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  • What To Expect When Cliff Natural Resources Reports Earnings [View article]
    Revenue = Price x Quantity. U.S. steel production has been turning in 20 month lows the last few weeks, volumetrically speaking. Low Q. CLF has to be taking it on the chin as US producers down opt in their mine partnership agreements. Agree that all the stimulus $ will get to CLF eventually - but not anytime soon. Internationally, BHP is laying off.

    Point is, it's all timing on these commodity stocks. Think you are a little early.
    Oct 10, 2012. 07:57 AM | 1 Like Like |Link to Comment
  • ArcelorMittal: A Steel Maker With Solid Growth Potential And A 4.35% Dividend [View article]
    Two questions:

    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.
    Oct 9, 2012. 12:54 PM | 2 Likes Like |Link to Comment
  • ThyssenKrupp (TYEKF.PK) is considering selling its two-year old $5B high-tech steel plant in Alabama and its $6.8B facility in Brazil after a strategy to transport slabs from the latter facility for processing into high-grade sheets in the U.S. factory led to massive losses. Those officially or unofficially interested in the Alabama plant include Nucor (NUE), U.S. Steel (X) and ArcelorMittal (MT). [View news story]
    With U.S. production at a 20 month low, capacity has to exit.
    Oct 2, 2012. 06:54 AM | Likes Like |Link to Comment
  • Siemens (SI), GE and start-up backed by Bill Gates are among those developing different methods for storing surplus energy. It's not just about batteries, with one technique using excess electricity to pump compressed air into caves and then releasing that air to generate power when needed. The storage is needed to cope with the vagaries of solar and wind energy. [View news story]
    In re: JohnInMA's comment. You are right as to the opportunity cost and the marginal cost of operating a generation facility. There are times when the capacity to produce power (or shed load) is very valuable and thermal efficiency doesn't matter. That said, the project still has problems from two perspectives.

    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.
    Sep 5, 2012. 08:47 AM | Likes Like |Link to Comment
  • Siemens (SI), GE and start-up backed by Bill Gates are among those developing different methods for storing surplus energy. It's not just about batteries, with one technique using excess electricity to pump compressed air into caves and then releasing that air to generate power when needed. The storage is needed to cope with the vagaries of solar and wind energy. [View news story]
    Funny how having lots of money will make you forget the first and second laws of thermodynamics. These schemes are expensive and trivial, when held next to grid demands. But Siemens will cheerfully take your money, Bill.
    Aug 28, 2012. 10:02 AM | 2 Likes Like |Link to Comment
  • Kinder Morgan - Pipe Dream Valuations [View article]
    Have you done comparatives on distributable cash flow to unit holders? The clientele that owns these things are "yield vampires", ie, keenly interested in yield vs. other investment attributes. Disclosure - I'm a yield vampire as well... Anyway, it may help the discussion on the relative merits of MLP's.
    Aug 9, 2012. 12:43 PM | 2 Likes Like |Link to Comment
  • Cliffs Natural Resources' Dividend Is Safe, But Risks Remain [View article]
    Something you may want to consider/keep your eye on: USX and MT have their US labor contracts under negotiation this year. Per the recent Wall Street Journal Article, ArcelorMittal has asked for a 36% reduction in labor costs per ton.

    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.
    Jul 24, 2012. 03:18 PM | 1 Like Like |Link to Comment
  • Why Airline Profits Will Fatten Over The Next Decade [View article]
    Work in it a while. No reinvestment. Overcapacity. No returns. No bonuses. You'll whistle a different tune.
    Jul 23, 2012. 11:53 AM | Likes Like |Link to Comment
  • Why Airline Profits Will Fatten Over The Next Decade [View article]
    I worked in the steel industry, another commodity biz (yes, airplane seat miles are a commodity). In 2003-2004, many of the "it's a new era" thoughts were expressed just as you have: Ogliopolistic behavior, tighter capacity demand balance, better deal with the unions, etc.

    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.
    Jul 21, 2012. 10:05 AM | 1 Like Like |Link to Comment
  • ECRI Believes Recession Has Begun [View instapost]
    Two signs that seem to support your recession call are national electricity sales volumes and mogas consumption. I like to look at both of these as their usage is ubiquitous and there are no real alternatives that are practical. They are a pretty clean look at economic activity with very little lag. In both instances, the YOY volumetric consumption is lower in 2012 than 2011. The former by 2.5-3%, the latter by about 5%.
    Jul 11, 2012. 01:12 PM | Likes Like |Link to Comment
  • Correlation Between MLP Returns And Oil Prices In May 2012 Could Have Been Worse [View article]
    Maybe. I'll note that there are periods when the two data series correlate, and periods when they don't. If the value of each is rising with economic activity, then they aren't correlated to each other, they are correlated to an activity proxy like GDP deflator. That is Beta, and there's just no escaping that.

    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.
    Jun 26, 2012. 10:32 AM | 1 Like Like |Link to Comment
  • My Eureka Moment With Acme Packet [View article]
    I'm long APKT, and see much of what you do. I am concerned by

    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.
    May 25, 2012. 10:44 AM | Likes Like |Link to Comment
  • Confessions Of An EV Pioneer Turned Heretic [View article]
    John: I agree with your assessment of the cold economics of EV's, as well as a number of other alternative energy schemes that have been stuck under my nose during working hours, usually by addle brained state regulators and others of the body politic.

    That said, you have to give deference to this fact: Humans are, to varying degrees, limitedly rational. Folks buy Ferraris, Rolls Royces, etc. There is no economic rationality in that. Rather, folks are buying a bundle of product attributes when they buy an auto. If folks wanna buy a wildly uneconomic, inefficient EV so they can impress their buddies in the Isaac Walton League, I say let'em. The market will clear.

    Just don't subsidize it. Let them have their EV straight up, no ice. Ditto for wind farms, Cow poop biodigesters, Marcellus shale wells, et al.

    You will never win the argument with those that like these alt-energy things. They just do. Rather, fight for NO subsidies. And when I say no subsidies, that's NO for windmills, oil wells, whatever. All energy production is a business. As such they should stand/fall on their merits. Every darn one of them.

    It's a logically principled and a far more winnable argument.

    Nothing is more powerful than ideas who's time has come. Keep giving voice to these ideas!
    May 3, 2012. 04:04 PM | 9 Likes Like |Link to Comment
  • U.S. Steel Is Set Up To Take Another Beating [View article]
    All of the things you mention are certainly applicable to MT. In fact, they have a larger EU exposure. Would appreciate your view on this, as well as a view on SLX
    Jan 23, 2012. 09:22 AM | Likes Like |Link to Comment
  • Treasure Island Royalty Trust: A Net Asset Valuation Of The Trust's Core Property Interests [View article]
    James: An interesting opportunity. In essence, it affords the public the opportunity to buy an interest under a drilling well. Or wells. To say much more than that about the opportunity stretches credulity, in my view. Are you developing the production decline curves from offsetting wells completed in the same strata? Do we have some inkling on how long it will take to get this production hooked up to the interstate pipeline system? Have you run a "doomsday" scenario at say, $2.50/mmbtu gas for the next 3 years?

    I'll be honest - this strikes me as a "swing for the fences" investment. One where you are looking for 3:1 on your money at least. Far too much can go wrong to make it suitable for the typical royalty trust investor.
    Dec 28, 2011. 01:02 PM | 1 Like Like |Link to Comment