2.8 billion loss for the third quarter. North American credit-card loan charge offs increased by $311 million in the quarter, reflecting slower payment rates, higher bankruptcies, rising unemployment and lower recoveries on bad debt, Citigroup Chief Financial Officer Crittenden said on a conference call, Bloomberg News reported. Citi shares lost 33 cents each, or 2.03%, to close at $15.90.

Source: Global Investing Roundups Friday, October 17th, 2008

• Take-Two Interactive Software, Inc. (TTWO) shares plunged yesterday (Monday) after Electronic Arts Inc. (ERTS) withdrew its bid for the maker of the popular Grand Theft Auto 4 video game. Take-Two shares shed $5.32, a decline of 24%, to close at $16.57. But Ben Feder, Take-Two’s chief executive, said in an interview yesterday the company is “very, very happy to stay independent,” The Associated Press reported.

• Steelmaker Nucor Corp. (NUE), a recent feature in Money Morning’s “Buy, Sell or Hold” column, raised its third quarter earnings target, The Wall Street Journal reported. Due to improved performance and recent acquisitions, Nucor upped its project to $2.15 – $2.20 per share from an earlier estimate of $1.80 – $1.85 per share. Nucor’s recent acquisitions include scrap purchaser SHV North America and Harris Steel Group Inc.

• Electronics retailer Best Buy Co. Inc. (BBY) announced yesterday (Monday) that it would purchase Napster Inc. (NAPS) in a deal valued at $121 million. Best Buy’s acquisition includes Napster’s roughly 700,000 subscribers, its Web-based customer-service platform and mobile capabilities, MarketWatch reported.

• Target Corp. (TGT) and the Major League Baseball’s Minnesota Twins announced a deal that will put the second-largest U.S. discount retailers name on the new ballpark that is expected to be ready in time for the 2010 season, Bloomberg News reported. It’s the second sports venue contract for the Minneapolis-based Target, which already has its name on the arena of the National Basketball Association’s Minnesota Timberwolves.

• Oil prices closed below $100 a barrel for the first time in six months Monday, tumbling more than $5 as the outlook for both the global and domestic economy darkened. Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange – the first time crude has settled under $100 a barrel since March 4.

• Wilbur Ross, chairman and CEO of WL Ross & Co. LLC, said in an interview with CNBC that as many as a thousand banks could fail in the coming months. “I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s,” Ross said.

• Hewlett-Packard Co. (HPQ) announced yesterday (Monday) that it plans to cut over 24,000 jobs as part of its takeover of Electronic Data Systems (EDS). The cuts represent about 7.5% of the two company’s combined workforce, MarketWatch reported. The restructuring should result in an ultimate $1.8 billion in annual savings.

Source: Global Investing Roundups Tuesday, September 16th, 2008

US steelmaker Nucor (NYSE:NUE) took a thumping along with the rest of the sector. Shares are down 18% for the year, dropping 42% from their peak for 2008.

However, Money Map Report editor Horacio Marquez reckons Nucor’s “terrific fundamentals” mean its shares are poised for big gains. He says, “all the technical indicators … point to a massively oversold condition in Nucor’s shares.”

Shares of the Charlotte, N.C.-based Nucor could not escape the carnage and have endured an even bigger swing: From their low of $50.30 a share in early January, the shares of the No. 1 U.S. steelmaker soared 66% to a trade at a high of $83.56. From their peak, Nucor’s shares have declined 42%, closing Friday at $48.45. They’re down 18% for the year.

This sell-off came on the heels of spectacular second-quarter earnings, where earnings per share jumped 70% to $1.94 a share on the back of major strengthening in global steel prices. The disappointment came from a charge to inventory and forward-looking guidance of $1.80 to $1.85 a share, which was below Wall Street’s expectation of $1.91 a share.

Nucor remains one of the most admired companies in the steel sector, thanks to its superb management, ability to innovate, unquestionable leadership in the mini-mill steelmaker sector, and its disciplined business model.

Wall Street has soured on the overall steel sector. Just last Thursday, investment banking giant Goldman Sachs (NYSE:GS) downgraded the sector from “Attractive” to “Neutral.” It maintained its “Buy” rating on both Nucor and United States Steel (NYSE:X), but removed the latter from its “Conviction Buy” list.

The million-dollar question is this: Are we trying to catch a falling knife, or are we poised to capitalize on a superb buying opportunity? Unlike most cases, in which a good argument can be made either way, the answer here is very clear-cut.

Indeed, the situation with Nucor’s shares stands as an interesting case study of how Wall Street – and the financial markets in general – can overlook the profit opportunities that are then left for us to discover. In this case, in fact, Nucor may actually have created the profit play.

Let me show you just what I mean.

Among other peculiarities of Goldman’s shift in opinion, coming after such a spectacular decline – where sector coverage was transferred from one analyst to another – was the investment bank’s recognition that the “valuations of some of these stocks reflect a doomsday scenario, which we believe is not what longer-term fundamentals suggest.”

I could not agree more with this last assessment.

You see, I have been calling my many contacts at hedge funds, on Wall Street, and with local businesses in New York, Brazil and even China to find out exactly what the global situation is with respect to steel demand, and steel prices.

Yes, here in the United States, car sales of 13 million are a temporary disaster. But the needs in terms of infrastructure are huge. And construction of condos, which seemed doomed not so long ago, will reignite pretty soon.

Prices in the real-estate bubble areas have collapsed, and lenders have taken already huge losses. Multi-billion-dollar funds, which had been waiting up to three years to start deploying their capital, are starting to invest, and are buying entire buildings at discounts of as much as 50 cents on the dollar. And even the noted doomsday prophesier – PIMCO manager William H. “Bill” Gross – recognizes that investing in distressed mortgages represents an interesting investment opportunity.

Indeed, this is actually an understatement: When you are one of the only bidders in the market, and the banks are forced sellers, you can name your price.  And current prices of distressed mortgages have incredible discounts to the financial model prices in normal conditions, guaranteeing great returns for buyers.

These and other de-leveraging sales and recapitalizations are ultimately cleaning up the balance sheets of banks and allowing them to return to and resume their regular and profitable bread-and-butter lending business.  Non-residential construction and other steel-consuming manufacturing have barely slowed down – and in some cases are actually increasing due to strong export growth.

No wonder the U.S. economy grew at a 3.3% clip in the second quarter. The August payroll numbers indicate that it is growing at 2% or more, without counting the effect of the fiscal stimulus.  The relatively weak – but by no means recessionary – job picture guarantees that interest rates will remain on hold (at current low levels) for quite some time, helping the U.S. economy out of the temporary slump.

On the international front, my conversations with locals and other business reports I reviewed present a mixed bag for steel prices: Let’s take a look at the steel outlook in key markets around the world.

• In Brazil, there is an imbalance between the supply and demand for slab steel that will take five years to fill.
• China has slowed a bit – reaching high single-digit rates – due to the shutdown of factories and electricity in the major cities. But this was temporary, part of an overall strategy intended to clean the air and reduce overcrowding for the Summer Olympic Games. But all these activities are being restarted, even as we speak. China’s energy needs keep growing exponentially, which bodes well for the demand for steel for the new power plants. Out in China’s provinces, these needs are even more critical today, demanding that the construction of new plants and transmission lines – all of which require steel – get under way immediately. China’s Baosteel Group Corp. barely reduced prices to deal with its temporary oversupply. Japan and India did the same.
• The Middle East slowed down construction for the summer, as usual, given the high temperatures and other seasonal factors.  But South Korea’s steelmaking leader, POSCO Ltd. (NYSE:PKX), a favorite of U.S. investing guru Warren Buffett, saw no need to reduce prices. And Germany’s Salzgitter AG actually has increased prices, despite all the news about a supposedly slowing economy.
• And while India’s economy has seen its growth slow to a still-robust annual pace of 7% to 8%, new steel mills are being planned in order to be able to keep up with that country’s massive infrastructure needs, for which no slowdown is seen.
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