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Christopher Wallace

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  • Taking A Flyer On DryShips [View article]
    @Paulo - I like the drybulk space and arrived early to the party (story of my life) with BALT. I am looking at adding DSX. Having read many of your various articles, I am surprised that you would choose DRYS among all the shipping names. I have always felt management here was not great, and that it was a bit of a promotion at times. And their diversifcations out of shipping never thrilled me. Are those concerns for you as well? Obviously you are long; I was just wondering if you perhaps saw those as concerns but felt valuation trumped them.
    Oct 9 10:11 AM | Likes Like |Link to Comment
  • 4 Important Catalysts For The Coal Sector [View article]
    There is a natural tendency to expect correlation between gas and coal because they can be substituted, and that theory has been espoused frequently on SA. But that is just theory. In reality, since gas bottomed in April this year at $1.90 it has rallied to $3.40 (~50%). In the same time frame, CAPP coal has dropped from $66 to $53.5 (~15%). Price points are not relevant as the last 6 months have shown. Markets do not always trade according to the theory. Take oil and gas: oil has 6 x the BTU equivalent of natural gas, but scarcity makes the long term average price ratio more like 12. But earlier this year that ratio got as high as 40 and is now in the high 20s. As we have seen, energy prices can and will decouple from their BTU equivalents. We need to look for other catalysts, those that will move the market in this cycle.
    Oct 9 09:28 AM | 1 Like Like |Link to Comment
  • 4 Important Catalysts For The Coal Sector [View article]
    Thanks for your comment Mark. I certainly didn't forget the impact of natural gas; I merely chose not to include it among these near term catalysts, as gas has been rising for months and not affected coal prices, which I wrote about here: http://seekingalpha.co.... While over the long term gas and thermal coal prices will surely correlate, I wanted to focus this article on the four factors that have recently come into play and are more short term catalysts.
    Oct 8 01:22 PM | Likes Like |Link to Comment
  • Romney Scares Coal Shorts (Video) [View article]
    Good piece. I particularly like your point about Romney not needing to win but just to make it a race as benefiting coal stocks. With % of float short in the 15%-25% for many coal names, there is good upside potential leading up to the election. I think the action is likely to be more in the names skewed to thermal production as rising nat gas prices should provide a little assistance to that sector (but that thesis has been around for months and not played out).
    Oct 6 12:16 PM | 1 Like Like |Link to Comment
  • Why Natural Gas Pricing Matters For Coal Right Now [View article]
    Aricool, hasn't this already happened? I thought NGLs were down more than 50% since the beginning of the year.
    Oct 5 11:43 PM | Likes Like |Link to Comment
  • Why Natural Gas Pricing Matters For Coal Right Now [View article]
    Romney's performance in last nights debate is having more influence on coal stocks than gas prices. I am generally not a big coal bull at this point, but I can't resist the short term trade opportunity sitting in front of coal stocks as a result.
    Oct 4 11:32 AM | 1 Like Like |Link to Comment
  • Why Natural Gas Pricing Matters For Coal Right Now [View article]
    Craig, you are quite correct in stating companies behaved as they should have in adapting to changing market conditions, a point I am in strong agreement with. I guess the point I was trying to make was that I think (wish I could put that in italics, because I am by no means sure) that dry gas drilling is generally (in italics again) not profitable at these prices.
    Oct 4 11:29 AM | 1 Like Like |Link to Comment
  • Why Natural Gas Pricing Matters For Coal Right Now [View article]
    Craig makes a good point in asking that question. But the question maybe should have been how many BKs would there have been if people stayed in dry gas and did not switch to NGLs? Full cycle costs obviously differ for different plays, but I doubt that many will have proven profitable under $4, once EURs are known and not estimated.
    Oct 4 12:21 AM | Likes Like |Link to Comment
  • Why Natural Gas Pricing Matters For Coal Right Now [View article]
    At what price do you think the thermal side of the businesses you mentioned (JRCC, ACI, etc) will break even on their thermal coal operations? TIA.
    Oct 2 01:15 PM | Likes Like |Link to Comment
  • Irrational Exuberance Doesn't Last [View article]
    A good article, or probably a good three articles in one. Given the reaction in post Sept 13 trading, in what one would expect to be the biggest beneficiaries of the put, that is GLD, XLB, CU, USO, TBT and any other creature that feeds on inflation, one has to begin to think that something is missing. Each of those should be up substantially on QE Infinity and its inflation producing ways. But they aren't. I can't explain this short term tape, and I don't want to fight it either. But a market that does not react bullishly to bullish news is not bullish.
    Oct 1 10:23 PM | 4 Likes Like |Link to Comment
  • Some Signs Of Improvement For Coal [View article]
    Paulo, thank you for your reply and for publishing another informative and well reasoned article. I was early to the coal space, and wrong, and recently published an article about that. (http://seekingalpha.co...). Subsequent to publishing that article I have done a little further research and discovered that among the gas producers, the low debt/low cost producers have done much better than the rest of the pack since gas bottomed in April. I think that coal prices are bound to rise along with gas prices, as you have reasoned in your article and in your reply to my question. And I think that we have already begun to see a similar story with the coal producers that I observed with the gas producers: in the early stages of the rally you want to be with the low debt/ low cost producers. ARLP and NRP fit that bill and have significantly out-performed ACI, ANR and other more levered companies. No doubt those levered companies will have their day, but my guess is that will be later in the cycle. At least if they tend to follow the lead being set by natural gas.
    Oct 1 10:09 PM | 2 Likes Like |Link to Comment
  • Some Signs Of Improvement For Coal [View article]
    While the buy-coal-stocks-cuz-na... gone-up thesis has its intuitive appeal, it certainly has not worked thus far. To with nat gas is up over 50% in 5 months and CAPP coal is down 14%. And most of the coal stocks are down even further. Paulo, what makes this time different? Why will coal stocks rally now with natural gas when they have not done so before in this rally?
    Oct 1 07:00 PM | Likes Like |Link to Comment
  • Why Natural Gas Has Not Lifted Coal Stocks [View article]
    OK, I'll bite. Let's talk about it: of the 22% of production that is associated gas, how much of it is from unconventional wells? And how is that affecting the supply of nat gas?

    To me, the associated gas number is important because it has offset a lot of the effect of the rig decline. The associated gas % has climbed in each of the last 3 years. However, if the oil rig count continues to fall for any prolonged period of time, this source of gas may diminish as opposed to risisng as it has been. I have just looked at the total associated number. What significance do you see in the smaller, unconvenetional subset?
    Oct 1 01:42 PM | 1 Like Like |Link to Comment
  • Why Natural Gas Has Not Lifted Coal Stocks [View article]
    Ok, I found the associated gas number. Looks like I was correct in my original guess: in 2011 22% of production came from oil wells (associated production). Source: EIA. http://1.usa.gov/SgJuKz
    Oct 1 11:58 AM | 1 Like Like |Link to Comment
  • Chicago Fed President Charles Evans - the man whose ideas about QE∞ won the day on the FOMC - tells CNBC he expects unemployment in the 7% range for at least another 2 years. As 7% is unacceptable to Evans, the statement means he expects a minimum 2 years of continued $40B/month or more of asset purchases. Gold and silver erase early losses. GLD +0.3%, SLV +2% premarket. [View news story]
    Evans comments were known by the market 2 weeks ago. That is a 2 for 1 rally on the same news, if you ask me. Fade this rally going into the close.
    Oct 1 11:34 AM | Likes Like |Link to Comment
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