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Cash McCall

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  • Vale's Health: How One Symptom Caused A Fundamental Misdiagnosis [View article]
    Unfortunately, practically all the Seeking Alpha article over the last six months have continued to bite on a very stupid and incorrect assumption that VALE could not deliver good numbers with the fall off the iron Ore spot price.

    I basically responded in a viscerally negative way to those articles because the assumptions were all wrong. I explained that VALE margins were in excess of 50% and they are the lowest cost producer in the world. I showed that the cost of production was falling faster than the price of ore but no, I had to deal with articles by authors that had never been to China and quite frankly did not know the ore business or the coal business yet sold themselves off like experts.

    So I will clarify a very simple tenant. VALE, RIO, BHP will sell every ounce of ore than can mine. There is no glut, the emerging markets steel industries continue to increase at 3 to 6% a year. China doesn't have a glut of ore at their ports; and does not have a shadow banking issue. While it is true that china has borrowed a lot of money to expand its economy, it has borrowed from itself and does not have third party debt obligations as the US and Japan have.

    Further, China is engaged in a project now to build railroads in Brazil. They also extended 2.5 billion credit to VALE. VALE produces the highest grade ore in the world which requires less heat to produce better quality steel.

    VALEMAX is a significant play to reduce shipping cost.

    VALE pays a wonderful dividend, it makes money and it is selling for less than book. Only JP Morgan had the story right. Morgan Stanley shot from the hip and fell flat on its face with its moronic linking earnings of VALE to the spot ore market. They just didn't understand the ore business but that didn't stop them from trying to knock down VALE stock. While they were selling, smart money was buying.

    Aug 3 10:02 PM | Likes Like |Link to Comment
  • Stay Away From Whole Foods Market [View article]
    Whole foods mgt is a bunch of bumbling idiots. A great example is their removal of the Lobster Bisque from Bay, on the grounds that it was not lobster friendly enough. Apparently you go with the inferior product as long as the lobsters are not treated like food. OK... how utterly moronic.

    I give some latitude to the stupid policies of Whole Foods just because their bread and butter shoppers are nutty as loons about a whole plethora of liberal nutty causes. So mgt has to feed into this insanity to preserve its core. That said, Whole Foods remains the only store system where you can buy a great lunch and even experience some well prepared vegetarian plates.

    How about prices. Prices are still inflated. They have plenty of buffalo meat but you should be able to buy elk chops and other game meats but whole foods doesn't extend itself too far into the game meats.

    I don't like mgt's lack of prior expansion which should have been done gradually and consistently. So they are now forced to play catchup. Stores like the North Carolina Lowes foods are giving WFM a run for their money regionally. WFM should buy Lowes and expand their presentation without so much push for their core political nutty groups. Lowes has found a way to make shopping fun for those that are less concerned about freedom for mollusks.
    Jul 14 01:07 PM | Likes Like |Link to Comment
  • Facebook Can Halt Yahoo's Growth [View article]
    Yahoo is going nowhere. It is very clear the following red flags exist. Red Flag... MM sold off some 8 billion in Alibaba and went on a spending spree which produced NO bottom line results. Red Flag... Loeb was involved in the markup of Yahoo. Red Flag.. an Alibaba windfall in MM's hands will have no material benefit to the shares. Red Flag... Marissa sleeping incident; not just rude but unacceptable. Red Flag... Call put ratio shows danger ahead. Red Flag... any company that tries to ride market trends by being a third rate operator will ultimately lose. Red Flag... if MM were so good, don't you think Google would have kept her? A female CEO is a red flag; honeymoon period lasts two years then the companies crumble.

    Competition red flags: Google, MSFT, Facebook. Google has search engine, MSFT has the OS, Facebook has the Social network sealed. Yahoo has no core purpose.

    I suggest that the strong possibility exists that Yahoo will not reach 36 with the Alibaba IPO and if the IPO fizzles then Yahoo will drop 50%. This is a dangerous stock with an incompetent CEO.
    Jun 25 01:42 PM | 2 Likes Like |Link to Comment
  • Is Vale SA A Wise Investment? [View article]
    Ken, Well Stated. I have grown so tired of trying to respond to these VALE basher when they simply blabber without any facts. This Morgan Stanley article was pure fluff. No ore trader in the world recognizes Morgan Stanley. That said, the JPMorgan take was to suggest that VALE was grossly undervalued and they gave it an overweight rating and target of $21.

    VALE is a hugely profitable enterprise. Highest quality ore at over 66%. They have the lowest cost per tonne by 50% of the next closets competitor RIO. They now have VALMAX ships and 80% of the cost of delivered ore is shipping.

    VALEs new green ore Ships by VALMAX to Malaysia in July. There it will be offloaded and shipped to China. China is reading VALMAX ports.

    Also VALE stock is dirt cheap, having supposedly followed the price of ore to the bottom. However there is no correlation to this, however there is a inverse correlation albeit lose to the price of the Brazilian Real which will be addressed by the gov. There has been a recent increase in steel production in China and with it increased shipment of metallurgic coal and ore.

    I am often perplexed by these VALE bashers trying to use verbiage to describe typical commodity businesses. So I will break there bubble here.

    IRON ORE is basically ruled by three companies: VALE, RIO, BHP. That's it, all other players are small fry by comparison. When ore goes down the big three market share goes up. To mine ore, requires massive scale. VALE is the king daddy of them all with 76% of the global market. Because demand is high, all of the big three sell all they can mine. It is not like the oil business in which there are thousands of oil companies. There are but three true majors in the global mining business. BHP for example is the world's largest corporation, followed by VALE. RIO is a close third. BHP has a substantial oil business. VALE mines more iron ore than anyone.

    Nice to read a post by somebody that actually has done the research. I am perfectly fine with people disagreeing with my view but not as they did in this lightweight fluff article that regurgitates a very naive and thoughtless perspective on the iron ore and mining business in general.
    Jun 24 10:16 PM | 8 Likes Like |Link to Comment
  • Yahoo Shares Power Up As Alibaba Enters U.S. E-Commerce Markets [View article]
    And I am amazed after two years how little Mx. Mayer has done. Name one area which has had any material effect on the bottom line. Mx. Mayer lives off her oversized salary. She never bought any Yahoo shares. She has no stake in the company. She has spent billions on junk enriching former Google discards for nothing. Seeking Alpha is chock full of cheerleaders who can't define a single material benefit that her presence has brought to Yahoo. As with you, the worshipers all talk in vague terms without any factual specifics.
    Jun 18 09:28 AM | 1 Like Like |Link to Comment
  • Yahoo Shares Power Up As Alibaba Enters U.S. E-Commerce Markets [View article]
    If Alibaba merges Yahoo, Yahoo will not have massive 15 billion tax bill which you won't get with Yahoo. Secondly if Jack Ma offered to merge yahoo for half the present value of the Alibaba holdings by Yahoo, in which Yahoo shareholders would be given 12% of Alibaba would you take the deal today? I would because the future worth of Alibaba shares v the actual worth of Yahoo as a company is greater. The only reason to own Yahoo for the short term are those Alibaba shares. That is the only reason you think there is value. Large investors would jump at the chance to vote in favor of a Jack Ma proxy.

    Who else will buy yahoo with for all those billions you think it is worth? Name one. You can't.
    Jun 18 09:17 AM | Likes Like |Link to Comment
  • Yahoo Shares Power Up As Alibaba Enters U.S. E-Commerce Markets [View article]
    Oh so exactly why would you care if somebody sells a Rolex knockoff? Haven't you ever been to Hong Kong? In the USA they have even tried to regulate the size of the soft drink you can buy. In the USA some people want to regulate everything; I prefer unregulated capitalism thank you.
    Jun 18 09:01 AM | Likes Like |Link to Comment
  • Yahoo Shares Power Up As Alibaba Enters U.S. E-Commerce Markets [View article]
    I am always the contrarian on this board. Today Yahoo is down 5.3% and the cover story is that Alibaba was less profitable recently. That is incorrect of course. I like Jack Ma. He's a very good chess player.

    We found out today that Jerry Wang is on Alibaba board. We have the other cofounder on the Yahoo board. Both have large yahoo stakes unlike Marissa. I do not like Marissa; I don't think she knows what she's doing. I could list the purchases and direction but research that yourself; she is fumbling.

    My guess is that Ma is setting up to buy yahoo or create a merger. With enough proxy votes from the two cofounders and a few other major holders, Ma can take control. Then the Alibaba shares are effectively recaptured and he gets Yahoo for next to nothing. Marissa goes bye bye.

    How much would that cost. Assuming the 24% Alibaba shares are worth $50 billion in the long run which is reasonable then Ma could buy out Yahoo at less than 37 Billion leaving Ma with a recapture of 13 billion of his Alibaba shares.

    That would be a very appealing deal for Yahoo shares even if the conversion rate were only $37 a share. I do not envision Ma over paying for Yahoo. But this would give Yahoo shares a piece of the future of Alibaba which I think will be bright.

    I do not think the idea of giving the Valley Girl a windfall of 30 to 50 billion serves the best interest of Alibaba or the shareholders. While I am highly negative about the Yahoo Board and Marissa, I think the major shareholders will made the necessary adjustments and give MA control of Yahoo by proxy before August before the Alibaba IPO. This can be done simply by setting up an irrevocable proxy trust. So the actual acquisition would not take place until after the IPO.

    Let's face it; nobody is going to hand Marissa a windfall for doing nothing. This Alibaba deal was Jerry Yang's stroke of genius. Jerry Yang was forced out and founders are cleaver people who treat what they have built as their own offspring. Jack Ma is sympathetic to this and jealously guards Alibaba shares for that reason.

    I realize the Marissa cheerleaders will not like my take but Jerry Yang is back and he's driving a bulldozer.
    Jun 16 12:29 PM | 3 Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    Oh great... an astrologer.
    Jun 15 08:12 AM | Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    BHP has a large oil business. Oil prices have been up since 2009. IT is not a pure miner. Further, you clearly did not note my discussion on the REAL and the Aussie Dollar. So it looks to me like you don't know what you are talking about.
    Jun 14 08:31 PM | Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    Bob I simply disagree with the tenants of your arguments. You can attack me personally I could care less. But here are the facts:

    1) VALE will sell every ton of everything it mines this year and for the next 50 years.
    2) Chinese Demand alone is estimated at 926 million tons. So how does VALE production moving at 350 million tons now toward 450 million in 2016 square as a glut?
    3) Further Chinese steel production is up this year by 1.2% NOT DOWN as you imply!
    4) Even with every ounce of ore produced by the big three, China demand alone draws most of it. And VALE gets the lion share of nearly 70%.
    5) Chinese demand for ore will exceed 1.2 billion tons in 2015. This is why the big three are ramping up production.

    6) As for cost of production, your article presents old information and you state that RIO will match VALE at a $50 a ton cost. That is VALE's old cost. VALE production costs are dropping significantly with a 2015 target of $18 to $20 a ton pre-shipping. Further, Brazilian iron is the richest in the world with an iron content exceeding 66%. Australian's best ore is 62%. The better ore requires less heat so it saves energy costs and reduces pollution though that is not a big priority presently for the Chinese but it will become more important in the next five years.

    I read everything that comes out on the iron ore projections. Since my trips to China involve metallurgic coal sales, I think I have a pretty good handle on the steel business. I read the Morgan Stanley report and they are calling for seaborne iron ore to drop to $105 this year. How is this significantly affecting VALE when Vale's per ton cost continues to drop FASTER than the decline in ore? The same could be said for RIO but to a lesser extent.

    These mining companies aren't stupid. They know the numbers. They would never move headlong with increased production into a glut. But to get the lowest price per ton, they have to mine big and mine efficiently. These big firms compete and are taking market share.

    I have said your article is propaganda and it is. You are pushing RIO and presenting the fiction that VALE is a pariah. I think anyone that has read your article can see this. Why is increased production good for RIO and not good for VALE? I think its good for both of them.

    VALE's stock price has more to do with the appreciation of the REAL than the price of ore. In fact it is ludicrous to cite the drop in ore as the reason for VALE's stock price to have fallen since there is no logarithmic association with the price of ore but there is an albeit loose correlation with the appreciation of the REAL. And you might also take note that the Australian dollar is now withing relative parody with the US dollar.

    And when it comes to Australian ore, that is Australia's largest export.

    While it is true that the Gov of Brazil exerts pressure on VALE in a number of ways, including pushing VALE to produce steel in Brazil and the numbers are not there for Brazil Steel as yet; VALE has smartly resisted. Everyone in the steel business competes with China so they do not get in the way of heavy steel but stick to rolled steel or other niche markets. The USA does this and rolled steel is doing well in the USA. I merely think you underestimate the importance of steel to the emerging markets. China is simply huge by factors of 10X over the USA. Eventually per capita consumption of steel will match the USA. That's a huge consumption and perfectly models the curve of emerging markets growth.

    Finally, Morgan Stanley is not particularly good at predicting mining commodities. What they have done is made a fundamental mistake of tying seaborne iron ore prices to stock valuations. There simply is no correlation here. They are in fantasy land if they think a normalized price for seaborne ore should be $130 or $150. This isn't the oil trade here, this is mining and ore is brute scale. The emerging markets are growing. Sure they will sputter and falter but the long projections are huge for raw steel and finished steel and that is good for ore.

    Another point I would like to make is about Brazil. While it presently has a Socialist administration, that gov is well aware that it needs to tread lightly on VALE. VALE has brought massive wealth to Brazil. Naturally the gov wants heavy industry to produce finished products in Brazil such as ship building. However, the corporation leaders understand that finished steel industries have to compete with China so for the time being, Brazil's most direct route to prosperity is through the development of raw materials.

    Inflation is a big problem in Brazil. While growth is over 7% inflation is over 6%. The gov target is 4.5%. The REAL keeps moving up. This is also why VALE dividends are robust. It would likely be useful in Brazil to moderate growth but in emerging markets, big infrastructure is what opens the gates to big industrial development. At any rate, Brazil is stable and is a democracy and is simply blessed with virtually unlimited natural resources and superb farm land. As long as the Gov understands the strengths of Brazil and doesn't try to push it to compete in zombie finished steel businesses Brazil will thrive and so will VALE.

    My favorites in the ore business are in this order: VALE, BHP [which has an oil business] and then RIO. But they are all good companies but for the investor, I suggest that VALE gives more bang for the buck because it is a relentless low cost producer and has its own shipping.

    I appreciate your article even if much of it is stereotypical of many other American authors of Iron ore articles. I know at the base of many Iron Ore bashing articles is an anti-Chinese sentiment. I think that is misplaced. China is nothing shy of a colossus. Don't underestimate them.

    I would suggest you read the American history of the Transcontinental Railroad. The Chinese workers distinguished themselves in every capacity. This is no game for the Chinese. They mean to ascend through brute determination; a modern form of economic manifest destiny. The "Celestials" will not falter because they are tough as iron nails.
    Jun 13 01:47 PM | 4 Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    Precisely, you nailed it.
    Jun 11 10:38 AM | Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    Bob, I am a commodities and options trader. Your article was propaganda and flatly misleading. I have spent a lot of time in the Steel Mill district of China and it is flatly naive that China steel is in any jeopardy whatsoever. In fact I stick by the iron ore purchases in China alone to exceed 1000 tonnes. in 2015. And you have never been to China. It is a very dangerous thing to continue to parrot the woes of China that some short seller has conjured up. I can assure you without question that Chinese structural steel is the highest quality in the world. Chinese workers are relentless and the Chinese are the best traders in the world.

    This forum is for stimulate ideas for making money. We are at a five year low in the spot price of ore yet the Ore miners continue to make great margins and sell all they can mine. Your notion that these miners are confused and glutting the globe with too much ore is nonsense. Ore deposits are limited and constantly being depleted. Look at Joy Global. Miners are buying equipment; they aren't doing this for sport. They are doing this because mining is the most essential business to the developing of emerging markets and massive infrastructure. China is the big player and Chinese steel is the Chinese largest dollar export. VALE is rocking higher from here. You need to take a trip to China so you can get a feel for real capitalism, not the abused child version we now have in the USA.
    Jun 11 10:34 AM | 4 Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    That's where you are wrong. The Iron ore prices are normalizing from a shortage situation six years ago. We are talking about a spot price differential of roughly 25%. VALE still makes margins at 54% and they sell every thing they mine so that is not a glut. The term glut has been misplaced by Goldman who has been short VALE describing ore that is held by Bank of China as collateral. China is not stock piling ore. They used to have to stockpile ore due to shortages but VALE, RIO, and BHP have normalized the commodity. JP Morgan did a full analysis and values VALE at $19 a share.
    Jun 11 10:19 AM | 2 Likes Like |Link to Comment
  • Vale Hit Hardest By Global Iron Ore Glut [View article]
    Absurd basing of VALE. VALE is at an inflection point and is a great buy. JPM rates the stock target at $19 a share. So what does VALE have? They are the largest global producer of Iron ore and other mining commodities. They have 76% of the global market and are the lowest cost producer with the highest quality ore.

    The spot price of ore does not reflect the price of shipping. 80% of the price of delivered ore is shipping. VALMAX follows along the lines of J D Rockefeller in which the entire supply chain needs to be controlled. While it is true that China is placating its shipping business by outwardly complaining about the size of VALMAX, they are quietly providing dock capacity.

    What about this so called glut. This is fiction. The ports in China are estimated to have at most 80 to 100 tons. Much of this ore is not for sale but is collateralized by small Chinese businesses that have some leveraged shadow banking issues. Bank of China said it will no longer collateralize loans with ore. So this ore is not going into the blast furnaces.

    Further, china's largest export product is steel. They make the highest quality best priced structural on earth. The US buys all its structural steel from China. China exports far more steel than it uses but the emerging markets will need more structural steel going forward.

    Why do VALE, RIO, and BHP continue to seek new mines for ore? Ore deposits are limited and easily depleted. All three big producers presently sell ALL the ore they mine. Nobody is accumulating big stockpiles of ore. The term glut is absurd. Even if ore were to slip 5% the big producers would still sell all the ore they make. Since VALE is the biggest and lowest cost producer, their margins are 54% when ore is around $100 a tonne spot. With shipping, the margins don't improve but the supply chain does.

    Because Brazilian ore is superior by iron content it is cheaper and less polluting than Australian ore. Further, VALE has its first shipment of Green ore ready to arrive in China in July. This is a low pollution ore to assist the Chinese in smog control.

    VALE pays a large dividend and they pay it consistently and biannually. VALE isn't about to go under and it is not about to lose market share to RIO or BHP. The spot price of ore may be the propelling idiocy behind the VALE stock price but only because it has 76% of the global market. But as ore spot prices weaken, it is VALE's competitors that that get squeezed out. VALE gets stronger.

    Much has been made of the Socialist Gov in Brazil as well as the gov stake in the business. In spite of this, the Courts in Brazil gave a favorable ruling to VALE in regard to foreign income.

    VALE and BHP are both two of the world's largest corporations. Do not underestimate how they got there or the importance of mining to the unfolding of the emerging markets. They are big and they are aggressive in a world where everything they pull from the mines gets sold. VALE is near a five year low. Ore has bottomed and I support JP Morgan's valuation of $19 to 24 a share.
    Jun 10 01:30 PM | 8 Likes Like |Link to Comment
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