20% Dividend Potential With Northern Tier [View article]
I think the NTI enjoys a better advantage compared to most other energy MLPs out there.
For me, personally, the problem is that they are engaging in mostly refining petroleum into gasoline and diesel fuel. Considering the mass environmental problems we are having, producing products that cause these kind of toxic fuel exhaust weighed heavily on my conscience. Despite being under the Tier 3 sulfur content rules.
Realistically, gasoline and diesel will remain the main source of energy for transportation and electric power for years to come. However, other cleaner and gradually cheaper sources of energy are out there. That is becoming more of the reality.
Conscientiously, I hope this trend will continue with the likes of firms like Tesla. However, petroleum will continue to play a big part in the economy is many ways. I hope and what is happening is that oil as a transportation and power source is slowly diminishing.
I hope that NTI would be change with it sometime down the road.
Generating chatter from Fed critics is this Reuters report on the return of subprime lending in the auto business. Santander's (SAN) U.S. unit is one of the biggest sellers of securities backed by subprime auto loans. Less well-known is Exeter - originally backed by Goldman, now by Blackstone (BX) - the auto-finance company did $100M in business in 2010, $1B last year, and expects to hit $2.2B in 2015. [View news story]
Unlike real estate property, autos don't have the same kind of appreciation value, but seen as more a depreciating asset for necessity. Like all machinery, it loses value for time.
There are less chances of any kind of bubble in this kind of market.
But natural gas is still limited as to the receiving end. For example, not all vehicles have engines for them. That will take time for that to happen. What about for aircraft and sea vessels?
Furthermore, even though vehicle fuel accounts for most of oil usage, polymers are used for other areas such as plastics which also key components in the economy.
We'll be largely living in the oil age for possibly several more decades to come as we always have for 150 years.
>>I produce value, way more than I consume. No one produces material anything - that is just a law of physics. People only rearrange things into configurations that other men desire more. The *intelligence* with which that is done, has added all the value mankind has enjoyed since the stone age, and continues to do so.<<
But the economics of supply and demand are basic realities. They do apply to our lives. Energy is definitely one of them. And it is a tangible asset. Unless you want go back to animal-powered entities and candles.
Speculators play the market that depends on the economy as a whole. It was obvious to anyone who knows about energy commodities that the economy cannot sustain demand for energy at such high prices. There has to be a breaking point. I guess $145 was it.
It went down in 2008 because of the real estate bubble collapse and temporary deflation due lowering GDP. The first time since the Depression. Since then, inflation has been running less because of continual stagnation which also reduces demand for energy, namely oil.
BUT I'm talking over time. As developed countries demand more and more it with increasingly accessible dwindling world supply, inflation will gradually rise while the economy in the developed countries remain stagnated.
It's the like the 1970s again, except instead of a immediate shock, this stagnation will gradually happen and be more perpetual.
>>The whole picture is all resources are made by men from capital, ideas, and work. Money can create more of all of those things.<<
No, money can only extract and refine those "natural" resources. All the money and technology cannot replace the petroleum that is no longer there. Technology can create energy like through solar power, but we are still not very advanced in these alternatives. Solar doesn't have base power, power to get society going 24/7.
LIKE I SAID BEFORE, THESE DEVELOPMENTS AND INFRASTRUCTURE WILL TAKE DECADES!!!
Furthermore, the reason oil prices have fallen from $145 a barrel because the economy cannot sustain growth under that kind of strain. So, the economic dynamics lower and so does the demand for energy. THAT'S WHY OIL PRICES FELL BY A THIRD.
And when the economy picks up again, a disproportionate rise in oil prices will knock it down again. That's what is happening these days because we have higher world demand to world supply due to changes like the rise of China and India.
Hyperinflation is not the problem in the United States. The problem is economic stagnation with inflation (stagflation) when inflation should only be appropriately rising with a growing economy.
I said it will take decades for alternatives to largely become part of the energy infrastructure.
If it is as cheap as you say it is, then why did a barrel of oil went from around $20 a barrel in the 1990s to over $140 by 2008??? And with a norm of $70-80 a barrel now???
That is a problem of demand outstripping supply. Never before did energy prices grew so alarmingly so fast in such a short time since the before the Civil War. I'm sure you noticed it, especially in the gas pump.
Any hint of growth would be drive oil prices to over $100 a barrel and then bat it down again, causing constant stagnation. The economy cannot grow in the way you want under those kind of circumstances. It's like the 1970s again with stagflation of high inflation and stagnant growth. Except this time, it is more perpetual because the U.S. cannot import it's way out.
There is plenty of petro reserves, but getting to it is the hard part. In 1900, it took one barrel of oil to produce 100 barrels in the United States. In Saudi Arabia, it takes 1 for 25 barrels. In the oil sands pits in Canada, it takes 1 barrel to produce 4-5 barrels. This was something that was not even considered over 10 years ago. If it takes a barrel to get to one or two, it is simply not worth it.
I think Obamacare's contribution to the economy would be intrinsic. It's the other federally-mandated insurance program, the FDIC. You can argue by eliminating the mandatory insurance program, that the banks would save money and pass that on to the customers and borrowers. However, the price of eliminating the FDIC or its mandatory rules could have a greater negative impact than not having it at all as you can imagine.
You made several good points. Also, there are two other major strategic problems that will affect this economy for decades to come.
1) Disproportionate aging population in developed countries. The baby boomers are starting to retire which would be burdensome to the economy for relatively lesser more productive younger personnel in the workforce as well as the pension and health care systems. I don't think civilization ever faced such a disproportionate demographic problem before.
2) Lacking cheap energy commodity. Petroleum is still king even though it has been gradually losing its supremacy and to alternatives. It could take decades for alternatives to largely become part of the energy infrastructure. If this happens, it could be the biggest revolution in modern civilization since the Industrial Revolution itself.
All these will take time and the economy is not be what many people would consider at a dynamic level until these strategic issues are solved. Otherwise, pessimistically the first half of the 21st century for the developed economies is a write-off.
Bank Regulation: A Necessary Evil for Stock Market Growth [View article]
Finance laws such as Glass-Steagall Act should have never been completely repealed. If it was necessary, it could have been revised. But the complete elimination was ridiculous. It's basic premise for the Act was needed even more in contemporary times than it was over 75 years ago when it became law.
We don't need less regulation, but actually more. For example, much of the the derivatives market wasn't covered. And the people who ran the SEC under the Bush Administration in which much of the reckless and shady business was going on during that time, were unconditional free market advocates like Christopher Cox. Essentially, you had people who didn't believe in their jobs running an enforcement apparatus.
Whitney Tilson: Berkshire Hathaway Is Undervalued [View article]
I have to agree. In the long term, BRK is undervalued because of the positions it has. But the one that really makes it undervalued is Burlington Northern Santa Fe (BNI) railroad.
Railroad industry was one the most proficient industries since it inception in the mid-1800s to the 1950s when it experienced a decline that still makes it nearly a defunct industry today. What caused the decline in railroads in the 1950s were two factors.
The National Highway System was built under the Eisenhower administation, arguably the largest public works project in the history of mankind exceeding that of the Panama Canal, the Suez Canal, the Hoover Dam, Transsiberian Railroad, The Chunnal, the Pyramids, etc. Petroleum was very cheap back then because even domestic supply was than enough to meet (an ever increasing) demand at that time. In fact, the United States used to be major oil exporter until later in the 1960s. So, as a result trucking freight was more efficient and flexible than rail transportion.
Another factor was the advent of the jumbo jet for airlines. Again, with fuel being relatively cheap at that time, passengers prefer a much faster way to get from point A to B.
These evolutions had major socioeconomic impact in almost every way. Even Major League Baseball franchises that have been located mostly in the northwestern United States and only went as far as St. Louis before, expanded to new virgin markets further westward. New teams formed in those areas or were absorbed into the MLB.
America relied on cars more than ever because of the socioeconomic circumstances which also includes the emergence of suburban communities (the so-called "white flight") in the 1950s. Not only could people could afford cars during the boom times and the expansion of the middle-class in the 1950s, they were also essential when living out in the more distant suburbs.
In the background of all this, came the emerging auto insurance market. This is where Buffet really made his fortune more than Coca-Cola or any other investment. If I am correct on this, Berkshire Hathaway gradually bought up shares of Geico in the 1980s and 1990s until Buffet purchased it entirely. Why?
The United States has the largest auto insurance market in the world by far in which Geico is one of the largest. The average American is much more likely to own a car or two than own a home, a life insurance policy, or have health insurance. And as far I know, all 50 states in the Union requires auto insurance with a car. And with such relatively low overhead and the amount of float such a business produces, the cash flow of and cash float available to Geico (and BRK) is enormous which allowed Buffett to make large investments in stable and undervalued companies such as Coca-Cola and American Express.
Now, with the high cost of petroleum these days because of the high demands of globalization (and global industrialization), railroads are experiencing a industry revival in freight transportation and possibly even in passenger transportation. (Greyhound might get too expensive for some people).
We could be seeing a renewed rise in railroads that can have the same kind of major socioeconomic impact as the Interstate Highway System, the jet airliners, and even the internet and wireless communications have had on our society.
That's the true hidden instrinic value railroads like BNSF has in the long term for which Warren Buffet bought out and that can best increase the considerable returns for a firm with the market cap size of BRK.
Ironically, Buffett, who basically made the car-related industry the cornerstone of his fortune, is now betting on another transportation system for the future because of the changing socioeconomic circumstances. Like his 100% purchase of Geico, he's also making the same kind of commitment to BNSF, in which he sees parallels with as he did with Geico decades ago relative to their respective circumstances. Even to a point that he split BRK's Class-B shares, a practice that he has long objected to to accomodate BNSF shareholders and avoid capital gains taxes.
So, why BNSF? BNSF runs most of the lines west of the Mississippi River, a region that the fastest growing in the United States (along with the southeast). Cities like San Diego, Denver and Phoenix are projected to be among the largest in the United States with L.A. overtaking New York as the largest in the country. With the future looking more towards Asia and the Pacific rim as the place for commerce, the western states are going to expand rapidly.
China Agritech: Undervalued, Little Known [View article]
I am generally worried about the asset bubble in China, especially in urban coastal areas like Shanghai where housing prices have rose more than dramactically during the past several years with the economic boom.
CAGC has great potential as you mentioned in which I agree with and appreciate the insight that you have given.
However, being in Shanghai, how much exposure does CAGC have on the local real estate market? Being a small company, it does run a large risk to its balance sheet and overall cash flow, although in the long term the demand for speciality fertilizers in a ever demanding domestic market on less land space in China will continue to be profitable for CAGC.
Does the company have a good margin of safety within the real estate market? Did it purchase any such assets before this huge boom in the last few years?
Does anyone have more information regarding this issue?
20% Dividend Potential With Northern Tier [View article]
For me, personally, the problem is that they are engaging in mostly refining petroleum into gasoline and diesel fuel. Considering the mass environmental problems we are having, producing products that cause these kind of toxic fuel exhaust weighed heavily on my conscience. Despite being under the Tier 3 sulfur content rules.
Realistically, gasoline and diesel will remain the main source of energy for transportation and electric power for years to come. However, other cleaner and gradually cheaper sources of energy are out there. That is becoming more of the reality.
Conscientiously, I hope this trend will continue with the likes of firms like Tesla. However, petroleum will continue to play a big part in the economy is many ways. I hope and what is happening is that oil as a transportation and power source is slowly diminishing.
I hope that NTI would be change with it sometime down the road.
Otherwise, it is in an enviable position.
3 Under-Appreciated GDP Facts [View article]
No, oil was used for kerosene and other usage starting from the mid-19th century.
Like I said before, it will take time for other alternatives to develop.
Generating chatter from Fed critics is this Reuters report on the return of subprime lending in the auto business. Santander's (SAN) U.S. unit is one of the biggest sellers of securities backed by subprime auto loans. Less well-known is Exeter - originally backed by Goldman, now by Blackstone (BX) - the auto-finance company did $100M in business in 2010, $1B last year, and expects to hit $2.2B in 2015. [View news story]
There are less chances of any kind of bubble in this kind of market.
3 Under-Appreciated GDP Facts [View article]
Furthermore, even though vehicle fuel accounts for most of oil usage, polymers are used for other areas such as plastics which also key components in the economy.
We'll be largely living in the oil age for possibly several more decades to come as we always have for 150 years.
3 Under-Appreciated GDP Facts [View article]
Well-said!!!
3 Under-Appreciated GDP Facts [View article]
>>I produce value, way more than I consume. No one produces material anything - that is just a law of physics. People only rearrange things into configurations that other men desire more. The *intelligence* with which that is done, has added all the value mankind has enjoyed since the stone age, and continues to do so.<<
But the economics of supply and demand are basic realities. They do apply to our lives. Energy is definitely one of them. And it is a tangible asset. Unless you want go back to animal-powered entities and candles.
3 Under-Appreciated GDP Facts [View article]
Speculators play the market that depends on the economy as a whole. It was obvious to anyone who knows about energy commodities that the economy cannot sustain demand for energy at such high prices. There has to be a breaking point. I guess $145 was it.
3 Under-Appreciated GDP Facts [View article]
Inflation is risen in the up to 4% from 2002-2007 that included growing energy costs during that time.
http://bit.ly/QtDuMF
It went down in 2008 because of the real estate bubble collapse and temporary deflation due lowering GDP. The first time since the Depression. Since then, inflation has been running less because of continual stagnation which also reduces demand for energy, namely oil.
BUT I'm talking over time. As developed countries demand more and more it with increasingly accessible dwindling world supply, inflation will gradually rise while the economy in the developed countries remain stagnated.
It's the like the 1970s again, except instead of a immediate shock, this stagnation will gradually happen and be more perpetual.
3 Under-Appreciated GDP Facts [View article]
>>The whole picture is all resources are made by men from capital, ideas, and work. Money can create more of all of those things.<<
No, money can only extract and refine those "natural" resources. All the money and technology cannot replace the petroleum that is no longer there. Technology can create energy like through solar power, but we are still not very advanced in these alternatives. Solar doesn't have base power, power to get society going 24/7.
LIKE I SAID BEFORE, THESE DEVELOPMENTS AND INFRASTRUCTURE WILL TAKE DECADES!!!
Furthermore, the reason oil prices have fallen from $145 a barrel because the economy cannot sustain growth under that kind of strain. So, the economic dynamics lower and so does the demand for energy. THAT'S WHY OIL PRICES FELL BY A THIRD.
And when the economy picks up again, a disproportionate rise in oil prices will knock it down again. That's what is happening these days because we have higher world demand to world supply due to changes like the rise of China and India.
Hyperinflation is not the problem in the United States. The problem is economic stagnation with inflation (stagflation) when inflation should only be appropriately rising with a growing economy.
3 Under-Appreciated GDP Facts [View article]
I said it will take decades for alternatives to largely become part of the energy infrastructure.
If it is as cheap as you say it is, then why did a barrel of oil went from around $20 a barrel in the 1990s to over $140 by 2008??? And with a norm of $70-80 a barrel now???
That is a problem of demand outstripping supply. Never before did energy prices grew so alarmingly so fast in such a short time since the before the Civil War. I'm sure you noticed it, especially in the gas pump.
Any hint of growth would be drive oil prices to over $100 a barrel and then bat it down again, causing constant stagnation. The economy cannot grow in the way you want under those kind of circumstances. It's like the 1970s again with stagflation of high inflation and stagnant growth. Except this time, it is more perpetual because the U.S. cannot import it's way out.
There is plenty of petro reserves, but getting to it is the hard part. In 1900, it took one barrel of oil to produce 100 barrels in the United States. In Saudi Arabia, it takes 1 for 25 barrels. In the oil sands pits in Canada, it takes 1 barrel to produce 4-5 barrels. This was something that was not even considered over 10 years ago. If it takes a barrel to get to one or two, it is simply not worth it.
SEE THE WHOLE PICTURE???
3 Under-Appreciated GDP Facts [View article]
3 Under-Appreciated GDP Facts [View article]
You made several good points. Also, there are two other major strategic problems that will affect this economy for decades to come.
1) Disproportionate aging population in developed countries. The baby boomers are starting to retire which would be burdensome to the economy for relatively lesser more productive younger personnel in the workforce as well as the pension and health care systems. I don't think civilization ever faced such a disproportionate demographic problem before.
2) Lacking cheap energy commodity. Petroleum is still king even though it has been gradually losing its supremacy and to alternatives. It could take decades for alternatives to largely become part of the energy infrastructure. If this happens, it could be the biggest revolution in modern civilization since the Industrial Revolution itself.
All these will take time and the economy is not be what many people would consider at a dynamic level until these strategic issues are solved. Otherwise, pessimistically the first half of the 21st century for the developed economies is a write-off.
Bank Regulation: A Necessary Evil for Stock Market Growth [View article]
We don't need less regulation, but actually more. For example, much of the the derivatives market wasn't covered. And the people who ran the SEC under the Bush Administration in which much of the reckless and shady business was going on during that time, were unconditional free market advocates like Christopher Cox. Essentially, you had people who didn't believe in their jobs running an enforcement apparatus.
Whitney Tilson: Berkshire Hathaway Is Undervalued [View article]
Railroad industry was one the most proficient industries since it inception in the mid-1800s to the 1950s when it experienced a decline that still makes it nearly a defunct industry today. What caused the decline in railroads in the 1950s were two factors.
The National Highway System was built under the Eisenhower administation, arguably the largest public works project in the history of mankind exceeding that of the Panama Canal, the Suez Canal, the Hoover Dam, Transsiberian Railroad, The Chunnal, the Pyramids, etc. Petroleum was very cheap back then because even domestic supply was than enough to meet (an ever increasing) demand at that time. In fact, the United States used to be major oil exporter until later in the 1960s. So, as a result trucking freight was more efficient and flexible than rail transportion.
Another factor was the advent of the jumbo jet for airlines. Again, with fuel being relatively cheap at that time, passengers prefer a much faster way to get from point A to B.
These evolutions had major socioeconomic impact in almost every way. Even Major League Baseball franchises that have been located mostly in the northwestern United States and only went as far as St. Louis before, expanded to new virgin markets further westward. New teams formed in those areas or were absorbed into the MLB.
America relied on cars more than ever because of the socioeconomic circumstances which also includes the emergence of suburban communities (the so-called "white flight") in the 1950s. Not only could people could afford cars during the boom times and the expansion of the middle-class in the 1950s, they were also essential when living out in the more distant suburbs.
In the background of all this, came the emerging auto insurance market. This is where Buffet really made his fortune more than Coca-Cola or any other investment. If I am correct on this, Berkshire Hathaway gradually bought up shares of Geico in the 1980s and 1990s until Buffet purchased it entirely. Why?
The United States has the largest auto insurance market in the world by far in which Geico is one of the largest. The average American is much more likely to own a car or two than own a home, a life insurance policy, or have health insurance. And as far I know, all 50 states in the Union requires auto insurance with a car. And with such relatively low overhead and the amount of float such a business produces, the cash flow of and cash float available to Geico (and BRK) is enormous which allowed Buffett to make large investments in stable and undervalued companies such as Coca-Cola and American Express.
Now, with the high cost of petroleum these days because of the high demands of globalization (and global industrialization), railroads are experiencing a industry revival in freight transportation and possibly even in passenger transportation. (Greyhound might get too expensive for some people).
We could be seeing a renewed rise in railroads that can have the same kind of major socioeconomic impact as the Interstate Highway System, the jet airliners, and even the internet and wireless communications have had on our society.
That's the true hidden instrinic value railroads like BNSF has in the long term for which Warren Buffet bought out and that can best increase the considerable returns for a firm with the market cap size of BRK.
Ironically, Buffett, who basically made the car-related industry the cornerstone of his fortune, is now betting on another transportation system for the future because of the changing socioeconomic circumstances. Like his 100% purchase of Geico, he's also making the same kind of commitment to BNSF, in which he sees parallels with as he did with Geico decades ago relative to their respective circumstances. Even to a point that he split BRK's Class-B shares, a practice that he has long objected to to accomodate BNSF shareholders and avoid capital gains taxes.
So, why BNSF? BNSF runs most of the lines west of the Mississippi River, a region that the fastest growing in the United States (along with the southeast). Cities like San Diego, Denver and Phoenix are projected to be among the largest in the United States with L.A. overtaking New York as the largest in the country. With the future looking more towards Asia and the Pacific rim as the place for commerce, the western states are going to expand rapidly.
China Agritech: Undervalued, Little Known [View article]
CAGC has great potential as you mentioned in which I agree with and appreciate the insight that you have given.
However, being in Shanghai, how much exposure does CAGC have on the local real estate market? Being a small company, it does run a large risk to its balance sheet and overall cash flow, although in the long term the demand for speciality fertilizers in a ever demanding domestic market on less land space in China will continue to be profitable for CAGC.
Does the company have a good margin of safety within the real estate market? Did it purchase any such assets before this huge boom in the last few years?
Does anyone have more information regarding this issue?