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charliezap

charliezap
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  • Don't Invest In Oil & Gas Before You Read This [View article]
    A. On an asset allocation basis, UGP should not be compared with XOM, CVX, RDSA, etc -- integrated domestic/worldwide large caps. It belongs in a more speculative category. Perhaps foreign small/mid caps.

    B. The article is pure analysis by hindsight. What if you had included Petrobras in the performance standings?
    http://yhoo.it/YV3LmB

    C. You also say, "The majority of your petro dollar investments should be in the downstream refining, marketing, and distribution [sector]." This is very highly questionable advice. It is in complete contradiction with your reliance on historical performance. While we are currently in a cyclical period of fat refining margins, historically, the fattest margins, and highest returns on capital have been in the exploration sector. You can, in theory, smooth out returns by investing in the integrated companies (XOM, CVX, RDSA again) which combine E&P with R&M.
    Feb 26, 2013. 08:50 AM | 11 Likes Like |Link to Comment
  • BHP: Don't Buy The Hype [View article]
    Here is how BHP describes its business in its annual report:
    ----------------------...
    """We are the world’s largest diversified natural resources company. Our corporate objective is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. We pursue this through our consistent strategy of owning and operating large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. This strategy means more predictable business performance over time which, in turn, underpins the creation of value for our shareholders, customers, employees and, importantly, the communities in which we operate. We are among the world’s top producers of major commodities, including aluminium, energy coal, metallurgical coal, copper, manganese, iron ore, uranium, nickel, silver and titanium minerals, and have substantial interests in oil and gas."""
    ----------------------...
    Note that there is no mention of diamonds, which is confined to one small operation. No mention of gold either, so what is the relevance of gold miners, Yamana, Barrick, and Freeport?

    The major products are aluminum, coal, copper, oil and iron ore. Demand for all of these products is heavily dependent on the business cycle. Last I heard, China was still growing at over 7%, the US at about 2%, while Europe may be flat to down -- on balance there is still growing demand for BHP's output.

    The article contributes nothing of significance about BHP.
    Jun 29, 2012. 02:40 PM | 11 Likes Like |Link to Comment
  • Which Of These 3 REITs Will Outperform In 2012? [View article]
    """Purchasing properties that it intends to use for commercial rentals has allowed the company to profit on the low mortgage rates with higher securities, sometimes getting a 100% return in the process. This changed in 2011, driving up the corporate obligations, as evidenced by its debt to equity ratio of 557."""

    Nonsense. This article: A) shows virtually no comprehension of the business models followed by these companies, and, B) the numbers quoted are totally misleading. More specifically, these 3 companies are mortgage REIT's that invest primarily in residential mortgage securities (paper). They are not equity REIT's that invest in commercial rental buildings (bricks and mortar). They borrow short term funds to leverage the returns, and they hedge their interest rate risks. They make a profit on the spread between mortgage rates and short term borrowing rates.

    To alleviate credit risk, Annaly primarily invests in mortgage securities that are guaranteed by agencies of the US government. Like a bank, Annaly operates with a high ratio of debt to equity. Most recently, Annaly's ratio of total liabilities to assets was 85.6%. This gives a debt to equity ratio of 5.94, or 594%. (Did the author mean % when he said that the debt to equity ratio was 557?)

    Let's be clear. Annaly does not purchase properties "to use for commercial rentals". Nor does not "profit [from] low mortgage rates" on the properties. Incoming funds did not "collapse" in 2011. In fact, net interest income rose from under $0.5 billion in 2007 to $3.1 billion in 2011. The fairly sharp decline in reported net income was almost entirely due to a non-cash charge, unrealized losses on interest rate swaps, that has virtually no bearing on dividend paying ability.
    Mar 19, 2012. 01:25 AM | 11 Likes Like |Link to Comment
  • John Paulson Says to Buy Dividend Stocks and Houses, Sell Bonds [View article]
    1) Most likely taxes on qualified dividends will go up to just 20%. This will not have much impact on the stock market, IMO.

    2) Also, many stocks are held by non-taxable entities, such as pension funds and IRA"s. This is another item that will diminish the impact. There is a lot of disinformation being spread (particularly on CNBC and Fox Business) about taxes on dividends going to 39.6%. Tax fears provide a buying opportunity, IMO.

    3) Of course, the most sensible thing to do with dividends would be to give corporations a deduction for dividends paid, just as there is a deduction for interest paid. This would eliminate the bias toward debt, eliminate the double taxation problem, and simplify our tax returns. It would also encourage corporations to pay dividends and to stop hoarding cash or reinvesting in low return projects. (Dividends received by individuals would be taxed at the same rate as earned income, just as they were pre-GWB tax cuts.)
    Again, of course, it would happen. It makes too much sense, and is regarded as "politically impossible", just like the carbon tax.
    Oct 1, 2010. 12:13 PM | 11 Likes Like |Link to Comment
  • Don't Buy Exxon Mobil [View article]
    """ They are getting heavier into renewables . ."""

    Are you serious? About 99.9% of XOM's revenues comes from oil and gas, and chemicals, mostly derived from oil and gas feedstock.

    http://bit.ly/1us9UqW
    Dec 11, 2014. 12:44 PM | 10 Likes Like |Link to Comment
  • Second Quarter Portfolio Review: Building Dividend Growth And Quality [View article]
    DesertRat, the issue with REITs in a rising interest rate environment, is not, IMO, that higher interest costs will reduce the capacity to pay dividends, leading to rate cuts; at least, not with respect to eREITs.

    I counted 8 REITs on the list out of 48 stocks, all equity REITS. In the current rate environment, most eREITs have reduced short term borrowings and taken on longer term debt at favorable rates. If rates do rise, it will be because of improved business conditions, enabling REITs to raise the rents on lease renewals, thus offsetting any increases in interest costs.

    Mortgage REITs (mREITs) are a different kettle of fish. mREITs are much more heavily levered than eREITs, plus, the borrowings are heavily short term. Higher rates would squeeze earnings, unless the REITs' main assets are adjustable rate loans, or unless appropriately hedged. But this portfolio does not hold any mREITs.

    So the risk in eREITs (of which I hold about half a dozen) is not so much higher interest expenses, but interest rate risk. The eREITs that are most vulnerable to interest rate risk are the low yielders, those paying less than less than 3%. When rates on T-bonds rise above 3%, it is my opinion that many former fixed income investors who switched to dividend paying stocks will switch back to fixed income. Higher yielding REITs (those paying 5, 6, or 7%) will be less vulnerable to this pressure than the low yielders.
    Jul 19, 2014. 03:22 PM | 10 Likes Like |Link to Comment
  • Court revives BP retirement plan lawsuit filed after oil spill [View news story]
    """ . . participants in BP employee retirement savings plans alleged they were deceived into buying and holding BP stock before and after the 2010 Gulf of Mexico oil spill."""

    What nonsense! Lawyers attempting to take another chunk out of BP! I hope they fall on their aasssseess!
    Jul 15, 2014. 07:14 PM | 10 Likes Like |Link to Comment
  • Citigroup Mired In Mexico - Sell This Megabank [View article]
    Silly article. All of this news is factored into the price of the stock. Citi sells at the lowest P/E and lowest Price/TBV of the big banks, which leaves plenty of room for the stock to move up.

    According to Marketwatch, 20 analysts say Strong Buy or Buy. 9 are at Hold, and 2 say Sell. The median target price is $58. I'll go with the expert consensus, which says Citi will earn $5.50 next year. P/E on $5.50 is 8.5, which is very low!
    May 19, 2014. 09:04 AM | 10 Likes Like |Link to Comment
  • Is This the End for BP? [View article]
    What a misleading headline!

    At a price of $44.55 (30% below the high), and a market cap of $140 billion, it is obvious that the market does not think it is anywhere near the end for BP. Besides which, there is nothing really new in the article, though I don't know where the $100 billion clean-up estimate comes from -- I would stick with $30-40 billion. There is some uncertainty in the outcome of lawsuits, of course. However, I think that BP will in the end not take all of the responsibility -- some will fall to Halliburton, Transocean, Cameron, Anardarko and Mitsubishi.

    Also, most of the assets that BP is selling are marginal, peripheral, or fully mature assets. It is obvious that BP intends to stay in the high risk exploration sector of the industry, in order to exploit their exploration know how. BP may or may not be a fully integrated company in the end, but E&P is the most profitable sector of the business, while R&M (refining and marketing), has always been somewhat marginal. As far as the stock price is concerned, there is more upside than downside from here.
    Dec 15, 2010. 12:15 PM | 10 Likes Like |Link to Comment
  • Share Buybacks That Precede Disaster [View article]
    """BP halted its dividend payout, saving $10 billion a year. And BP, on July 20, agreed to sell some assets to Apache Corp (APA) for $7 billion and said it hopes to sell another $23 billion of properties. As YCharts reported, it appears BP will weather the storm.
    . . . .
    What’s more, regardless of who’s to blame for the Deepwater platform’s sinking, BP is responsible for its own balance sheet. And, as Bloomberg BusinessWeek noted, BP’s liquidity crunch was made even worse by the $37 billion it spent buying back its own shares in recent years, at what now seem highly inflated prices."""

    At least in the case of BP, this is nothing but a remarkable case of 20/20 hindsight. The Macondo incident was not a normally predictable event. Before the oil spill that sheared a third off BP's market cap and a large chunk off its shareholder's equity, BP was a relatively under-leveraged company. A share buyback was not outside of the bounds of prudent financial management. To the contrary, it was probably a wise course of action, if the alternative was to invest in lower return investments.

    Citibank is a different case. Definitely over-leveraged, especially considering the risky "investments" it had, both on and off the balance sheet. But Citi was competing with the likes of Goldman, Lehman, Bear, M Stanley, and M Lynch, all of which had persuaded the SEC that a capital ratio of 33 to 1 was OK.
    Sep 8, 2010. 05:11 PM | 10 Likes Like |Link to Comment
  • Oil Price Economics the 60 Minutes Way [View article]
    This is a brilliant debunking of a silly piece by 60 Minutes. Anyone who buys commodities in the futures market has to eventually sell that contract or take delivery. Yes, Goldman may own a few tanks in Cushing, OK. They may even own a refinery or two. But the US government tracks inventories on a weekly basis and there is no evidence of excessive hoarding. Yes, Morgan Stanley may have a few large tankers slow-steaming out there on the high seas, but the volumes involved in tanker storage are simply not enough to account for $140 per barrel of oil. Besides, now they are playing a different game, trying to take advantage of the contango situation, delivering in the future at higher prices, now that spot prices are below $40 per barrel. This will be to the advantage of the consumer, as it will bring down future prices. Seems to me the market place is working just fine.

    So why did oil go over $140. The obvious answer is supply and demand. No one can deny that China and India, growing at over 10% annually, added greatly to world demand. No on can deny that it takes years for the supply side to react to high prices, due to the enormous capital expenditures required to develop oil producing properties.

    And why did oil go back to $40. Again, simple. 1) That new supply came to market, 2) high prices caused substitution and economization and reduced demand, and, 3) RECESSION!

    In the short term, oil is a highly price inelastic commodity, which makes oil prices potentially highly volatile. Too bad Steve Kroft, and others, never did any Economics 101 before they ventured onto the networks to demonstrate their public ignorance.
    Jan 12, 2009. 10:45 AM | 10 Likes Like |Link to Comment
  • GT Advanced Technologies And InvenSense Are Prepping For Tremendous Sales Growth Over The Next 12 Months [View article]
    Somehow, it was very unwise of you to risk your retirement on just this one stock!
    Sep 22, 2014. 12:34 PM | 9 Likes Like |Link to Comment
  • 4 Beaten-Down Dividend Stocks For 2014 [View article]
    Getting a K-1 may be a bit of a tax filing hassle, but selling a MLP brings on additional levels of complexity.

    In 2012, my wife decided we should move to a larger apartment. To raise the funds, we liquidated one of our taxable accounts, which included the sale of EV Energy Partners, EVEP, at a significant long term gain. I have always done our taxes myself, using TurboTax. As the tax filing deadline approached, I realized that there were issues that I did not fully understand, but I filed (electronically) anyway, reporting the gain on Schedule D. More tax "fun".

    I delved deeper, and found that when you sell an MLP, you are not simply selling stock. You are selling a portion of an operating business and the gain has to be reported on Form 4797. A portion of the gain was deemed ordinary income, due to the depreciation recapture provision. I filed an amendment, and paid more tax.

    I reviewed my filing once more, and found that the gain was still showing up on Schedule D, as well as on Form 4797. The gain had been doubly reported in the original filing, once when I down loaded the 1099B from the brokerage firm, and once when I entered it manually on Sch D. I filed a second amended return, removing the Sch D entry. We now await a refund of several thousand $ from the feds and from NY State.

    I learned something new about filing taxes, and my wife is very happy about our new apartment. Now I just have to report the sale of our old apartment on our 2013 tax return.
    Jan 1, 2014. 08:39 AM | 9 Likes Like |Link to Comment
  • At A Decade-Long Low, Annaly Capital Management May Be A Buy [View article]
    Where do you get your notions from? Actually, the president has proposed the opposite, and would favor winding down or privatizing Fannie and Freddy. Only our elected congress is in the way.

    http://cbsn.ws/18Ux8P1
    Dec 17, 2013. 04:31 PM | 9 Likes Like |Link to Comment
  • American Realty Capital - Enough Already, Thoughts From A Shareholder [View article]
    @usiah

    Actually, I'm long ARCP (after the debacle), and have considered shorting O, for both technical and fundamental reasons. On the charts, the RSI for O touched 80 this week, while ARCP sank below 20.

    On valuation metrics, O sells at an FFO multiple of 18, while ARCP is at 8X (from Yahoo analyst estimates page). O sells at a premium to NAV, while ARCP is at a discount of around 30%. O yields only 4.6% while ARCP yields over 11%, so that if one is short O, the dividend from ARCP will easily cover the dividend payment due on O.
    Nov 5, 2014. 04:21 PM | 8 Likes Like |Link to Comment
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