Mark Anthony

Alcoa Kicks Off Earnings: Some Numbers That Don't Add Up

It is also wrong for Karl to judge AA, or any manufacturing company's valuation purely based on current P/E ratio. What about book value? What about future profit potentials?

AA's latest quarter reports sales revenue of $4.6B and income of $73M. So the income of selling aluminum is merely 1.6% of the sales proceeding. That's a very insignificant percentage not much higher than roughing or statistics error or even the fluctuation of foreign exchange rates. Just think about what if instead of 1.6%, but rather 16% of the sales proceeding goes into profit, how much should AA's P/E be then?

The price of aluminum itself goes up or down more than 1.6% a day. So it is rather insignificant to argue that only 1.6% of the sales proceedings goes into profit. This number could change very drastically by the next few quarters.

I am not quite interested in aluminum play because the earth has a virtually unlimited natural resource for aluminum production. It's all a matter of turning electricity into the aluminum metal, with no company owning the dorminant technology.

So the up side of aluminum is limited comparing with other, more scarce natural resource play, like my favorite palladium and tellurium. This is why I always maintain holding SWC position at at least 50% of my portfolio. That's how strongly I feel about scarce natural resource plays.

Alcoa Kicks Off Earnings: Some Numbers That Don't Add Up

Karl:

Your article suggests that there are some numbers in AA's quarterly report that are inconsistent and hence suspicious or untruthful. Questioning the numbers of a company's quarterly report "does not add up" is a serious accusation. However your article fails to point to any single number in AA's quarterly report that is inconsistent or suspicious.

So exactly which ones of AA's numbers do not add up?

The only thing that does not add up is your article. The content of your article does NOT add up to its title. AA's quarterly report is truthful and consistent within itself, with no ground for suspicion.

You have been very wrong on US dollar and on the direction the equity market is moving, by "short the phone book". The world does not want our dollars. But the world want US products. The world economy, leading by the China recovery, will thrive. The world wants basic materials. AA produces aluminum, a base metal traded and wanted the whole world around. It does not matter where AA is located, in the USA or in China or in any where. The aluminum is the same aluminum regardless who produces it. So as long as the world wants to have aluminum, AA will have value. And that valuation has nothing to do with the demise of the US dollar. AA's valuation could only go higher measured in US dollar, as the value of dollar moves lower.

I have no position in AA as I have better long plays. But I just find Karl's thesis completely wrong. Bottom line is that the world reject certain things from the USA but want certain things from US. Read the comment section here to understand why:
seekingalpha.com/artic...

Yet Another Huge Economic Number Coming out of China. Hard to Believe

To the author:

You clearly have not been to China and don't know about China, so you are questioning the numbers. But they are real. The annual taxations and fees for owning a car is extremely high in China, compare with here in America. So when government cuts taxes that is a huge boost to auto sales, as that brings a lot of people edge into the group who finally can afford to own a car.

Unlike the sheeples in the USA who are totally clueless, the Chinese are extremely alert and they have mostly determined that the US dollar is going down, and high inflation in both the USA and China is definitely coming, so, within just a couple of monthes, the real estate market in China suddenly turned and boomed again, as people buy multiple housing units as a way to preserve asset value. There are also organized tour groups to visit the USA and to seek buying houses in big US cities.

Recent World Events Are Bullish for Metals

JakeAllen:

No I do not own NILSY and do not plan to start any time soon. NILSY is mainly a nickel player, not a palladium player, even though they are the world's largest palladium supplier. Palladium is just a minor by-product for them. NILSY is in a very bad share now, which is actually bullish for palladium.

The correct stocks to buy for a palladium play are SWC and PAL. Don't buy NILSY. Read this recent news and you can conclude that it's imminent that they run out of cash and have to shut the mine down soon due to low nickel price:

sg.news.yahoo.com/rtrs...

Recent World Events Are Bullish for Metals

Also read today's mineweb piece to understand the paradigm shift of the depletion of Russian palladium stockpile:

The Russian palladium stockpile - do we need to worry?
www.mineweb.net/minewe...

Recent World Events Are Bullish for Metals

Yes adding SWC today is a good idea. I would recommend 50% on SWC and 50% on PAL, or even 60% on SWC and 40% on PAL.

Don't be discouraged by SWC's inaction today. There seems to be a big over-sized short trapped in SWC, unable to unwind its over-sized short position, and has been shorting more to hammer SWC down hard to trigger a sell off. They will fail.

Look at history of SWC shorts:
www.nasdaq.com/aspxcon...

Comparatively, PAL shorts were able to cover nicely at the end of May:
www.nasdaq.com/aspxcon...

So buy SWC without hesitation. There will be a short squeeze soon.

Recent World Events Are Bullish for Metals

Jake2:

There might be something I do not quite understand in the coal market. But I looked at the BP survey cited in the article, and do not see a whole lot of supply/demand imbalance. There are some discruptions but I see them as temporary in nature, not quite long term effects. I am not saying coal should turn south here, I am saying such price rally can not last long. In comparison PGM bull can be way much stronger and much longer lasting.

Recent World Events Are Bullish for Metals

There is currently no PGM metal ETFs in the US market, but there are some recent ETNs. See this SeekingAlpha entry:
seekingalpha.com/artic...

In Switzerland there are ZPAL and ZPLA. (Look them up in Bloomberg using zpal:sw and zpla:sw)

Best leverage of course is the two PGM stocks I mentioned, PAL and SWC. Or by physical metal from dealers like APMEX or PalladiumDealer.com. APMEX is good business. I do not have dealings with PalladiumDealer so can not make recommendation.