Dividend.com: KLA-Tencor Chipped

BASF Warning Does Not Bode Well for Dow Chemical, DuPont

News is out this morning that the world's largest Chemical company, BASF, will be cutting up to 20,000 jobs.

The company is cutting its profit outlook for 2008 and announced cutbacks in production, citing a "massive" decline in demand in key industries. Management announced plans to temporarily shut down 80 plants worldwide and reduce production at a total of about 100 plants.

This news is certainly not bullish for investors looking to get into the chemical sector. We have been avoiding names like Dow Chemical(DOW Quote) and DuPont(DD Quote), despite the fact that the stock prices appear "cheap." Value managers have been big buyers of the companies, citing the high dividends as a reason to own the names. We see the dividend payouts as perhaps being in jeopardy, and this news today, makes us even more cautious on the chemical area. We would look elsewhere for better opportunities.

Bad Housing-Starts Number Actually Good News

We just got the monthly housing starts number, which showed that starts fell 4.5% to an annual rate of 791,000, a record low dating back to 1959.

As bad as this sounds for a homebuilder like KB Homes(KBH Quote), this is actually great news for the economy. It comes down to simple supply and demand. The market does not need more new homes coming on the market, but rather, we need to start taking inventory down.

With a current excess supply of close to 2 million homes on the market, investors need to understand that it will take time to work through this buildup. As an investor, the key is to have patience and not rush into any area of the stock market that may need possibly years to turn up.