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  • NYT: Exxon climate statements under NY AG scrutiny  [View news story]
    I guess Schneiderman will be running for governor of N.Y. Also, it sounds like Peabody (aka Delta) has been on double secret probation! I believe that is Schneiderman in the video below.
    Nov 5, 2015. 04:02 PM | 12 Likes Like |Link to Comment
  • Peabody Energy: The Bears Can't Have It Both Ways  [View article]
    I believe many shale oil and gas producers had to start drilling or lose their lease on acreage drilling rights. As, the author points out the major midstream players are highly levered, but they will be able to roll over their debts and they certainly will cut cap-ex and expansion plans well before refinancing is needed.

    However, many small and midsized players will not be able to roll over their debts and their production will be sold to larger players at discounted prices and shut-in until prices improve markedly. The fact the oil/gas majors have announced massive cap-ex reductions (over $200 billion) means they will acquire most of the distressed assets, which replaces the lost production increases that would have come from their new cap-ex on development. It is so important to remember in the oil and gas business you are running frantically just to stay in place due to depletion.

    Natural gas is nicknamed the "widow maker", it will live up to the name again at some point and when the price moves higher, coal will once again be the stable low cost alternative for utilities that haven't completely deserted coal. As the EIA has repeatedly forecasted, coal will remain in the energy mix for the next few decades (or longer).

    Finally, if the eventual price rise in natgas large enough and sustained over time, we may even see new cleaner operating coal plants built, providing we get a change next November in our government that wipes away the current EPA absurdity and ridiculous executive orders issued by the current anti-American business administration that resides in D.C.

    To Courage and Conviction, your work on Peabody is excellent and I am long Peabody equity, it is due to your work that I have added a position in the bonds as well and believe they have many options to survive, but as you have stated many times they need to take action sooner rather then later or their options will dwindle as they wait for the much needed rebound in price and tonnage.
    Nov 5, 2015. 03:24 PM | 3 Likes Like |Link to Comment
  • Peabody Energy: Indiana, Let It Go  [View article]
    Biological, excellent post, so true about our current sorry excuse for government and their outrageous quest to destroy the coal industry. A very old and good friend of mine knows people who bought and sold coal mines and he has told me that these investors have never, in their lifetimes, seen a U.S. government so hostile to an industry.

    I too was way to early in this investment in BTU and it has cost me more then a few multiples of what C&C lists above, but I will hold as you say until the elephant enters the room and will wait until the 800 pound gorilla known as the hostile current administration leaves the room.
    Oct 30, 2015. 11:17 AM | 3 Likes Like |Link to Comment
  • Peabody Energy: Time To Play Hedge Fund Whack-A-Mole  [View article]
    C&C, your reply from above is so spot on (below).

    Right now, it's 2009 for BTU. Too bad Buffet's Berkshire Hathaway Energy is trumpeting their climate change pledge as many companies pay lip service to our current government. What Peabody could really use is an investment (or loan/sale on unencumbered assets) from Buffet as BofA and Wells obtained from the "Oracle of Omaha" of a billion or two to start market purchases of their debt. Structured like the BofA preferred with warrants, would be a homerun for him, but unfortunately unlikely to happen.

    "Author’s reply » Fliper - you are exactly right. The market pushed BofA and WFC there in 2009. JPM was way too strong and Jamie Dimon is the best banking CEO in the world.

    If they can push BofA and WFC then they can push Peabody. Time to announce my convertible deal. it is sink or swim time."
    Oct 29, 2015. 11:57 AM | Likes Like |Link to Comment
  • MLPs struggle as reality check slaps old narrative of hedge against price swings  [View news story]

    so true, ETF liquidations earlier this week were indiscriminate. All quality large cap MLPs (MMP, SEP, EPD, ETP to name a few) are held in ETFs. An ETF gets an order to liquidate (especially physical delivery) they sell seemingly regardless of price (algorithm/program) with only real objective of completing the sale of basket of MLPs.

    Since Tuesday's lows, EPD +25%, MMP +19%, ETP +15% and SEP +8%. KMI, although no longer an MLP, stills trades with sector was +14%. The fact that the larger the market cap, the more volatile the move, indicates to me ETF liquidations, since the larger cap MLPs, which hold larger weightings within the sector ETFs, were sold more heavily and provided the bulk of the funds liquidated.

    The subsequent rallies in these names seems to continue today, which likely indicates the end of the month, and more importantly end of the quarter sell program in MLPs is over.
    Oct 2, 2015. 02:17 PM | 3 Likes Like |Link to Comment
  • No long-term future in tar sands, Alberta's premier says  [View news story]
    "Alberta premier Notley says she sees no long-term future in fossil fuels" technically, correct since all fossil fuels are eventually depleted without new sources being brought online. Most energy companies now are cutting cap-ex which guarantees supply reductions and ultimately higher prices since demand is relatively inelastic for fossil fuels no matter what the lunatic left dreams and hopes for. Maybe the voters of Alberta should try a recall on the election of Nutley, sorry Notley.
    Sep 30, 2015. 04:41 PM | 4 Likes Like |Link to Comment
  • Environmentalists challenge major U.S. mines owned by CLD, ACI, BTU  [View news story]

    so true, four more years of the skinny one's reign of terror on the U.S. would definitely regress the country further toward their goal of having bicycles and horses as prime modes of transportation.

    On a more serious note, a repeal of all the ridiculous regulation and executive orders by the next president of Skinny's agenda will begin the process of recovery for the country both domestically and internationally. This country can survive bad presidents, but eight years of incompetent, or more likely an anti-American agenda, has left it's mark and will be felt for some time to come.
    Sep 19, 2015. 10:28 AM | 5 Likes Like |Link to Comment
  • Peabody Energy approves 1-for-15 reverse stock split  [View news story]
    A secondary share offering is guaranteed since Peabody will have only ~18.5 million shares after reverse split. Share authorization will stand at ~53.33 million shares after reverse split. The question is when? Obviously, sometime between 10/2015 and 10/2018 (11/2018 is when first debt maturity comes due).

    In the prospectus, they offered five options for reverse split 1 for 8, 1 for 10, 1 for 12, 1 for 15 and 1 for 20. Why choose 1 for 15? My guess is they sounded out the large institutional holders (Fidelity 8.14%, Blackrock 6.43%, Vanguard 5.85%, Balyasny 5.04% / all listed in prospectus) and based it off feedback from these owners who control over 25% of the equity. Also, I believe part of their credit line is only accessible/contingent upon raising additional equity, although they can access most of the credit line before tapping the portion requiring equity issuance.

    Dilution is a certainty, what I would really like to know is why the company didn't issue equity when they bought MacArthur coal years ago when their equity partner, Acerlor Mittal, backed out. They chose 100% debt financing, which is why the stock is where it is now. Of course, it is too late to correct that mistake, but if they were too late then, they will likely be too early now when they choose to issue additional equity, which will worsen the dilution.

    However, the large institutional holders may prefer an earlier secondary since they benefit and will be taken care of by the underwriters. If the short position remains large (still listed at ~36% at end of August) and the large hedge fund shorts are excluded any allocation on a secondary, a memorable squeeze may ensue. Of course, coal pricing, coal demand and political opposition will all need to show trends in the right direction.

    Reverse splits are seldom a positive and it is disappointing BTU has chosen this path with the stock still above listing requirements. The better move would have been to wait implementing this desperate measure especially given the comments of the CEO regarding coal's future.
    Sep 17, 2015. 12:21 PM | Likes Like |Link to Comment
  • Bank Of America Capital Position: Mostly Smoke And Mirrors (Part I)  [View article]
    agreed, hard to believe that the Fed and OCC would allow this change if they believed BAC was capital deficient. Also, I believe BAC has a lot less level 2 and 3 assets then JP Morgan and Citibank, which is important given liquidity constraints in holding those types of assets. It should not be forgotten that the 2008 crisis was more about liquidity (technical defaults) then outright failures.
    Sep 4, 2015. 10:02 AM | 3 Likes Like |Link to Comment
  • Emotions Have Left CTC Media Trading At Under Cash Value With Free Upside On Operating Business, 40% Base Case Upside  [View article]
    The minority shareholders will have no say over how cash is used (hopefully the company does distribute the proceeds, but is Russia and Putin does what he wants and could stop this distribution).

    Also, odds are high that minority shareholders will be bought out at discounted price, it has happened before in Russian shares as well as European share (called a squeeze out of minority shareholders).
    Aug 25, 2015. 01:40 PM | Likes Like |Link to Comment
  • Peabody Denies Reports That It's Selling All Of Its Australian Assets  [View article]

    Most of BTU's Aussie coal sales to China is met coal, not thermal coal, so not sure why you think electricity demand in China is really relevant to BTU. Steel production is what drives met coal sales.
    Aug 20, 2015. 10:49 PM | 2 Likes Like |Link to Comment
  • Peabody Denies Reports That It's Selling All Of Its Australian Assets  [View article]

    Yes over regulation by this administration. In the first six years of this administration they have increased regulations/major rules across all federal agencies buy 499 versus the same time period in the previous administration (Forbes 8/17 issue article titled NIMBY Nation, I suggest you read it).

    The result of these major regulatory changes (defined by the GAO as having an annual of more then $100 million on the economy or significant impacts on prices, production, employment or international competiveness) have hindered business owners and stalled numerous major projects in the energy industry (as well as other industries). How you may ask? Mainly by empowering environmental advocacy groups with the means to sue using the new regulations (Keystone XL is just one the major media decided to publicize) to stall, delay indefinitely it seems while they essentially "shake down" the companies doing the cap-ex/investing. Other mega projects stalled by these tactics are: Bay Delta Conservation Plan, Cape Wind Project, Port of Savannah, Expansion of I 95 in Connecticut, Yucca Mountain, California High Speed Rail, NY State fracking ban, Energy Gateway Transmission Project and of course Keystone XL pipeline. These are just multi billion dollar projects, many smaller ones are impacted by lawsuits and multi layer permitting that has been increased by the EPA in their jurisdictional grab.

    Your comment about me suggesting let the government, via the EPA, let more supply on the market when there is no demand is interesting. I want the government to back off and stop interfering and stop "managing the economy" as some failed form of the old Soviet centralized five year plans disguised as environmental righteousness. Maybe you think they can "manage supply and demand" but I see no government anywhere in the world ever being successful in those endeavors.

    You really think there is no demand? Energy demand is growing and is forecast to continue to grow according to the EIA (links below) with fossil fuels all in the mix for the foreseeable future. However, with the capex cuts being announced by major energy producers and long lead times for many projects (ten years for certain oil projects), rest assured current oversupply will not last and prices will recover.

    Bankruptcies in the coal sector (JRCC, PCX, WLT, ANR to name a few) have occurred and will reduce supply since the new owners won't recover their debts owed by engaging in a race to the bottom. They will reduce supply until pricing rises to levels that create profits to recoup their losses in reorganization. This will help BTU, which has stated almost all of their mines are profitable in current environment with the exception of a few. The Australian hedges really hurt them, but they will roll off in the next two years as well as their lease installment payments in the PBR finishing along with VEBA payments. It is estimated that all of this increases cash flow by over $700 million by end of 2017.

    With their first significant debt payment due in November 2018, they have time and should be able to pay down some of the debt and refinance the balance since they will have ample steady cash once again by that maturity. Lenders love cash flow and BTU has long term contracts with the utility industry that aren't going away. So, I really don't understand your comment of "should be aware that the end is coming for BTU". Why, because there have been multiple bankruptcies in the industry?

    Those companies were very different from BTU with more expensive eastern coal operations (or just met coal for the steel industry) that are way more labor intensive then the PRB.

    Go short if you want in BTU and I wish you luck, but I believe they survive and will stay long with an eye towards the 2016 election and beyond. A republican win next November will definitely make a difference for coal (as well as all fossil fuels) as current EPA rules/regulations will be rewritten and/or abandoned.
    Aug 20, 2015. 10:39 PM | 6 Likes Like |Link to Comment
  • Peabody Denies Reports That It's Selling All Of Its Australian Assets  [View article]
    I think it is fair to say shorts are covering in BTU. The short position listed on yahoo is outrageous at 42% of float and volume has spiked the last few days, today ~58 million shares traded, more then 3.0x average trading volume. Soros buying 1 million shares is pretty much a non-event since it is pocket change for him. However, what is interesting is his reputation (actually the smart traders that work/worked for him) and his buying may have prompted the short covering.

    The large hedge funds that have punished this stock lower now may believe BTU is not headed for bankruptcy since so called smart money has started buying (debatable with Soros who always takes credit for trades his portfolio managers/traders made whether or not it was his idea or theirs / case in point the breaking of the BOE with a short of the pound was Stan Druckenmiller's trade when he worked for Soros, however Soros got all the credit). The only reason to stay short a stock at a buck after a 90% fall is for a bankruptcy filing which would enable the shorts to never have to cover (buy it back) their position and realize a taxable gain (they get cash up front from short sale and most of their margin is returned from their prime brokers/lenders when BK is implemented).

    The only reason to stay or continue to run the short at a buck is for tax benefit if you truly believe bankruptcy is coming since most of your money is already made. Also, given the carnage in overall market the last few days, hedge funds may be taking profits in their BTU position to offset losses in other longs that may have occurred when they bailed on these positions. After all, when they report to their clients all that matters is net returns/gains.

    Finally, the Obama EPA will be history in a little over 16 months and will not cause anymore damage, although they will try, but likely run out of time. If the republicans don't screw it up in the 2016 election, it looks like a lay-up for them, the next administration will likely be very friendly to all fossil fuel producers and stop the ridiculous over regulation this administration has brought to the energy industry in the U.S.
    Aug 20, 2015. 05:56 PM | 12 Likes Like |Link to Comment
  • Brokerages get tough with advisers who break rules  [View news story]

    Brian Moynihan has been consolidating BAC and all the acquisitions made by previous CEOs. He is a lawyer by training and probably was the right guy (if I remember correctly the only one reported to really want the CEO job when Ken Lewis was forced out) as CEO to settle the major lawsuits and shrink the firm by selling non core operations and reduce headcount. Actually, they set this plan in motion five years ago and named it "New BAC" and have been executing since.

    In my opinion, BAC will never sell Merrill Lynch Wealth Management since it is a cash cow for them and gives them a global footprint for distribution of product/services and for gathering assets (fee based income) and compliments nicely with their core banking business. They also reorganized it by splitting it from Merrill's institutional investment banking business by combining it with U.S. Trust and other similar businesses under a new executive with direct report to CEO.

    To give an example of how they are integrating banking and brokerage, I still have my accounts at Merrill Lynch and have a Bank of America credit line on one account (~55% available as LTV) that costs me nothing unless I use it. The rate charged is based on LIBOR plus 300 bps, very attractive currently, but it floats, bad for me if rates rise, but good for bank since their 300 bps of interest has no market risk and principle is secured by a portfolio that can be sold quickly to cover loan. It is not a margin loan to buy stocks, since when it was set up you are asked if it will be used for financial assets or other purposes. My point is, it is good business (secured lending) for BAC and what they do, lend money.

    Institutional businesses they acquired with Merrill Lynch are now organized under another executive with direct report to CEO and include BAC's corporate banking and businesses that fall under an institutional type rather then retail. Again, the point is it doesn't seem they will sell Merrill Lynch since it was reorganized to a new structure as well as banded on the BAC platform. If you wanted to sell it someday, it would be better to operate it as wholly owned subsidiary.

    All this is happening under Moynihan, he has done a good job consolidating the BAC acquisitions and reducing costs. Is he the guy to lead the bank with a new growth strategy? I don't know, but it seems history shows that there are basically two types of CEOs, the cost cutter and the visionary. Brian Moynihan is clearly a cost cutter, can he pivot to a growth strategy if overall economic conditions justify it and regulatory restrictions allow it? I honestly don't know as I stated above, but history isn't on his side.

    I still own BAC stock, like joanpete, but also own UBS stock since I believe the old Merrill management will be better at growing a wealth management business since it is what they know and did, something current BAC management is, hopefully, learning.
    Apr 8, 2015. 10:39 AM | Likes Like |Link to Comment
  • Brokerages get tough with advisers who break rules  [View news story]

    You are right about former Merrill Lynch management, it was excellent, but that was up until 2001.

    In 2001 Stan O'Neal was promoted to CEO by sabotaging his competitor for the job, Jeff Peek. Peek was in charge of MLAM (eventually sold by O'Neal to Blackrock to help pay for his mistake of a mega push into subprime) and had his henchman Ahmass Fakahany (CFO of MLAM at the time) present awful numbers regarding MLAM (at the board meeting to decide the next CEO) and therefore Peek's ability to manage. That the numbers were later corrected and admitted that they were all mistaken, didn't matter since O'Neal was promoted to CEO of Merrill Lynch.

    It was his gross incompetence that led to the downfall of Merrill Lynch with it eventually needing Bank America to buy the firm. O'Neal was despised by most of the old time Merrill management team and eventually many left the firm, or were forced to leave by the dictatorial O'Neal. He brought in his own guys like Dow Kim and Osman Sermerci to do what they were told by O'Neal since he knew better then anyone else.

    When Merrill's best bond trader and head of fixed income trading, Jeff Kronthal, told O'Neal that the subprime was risky and needed to be reduced, at the time the firm had only ~$5 billion in exposure, O'Neal basically told him you are either one of my guys or you are out. Kronthal was not an O'Neal guy so he was fired (link below). Sermerci was put in charge of bond trading and subsequently increased the firm's subprime exposure to ~$50 billion and dooming Merrill Lynch as an independent firm. O'Neal also bought First Franklin, a sub prime lender, to further ensure the demise of the firm as we knew it.

    I am also retired from Merrill Lynch, after working eighteen years as a trader in the International Equities Department. It is a sad story of what happened to Merrill Lynch, which in my opinion was the quintessential American brokerage/investment bank and that had a client first focus/mentality (both retail and institutional) that was very real. Other firms, our competitors (Goldman and Morgan Stanley in the U.S. / all the U.K brokers/bank as well), I believe only paid lip service to this principle and as has been reported in many investigations, traded against clients whenever an opportunity presented itself.

    Finally, I will point out that many of the former Merrill executives that left in the years after O'Neal became CEO, have slowly gotten back together over the past five years or so to rebuild the original model that worked very well prior to the O'Neal years. The firm they are now at is UBS. I believe UBS will become more like Merrill Lynch used to be as they put the problems from UBS's prior management behind.
    Apr 6, 2015. 01:04 PM | 3 Likes Like |Link to Comment