taojaxx

Vale May Bid for Mosaic: Let the Great Potash War Begin

Ryan,

Thanks for responding. My point is this argument about population growth is so general, I view it as useless for our purpose: it assumes similar oligopolistic supply structure and no extra discoveries whereas as we speak current pricing triggers development and Brazil for example announced one such discovery.
As to the link with the real estate bubble, POT from $45 to $226 back to $50 (so multiplied by 5 and subsequently divided by 5.5) seems to me to fit the definition of a bubble.
As you said, best of luck in your investment. After 30 years in this investing business, I have found that the major success factor was precisely that: luck. It oftentimes comes alongside hard work ("the harder I work, the luckier I get"), but not always.


On Jul 18 02:19 PM Ryan Barnes wrote:

> To Taojaxx: Yes, I read all the same reports that you have in the
> past 24 hours. Yes, Vale denied interest in MOS, just like every
> acquirer in the past 20 years has done when faced with a potential
> leak.
>
> And yes, inventories are up at Potash Corp, and Agrium has announced
> price cuts in the range of 20%; this is why share prices have been
> cut in half as I mentioned. As to the broader thesis of global demand
> for protein being higher...if you think that's comparable to real
> estate, that's your right...I just don't see any comparison.
>
> The increased demand for real estate was based on the increased access
> to cheap credit, making ever larger patches of the demograpic quilt
> feel that owning a home was their "right". That part of the fundamental
> equation has changed. The increased demand for proteins in a growing
> population has not changed to date, and I don't see anything stopping
> it.
>
> Best of luck to all in your investing efforts.

Vale May Bid for Mosaic: Let the Great Potash War Begin

In case you don't know, Vale denied they were interested in buying MOS.
Similarly, AGU just cut the listed potash price from $770 to $512 per short ton, and POT announced that North American potash inventories were uo 152000 tons in June, bringing them 115% hgher than the average level of the last 5 years.
As to the world needing proteins, this is the pump argument overused last year to justify ridiculous valuations for fert stocks which were subsequently cut in half, in 3 or in 4 from peak to trough.
Reminds me of the "they don't build real estate anymore" we've been satiated with during the bubble heydays.

Inflation Is Going to Be a Major Problem... But Not Today

The Fed has not inflated money supply, it has inflated the monetary base, namely reserves held by commercial banks. As long as these reserves sit on the Fed balance sheet as they do now, money supply is sterilized and creates no inflationary risk. When banks start lending again to earn more than the 25 bp the Fed is currently paying them, then money supply will rise and inflation will be a problem. At that time, the Fed will have plenty of time to mop up liquidity by selling Government bonds (or its own securities, if Congress allows the Fed to issue them).
So, no rush on commodities for inflationary reasons. You might wish to load up on them though, as most don't make the above distinction. As we know, in trading what's important is not what you think, but what the market thinks. Enjoy the commodity party, but stay close to the door as there will be money changing hands when people realize that Marc Faber's certainties ($ debased, buy commodities and a handgun, head for the hills or for China) might change overnight.

Is Potash Corp. Overpriced?

Agree on the short position, short term. Was long up until a week ago or so.
That said, don't know where you heard that the IMF was "putting severe pressure" on Asian countries "to stabilize their currency". If anything, the IMF has been busy encouraging Asian countries to float, either upward (until the crisis hit) or downward (since then).
Looks to me you're hastily cobbling together half baked arguments to back your short position.
It's a case of "are you short because you're bearish or are you bearish because you're short?"
But yes, it looks overbought and might healthily retrace.