gausmus's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.com/user/528568/comments http://seekingalpha.com/article/1294531/comments?source=feed#comment-16658241 16658241 Fri, 22 Mar 2013 12:01:18 -0400 http://seekingalpha.com/article/1289531/comments?source=feed#comment-16565431 16565431 Wed, 20 Mar 2013 15:54:50 -0400 http://seekingalpha.com/article/1289531/comments?source=feed#comment-16550621 16550621
Deal makes sense for MT given the a) their debt load, b) poor prospects in W. Europe, c) their desire to own the Thyssen asset in Alabama, and d) the miserable state of the ore industry. CLF has a $20 handle today, for pete's sake!

If I were looking to own Fe ore reserves in the ground, I'd just go buy it where it's cheapest/transparently valued/most liquid...CLF.]]> Wed, 20 Mar 2013 12:05:04 -0400
Deal makes sense for MT given the a) their debt load, b) poor prospects in W. Europe, c) their desire to own the Thyssen asset in Alabama, and d) the miserable state of the ore industry. CLF has a $20 handle today, for pete's sake!

If I were looking to own Fe ore reserves in the ground, I'd just go buy it where it's cheapest/transparently valued/most liquid...CLF.]]> http://seekingalpha.com/article/1261431/comments?source=feed#comment-16142041 16142041
1) As an engineer, I'm embarrassed that a lawyer has to do an energy balance for the rest of us. Good job John!

2) I agree with your general theme that use of batteries in ev's, load balancers on the grid, etc. is an exercise in economic silliness, I 'll just point out that many electricity consumers are not:

a) fully rational in their energy economic choices
b) fully rational in their purchase of other consumer goods.

People buy Cadillacs, Suburus, etc. All are functional, but meet different consumer needs. EV's are no different. Not low cost, certainly, but they do provide a tangible badge for those that desire to be "greener than thou".

Don't get me wrong. Nothing wrong with green. We should do it. But as John points out, it is not happening here when you take a hard look at the #'s.]]> Mon, 11 Mar 2013 15:18:20 -0400
1) As an engineer, I'm embarrassed that a lawyer has to do an energy balance for the rest of us. Good job John!

2) I agree with your general theme that use of batteries in ev's, load balancers on the grid, etc. is an exercise in economic silliness, I 'll just point out that many electricity consumers are not:

a) fully rational in their energy economic choices
b) fully rational in their purchase of other consumer goods.

People buy Cadillacs, Suburus, etc. All are functional, but meet different consumer needs. EV's are no different. Not low cost, certainly, but they do provide a tangible badge for those that desire to be "greener than thou".

Don't get me wrong. Nothing wrong with green. We should do it. But as John points out, it is not happening here when you take a hard look at the #'s.]]> http://seekingalpha.com/currents/post/782761?source=feed#comment-14162071 14162071 Fri, 25 Jan 2013 14:12:19 -0500 http://seekingalpha.com/article/1122781/comments?source=feed#comment-14047331 14047331 Wed, 23 Jan 2013 11:06:32 -0500 http://seekingalpha.com/article/1122781/comments?source=feed#comment-14000781 14000781 Tue, 22 Jan 2013 09:55:21 -0500 http://seekingalpha.com/article/1098011/comments?source=feed#comment-13394031 13394031
1) Can Ward be dislodged? Enterprise value is binary on this point. He still (apparently) has the support of the Prem Watsa, the "Buffet of Canada". Who else?

2) Is the Mississippian an economic play? Most/all of it? SD's management has a huge credibility problem. Can anything they say be believed? See SD article posted on SA "What Happened to the Economics of Sandridge's Mississippian Wells?" A pretty good deep dive on the company's primary asset. The author went back back and plotted the production curves, compared them to SD's publicly claimed economics, came to a 'NO' answer. In fairness, another analysis by Braden Holt, also posted on SA, was a bit more positive. Mr. Holt still professes skepticism on the economics of the entire play.

3) Presuming Ward, et al are kicked out, does the ugliness stop there? It would seem that the Board of SD would have a fiduciary responsibility to go after the WC Trust, and perhaps other assets of the Ward family. That will be a distraction.

The whole problem here is that the investment is an up/down bet on the exit of the current management team. Why do that when there's so many other transparently managed O&G firms that have great economics and upside? Then, you can look at the stuff you are supposed to look at, like cashflow, growth opportunities, multiples.

It's just a darn shame. A founder with this kind of smarts and drive, so blatantly engaged in self dealing; treating the shareholders like marks waiting to be fleeced. And the market discounts accordingly. SD could be a good deal for everybody, and probably a better deal for the Ward family. It makes you wonder what's going thru his head.]]> Mon, 07 Jan 2013 10:42:54 -0500
1) Can Ward be dislodged? Enterprise value is binary on this point. He still (apparently) has the support of the Prem Watsa, the "Buffet of Canada". Who else?

2) Is the Mississippian an economic play? Most/all of it? SD's management has a huge credibility problem. Can anything they say be believed? See SD article posted on SA "What Happened to the Economics of Sandridge's Mississippian Wells?" A pretty good deep dive on the company's primary asset. The author went back back and plotted the production curves, compared them to SD's publicly claimed economics, came to a 'NO' answer. In fairness, another analysis by Braden Holt, also posted on SA, was a bit more positive. Mr. Holt still professes skepticism on the economics of the entire play.

3) Presuming Ward, et al are kicked out, does the ugliness stop there? It would seem that the Board of SD would have a fiduciary responsibility to go after the WC Trust, and perhaps other assets of the Ward family. That will be a distraction.

The whole problem here is that the investment is an up/down bet on the exit of the current management team. Why do that when there's so many other transparently managed O&G firms that have great economics and upside? Then, you can look at the stuff you are supposed to look at, like cashflow, growth opportunities, multiples.

It's just a darn shame. A founder with this kind of smarts and drive, so blatantly engaged in self dealing; treating the shareholders like marks waiting to be fleeced. And the market discounts accordingly. SD could be a good deal for everybody, and probably a better deal for the Ward family. It makes you wonder what's going thru his head.]]> http://seekingalpha.com/article/1041651/comments?source=feed#comment-12212391 12212391
You are correct about overcapacity. That is a simple math exercise. And you are correct that, under normal circumstances, the capacity would be winnowed, leaving the better mills/management holding the remaining capacity.

BUT - As you have stated: "The fractured state of the global steel industry is due to the industry's historic role as a primary engine of a country's economic development." This historic role (development) usually means that state sponsored capacity can and does operate below full absorbed cost. For years on end.

Nucor is hardly the first to suggest consolidation. Lakshmi Mittal (ArcelorMittal) has preached this for years; was the central force in industry consolidation for most of the period 2000-present.

Now faced with uneconomic capacity in France, Mr. Mittal had his head handed to him by the French govt. for having the temerity to suggest that +/- 600 uneconomic jobs should be eliminated. Threats of nationalization over 600 jobs?!?

So, I guess I'm saying that I am not sanguine that this consolidation will come without years of subsidization by national governments. My view is that overcapacity will persist.

Steel, Energy, and Airlines are the playthings of misguided governments seeking to "develop" their economy with state sponsored investment.

I'd argue an alternative future: The steel biz will continue to be the profitless zombie industry it has been since the 1970's.

And what a shame. Nucor, Steel Dynamics, and the mills along the lakefront in NW Indiana are among the leaders in the industry for competitive cost structures. In a fully rational market, they'd have no problem. With France, China, et al operating capacity to export unemployment, I'm not so sure anymore.]]> Mon, 03 Dec 2012 18:14:12 -0500
You are correct about overcapacity. That is a simple math exercise. And you are correct that, under normal circumstances, the capacity would be winnowed, leaving the better mills/management holding the remaining capacity.

BUT - As you have stated: "The fractured state of the global steel industry is due to the industry's historic role as a primary engine of a country's economic development." This historic role (development) usually means that state sponsored capacity can and does operate below full absorbed cost. For years on end.

Nucor is hardly the first to suggest consolidation. Lakshmi Mittal (ArcelorMittal) has preached this for years; was the central force in industry consolidation for most of the period 2000-present.

Now faced with uneconomic capacity in France, Mr. Mittal had his head handed to him by the French govt. for having the temerity to suggest that +/- 600 uneconomic jobs should be eliminated. Threats of nationalization over 600 jobs?!?

So, I guess I'm saying that I am not sanguine that this consolidation will come without years of subsidization by national governments. My view is that overcapacity will persist.

Steel, Energy, and Airlines are the playthings of misguided governments seeking to "develop" their economy with state sponsored investment.

I'd argue an alternative future: The steel biz will continue to be the profitless zombie industry it has been since the 1970's.

And what a shame. Nucor, Steel Dynamics, and the mills along the lakefront in NW Indiana are among the leaders in the industry for competitive cost structures. In a fully rational market, they'd have no problem. With France, China, et al operating capacity to export unemployment, I'm not so sure anymore.]]> http://seekingalpha.com/currents/post/690331?source=feed#comment-12067101 12067101 Thu, 29 Nov 2012 09:03:23 -0500 http://seekingalpha.com/currents/post/688031?source=feed#comment-12041761 12041761
Lakshmi Mittal got his start buying govt. owned/subsidized steel mills when their government sponsors got tired of the endless drain on the national treasury. Sure, Mr. Mittal (who I admire greatly) gave these assets the tough love they needed to make Revenues > Costs. That's what owners do!

France should consider:

1) The company predecessors of Arcelor were wards of their governments (France, Spain, Belgium). For Hollande to step in at this point and threaten nationalization ignores a sad and recent history in the FRENCH steel industry.

2) If anybody can make a steel mill profitable, it's Mr. Mittal. His "street cred" on this point is legendary. Should France succeed in wresting control of this plant from ArcelorMittal, it almost guarantees an ongoing drain on the FRENCH treasury.

So jev - I agree with your "defragmente" comment. Mr. Mittal does as well, and has said so in the press many times. But it will not work with Hollande & his sychophants roaming the earth unfettered by a moral code and clear business purpose.

This is a very black mark on the history of French commerce.]]> Wed, 28 Nov 2012 13:17:58 -0500
Lakshmi Mittal got his start buying govt. owned/subsidized steel mills when their government sponsors got tired of the endless drain on the national treasury. Sure, Mr. Mittal (who I admire greatly) gave these assets the tough love they needed to make Revenues > Costs. That's what owners do!

France should consider:

1) The company predecessors of Arcelor were wards of their governments (France, Spain, Belgium). For Hollande to step in at this point and threaten nationalization ignores a sad and recent history in the FRENCH steel industry.

2) If anybody can make a steel mill profitable, it's Mr. Mittal. His "street cred" on this point is legendary. Should France succeed in wresting control of this plant from ArcelorMittal, it almost guarantees an ongoing drain on the FRENCH treasury.

So jev - I agree with your "defragmente" comment. Mr. Mittal does as well, and has said so in the press many times. But it will not work with Hollande & his sychophants roaming the earth unfettered by a moral code and clear business purpose.

This is a very black mark on the history of French commerce.]]> http://seekingalpha.com/article/1019091/comments?source=feed#comment-11799041 11799041 Tue, 20 Nov 2012 08:06:24 -0500 http://seekingalpha.com/currents/post/674841?source=feed#comment-11786341 11786341 Mon, 19 Nov 2012 18:17:44 -0500 http://seekingalpha.com/article/1003871/comments?source=feed#comment-11600041 11600041
How to build a company is not at issue here. How to make it reflect full value is. By the only objective measure that matters (the market), SD's management is wanting.]]> Wed, 14 Nov 2012 13:40:09 -0500
How to build a company is not at issue here. How to make it reflect full value is. By the only objective measure that matters (the market), SD's management is wanting.]]> http://seekingalpha.com/article/1003871/comments?source=feed#comment-11560861 11560861
Then there's production property purchase in the Gulf. How is that accretive?

Finally, there's the communication problem you mention. The response to the TPG-Axon letter was a classic. Let me paraphrase: "We (SD) disagree with TPG's assessment of the situation. We'll talk to them. That's all for now, shareholders."

Tom Ward and Co. need to figure out that the point of a business is to make the owners richer. Not to drill every well you can. Not to snarf up every lease you can. Not to grab every drop of oil you can. Make it cashflow. Get your credit rating back. Cull your assets.

It's so darn simple. And some management team is gonna do it, either Tom Ward et al or the next group. But it will happen. Meanwhile, shareholders will suffer.]]> Tue, 13 Nov 2012 15:08:50 -0500
Then there's production property purchase in the Gulf. How is that accretive?

Finally, there's the communication problem you mention. The response to the TPG-Axon letter was a classic. Let me paraphrase: "We (SD) disagree with TPG's assessment of the situation. We'll talk to them. That's all for now, shareholders."

Tom Ward and Co. need to figure out that the point of a business is to make the owners richer. Not to drill every well you can. Not to snarf up every lease you can. Not to grab every drop of oil you can. Make it cashflow. Get your credit rating back. Cull your assets.

It's so darn simple. And some management team is gonna do it, either Tom Ward et al or the next group. But it will happen. Meanwhile, shareholders will suffer.]]> http://seekingalpha.com/article/957771/comments?source=feed#comment-11014971 11014971 Mon, 29 Oct 2012 13:27:07 -0400 http://seekingalpha.com/article/957771/comments?source=feed#comment-11012141 11012141
and,

The industry has learned to complete the wells far more effectively than the orignal horizontal wells. Average Initial potentials and average ultimate recovery (estimated) are up.

Both of these incremental improvements have done much to support production volumes.]]> Mon, 29 Oct 2012 12:32:58 -0400
and,

The industry has learned to complete the wells far more effectively than the orignal horizontal wells. Average Initial potentials and average ultimate recovery (estimated) are up.

Both of these incremental improvements have done much to support production volumes.]]> http://seekingalpha.com/currents/post/578511?source=feed#comment-10373601 10373601 Wed, 10 Oct 2012 11:00:14 -0400 http://seekingalpha.com/article/914751/comments?source=feed#comment-10364241 10364241
Point is, it's all timing on these commodity stocks. Think you are a little early.]]> Wed, 10 Oct 2012 07:57:14 -0400
Point is, it's all timing on these commodity stocks. Think you are a little early.]]> http://seekingalpha.com/article/913481/comments?source=feed#comment-10334041 10334041
1). Is the dividend sustainable? X, MT, AKS have been on the "trail of tears" for some time now. Eurpope's travails are a particularly heavy weight on MT's stock price/earnings power.

2) what are the intentions of the Mittal family? The Arcelor/Mittal Steel merger can be understood as a liquidity event for the family. What's their next move?

I have no idea what the answers are. But the questions need answering before investing.]]> Tue, 09 Oct 2012 12:54:08 -0400
1). Is the dividend sustainable? X, MT, AKS have been on the "trail of tears" for some time now. Eurpope's travails are a particularly heavy weight on MT's stock price/earnings power.

2) what are the intentions of the Mittal family? The Arcelor/Mittal Steel merger can be understood as a liquidity event for the family. What's their next move?

I have no idea what the answers are. But the questions need answering before investing.]]> http://seekingalpha.com/currents/post/565521?source=feed#comment-10064971 10064971 Tue, 02 Oct 2012 06:54:37 -0400 http://seekingalpha.com/currents/post/510531?source=feed#comment-9103401 9103401
1) The clock hours in a year when capacity is valuable are few in number. These numbers are publicly available from MISO, PJM, ERCOT, etc. So, the project must make sense vs. other alternatives (load shedding, predominantly). New gas fired capacity is maybe $1200/kW, which is a tough price target for compressed air facilities. Load shedding is even cheaper than that, and we've only scratched the surface of this resource in the U.S.

2) Even if you can get past 1), the project has to overcome the triviality issue, ie, a 1 or 2 MW capacity project is too small to have any meaningful change in the capacity/demand balance at the ISO or utility level. And that's what matters.

There's another test out there that all should consider. Investor owned utilities have a very low cost of capital and every incentive to invest (that's how they earn, after all). If the IOU's could dream up a scenario that showed benefit to ratepayers, these things would pop out of the ground like toadstools after a summer rain. They don't. That speaks to the (non) viability of this technology very loudly.

Those outside the industry can hope, dream, imagine. Investors (that's what Seeking Alpha is about, right?) will take a pass absent subsidies pointed at the technology.]]> Wed, 05 Sep 2012 08:47:19 -0400
1) The clock hours in a year when capacity is valuable are few in number. These numbers are publicly available from MISO, PJM, ERCOT, etc. So, the project must make sense vs. other alternatives (load shedding, predominantly). New gas fired capacity is maybe $1200/kW, which is a tough price target for compressed air facilities. Load shedding is even cheaper than that, and we've only scratched the surface of this resource in the U.S.

2) Even if you can get past 1), the project has to overcome the triviality issue, ie, a 1 or 2 MW capacity project is too small to have any meaningful change in the capacity/demand balance at the ISO or utility level. And that's what matters.

There's another test out there that all should consider. Investor owned utilities have a very low cost of capital and every incentive to invest (that's how they earn, after all). If the IOU's could dream up a scenario that showed benefit to ratepayers, these things would pop out of the ground like toadstools after a summer rain. They don't. That speaks to the (non) viability of this technology very loudly.

Those outside the industry can hope, dream, imagine. Investors (that's what Seeking Alpha is about, right?) will take a pass absent subsidies pointed at the technology.]]> http://seekingalpha.com/currents/post/510531?source=feed#comment-8850261 8850261 Tue, 28 Aug 2012 10:02:35 -0400 http://seekingalpha.com/article/794291/comments?source=feed#comment-8251421 8251421 Thu, 09 Aug 2012 12:43:42 -0400 http://seekingalpha.com/article/744091/comments?source=feed#comment-7711721 7711721
Just a wild guess: The Steelworkers have a different idea entirely. IF MT sticks to their guns (a big IF), the reasonable investor would expect a strike. I haven't done the math on what this means to CLF's sales, but it has to be substantial. MT has to be their biggest North American customer.]]> Tue, 24 Jul 2012 15:18:26 -0400
Just a wild guess: The Steelworkers have a different idea entirely. IF MT sticks to their guns (a big IF), the reasonable investor would expect a strike. I haven't done the math on what this means to CLF's sales, but it has to be substantial. MT has to be their biggest North American customer.]]> http://seekingalpha.com/article/736211/comments?source=feed#comment-7667081 7667081 Mon, 23 Jul 2012 11:53:00 -0400 http://seekingalpha.com/article/736211/comments?source=feed#comment-7617601 7617601
Guess what? Some profits, followed by new entrants, followed by upstream capitalization of profits, down stream capitalization of risks. AcrcelorMittal stock was $102/SH. Now it's $15/SH.

These industries are just structurally bad businesses - no way to find a niche and own it. ]]> Sat, 21 Jul 2012 10:05:31 -0400
Guess what? Some profits, followed by new entrants, followed by upstream capitalization of profits, down stream capitalization of risks. AcrcelorMittal stock was $102/SH. Now it's $15/SH.

These industries are just structurally bad businesses - no way to find a niche and own it. ]]> http://seekingalpha.com/instablog/668911-erik-mccurdy/836521-ecri-believes-recession-has-begun?source=feed#comment-7282141 7282141 Wed, 11 Jul 2012 13:12:50 -0400 http://seekingalpha.com/article/682121/comments?source=feed#comment-6804381 6804381
Hate to geek out on you here, but you really should correlate period by period MLP returns to non-dimensionalized oil prices (% gain/loss from some base point) and change in GDP deflator. If the correlation that you claim exists, you should be able to t-test its significance.

Overall, pipeline MLP's are toll road operators. Doesn't matter what the value of the cars are - just that they go thru the tollbooth. Oil price shouldn't matter all that much.]]> Tue, 26 Jun 2012 10:32:29 -0400
Hate to geek out on you here, but you really should correlate period by period MLP returns to non-dimensionalized oil prices (% gain/loss from some base point) and change in GDP deflator. If the correlation that you claim exists, you should be able to t-test its significance.

Overall, pipeline MLP's are toll road operators. Doesn't matter what the value of the cars are - just that they go thru the tollbooth. Oil price shouldn't matter all that much.]]> http://seekingalpha.com/article/577161/comments?source=feed#comment-5807181 5807181
1) the PE, which is stratospheric for any company

2) So much of their market is Telco's. They have been (and will be) pressured for the foreseeable future, which means that they will be super cranky price sensitive customers that will leverage these APKT as much as they possibly can.

At a 54 PE, you can chuck the DCF and balance sheet out the window. You're buying concept. APKT has great concept, but I question the health of their primary customers and the stance they take toward all suppliers, not just APKT.]]> Fri, 25 May 2012 10:44:19 -0400
1) the PE, which is stratospheric for any company

2) So much of their market is Telco's. They have been (and will be) pressured for the foreseeable future, which means that they will be super cranky price sensitive customers that will leverage these APKT as much as they possibly can.

At a 54 PE, you can chuck the DCF and balance sheet out the window. You're buying concept. APKT has great concept, but I question the health of their primary customers and the stance they take toward all suppliers, not just APKT.]]>