IsThisRight's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/136942/comments http://seekingalpha.com/article/174898-whatever-happened-to-those-ethanol-companies?source=feed#comment-779868 779868
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. ]]> Fri, 27 Nov 2009 14:38:45 -0500
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. ]]> http://seekingalpha.com/article/173679-green-plains-renewable-energy-a-smart-play-in-ethanol?source=feed#comment-764357 764357 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. ]]> Tue, 17 Nov 2009 17:15:09 -0500 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. ]]> http://seekingalpha.com/article/142931-national-semi-s-good-quarter-inventory-reduction-more-positive-than-bookings-growth?source=feed#comment-544234 544234
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!!! ]]> Fri, 12 Jun 2009 14:19:44 -0400
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!!! ]]> http://seekingalpha.com/news/market_currents/post/21575?source=feed#comment-459342 459342 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..
]]> Fri, 10 Apr 2009 17:26:19 -0400 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..
]]> http://seekingalpha.com/article/128390-exclusive-big-banks-recent-profitability-due-to-aig-scam?source=feed#comment-445799 445799
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. ]]> Mon, 30 Mar 2009 20:45:59 -0400
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. ]]> http://seekingalpha.com/news/market_currents/post/19927?source=feed#comment-428372 428372
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! ]]> Mon, 16 Mar 2009 18:07:39 -0400
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! ]]> http://seekingalpha.com/article/115278-buffett-s-import-certificates-plan-could-pilot-the-economy-to-a-safe-landing?source=feed#comment-359372 359372 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. ]]> Sun, 18 Jan 2009 20:34:21 -0500 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. ]]> http://seekingalpha.com/article/110710-paulson-s-plan-fails-to-understand-the-problem-madoff-is-a-perfect-example?source=feed#comment-330039 330039
My view of the problem and actions :
The $7-10 trillion "invested" by Treasury ( and they have insisted that they are investing not spending) is MOSTLY A REPLACEMENT FOR PAST DEBTS held by US corporations, and/or to REPLACE LOST FUNDS ALREADY INCURRED BY SOME BANKS. So these TARP and Fed transactions are just recognizing these debts ( corp and banks) onto the US balance sheets. The market is not allowing any corporation and banks to expand their debt levels, while these Treasury and Fed actions are underway.
.

We need to to look at the total basket of corp debts and bank Tier 1 assets as the balance sheet of the U.S nation. As the fed lowers rate, the banks earn more. As the corporations log profits each quarter or sell assets to foreign companies, they will be deleveraging. So as a nation, the bank earnings and the corporation profits will help to deleverage the U.S. balance sheet.

At the personal budget level, from our salary, we will also be either saving more or paying back debt. This will also help in the deleveraging process.

Oh yeah, these pesky CDS ( 50 Trilliion liability). Look at it this way, by minimizing corp and banks going bankrupt, the CDS liability goes down as time elapses. The CDS buyers will be fatigue or they with an upswing they will panic and liquidate some of their bets.

Liongterm:
When the fed gets to lend NET NEW MONEY to the banks n corporations, without taking any old debt instruments or bank shares, then these steps would be growth stocking actions. But until now, the "Treasury investments" are just buying U.S. time to deleverage. Paulson did tell us : "we need to delverage" and that is what he and the WW market is driving U.S. to do.


So for now, let's try
1 to tally how much total debt we have
2 estimate our total earnings each quarter
3 assume that we use 80% of our colletive profits to pay down debt
4- estimate how much assets that we can sell externally - at right time at the right price
5- By adding 3 and 4 above, we can estimate the time needed to deleverage the US balance sheet.

Once we can see the end-date for deleverage, then we plan to grow the pie again SLOWLY by controllng both our spending and debt growth rates. ]]> Mon, 15 Dec 2008 12:30:17 -0500
My view of the problem and actions :
The $7-10 trillion "invested" by Treasury ( and they have insisted that they are investing not spending) is MOSTLY A REPLACEMENT FOR PAST DEBTS held by US corporations, and/or to REPLACE LOST FUNDS ALREADY INCURRED BY SOME BANKS. So these TARP and Fed transactions are just recognizing these debts ( corp and banks) onto the US balance sheets. The market is not allowing any corporation and banks to expand their debt levels, while these Treasury and Fed actions are underway.
.

We need to to look at the total basket of corp debts and bank Tier 1 assets as the balance sheet of the U.S nation. As the fed lowers rate, the banks earn more. As the corporations log profits each quarter or sell assets to foreign companies, they will be deleveraging. So as a nation, the bank earnings and the corporation profits will help to deleverage the U.S. balance sheet.

At the personal budget level, from our salary, we will also be either saving more or paying back debt. This will also help in the deleveraging process.

Oh yeah, these pesky CDS ( 50 Trilliion liability). Look at it this way, by minimizing corp and banks going bankrupt, the CDS liability goes down as time elapses. The CDS buyers will be fatigue or they with an upswing they will panic and liquidate some of their bets.

Liongterm:
When the fed gets to lend NET NEW MONEY to the banks n corporations, without taking any old debt instruments or bank shares, then these steps would be growth stocking actions. But until now, the "Treasury investments" are just buying U.S. time to deleverage. Paulson did tell us : "we need to delverage" and that is what he and the WW market is driving U.S. to do.


So for now, let's try
1 to tally how much total debt we have
2 estimate our total earnings each quarter
3 assume that we use 80% of our colletive profits to pay down debt
4- estimate how much assets that we can sell externally - at right time at the right price
5- By adding 3 and 4 above, we can estimate the time needed to deleverage the US balance sheet.

Once we can see the end-date for deleverage, then we plan to grow the pie again SLOWLY by controllng both our spending and debt growth rates. ]]> http://seekingalpha.com/article/93064-pacific-ethanol-market-growth-and-increase-in-production-to-the-rescue?source=feed#comment-272012 272012
On Oct 2nd at an Oppenheimer Investment event, PEIX CEO stated that although they have increased prodcution, sales volume will be approx 50/50% in-house vs resales production.
So, just to correct point # 2 above, resales group is growing as fast as the new plant coming online in 2Q and 3Q... Good news that local markets are absorbing both production and resales gallons coming across from other companies. ]]> Thu, 02 Oct 2008 16:25:41 -0400
On Oct 2nd at an Oppenheimer Investment event, PEIX CEO stated that although they have increased prodcution, sales volume will be approx 50/50% in-house vs resales production.
So, just to correct point # 2 above, resales group is growing as fast as the new plant coming online in 2Q and 3Q... Good news that local markets are absorbing both production and resales gallons coming across from other companies. ]]> http://seekingalpha.com/article/98256-big-blue-s-stock-may-be-affected-by-ibm-s-bank?source=feed#comment-271587 271587
In the case of 'IBM Banks', let's ask a few questions.
- Do they take get their high margins by borrowing and lend it out at a interest rates? From this they get 46% on the money? In my world, this is a corner loan - called loan shark! Since the company has best high-grade customers, I doubt that these customers are dummies. So my deduction is that this not how 'IBM Bank' earns this High money.

- What else does the 'IBM Bank' do as a business that could account for the high margin? OH, they lend money to customers doing mission-critical services... And that part of the business is growing ( like relieving traffic jam, or placing 100's of operating banks in China...). So by financing the customer's expense for these services, the bank earns more.
Yeah, this is good but still does not account for 46% margin.

-What else do they do to be so good? Ah, the 'IBM Banks' are "USED CAR SALESMEN" ( oops used computer salesmen) around the world.
Imagine being IBM Banks as owner of oops 3-4-5 year big and mid-size computers, kept in a pristine corporate computer centers. Due to efficiency or growth, the first user of these computers want to upgrade. Then the 'owner' of the computer has to take back the 'used computer' still in great operating conditions. By reselling the same computer to someone else who is in dire need for that size computer and making a profit. It is like leasing the best Benz, take it back and resell it at high-value! Ah, that part of the used car ( oops used computer) can have a high margin since the profit on the sale when added to the fact that two sales are made (1 sale to the 1st customer for a newer model and a sale to a 2nd buyer).

Ok, now we can understand that a bank is a bank and a 'used car' sales operation( oops IBM Bank is a bank and 'used computer' sales operation). As a seperate financial unit, due to accounting law, these used-computer sales are not reported in brand sales, but are reported as income in the finance unit. Oops, the cost of the used-computer is the trade-in cost which was established 3-4 years ago! In a conservative bank, Interest money was earned on the original equipment and part of that earning in the past 3-4 years was set aside as a risk mitigation ( in case the trade-in value is less than the resell price). But if the used-equipment sales keep rolling forward, the abl keeps making profits.

Now does the fear about the sub-prime sludge the same as the IBM Bank prospects? You tell me. Oh by the way, in an economic slowdown but a lot more companies might consider used equipments rather than buying new, the margins on the used computers go higher!
The trick is to slow down the expenses on new mnfg to match demand... not to slow the bank who has equipment with higher margin for sale!

This is why a high-level GRADE is assigned to the IBM Bank bonds.

]]> Thu, 02 Oct 2008 11:28:22 -0400
In the case of 'IBM Banks', let's ask a few questions.
- Do they take get their high margins by borrowing and lend it out at a interest rates? From this they get 46% on the money? In my world, this is a corner loan - called loan shark! Since the company has best high-grade customers, I doubt that these customers are dummies. So my deduction is that this not how 'IBM Bank' earns this High money.

- What else does the 'IBM Bank' do as a business that could account for the high margin? OH, they lend money to customers doing mission-critical services... And that part of the business is growing ( like relieving traffic jam, or placing 100's of operating banks in China...). So by financing the customer's expense for these services, the bank earns more.
Yeah, this is good but still does not account for 46% margin.

-What else do they do to be so good? Ah, the 'IBM Banks' are "USED CAR SALESMEN" ( oops used computer salesmen) around the world.
Imagine being IBM Banks as owner of oops 3-4-5 year big and mid-size computers, kept in a pristine corporate computer centers. Due to efficiency or growth, the first user of these computers want to upgrade. Then the 'owner' of the computer has to take back the 'used computer' still in great operating conditions. By reselling the same computer to someone else who is in dire need for that size computer and making a profit. It is like leasing the best Benz, take it back and resell it at high-value! Ah, that part of the used car ( oops used computer) can have a high margin since the profit on the sale when added to the fact that two sales are made (1 sale to the 1st customer for a newer model and a sale to a 2nd buyer).

Ok, now we can understand that a bank is a bank and a 'used car' sales operation( oops IBM Bank is a bank and 'used computer' sales operation). As a seperate financial unit, due to accounting law, these used-computer sales are not reported in brand sales, but are reported as income in the finance unit. Oops, the cost of the used-computer is the trade-in cost which was established 3-4 years ago! In a conservative bank, Interest money was earned on the original equipment and part of that earning in the past 3-4 years was set aside as a risk mitigation ( in case the trade-in value is less than the resell price). But if the used-equipment sales keep rolling forward, the abl keeps making profits.

Now does the fear about the sub-prime sludge the same as the IBM Bank prospects? You tell me. Oh by the way, in an economic slowdown but a lot more companies might consider used equipments rather than buying new, the margins on the used computers go higher!
The trick is to slow down the expenses on new mnfg to match demand... not to slow the bank who has equipment with higher margin for sale!

This is why a high-level GRADE is assigned to the IBM Bank bonds.

]]> http://seekingalpha.com/article/97958-how-the-u-s-saved-europe-s-banking-system?source=feed#comment-270480 270480 thank you for the comprehensive data on the european banks.
Any such insights of comparative info on US and AP banks? ]]> Wed, 01 Oct 2008 11:55:42 -0400 thank you for the comprehensive data on the european banks.
Any such insights of comparative info on US and AP banks? ]]> http://seekingalpha.com/article/97626-why-i-m-selling-pacific-ethanol?source=feed#comment-269589 269589
Funny, ...my second comment is that you made your observation right around when they announce that they have COMPLETED their construction of 4 plants and now have reached the 220billion gallons capacity that they had as a goal for the company. Last celebration opening day on Oct 10. ]]> Tue, 30 Sep 2008 11:16:06 -0400
Funny, ...my second comment is that you made your observation right around when they announce that they have COMPLETED their construction of 4 plants and now have reached the 220billion gallons capacity that they had as a goal for the company. Last celebration opening day on Oct 10. ]]> http://seekingalpha.com/article/96062-verasun-s-screw-up?source=feed#comment-257887 257887
Like you, I had judged their 'operating' skills in merging two companies, building bulk supply to be able to optimize distribution thru unit trains, and becoming efficient with low volume production (355 million gallons per quarter).

Hopefully, they will step away from the casino table, rather than raising the ante by more bets- by their own filings, 4Q will also be similar impacted.

It will take sometime to work thru this as they have just added $.70/gallon to the cost of their plants( $100M lost over 1.4B gallon production). At 10% interest, this is a 7c cost to every gallon of ethanol that they sell until they can repay this debt.

I think that they have just made themselves a take-over candidate. May be someone will value their plants at $2.50 per gallon? ADM, or an oil company like BP to the rescue? ]]> Thu, 18 Sep 2008 09:36:36 -0400
Like you, I had judged their 'operating' skills in merging two companies, building bulk supply to be able to optimize distribution thru unit trains, and becoming efficient with low volume production (355 million gallons per quarter).

Hopefully, they will step away from the casino table, rather than raising the ante by more bets- by their own filings, 4Q will also be similar impacted.

It will take sometime to work thru this as they have just added $.70/gallon to the cost of their plants( $100M lost over 1.4B gallon production). At 10% interest, this is a 7c cost to every gallon of ethanol that they sell until they can repay this debt.

I think that they have just made themselves a take-over candidate. May be someone will value their plants at $2.50 per gallon? ADM, or an oil company like BP to the rescue? ]]> http://seekingalpha.com/article/78183-are-we-at-the-bottom-of-the-ethanol-barrel?source=feed#comment-170922 170922 However, the bounce in these ethanol stocks can be best understood this way:
1/ In a "credit crunch" environment, the "squeeze" came from the speculators trying to trap the companies while their cash flow is constrained. The constraints are from the construction obligations and lately the price of corn.
NOW, since PEIX has shown that a) they can generate cash (EBITDA $12M) even at the high price of corn b) they are at the end of their construction plans (3Q08) and c) they finally have a CFO who can look under all the rocks of the financial contracts.... for all these facts, now Wall St can start pricing the stock on its relative value to oil/gas, without the 'squeeze' from the SHORT speculators.

Incidentally, except for ADM who has a lot of cash, most ethanol CORN plant construction will be done by 2008!!! The scarce about corn will be over soon. ]]> Wed, 21 May 2008 07:56:43 -0400 However, the bounce in these ethanol stocks can be best understood this way:
1/ In a "credit crunch" environment, the "squeeze" came from the speculators trying to trap the companies while their cash flow is constrained. The constraints are from the construction obligations and lately the price of corn.
NOW, since PEIX has shown that a) they can generate cash (EBITDA $12M) even at the high price of corn b) they are at the end of their construction plans (3Q08) and c) they finally have a CFO who can look under all the rocks of the financial contracts.... for all these facts, now Wall St can start pricing the stock on its relative value to oil/gas, without the 'squeeze' from the SHORT speculators.

Incidentally, except for ADM who has a lot of cash, most ethanol CORN plant construction will be done by 2008!!! The scarce about corn will be over soon. ]]> http://seekingalpha.com/article/70169-pacific-ethanol-build-ahead-is-a-manufacturing-strategy?source=feed#comment-170223 170223
Plus today, we learn that 1 of their plant had a few down days. This did not stop PEIX from showing 'better-than-expected' results, in a higher corn price environment.

My next prediction ( give it 60 days) is lower corn price - due mainly to WW supply from poorer countries around the world. An ear of corn is an ear of corn, when fed to the sows. ]]> Mon, 19 May 2008 18:48:03 -0400
Plus today, we learn that 1 of their plant had a few down days. This did not stop PEIX from showing 'better-than-expected' results, in a higher corn price environment.

My next prediction ( give it 60 days) is lower corn price - due mainly to WW supply from poorer countries around the world. An ear of corn is an ear of corn, when fed to the sows. ]]> http://seekingalpha.com/article/71802-it-s-now-official-ethanol-is-a-scam?source=feed#comment-148376 148376
What is your alternative plan, Mr Perry, PH.D? ]]> Thu, 10 Apr 2008 13:17:19 -0400
What is your alternative plan, Mr Perry, PH.D? ]]> http://seekingalpha.com/article/71642-amd-product-ramp-up-and-new-factory-plan-what-gives?source=feed#comment-147814 147814 Wed, 09 Apr 2008 14:32:11 -0400 http://seekingalpha.com/article/69155-pacific-ethanol-anticipates-a-gloomy-q4?source=feed#comment-131908 131908 1/ Oregon was to come online in 1Q08 ( law was passed, plant was built...). So PEIX started puttin in storage in Oregon enough ethanol to serve a BRAND NEW MARKET. So their business incurred the cost of buying the corn, operating the plant and not getting the revenue until the grand opening of the market. This only happens once. And it is a GOOD THING.
2/ Since ethanol price in 1Q08 is higher than 4Q07, even if there was no new market, would you not like to hold back on $1.97/gallon and sell 3 months later for $2.20-$2.30/ gallon?

Come'on... everyone jumps on 4Q07 numbers without a single thought about market condition in 1Q08.

By the way, PEIX is not driving the U.S. SouthEast market supply. But other companies, with their eyes on FL, NC... will have to do the same thing ( build-ahead) in order to develop these NEW markets.
]]> Wed, 26 Mar 2008 13:07:12 -0400 1/ Oregon was to come online in 1Q08 ( law was passed, plant was built...). So PEIX started puttin in storage in Oregon enough ethanol to serve a BRAND NEW MARKET. So their business incurred the cost of buying the corn, operating the plant and not getting the revenue until the grand opening of the market. This only happens once. And it is a GOOD THING.
2/ Since ethanol price in 1Q08 is higher than 4Q07, even if there was no new market, would you not like to hold back on $1.97/gallon and sell 3 months later for $2.20-$2.30/ gallon?

Come'on... everyone jumps on 4Q07 numbers without a single thought about market condition in 1Q08.

By the way, PEIX is not driving the U.S. SouthEast market supply. But other companies, with their eyes on FL, NC... will have to do the same thing ( build-ahead) in order to develop these NEW markets.
]]> http://seekingalpha.com/article/69850-the-case-against-ethanol?source=feed#comment-131853 131853 Ethanol ( as of 3/26 noon) is at $2.47 while corn is at $5.48.
A price difference of $3 versus $4 is a LOT.

Now for the other facts:
1/ "The corn used for ethanol could be used for feeding the poor" Question is : would the corn be grown at all if there is no ethanol sales to supplement oil-based gas?

2/ "Ethanol uses as much energy as the coal, oil and natural gas that it takes to make the ethanol".
Question is : why is it we do not turn coal or natural gas into gas?
So taking coal or natural gas energy and CONVERTING it to fuel to put in a car is ingenious!
3/ "The cost of subsidies pf $1-$1.38...'
a) My understanding is that the CORN ethanol subsidy is 50c a gallon. It goes to the REFINERS to kick start their investments to build the infrastructure to store/mix/distribute ethanol. Now this infrastructure is partly USABLE for cellulosic ethanol in the future.
b) the $1-$1.38 is to have the ethanol industry do the research/development/b... new plants for ethanol which will not depend on corn.

So first the author of the article blames the use of corn, then votes again approach to develop ethanol with other than corn.
OK, let's hear your POSITIVE proposal on how to solve the energy challenge. I will start first : I am all for conservation=driving less, buy smaller cars. Any other ideas to burn LESS OIL BASED GAS?
]]> Wed, 26 Mar 2008 12:19:06 -0400 Ethanol ( as of 3/26 noon) is at $2.47 while corn is at $5.48.
A price difference of $3 versus $4 is a LOT.

Now for the other facts:
1/ "The corn used for ethanol could be used for feeding the poor" Question is : would the corn be grown at all if there is no ethanol sales to supplement oil-based gas?

2/ "Ethanol uses as much energy as the coal, oil and natural gas that it takes to make the ethanol".
Question is : why is it we do not turn coal or natural gas into gas?
So taking coal or natural gas energy and CONVERTING it to fuel to put in a car is ingenious!
3/ "The cost of subsidies pf $1-$1.38...'
a) My understanding is that the CORN ethanol subsidy is 50c a gallon. It goes to the REFINERS to kick start their investments to build the infrastructure to store/mix/distribute ethanol. Now this infrastructure is partly USABLE for cellulosic ethanol in the future.
b) the $1-$1.38 is to have the ethanol industry do the research/development/b... new plants for ethanol which will not depend on corn.

So first the author of the article blames the use of corn, then votes again approach to develop ethanol with other than corn.
OK, let's hear your POSITIVE proposal on how to solve the energy challenge. I will start first : I am all for conservation=driving less, buy smaller cars. Any other ideas to burn LESS OIL BASED GAS?
]]> http://seekingalpha.com/article/69163-pacific-ethanol-juicy-details-from-tuesday-s-10-k?source=feed#comment-129261 129261
A more subdue view of the status from the 10K reading:

1/ how come a plant which is producing ethanol is not fully completed? Seems like a trap was set for PEIX long ago and thru Lyles making a loan, PEIX was able to bridge to 2Q08. But yet had to break a few eggs ( eight euro loans instead of seven sounds like a trip wire that went boom!)

2/ $14M of loss in 4Q : since 6.6M is due previously Dec announced Madera plant delay- 4rd plant in construction and due to interest protection ( IF interest goes up on $170M debt, they are protected) so roughly there is another approx $8M of loss . read on…

3/ My guess ( again a guess) is that PEIX had to write down some of its inventory ( about 15m gallon by some 18c/gal ( $2.11 in 3Q to $1.97) so that is about $3M of the 8M… They got a higher price / gal than the industry ( good marketing and RISK MANAGEMENT)...read on

4/ Whatever else they produced and put in storage in 4Q might have cost them another $5-6M of cost without revenue.

Between # 3 and #4 the loss was about $8M.
when added to Number #2 this account for $14M.

NOW for the positive side of the 10K!!!
1/ THEY HAD TO PRODUCE AHEAD OF 1Q06 so they could stock pile for Oregon. That is called build-ahead!! Mr Greenberg, do you know that buil-ahead is an actual STRATEGY in manufacturing?

2/ Since they assume the risk of producing and storage, we know NOW in March 08 that the ethanol gal was selling for $2.2 to $2.30!!! (higher than the $1.97 price in 4Q). So what if their margins was lower for the 4Q period when they had to overproduce in order to build a whole new market in Oregon. I would have like to hear Mr Greenberg if the Oregon market was open for business, or Florida, or NC and they was no stockpiling ahead of time. Be real when you see a loss figure, Mr Greenberg. The number for a growing business is EASILY FORGIVEN IF IT IS AN INVESTMENT TURNED INTO CASH WITHIN 6 MONTHS. How shortsighted we become on Wall St where we go to bed on Friday and wake up on Monday witha whoops… I did it again(by Britney)!

3/ Lyles LLC agrees to buy 3M warrants to buy the shares at $7 per share at any time. AND paid for these warrants in advance. As an outsider looking in, I will take the same bet.

Mr Greenberg, you would never be able to really get your hands durty with dirt, corn, steel, trucks, pumps… You can only read a 10K]]> Thu, 20 Mar 2008 09:58:00 -0400
A more subdue view of the status from the 10K reading:

1/ how come a plant which is producing ethanol is not fully completed? Seems like a trap was set for PEIX long ago and thru Lyles making a loan, PEIX was able to bridge to 2Q08. But yet had to break a few eggs ( eight euro loans instead of seven sounds like a trip wire that went boom!)

2/ $14M of loss in 4Q : since 6.6M is due previously Dec announced Madera plant delay- 4rd plant in construction and due to interest protection ( IF interest goes up on $170M debt, they are protected) so roughly there is another approx $8M of loss . read on…

3/ My guess ( again a guess) is that PEIX had to write down some of its inventory ( about 15m gallon by some 18c/gal ( $2.11 in 3Q to $1.97) so that is about $3M of the 8M… They got a higher price / gal than the industry ( good marketing and RISK MANAGEMENT)...read on

4/ Whatever else they produced and put in storage in 4Q might have cost them another $5-6M of cost without revenue.

Between # 3 and #4 the loss was about $8M.
when added to Number #2 this account for $14M.

NOW for the positive side of the 10K!!!
1/ THEY HAD TO PRODUCE AHEAD OF 1Q06 so they could stock pile for Oregon. That is called build-ahead!! Mr Greenberg, do you know that buil-ahead is an actual STRATEGY in manufacturing?

2/ Since they assume the risk of producing and storage, we know NOW in March 08 that the ethanol gal was selling for $2.2 to $2.30!!! (higher than the $1.97 price in 4Q). So what if their margins was lower for the 4Q period when they had to overproduce in order to build a whole new market in Oregon. I would have like to hear Mr Greenberg if the Oregon market was open for business, or Florida, or NC and they was no stockpiling ahead of time. Be real when you see a loss figure, Mr Greenberg. The number for a growing business is EASILY FORGIVEN IF IT IS AN INVESTMENT TURNED INTO CASH WITHIN 6 MONTHS. How shortsighted we become on Wall St where we go to bed on Friday and wake up on Monday witha whoops… I did it again(by Britney)!

3/ Lyles LLC agrees to buy 3M warrants to buy the shares at $7 per share at any time. AND paid for these warrants in advance. As an outsider looking in, I will take the same bet.

Mr Greenberg, you would never be able to really get your hands durty with dirt, corn, steel, trucks, pumps… You can only read a 10K]]> http://seekingalpha.com/article/66399-ethanol-three-developments-to-watch?source=feed#comment-120633 120633 Fri, 29 Feb 2008 10:27:56 -0500 http://seekingalpha.com/article/63524-larry-kumins-ethanol-use-may-peak-soon?source=feed#comment-115132 115132
Why is it doubtful that the car industry and the consumer will not accept E85? ]]> Thu, 07 Feb 2008 16:52:59 -0500
Why is it doubtful that the car industry and the consumer will not accept E85? ]]> http://seekingalpha.com/article/59967-housing-risk-factor-keep-an-eye-out-for-december-data?source=feed#comment-110023 110023 1/ HOV showed data that as homebuilder they had substantially decreased their prices ALREADY and existing Home sellers are the laggards in adjusting prices. This input says that new home buyers will buy the comparative value inherent of in new homes. So the HB will be able to liquidate their inventory EVEN if the market rate of sales stays low. The HB just have to stop acquiring or developping NEW LOTS. Lots are abouit 25% of the fixec cost of the homes.
50% is variable cost ( building the home) and the balance is interest on debts and profits.
2/ in 4Q07 KBH sold for $2B worth of homes from inventory. An analyst complimented KBH for this level of sales from inventory. The reading there is that this sales level, eventhough lower than yty by $1B, it is still a higher level of sales than the analyst expectation.
My call: the HB are making bottom here. The duration of the bottom flat curve line is what we should start observing in 1H08 and not expect a V type recovery. But at least some 'rational value' should be assigned to these companies. ]]> Sun, 13 Jan 2008 17:39:25 -0500 1/ HOV showed data that as homebuilder they had substantially decreased their prices ALREADY and existing Home sellers are the laggards in adjusting prices. This input says that new home buyers will buy the comparative value inherent of in new homes. So the HB will be able to liquidate their inventory EVEN if the market rate of sales stays low. The HB just have to stop acquiring or developping NEW LOTS. Lots are abouit 25% of the fixec cost of the homes.
50% is variable cost ( building the home) and the balance is interest on debts and profits.
2/ in 4Q07 KBH sold for $2B worth of homes from inventory. An analyst complimented KBH for this level of sales from inventory. The reading there is that this sales level, eventhough lower than yty by $1B, it is still a higher level of sales than the analyst expectation.
My call: the HB are making bottom here. The duration of the bottom flat curve line is what we should start observing in 1H08 and not expect a V type recovery. But at least some 'rational value' should be assigned to these companies. ]]> http://seekingalpha.com/article/59192-boeing-s-787-hacker-vulnerable?source=feed#comment-108717 108717 1/ Boeing and FAA started talking on this in 2003 ( 5 years ago). GREAT!
2/ Regulation was released in mid-2007 and between now and then MOST back-and-forth between FAA and industry was with AIRBUS.

Does this mean that AIRBUS is caught with out-of-spec design?
Comments, please]]> Mon, 07 Jan 2008 11:28:49 -0500 1/ Boeing and FAA started talking on this in 2003 ( 5 years ago). GREAT!
2/ Regulation was released in mid-2007 and between now and then MOST back-and-forth between FAA and industry was with AIRBUS.

Does this mean that AIRBUS is caught with out-of-spec design?
Comments, please]]>