Cat Stock Blog

The local paper in Joliet has the most complete report (besting the grownups at the Chicago Tribune, no less) on Sunday’s spill, which happened when an open-air storage tank for used oil overflowed because of a pump malfunction. The oil sludge spill contaminated three miles of the Des Plaines river.

How much damage the spill could potentially create is unknown.

The first step in such a spill is to contain it, said John Lesnak, environmental protection specialist in surface water section at the Illinois Environmental Protection Agency.

Trying to contain the sludge is just what the Coast Guard was doing, with help from the Channahon and Rockdale Fire Departments, Joliet police Lt. Jeff Allbert said. They are surrounding the contaminated water with a floating wall, Mitchell said.

That wall, also called a boom, is a floating absorbent ring that floats on the water.

“If (the contaminant is) floating, they just corral it with these booms, these floating rings, and then they go in with a sweeper and they just slurp it up,” Lesnak said. “The idea is they contain it with the booms so it doesn’t spread and then they clean it up.”

That was the plan, according to Mitchell, who said after the booms collect the spill, two vacuum trucks on the scene would suck up the sludge.

While officials said there was not harm to humans nor any evidence of fish or waterfowl harm, Mitchell did point out that if there was an animals within the three-mile radius, it could be in trouble.

For those who’ve never worked in a factory or machine shop: oil lubricates cutting surfaces and various manufacturing processes. Basically you pour oil over something to keep drill bits and other cutting things from overheating (also, reducing friction keeps cutting tools sharper longer). The oil then flows down into a catch-basin of some sort and gets recycled.

Presumably this left-over oil is what was stored in the tank that overflowed.

I read somewhere that 6,000 gallons is about how much a tanker truck carries.

Caterpillar notched its first positive week of 2009 with a 7.8 percent pop from last Friday’s close of 30.85. There was no sane explanation for the three-day buying binge that got us here (today’s lame excuse: terrible unemployment numbers will hasten passage of the federal stimulus package. Right.). Full quote at Yahoo Finance.

Major indexes closed in the green too: Dow, up 2.70%; Nasdaq, up 2.94%; S&P 500, up 2.69%. Wrap-up at Market Watch.

Volume in Cat shares of 16 million was down a bit from yesterday, but still well above average. Three days in the green on high volume suggests a lot of confidence in Cat’s prospects (though I can’t help wondering how much short-covering had to do with these big booster steps), and today’s close is well above yesterday’s $32 resistance level. Next week will be the test.

Bloomberg says Caterpillar’s sale yesterday of $3 billion in bonds will help it pay for debt coming due this year.

The $3 billion of bonds the Peoria, Illinois-based Caterpillar sold yesterday in three issues will bolster the $7.3 billion of committed credit facilities and $2.7 billion of cash the company can use to meet its maturities this year, said Bruce Clark, a corporate debt analyst with Moody’s in New York.

“It’s very constructive,” Clark said in a telephone interview yesterday. “It goes a long way toward addressing the liquidity shortfall.”

Cat’s stock is in raging-bull mode today, apparently for the simple reason that it was able to find buyers for these bonds.

The bond sales included $1.65 billion of five-year, 6.125 percent notes and $1 billion of 10-year, 7.15 percent debt, both of which were priced to yield 425 basis points more than Treasuries of similar maturity. The company also sold $350 million of three-year, 5.75 percent securities at a spread of 437.5 basis points. A basis point is 0.01 percentage point.

The spread is the risk premium Cat has to offer to entice bond buyers. Cat paid a bit less this time than it did for bonds sold in December, but still more than last September (apparently before all hell broke loose).

Caterpillar leaped out of the gate and climbed all morning, but profit-takers took some of the glow off by the day’s end. Financial and tech shares had a nice outing, too. Good day to be bullish; we’ll see how long it lasts. Full quote at Yahoo Finance.

Indexes were all up: Dow, up 1.34%; Nasdaq, up 2.06%; S&P 500, up 1.64%. Wrap-up at Market Watch.

Caterpillar has had two green days in a row on above-average volume, though both days saw price seepage into the close. Check out Cat’s six-month chart at StockCharts.com and pay heed to today’s high, around $32 a share. Then look at the previous lows in October and November: also around $32. This is a classic bear market pattern: old “support” become new “resistance.” We need a strong surge above $32 to be confident that this rally has legs.

The same site whose “Caps” program called Caterpillar a screaming buy at $46 in December now has a Fool surveying the carnage of January in heavy machinery stocks and concluding: 2010 is looking good.

Yes, Fools, the cat is now fully out of the bag. Global industry simply fell off a cliff sometime last fall, and the more plant closures and layoffs we see, the more this once-bagged cat resembles a rabid, ferocious lion

Actually the post does mention most of the regulars — Terex, CNH and company — and notes that Deere’s earnings later this month are the numbers to watch.

Finally, a burst into the green: Caterpillar popped at the open and climbed all morning, then proceeded to give back half of its gains in the afternoon as earning worries on the broader markets cut the wind from everybody’s wings. Full quote at Yahoo Finance.

Indexes finished in the red zone: Dow, down 1.51%; Nasdaq, down 0.08%; S&P 500, down 0.75%. Wrap-up at Market Watch.

Trading volume in Cat shares remains about 40 percent above average, which normally would be a happy outcome on an up day. If you check the candlestick patterns on Cat, though, you see one of those inverted hammers that tends to predict more travels to the downside. I suspect once earnings season subsides and the river of bad news fades from the headlines, we might finally see a bit of a rally (barring further bank meltdowns, of course).

Another of those “coulda been worse” days. While the rest of the markets took a tentative march into the green, Caterpillar remained stuck in the red, probably because of the lousy Cummins guidance, though there’s some comfort in the shares not having set a new 52-week low. Full quote at Yahoo Finance.

Indexes were all up: Dow, up 1.78%; Nasdaq, up 1.46%; S&P 500, up 1.58%

Cat’s been trading in a narrow band around $30 a share the past couple days and can’t seem to make up its mind where it wants to go, which seems odd in light of the 17.8 million shares traded. I have no sense of where things might be going, which is probably healthy because my senses tend to lie.

Like we needed proof a bear market is a bull going backward: Caterpillar set a fresh 52-week low out of the gate Monday morning, but rebounded a bit on news that the manufacturing sector’s performance in January was a bit less skunklike than it was in December. Full quote at Yahoo Finance.

The indexes were mixed: Dow, down 0.80%; Nasdaq, up 1.22%; S&P 500, down 0.08%. Wrap-up at Market Watch.

Cat’s volume at 16.7 million shares remains about 30 percent above average, which is not encouraging on a down day. Buyers keep dipping their toes in the water at $30 a share; I think it’ll be up to the rest of the market to give them enough confidence to dive back in.

The New York Times has a story that must have mining companies’ mouths watering: the world’s largest reserves of lithium — a key ingredient in batteries that could power hybrid cars — lie beneath a salt flat in a remote corner of Bolivia, whose current president is Evo Morales, a leftist pal of Venezuela’s Hugo Chavez, who is bound and determined to make sure Bolivians are the primary beneficiaries of all this metal. I was counting the paragraphs till somebody denounced evil imperialists, and I wasn’t disappointed:

“The previous imperialist model of exploitation of our natural resources will never be repeated in Bolivia,” said Saúl Villegas, head of evaporates, a division in Comibol that oversees lithium extraction. “Maybe there could be the possibility of foreigners accepted as minority partners, or better yet, as our clients.”

Uh, Saúl, no matter what you do, if you mine the lithium, you’re going to have to sell it to somebody else. The lesson of history is that attempting to gore the capitalist pig just encourages said pig to feed at somebody else’s trough.

The story summarizes all the issues at stake between economically poor countries that are resource rich and would like to become economically prosperous without having to cut deals that let somebody else rake in all the profits. Could Bolivia become a model for building an industry that makes the nation and its people wealthier? Perhaps, but the fact that people making empty denunciations of imperialism are running things makes me skeptical.

(Nice thing from Caterpillar’s perspective: no matter who does the digging, they’re gonna need shovels).

Fortune goes grasping for good news in Caterpillar’s turn of bad fortune.

This is just the time for Caterpillar to fine tune its production system, which it borrowed from Toyota, to get it operating at peak efficiency.

A breather is surely needed. Like auto manufacturers, Caterpillar sells its heavy equipment through independent dealers. But unlike auto companies, Caterpillar does not disclose its monthly production, sales or inventory levels.

Still, it isn’t too difficult to imagine the consternation at those dealers today. With economic activity at a standstill, they have lots filled with acres of unsold yellow equipment that they are being forced to finance month to month. And were Caterpillar’s factories still running at full strength, the company would be pushing more and more inventory on them.

Unlike cars, a backhoe or motor grader can’t be sold with an advertising campaign or higher marketing incentives. It takes more than a push from the manufacturer to move a project along from the planning and financing stage, to make it “shovel ready” for new Caterpillar gear. The dealers were pretty much dependent on the overall level of business activity.

But if Caterpillar can successfully adapt lean production to its distribution system the way that Toyota did for its own system, then the dealers’ inventory problems should be significantly alleviated.

Frankly this story is pretty superficial but if you hear your boss talking about it, you’ll know where he got the idea.