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  • Banks vs. Insurance Companies: Representations and Warranties [View article]
    Thanks for consolidation of the inputs from different aspects... Net,Net, 1) some of the costs are already expanded 2) the banks have seen the HUMP 3) now it seems that they can see light of the tunnel (2Q11) and 4) the numbers are nowhere the $50B in the presss.
    Oct 15, 2010. 12:53 PM | Likes Like |Link to Comment
  • Imperial Sugar to Report Earnings Friday: Expect a Beat [View article]
    We do expect a beat AND watch cash to increase to a comfortable operational level
    1) sugar cost for 2Q was written down in 1Q - ahead of time

    2) sold sugar from inventory due to build-up while plant was
    in ramp-up mode.

    3) OSHA settlement was less than reserved for

    4) there should be a plus on 3Q sugar derivatives

    Wash the cash line. Earnings can be pushed by write-off
    for taking down Louisiana staff for new construction.
    Aug 2, 2010. 12:32 PM | Likes Like |Link to Comment
  • Dudley Off to a Shaky Start at BP [View article]
    Mr Hackel, are you short the common shares? Seems like the capital market played this down and need to keep it down as long as possible. Except that in this case, they are playing against a deep pocket target who can counter ( ie see the number of IB on BP's payroll).

    My surprises in Dudley's first day as CEO are 1) announcement that they will lower debt and 2) Dudley said that they will not 'rush back' to the same dividend level.
    I interpreted to say that they need to keep their large investors who had for income.... but wil not be paying at the same rate.

    Mr Hackel will need to realize that in the 'new normal' world, paper debt will only be extended for 'productive capacity' . Companies will not be given the latitude to tackle problems with more paper. No one around to extend the debt, but plenty of asset buyers.
    Jul 28, 2010. 08:41 AM | 2 Likes Like |Link to Comment
  • Why I'm Adding to My Positions in Salesforce.com and Akamai Technologies [View article]
    I would be cautious... The traffic flow will move from wired internet to wireless internet. a key gateway to wireless will the Telecoms.
    With wireless comes mobility, with mobility comes smartphones.

    So the Telecoms can create an alternative set of repositories to serve the wireless ads, videos...

    Akamai optimizes the free Internet. Wireless is not free. Telecom can offer a competitive deal to Google/ Apple. Google has the storage of the videos, Apple has the storage of music and apps.
    So they can get the stuff to the Telecoms... and poof goes Akamai.
    Jul 14, 2010. 12:47 PM | Likes Like |Link to Comment
  • Yet Another Entrant in the Ethanol Race [View article]
    I value the summary of all the activities in the area. Ms Fiakas obviously follow closely the DOE activities and the nascent industry.

    However, the criticism is reminiscent of the Internet age. One does not know that eBay or Amazon would be key winners when a lot of investment bankers or shallI say VC's were hot in pursuit.
    The DOE has to take the same kind of 'risk'. If one or two of these companies hit the target, we will have another 20B barrels - yearly- of alternative fuel.


    Oh, a second generic comment about 'ethanol'. Just like today, the common investor can distinguish between 'eBay' and 'Google' and 'Amazon' business model ( they all are Internet based but not doing the same thing), a writer like Ms Fiakas need to differentiate between a Green Plains Renewable(GPRE) which is producing fuel for cars and this new venture going after Jet Fuel.
    One kind of fuel need does not preclude the need for the other.

    Ms Fiakas, I would be interested in your views of F-T biomass technology versus Amyris/Cosan and this new Logos Technology. Again, too early to put all eggs in one basket, but worth studying all the 'alternatives' ( no punt intended). .
    Jul 9, 2010. 11:59 AM | 2 Likes Like |Link to Comment
  • Goldman's Abacus: The Difference Between a CDO and a Synthetic CDO [View article]
    We keep repeating 'ACA bought $900m+ of the underlying CDS.
    Whose money did ACA used to buy the CDS?
    Was it ACA own money, or other people money ( like our pension
    funds...)?
    Did we know that the banks were betting with our money, or investing it in more productive companies?

    So the losers were not just IKB, but also the funds used to inflate the CDOs - thus our pension plans loosing 60% during the crisis.
    May 23, 2010. 12:46 PM | Likes Like |Link to Comment
  • Imperial Sugar: Second Quarter Earnings Peek [View article]
    I am surprised that the loss on the futures was not expected.
    1- IPSU reported Sept and December GAINS total $45M on 4m cwt (rounded weight) when the average futures prices on Dec 31st was 35c/pound.
    So as the price of the futures came down to 30c, of course there is a loss of $24m. But it is a loss against GAINS previously reported.
    So far IPSU is ahead in the futures 'game' 45m minus 24m = $21M( already booked in 2009 calendar).

    The more promising tidbits in the CC was to hear that retail sugar prices were staying up and expected to ramp up. So sunken cost of produced sugar will be delivered with higher margins.

    I also cross my fingers that the front-end part of the plant, the part not rebuilt, can run at full speed and not break down. Otherwise,
    equipment replacement costs might be a head-wind.

    Otherwise, finally the company is up and running again.
    And oh yes, the good news about 'early beets planting' is welcome news for next year input cost equation.



    May 11, 2010. 06:21 PM | Likes Like |Link to Comment
  • What Is Getting Hit Hardest? [View article]
    Percentages are misleading. When the winners went up 100% or more and then go down 30%, where does that leaves us? Up 70% from the low point.
    If there was an overshooting, then the pull back is justified.
    If there is a solid base for the company but projections are murky, then a cautious pullback is also understandable.

    The trick is to hold and buy more stocks of the company where the market has misjudged the company projections. Holding over the next reporting period is the first milesttone and then to buy more as industry trends are confirmed.
    The harder trick is to agree with the market pullback and to sell after the pullback has started.
    But trust what you see, observe and know something about..
    Jan 31, 2010. 09:30 AM | 4 Likes Like |Link to Comment
  • Whatever Happened to Those Ethanol Companies? [View article]
    The premise that 'revenue' is decreasing is a misunderstanding of the source of the revenue; and of margins.

    While having their plants under construction, PEIX had the cash flow to buy and sell ethanol as a marketeer. Revenue and MARGINS from production was the driver of long-term value.

    Re-starting the plants will again drive the value of the company; not the pass-thru dollars of ethanol reselling. Now mind-you, that this reselling business kept the management eating while the plants are in BK, but nevertheless, I rather take the production of fuel and WDG and the higher margins resulting, than judge the company on the top line dollar figures.
    Nov 27, 2009. 02:38 PM | Likes Like |Link to Comment
  • Green Plains Renewable Energy: A Smart Play in Ethanol [View article]
    Brazil is at full ethanol capacity using its cane for sugar and price is up. So, in the U.S., as import is tight, supply is in balance , price has moved upwards.
    GPRE is leading the public companies, but ALL the ethanol producers are benefiting.

    The smart play for investors is to play the whole industry: corn is plentiful, scarcity of capital limits brand new plants and other forms of ethanol, and demand for daily use (fuel for cars) is constant.

    The SMART thing about the industry is that it can avoid exporting $20B yes improve the value of the dollar.

    The second way for the SMART investor to think about this : as a new industry, in 2010 it will produce 12 billion gallons. Where we to pay 20c profits/gallon, this is $2.4B profit. Take that to the banks and get $10B in construction loan for growth projects. Create Jobs, improve our import/export balance. We will not eliminate oil nor our national debt but we can decrease it.
    Nov 17, 2009. 05:15 PM | Likes Like |Link to Comment
  • National Semi's Good Quarter: Inventory Reduction More Positive than Bookings Growth [View article]
    Your article clarifies the statement made by NSM that they have lowered their inventory, in this cycle, from above 11 weeks to 9 weeks.

    3 comments :

    1/Thru your chart, this is a level reached SINCE DEC 2004!

    2/ Since their goal is to keep this level of inventory flat WHILE THEY SEE INCREASED ORDERS, this is good.

    3/ Nine weeks ( 65 days) is also the lowest level for TXN back in Dec 03.

    Just-in-time manufacturing has the benefits of lower capital ( ie Debt) needed to run the business!!!
    Jun 12, 2009. 02:19 PM | Likes Like |Link to Comment
  • Even the most optimistic scenarios don't play well for China, Nouriel Roubini says. "The world where the U.S. was the consumer of first and last resort... and where China was the producer of first and last resort... is changing."  [View news story]
    Just like we had a bubble in borrowing, they had a bubble in overbuilding in order to sell to us. Now that EVERYONE realizes that the RATE OF GROWTH was not sustainable, our economy and theirs will settle at a lower level.
    But we should think that we will make everything that we need, or that they will have zero production.

    Look at the auto production 2-5 forecast : some think it is will 9m in 2010, some think it will be 11m in 2011... So somewhere in the at range of volume AND TIME ( ie we could have 10m in 2010 not necessarily 2011)... So for now everyone is ESTIMATING.

    For now, Roubini is using his fame to make judgement call that are not accurate. He should SHUT UP and go drink more wine to celebrate that he made a dire call once, while we fix what is wrong..
    Apr 10, 2009. 05:26 PM | 1 Like Like |Link to Comment
  • Exclusive: Big Banks' Recent Profitability Due to AIG Scam? [View article]
    Let me try to understand the loop :

    Figures below are FICTITIOUS --- just as a model ...

    1- AIG, as an insurance company, holds contracts with HIGH liability - let's say 60 cents liability on the dollar ( assuming the subprime papers are worth 30 cents in the Itraxx index).

    2- The banks hold/own the actual subprime paper which is mark-to-market at 30 cents. But the banks believe that the value ( based on cash flow) is closer to 60 cents.

    3- AIG keeps saying that their CDS is "senior"--- meaning that they do not have to immediately settle until a set condition ( example : only pay IF and WHEN the debt cash flow is interupted. So if the mortgages still pay 92% cashflow, AIG doesnot pay). But meanwhile, on the AIG books, the liability of 60 cents on the balance sheet show LARGE loss.

    So the unwind:
    4- IF AIG pays 20cents to the bank to close out the contract, AIG balance sheet shows a GAIN of 40 cents ( 60cents liability - 20 cents).

    5- The banks never believed that their subprime paper was worth 30 cents. The banks always said that they are not selling at 30 cents. So let's say that they think that it is worth 60cents.
    By receiving 20 cents from AIG, they bought the suprime paper for 100 cents, got 20 cents from AIG. So now that the banks can sell the subprime paper for 60cents. Sell for 60 cents + 20 cents AIG = 80 cents bank income... loss of 20 cents ( 100cents purchase - 80 cents income from sales and insurance).

    6- Now Mr G. ( Treasury ) walks in with Hedge Funds - $1T Plan - ready to sweep all the subprime away from the banks at 70 cents!.

    In Step #5 above, the banks get 20 real cents earnings by 'cancelling' their insurance held by AIG. AIG 'makes' 40c or avoid loosing 40c ( 60 cents liability - 20cents paid). The banks never believe that the insurance is worth 60 cents, but they could not claim it either ( the banks were getting cash from the mortgages)

    Zero Hedge is seeing all these unwind transactions at below value, BUT WHOSE VALUE IS TRUE... the market maker value ( Itraxx index?) or the value that the two parties agree to close out their liability? This CDS over the counter market is unregulated, remember? There is nothing that stops one party to accept whatever value agreed by both parties to unwind their own transactions.

    When you have a car accident and the adjuster gives you a value for the repair, you can always negotiate a settlement price and turn in the damage car. The subprime papers are being adjusted to be traded in.

    We should remember that the 'Banks Gains' are partly reversal of "loss" that they alreay took in 2008. The AIG gains are reversal of write-downs / reserve that they took in 3Q and 4Q 2008. The real 20cents that they transfer to the banks are capital that AIG will collect when they sell their other divisions ( airplane leasing...). AIG looses Broadwalk in the monopoly game; the banks' real losts are 100cents on the dollar minus what they get selling to the Treasury+Hedge Funds.

    The CDS market loose the VOLUME of business on naked CDS. there will always be covered CDS on real bonds, but the insurance company will need to post real capital to cover potential claims.


    Estimates:
    AIG took a loss of $60B in 4Q2008. And we know that they decreased their CDS portfolio from 2.3T to 1.7T = delta $600B. So in round figure they paying 10 cents per portfolio dollar ( 60B / 600B) just to close out the CDS contracts.
    Mar 30, 2009. 08:45 PM | 6 Likes Like |Link to Comment
  • Notwithstanding the hullaballoo about U.S. sovereign CDSs clearing 100bps, credit-default swaps are not a default trade. "99% of people buying CDS do not believe that the entity upon which they are buying protection will actually default... People buy and sell stocks because they think the stock in question will increase or decrease in price. Same goes for CDS."  [View news story]
    CDS have been quoted as an 'obsolute' risk level as if a value of 100 for junk bonds has the relative weight of country bond.

    Second, there is no continuous trend chart of price level, more of a peak thru a peep hole during a 'crisis window'.

    The absolute CDS values are also published without volume figures. So a few million dollars worth of trade is supposed to be the guide for hundred of billions bonds with different maturities and rates.

    CDS IS THE TAIL THAT WAGS THE DOG!
    Mar 16, 2009. 06:07 PM | Likes Like |Link to Comment
  • Buffett's Import Certificates Plan Could Pilot the Economy to a Safe Landing [View article]
    Which came first the chicken or the egg?
    We imported too much AFTER we created the pile of housing debt which gave us the false sense of being richer than we were. We could not have imported too much if we did not borrow to do it.
    I still do not know about the chicken and the egg.
    Jan 18, 2009. 08:34 PM | 1 Like Like |Link to Comment
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