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  • My PepsiCo Valuation And Strategic Plan [View article]
    Just a couple of observations. In your summary you say that they company is fairly valued at the current price so something needs to be done to unlock more value. That does not make sense. If a company is fairly valued, you do not create more value by splitting it apart. You split a company when it is under valued and the market is not recognizing the value of a division in the overall stock price.

    If you really believe that soda pop will be deemed to have health risks similar to tobacco and will be outlawed, I sincerely believe PEP is not fairly valued. It would be significantly over valued

    I did not finish the article
    Apr 9 02:58 PM | 8 Likes Like |Link to Comment
  • Is Newmont Mining Still A Safe Place For Investors? [View article]
    Apologies about the confusion on the comment about Congress. I was merely pointing out that it is very difficult to predict the future. I sincerely doubt Congress will improve anytime in the foreseeable future. I actually meant it as a joke. But the economy could improve. That would probably drive interest rates up, which would be bad for gold. So gold is not a sure thing. Hence my point about the value of owning stocks.
    I own it because it is a hedge against some bad outcomes like the devaluation of the $ or inflation or worse. It should provide a means to store or maintain value. Miners provide leverage to that outcome. Gold is a defensive play; I don't think you own it to make money like a stock.
    BTW, James Montier of GMO did a recent piece on the value of gold as an inflation hedge. He determined that it was not that great over the long haul. You did better with good old equities. You can find the piece on GMO's web site. He is always a great read.
    Kind regards
    Mar 11 02:08 PM | Likes Like |Link to Comment
  • IBM: A Strong Buy [View article]
    Perhaps you could provide some detail as to when you think IBM's sales might start turning around. Something like a 1/3 of sales come from developing countries. Sales in China were down 22% in 3Q. CEO just admitted missing their targets. Sales have been declining each quarter for ~2yrs? But EPS keeps rising due to share buy backs and lower tax rate. That would sure seem to me to be an indicator of low quality earnings. I'd like to know why you think profitability from operations will improve and when. Thanks
    Mar 11 01:55 PM | 1 Like Like |Link to Comment
  • Is Newmont Mining Still A Safe Place For Investors? [View article]
    Correct me if I am wrong, but I believe NEM has had its dividend tied to the price of gold for quite some time. It is not new at all. Low gold price, low margins, low dividend; makes sense.
    You have laid out the bear case well - due to a lack of interest in gold by investors, prices have gone down and will continue to do so. But you certainly missed the bull case. I have no idea where the price of gold is going or when it will get there. But I do know that all the miners' stock prices have really been beaten up. At today's prices, miners are operating close to break-even or are losing money. This is forcing the rather poor management of miners improve the efficiency of their operations and write off high cost reserves. It is also restricting supply. Miners have very high operating leverage so an increase in the price of gold will result in a much higher CF and NI, once break-even is passed. So miners provide leverage to the price of gold. It is also my understanding that the Chinese and Indians have not lost their interest in gold at all and most of the bullion that came out of the ETFs went to China thereby decreasing western inventory. Lastly, I also know that I don't know how the Fed's grand experiment is going to ultimately work out. I can imagine scenarios where the dollar becomes less valuable and gold retains its value. I can also imagine the US economy actually picking up and labor costs rising. After all, unemployment has dropped from 10% to 6.7 with only a 2% increase in GDP. If things improve further, inflation may raise its head as labor cost is a big inflation driver. Bottom line: I agree, dividends of miners may continue to decline. But to me gold continues to provide a hedge against unknown bad outcomes and miners provide a leveraged way to play an increase in the price of gold. Who knows, things may work out fine. Congress will get its act together and rein in the deficit, the Fed will unload $3T or so of bonds and gold will go down way below the cost of mining it forcing many miners out of business. In that case owning the shares of businesses should do well.
    Mar 10 11:20 AM | 2 Likes Like |Link to Comment
  • Occidental Petroleum: Catalysts Will Power This 3% Yielder Higher [View article]
    I'll give this a shot. CA assets are in a growth mode and require reinvestment of free cash flow. TX assets don't require as much reinvestment and therefore OXY can dividend out that FCF. So separating them allows the market to assign different multiples to separate companies. Income seeking investors can stay with OXY. Growth investors can invest for the long haul with the CA assets. Also as you can see from a lot of the comments here, there is a great deal of skepticism about the ability of OXY to actually drill and complete all the wells they plan due to government regulations. But clearly OXY is doing a lot of work in CA already and it is predicted to be a very large play.
    Feb 18 05:15 PM | 1 Like Like |Link to Comment
  • Occidental Petroleum: Catalysts Will Power This 3% Yielder Higher [View article]
    I am very puzzled by this remark. You seem to imply that the company is dead in the water in CA and will not be able to increase production. Last year Oxy produced 154,000 BOE p/d in CA, spent $1.5B in capital and generated $1.3B in free cash flow. They were able to improve capital efficiency and reduce operating costs by 20%. In 2014, Oxy plans to spend $1.9B in capex in CA drilling about 1050 wells, up from 770 in '13 and grow production by 4%. Clearly they are getting permits in CA and growing production.

    As you pointed out, OXY is spinning off its CA operations. I don't think they are doing this because the business has no potential. The company has stated they are doing it as CA has more growth potential than the rest of Oxy's operations and will require more capex. Therefore, the new spin off will not pay a dividend but rather invest their FCF.

    What exactly do you mean by your comment???
    Feb 15 01:55 PM | Likes Like |Link to Comment
  • Why Bitcoin Matters [View article]
    I am no expert on this subject and felt the same as you until I read this piece. I think you need to look at bit coin in two ways, one as a medium of exchange, just like money as the bit coin can be exchanged into currency as soon as it is received. There is no speculative risk when you do that. The second way is to view bit coin as a speculative trade. If you hold it, it can go up or down. Those are 2 very different approaches.
    Jan 27 01:12 PM | 1 Like Like |Link to Comment
  • Why Bitcoin Matters [View article]
    Yes Memshu I do know someone that did get hosed, all retirees including me. Zero interest rates have forced people into speculative assets to get any yield. Zero interest rates are just like taxation; they are taking money from those who need it to live and have saved all their lives to have enough in retirement. Zero interest rates and money printing have caused bubbles such as the recent housing bubble. I think that may have hosed a few people.
    Jan 27 01:08 PM | 1 Like Like |Link to Comment
  • Occidental Petroleum: 11% Upside Plus Dividends [View article]
    Thanks for pointing this out. It is a significant point that the author missed.
    From reading the transcript of the 3Q call the company is looking at selling a minority stake in the MidEast NoAfrica operations that would lower their political risk. They also want to sell their midstream operations. Most interestingly, they are considering spinning off their CA Monterey Shale operations. The CA operations are in the expansion stage and require a lot of capital. The company pointed out this is not consistent with a dividend paying entity. So a separate company would be able to retain earnings to grow that business. The monterey shale is one of the biggest reserves in the country; however, it requires a great deal of drilling expertise. OXY is the largest land holder in the area with 2.1M acres. OXY has demonstrated its ability over the last several years. Venocco, the second largest land holder now private, came up short with their initial wells.
    So the reason to really look at OXY is their divestiture plans and their potential to increase their returns on capital. From just a quick look, they would be reducing their political risk and maximizing the value of some of their biggest assets. This is not a steady-as-you-go company. Developing CA has huge potential and optimizing its capital structure should reward shareholders. Perhaps that is why it is trading at a high PE.
    Any meaningful additional insight would be appreciated.
    Jan 13 02:27 PM | 1 Like Like |Link to Comment
  • Vanguard Natural Resources Makes A Strategic Shift Towards Natural Gas [View article]
    Thanks for the well done article. Would you please expand on the comment that upstream MLP's are a house of cards in the event the financial markets collapse?
    Is it because upstream MLP's have to replace production and, as they pay out their cash flow, have to raise more capital for cap ex? In other words, they are essentially investment banking junkies?
    What attracted me to VNR a couple of years ago was their first foray into NG where they got a large amount of hedges with the purchase of the resources. That allowed them to hedge almost 100% of their NG production out 5 year. Seemed plenty of time to for NG prices to rebound. In the meantime, they were making money at their hedged price.
    The company seems to have very disciplined management and a good margin of safety and insulation from further declines in NG prices. Therefore, dividend should be pretty stable even if they can't access public markets.
    Appreciate your help
    best regards
    Jan 6 02:26 PM | 1 Like Like |Link to Comment
  • A Sober Look At InterOil's Deal With Total SA [View article]
    Thanks
    So if I am right and there is the possibility that IOC may have difficulty in raising the cash required to buy out the minority stake, has any figured out what would happen if they are unable to get that first piece done?
    Seems to me that the nay sayers are all focused on the tremendous upside to the play. However, there seems to be substantial risk and uncertainty involved with getting to actual production as Mr. von Altendorf points out. h2o2 may be correct but IOC still has to drill additional, expensive delineation wells and they may not have the funds to do so after they buy out the minorities. I have not read the agreement so I may be missing something. Please let me know where I am wrong.
    Thanks and best regards. Very in-depth thinking by all here. Good work
    Dec 30 11:48 AM | Likes Like |Link to Comment
  • A Sober Look At InterOil's Deal With Total SA [View article]
    Help me out here. The company should get $613M upfront upon the minority interests agreeing to be bought out at some price between $248M and $1.2B?? The company has to use that up front payment to possibly pay off the convert debt of $70M and it has to drill some delineation wells that will be expensive. If the buyout number comes in on the high side, where would they get the cash to do all of the above - the early interim resource payment?? Am i correct in assuming that there are some real financing risks here?
    Dec 29 02:25 PM | 4 Likes Like |Link to Comment
  • Allied Nevada Gold - Huge Relative Value And Ripe Takeover Target [View article]
    How can you say this company will not go bankrupt??? I could very easily go bankrupt. All that has to happen is for gold prices to go down to $1100 and they will be burring cash. This is the risk to ANV and all other miners that did not hedge gold prices, which I don't think any did. If you believe that gold will go back up, which it may, ANV will have a big pay off. However, if gold does not go back up you get wiped out - zeroed. That is not an asymmetric bet - one with up side and minimal downside. There are a lot of reasons to be bullish on gold but don't say the company can't go bankrupt. It can. There are other substantial risks here as well - dilution and an unfavorable stream deal as pointed out above.
    Dec 22 12:40 PM | 1 Like Like |Link to Comment
  • Allied Nevada Gold - Huge Relative Value And Ripe Takeover Target [View article]
    Note that old management that made the mistakes is gone.
    Dec 22 12:21 PM | 1 Like Like |Link to Comment
  • Allied Nevada Gold - Huge Relative Value And Ripe Takeover Target [View article]
    Itinerant you make a good point. Assuming they figure out a more optimized way to mine the sulfides, they still have to spend $500M to build a mill to grind the crushed material to powder.

    Regarding the comparison to Pasqua Lama, ANV's original estimate to get the mine fully operational with the mill was $1.243B. Dividing that by the 20.793 P&P reserves, you get $60 per oz. So you are spot on in that the reserves are very cheap at this mine. But any purchaser would have to lay out the $500M to finish the mill.

    The other point about this mine is that it has a very large amount of silver deposits that can significantly reduce their adjusted gold production costs. Going back to their Jan 24, 13 presentation, they expected production of gold to be 582k per year from 2015-24 and silver to be 29M ozs, which they predicted would drive the average cash cost to $166 per oz. Point being that Hycoft has the potential to be a very cheap operation. However, that may have been too optimistic. They have a ways to go to figure out how to optimize mine production.

    An additional favorable point is that next year their Merrill Crowe plant will be operational and that will allow them to maximize silver extraction, which will drive down cash costs below '13. Capex is projected to be a lot lower at around $35m including sustaining.

    However, results still depend on the price of gold. $1200 AU is below their all in cash costs including sustaining capex and interest. Given that interest rates seem to be rising, AU may be low for a while. Don't know how many buyers there are out there.
    Dec 21 11:11 AM | 1 Like Like |Link to Comment
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