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Alexander Kaitz  

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  • The Curious Case Of Canada [View article]
    Excellent comment! Everyone likes to think it won't happen to them because they are different or the situation is different. That's what Americans thought before our housing crisis, probably what the Greeks were saying before their problems, what all the investors in the Chinese market thought before the last couple weeks. The fact is you can't keep borrowing more, and markets don't grow forever. At some point the cycle shifts and reality sets in.

    On the other hand markets don't fall forever either. If Canada is lucky commodities will turn around right as housing collapses and their high debt levels cause the financial system to get into trouble.
    Aug 26, 2015. 08:26 PM | 3 Likes Like |Link to Comment
  • IDF 2015: Keynote Exposes Intel's Broken Approach To Mobile [View article]
    Whether we like it or not, smartphones and tablets will become commoditized. It's a natural progression that every product goes through, from purple dye to computers. In a commoditized market Intel has the advantage, they are a more efficient producer, and they are able to focus their resources more directly on chip development, where they are specialized, instead of spending resources researching all along the production chain, as well as researching other products and their entire supply chains. You will notice in the Macbooks, Apple uses Intel chips. Eventually Apple will have to choose; expend significant resources competing with chip makers in an increasingly commoditized market, or use those resources to develop and market new products. If you look at where Apple's revenue growth over the last 10 years comes from, the answer should be clear.

    Slightly off topic, but related, the expansion of phone, tablet, and now wearable tech, is creating an accelerating need for servers. This is a market where Intel is dominant and will only see more growth.
    Aug 20, 2015. 04:02 PM | 3 Likes Like |Link to Comment
  • Get Off Of American Railcar Industries Inc. [View article]
    Looking over lease revenues, ARII's revenue per car has been rising. Improving margins suggest to me that ARII is still seeing strong leasing demand. ARII also seems well placed to take advantage of the retro fitting that will be taking place with the new tanker car regulations after just completing an expansion of their repair facilities last year. What are your thoughts on this?
    Aug 17, 2015. 12:33 PM | Likes Like |Link to Comment
  • 4 Reasons Why Oil Will Not Trade Much Below $40 [View article]
    Why do you think the Saudi's need $80-90 to breakeven? Because while there are some countries that need that, Venezuela for example, I don't think the Saudi's need that level. The Saudi's production is still relatively cheap, and while the government's spending needs do raise the breakeven costs, it's not all the way to $80. Besides I think for the Saudi's this is more about holding onto market share and maintaining OPEC as the price setter. If they drop oil production and US production fills the gap, they lose the ability to set oil prices, and potentially could lose OPEC members, while making US producers rich. They have to keep going until US production drops significantly.
    They are also more quietly taking on green tech, which is getting cheaper and easier to implement, and in the long run is an even greater danger to OPEC. Keeping oil expensive would only spur more green innovation and greater political will to implement it. With oil so cheap green energy becomes much less economic.
    Aug 11, 2015. 02:28 PM | Likes Like |Link to Comment
  • Tesla: Why The Smart Money Is Short [View article]
    Where do you think the electricity for your Tesla comes from? The majority of electricity produced both in the US and Worldwide comes from coal, and the fastest growing area of electrical production is natural gas. Doesn't matter if it's from the electrical plant or fuel cells in your car, you're still using those natural resources.
    Jul 29, 2015. 02:38 PM | Likes Like |Link to Comment
  • Tesla: Why The Smart Money Is Short [View article]

    I actually agree that Tesla could work as a luxury brand going after the high end market. But the new model 3 is supposed to be targeted at the affordable car market and I don't think they will be able to recoup any investment in an affordable car for a long, long time. The market just isn't ready yet. Many of the resources they have invested in this area may have to be written off, and they could be producing these cars at a net loss for years. That could be very painful for any investors, especially those who are buying today at over $250.
    Jul 29, 2015. 02:27 PM | Likes Like |Link to Comment
  • Tesla: Why The Smart Money Is Short [View article]
    Let me just point out 4 issues.
    First, Tesla claims the model 3 will have 250 miles. I've never known a piece of technology to live up to manufacturers claims. Add to that the batteries will become less efficient with age, lowering their range.

    Second, you obviously don't know many people who live in apartments. Most apartments do not have attached garages, they may have off street parking, but I doubt many landlords are willing to let you run extension cords across their parking lots. For one thing the potential liability from someone tripping would scare any landlord.

    Third, people in the affordable car market are probably not going to want a car they can only use to go to work, they are probably going to want something they can at least drive somewhere for a long weekend. I regularly take weekend trips to places 200 miles or more away (that's 400 miles round trip).

    Fourth, 30 minutes is still significantly longer then the time it takes to refuel a petrol tank. That doesn't include the time spent waiting in line to recharge. Most gas stations have 4-8 pumps, I doubt any have an equal number of charging stations, if they have any at all. Just finding one charging station could be difficult in many places.
    Jul 23, 2015. 07:16 PM | Likes Like |Link to Comment
  • Tesla: Why The Smart Money Is Short [View article]
    I disagree that going after the high end market is a mistake, it has higher margins and people who are more likely to buy something for the "cool" factor because they have higher disposable income. The present and history are rife with companies that successfully specialized in high end goods. Just in the car industry I can name multiple examples, Rolls Royce, Bentley, Morgan, Mclaren, Ferrari, the list goes on.

    Part of Tesla's rising costs are because they are now trying to go after the affordable car market with their new affordable electric car. I feel, with the exception of certain markets, like San Francisco, the world is not ready for an affordable electric car. The infrastructure just isn't in place yet, and if you can't afford putting in your own charging station at home, you may have to ship your car 100 miles to San Francisco to charge it, or try charging it on your dinky 110v home system. Good luck with that, and what if you don't have a garage, like me? What about at work? Are you going to run an extension cord from your office (or home) to the street?

    Tesla needs to find a way to take advantage of the currently existing gas station infrastructure. They say that they have new fast charging batteries, but even so, are you going to sit at the gas station for 1-2 hours every time you need to charge your battery? I'm not willing to do that, I'll fill up my petrol tank in 10 minutes and be on my couch watching T.V. by the time your finished charging. Besides outside of the San Francisco Bay Area, and maybe a few major cities like LA, NYC, or Seattle, I don't think you could find a charging station.

    I would be more inclined to work on technology to decrease battery size while increasing efficiency, then make it easy to pull the battery out and put a new one in. Create standard battery bays and release the specs so other companies can make batteries that fit those bays, fostering further battery development through competition. Then get gas stations to carry those batteries, they don't have to go through the expense of putting in charging systems (which probably aren't economical in most of the country yet with so few electric cars), they can rely on their current electrical system to charge several batteries, for a fee taking your dead battery and putting in a fully charged battery. You might get more buy in from gas stations this way since the cap/ex requirement is negligible. This would also mean that consumers can switch out batteries in a few minutes and not have to wait around for an hour to charge their car. You might actually be able to go on a road trip and not be stuck within a 50 mile radius of your house.

    Just some thoughts. For now I'll avoid Tesla and keep my automotive investment in Ford, with a nice 4.2% yield and a profitable underlying business. A business whose necessary infrastructure is already built and in place worldwide.
    Jul 21, 2015. 07:02 PM | 1 Like Like |Link to Comment
  • Coming Down To The Last Puff For Lorillard [View article]
    The regulators have been very slow to approve this deal, I think there is a good chance of getting the dividend whether management wants to pay it or not. Either way, I have been playing this arbitrage opportunity for months now and I'll stick it out to the end.
    May 22, 2015. 06:04 PM | Likes Like |Link to Comment
  • A Single Mother's Income - Dividend Growth Investing [View article]
    An interesting article with a lot of background information on where your perspective is coming from, which is always interesting. A word of warning however on Australian stocks. The Australian economy is heavily dependent on natural resources exports, especially coal and iron ore. Having just been in Perth, I can say that they are already starting to feel the hurt from lower iron ore prices, and in my opinion, as well as several analysts who specialize in this area that I've talked to, this is only the beginning. The effect of this is likely to reverberate through the entire Australian economy. At one point I had as much as 10% of my personal account in Australian stock, right now the only company that I still own is BHP Billiton.

    BHP will be helped by lower prices as they have low cost mines and have immense access to capital. Enough to weather the storm and come out the other side with higher market share when many of the smaller and medium sized producers go bankrupt. Rio Tinto is also one of those companies that will come out of this stronger then before.
    Apr 9, 2015. 03:07 PM | Likes Like |Link to Comment
  • Lightstream Is One Lender Decision Away From Being Forced Into Restructuring [View article]
    I understand Lightstream's debt issues but I do have a couple questions about why you feel the company's credit line is in danger.
    - First, I have not heard anywhere besides this one article that the credit line is in danger of being subject to a borrowing base re-determination. Have any of the lenders announced they are considering it? Or are you basing the possibility of it happening on the fact that it happened to one other company; a company that is significantly smaller and less well established. Are you aware of who the individual lenders are and what their exposure to the oil and gas industry is? Or what level of experience they have in the oil and gas industry? Are any of these lenders overextended? It seems to me that before worrying about whether these lenders are likely to panic, which is what you are suggesting might happen, these questions need to be answered.
    - Secondly, the example that you give of GeoMet shows a 36% decrease in their credit line. A 36% decrease for Lightstream would still leave a $736 million credit line. Even if the credit line is cut in half that would still leave $575 million. It is not clear in the article, why you feel the line would be cut all the way to $460 million.
    - Third, you mention oil prices must recover to $80/barrel for Lightstream to be out of danger. You do not make clear in this article why that is. The company seems to feel that it will do fine in a $65/barrel environment. I don't think we will see $80/barrel any time soon, but $65/barrel within two years is certainly a possibility.
    -Finally I don't see why they couldn't cut drilling drastically, perhaps entirely, for a year or two and accept the decline in production. As flipper2028 said earlier, lifting costs are around $15. Transportation costs are another $15. This would still leave them a significant amount of free cash flow to reduce debt with.
    - In terms of asset sales, while there will likely be many companies trying to sell assets, the Bakken is still considered prime real estate which should help Lightstream. The infrastructure from the Bakken to major markets has been expanding, and continues to expand, which should reduce transportation costs, making producing wells more valuable. The sale you mention, 72 boepd for $12.4 million, works out to $172 222.222 per boepd, this does not seem "paltry" to me.

    Correct me if I am wrong, but your article appears, to me, to be a worst case scenario for Lightstream. I would also be interested in having more background information behind your assumptions that the lenders are considering a borrowing base re-determination, that the credit line will be reduced to to $460 million, and that Lightstream requires $80/barrel oil before they will be out of danger
    Feb 12, 2015. 07:06 PM | 3 Likes Like |Link to Comment
  • Exit Lorillard Before Earnings [View article]
    This article is a complete misunderstanding of the situation. First if you had looked at the particulars of the deal you will have noticed that it's a three way deal and LO's E-cigarette brands will be going to Imperial, along with several other assets. As for the arbitrage opportunity, this deal is supposed to close in the next few months, 6.1% in less then 5 months seems like a pretty good opportunity to me. Don't forget that this deal is mostly cash, which limits your risk from market fluctuations.
    Feb 9, 2015. 03:40 PM | Likes Like |Link to Comment
  • Penn West: Oil For Pennies On The Dollar [View article]
    Brian, WCS does essentially follow WTI, less transport costs, and with a slight differential from differences in the mixture, but the transport costs are not necessarily 10%. The transport costs from the fields that PWE has said they will be concentrating on, Slave Point, the Cardium, and the Viking, to market are approximately $10-15/boe. When WTI was sitting around $100 that was 10%, now that WTI is sitting nearer to $50 transport costs are closer to 20%.
    Jan 14, 2015. 09:12 PM | 3 Likes Like |Link to Comment
  • About Linn's Big Dividend Cut [View article]
    Well thought out article. The only disagreement I have is that I think you may be to optimistic with your timeline for oil prices to recover. Much of the worlds oil is uneconomic to drill at current prices, but unless there is a major production cut in an important oil producing country it will take time to work through the current oversupply. It is fairly clear that OPEC has decided not to cut, Russia needs the revenue and is unlikely to cut production. The only realistic scenario is for North American companies to cut cap/ex allowing high decline rates in shale formations to reduce our oil production.

    This is already starting to happen, but it is uneven and companies will likely continue drilling on any wells that are already nearing completion. What this means for supply is a more gradual reduction. We also can't forget that the market doesn't always behave rationally in the short term. Speculators could keep oil prices artificially low for a surprisingly long time despite economic realities. Based on what I have seen for drilling and production costs, $70 oil seems like a realistic estimate of where prices will end up, it's just that we could take longer then you estimate in your article to reach that level.

    Having said all that I was buying LINE and LNCO starting all the way back in early December when oil prices started their slide. I think that oil prices will recover well before 2019 when the company will need to refinance. Perhaps somewhere in 2016 or early 2017, and LINE has decent hedges all the way through 2016.
    Jan 5, 2015. 12:57 AM | 1 Like Like |Link to Comment
  • Hold Your Nose And Start Buying Royalty Trusts [View article]
    I do agree with you on oil prices, although I have been concentrating my purchasing last week and this week on the oil MLPs rather then the royalty trusts. Many of them are sitting with 10%+ dividends and none of the limitations of the Trusts. LRE by example has a dividend of 17.5% at its current price. On the gas side I think that if we have another bad winter in New England, which we appear to be having, the gas producers that sell directly into the Eastern market could have excellent numbers next year.
    Dec 1, 2014. 06:42 PM | Likes Like |Link to Comment