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gausmus

gausmus
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  • Six Dividend Champions With Higher Yields (But Also Higher Payout Ratios) [View article]
    Mr. Fish:

    I'm a bit concerned about your use of Div Payout as a screen, that is, your desire to see high payout ratios.

    Let's face it - management HATES to cut dividends. Usually, is will adversely affect stock price, the institutional investors will give management what for, etc. So - it logically follows that companies with CONSERVATIVE payout ratios are better. The div is a quasi-fixed obligation, and having some cushion is a good thing. Business is risky, earnings variances are not normally distributed, and all of that. I feel a lot better about the surety of a 50% claim on a revenue stream than a 85% claim.

    Other than that - really good stuff!
    Oct 7 10:43 AM | 5 Likes Like |Link to Comment
  • A Natural Gas Stock With a High Dividend, Revisited [View article]
    Right stock, wrong reasons.
    1) As an IRA investment (a'la markbosje) it makes a lot of sense. Just keep stacking the $ in there. Tax comment raised by others certainly is a point of consideration for high income investors.
    2) The comparison of gasoline and natural gas is misleading. The U.S. has undergone a fundamental shift in it's perceived natural gas resource base. The trust has to make sense to you, dear investor, with a $4 to $5/MMBtu price deck for the for foreseeable future. There's just no reason to expect convergence between NG and any other fossil fuel. Markets are largely unique given the differing properties of each fuel.
    3) To me, investment in a royalty trust (SJT, MSB, HGT, etc) is akin to investment in a high yielding bond. The investor profile should be a person seeking lower risk, has a tax advantage (IRA, writeoffs elsewhere), and a GOOD understanding of commodities. Even though these royalty trusts trade like equities, they really aren't equities. They take a first position in the revenue stream, not a residual one.
    Sep 27 09:23 AM | 6 Likes Like |Link to Comment
  • Better Than Big Oil: Infrastructure Investing at Its Best [View article]
    My objection to the supermajor names you show is not the same as yours. My concern is: Do they reinvest capital and earn market clearing returns on it, given that they are "locked out" of most of the world's oil prospects?

    Cynical me. I think the answer is NO. They don't really earn their keep on incremental investment. Which is why I'm attracted to BPT, SJT, and other royalty trusts. So much of what you buy when you buy an oil company (or Iron Ore company, etc.) is that they are a proxy for the commodity - you like to be long oil, coal, ore, whatever. I like the exposure. I love the yield. HATE the overinvestment. Frankly, the royalty trust route creates a situation where management can't screw it up by overinvesting.

    Look, I'm not saying that the management of XOM are bad folk. They are a bureaucracy, and they seek to self perpetuate. They have spreadsheets, financial models, etc. saying that they are doing the right thing. Fish gotta swim. OilCo's gotta invest. An investor needs protection from that, unless you go smaller in the petro world and pick up a name that isn't anchored by it's huge PDP reserve base.
    Sep 2 12:26 PM | Likes Like |Link to Comment
  • Why Natural Gas Storage Numbers Are Misleading [View article]
    A great article and it does much to explain the summer/winter spread. Storage, after all, is only worth what the spread says its worth, at least in the tactical time frame. The curve shape (as opposed to price level which seems to preoccupy many of the posts) is flat flat flat, as everyone knows. The author is just closing the loop by saying, albiet in an oblique way, "hey, there's a lot more storage available to the market, there's supply and demand for that as well, ergo the value of storage has dropped." The market is saying that we really don't need to build anymore storage, if we but care to listen to it.
    Sep 1 10:52 AM | Likes Like |Link to Comment
  • The Shift From Stocks to Bonds Continues [View article]
    Hate to sound like a broken record, but oil and gas royalty trusts play into this theme very well. Yields are >> than present bond yields, and you get the commodity price appreciation kicker. I'll keep these cards and keep playing, thank you. HGT, SJT, BPT
    Aug 24 09:12 AM | 2 Likes Like |Link to Comment
  • Ternium: Still Undervalued [View article]
    Um, a slight correction to your analysis (which I agree with, for the most part.) To wit: X has the best equity owned ore position of all of the U.S. integrateds. The Minntac mine is high volume, low cost, and a real competitive advantage. They've also improved the Keetac mine.
    Aug 5 12:12 PM | Likes Like |Link to Comment
  • Energy Watch: Should Regulators Require Drillers Build Preemptive Relief Wells? [View article]
    OMG - a theoretical physics professor opining about a risk mitigation activity far from his area of expertise - and it carries the weight of serious discussion. How far we've fallen.

    First off, happy Cajun is right. Every penetration of a hydrocarbon deposit creates another opportunity for a blowout. What risk has been mitigated? But then, we could always require a relief well for the relief well. You know - just to be sure.

    Second - let's be absolutely honest about BP's activities here (and I'm long BP). The well design was unsafe, driven by pointy headed accounting analysis, not sound engineering principles. The practices during drilling were unsafe, again driven by schedule and cost, not by actual well conditions. They had a "wet shoe" on the last casing string (bad cement job), the well was flowing (as evidenced by mud pit gain). The well gave every sign of needing additional work while it was still under control - and the management on site IGNORED this. "I'm 9 million red on my budget - horrors!" We all know the real horror now.

    That mindset is rooted in relentless adherence to budget and schedule. For this, Sr. Management @ BP deserves a horsewhipping.

    But then - that's the point. The solution isn't in the "relief well" solution. Structurally increasing the cost of energy exploration will drive more pointy headed accounting behavior, and misses the real problem. The real solution is sound well design and sound drilling practices. That's driven by sound management oversight. If you are going to demand anything - demand that!
    Jul 22 11:13 AM | 3 Likes Like |Link to Comment
  • Trading in BP Shares: Some Factors to Consider [View article]
    A question worth posing: Much is made of the flow rate and thus the eventual liability on a $/bbl basis. HOW WILL WE EVER KNOW WHAT THE FLOW RATE IS/WAS? We know that it is at least as much as that which has been captured. And that captured isn't part of the liability equation. But that's about all we know, for sure, in the legal sense of it. There isn't a flow meter on the well. Everybody's speculating.
    Jun 20 09:18 PM | Likes Like |Link to Comment
  • A Real Worst-Case Scenario for BP: 20M Barrels, $560B Damages [View article]
    Okay, we don't know how much oil is being poured into the gulf. Nor does the govt., or some frisky prosecutor. There will be all sorts of discovery and opinions, but that's just it - they're opinions. Unless the number can be bracketed (and how do you do that absent a flow meter on a pipe?), it's conjecture, and thus, so is the balance of your post.
    Jun 16 08:57 AM | 2 Likes Like |Link to Comment
  • Banks, BP, Tax Increases: State Sponsored Muggings [View article]
    Hmmm...Think I've just reread the first third of "Atlas Shrugged". That tome, though poorly edited, becomes ever more prescient.
    Jun 16 08:53 AM | 2 Likes Like |Link to Comment
  • Soros: Financial Crisis, 'Act II' [View article]
    Soros is a super smart guy, obviously, but he's ALWAYS talking his book, or perhaps more accurately, front running his book with his mouth. Salient situation is as he describes, but the color he puts on it - sure sounds like hes lined up in the gold bug camp.
    Jun 11 03:29 PM | 6 Likes Like |Link to Comment
  • Gulf of Mexico Oil Spill: Liability Payment Capacity View [View article]
    What was it Bernard Baruch said? Oh yes: "Buy when there's blood in the streets". Metaphorically apt and sound advice, as oil is the life blood of the world's economy. The longer this goes on (and I earnestly hope it doesn't go on one second longer than necessary), the more hysterical the rhetoric becomes, and the richer the opportunity will be for unemotional investors.
    Jun 3 09:26 AM | 3 Likes Like |Link to Comment
  • Is It Wrong to Exploit the BP Oil Spill for Profits? [View article]
    Oh really? What's happened here (BP Mocando) is deplorable - no right thinking person would dispute that. Should procedures, regulation, etc be revisited - absolutely.

    But other forms of deplorable exist, and you've glossed over them. Nondispatchable renewable energy at costs 5 to 10x what's available from fossil fuels would fit in this box. To say nothing about renewables inability to meet overall energy needs from the available (or projected) renewable energy resource opportunity.

    That future is neatly encapsulated by Spain, which has spent a ton on renewables. They don't dispatch well, Spain has spent their way into the poor house, and they are still dependent on imported fossil fuels. As Ayn Rand would say: "A is A". The world is what it is. Not what we would wish it to be.
    May 28 11:21 AM | 3 Likes Like |Link to Comment
  • Gulf Oil Spill: Will BP Survive? [View article]
    Suggest that investors need to put numbers to the thesis "If the company survives, it will be damaged for years to come."

    The numbers: $765 MM for cleanup and plugging efforts to date. This includes a relief well that is underway, which is probably the only thing that will work. The so called "top-kill" is unlikely to plug the well. At best, it will staunch the flow of oil. Politically and environmentally desirable, but it doesn't shut it off. Exxon Valdez was about 2.1 billion dollars in 2010 terms (Using CPI as a deflator) Right now, the market is discounting the stock 15x the Valdez event. I arrive at this number by using the decline in oil ETF's as the beta impact, thus the balance of decline is alpha, which is what we are seeking on this website :^). Relief wells are about $300 MM a pop. Cleanup will be (pick a number) 5 billion, 10 billion. Nobody's mentioned anything near $33 billion.

    Yes, there will be lawsuits for years. Eventually, all parties will tire and they'll come to terms. Washington will have its public excoriation of BP. But that doesn't cost money.

    So - the numbers would indicate that what you suggest isn't possible. $33 billion of alpha vs. worst case clean up of $15 billion.

    The company's survival? PLLLEEEAAASSSEE.

    The chart scares the bejeebers out of me, and I'm trailing it with stops. But BP's looked cheap from 45 on down. To me, anyway.
    May 25 03:44 PM | 1 Like Like |Link to Comment
  • BP: What Options Does an Investor Have? [View article]
    Stock has gone from $60-ish to $45-sh, so about $50 Billion of market equity has gone POOF! Now, I'll accept that a lot of this is probably market selloff, ie, beta, not alpha. But, BP's beta is 0.75. Using the S&P as a proxy, we've seen the market go from 1220 to 1120 or down 8%. If BP's beta is .75, then that's .08*.75 or 6% to market action, balance to Macondo, I guess.

    Using an energy ETF: (VDE) - high was 91, presently trading @ 81, drop of 9%. (USO) - 42 to 34 = 19% drop, but I think they have a BP position, so they don't count. (XLE) - 62 to 56 = 9.6%. So, I'm saying the oily stocks have a 9% hit due to CL pricing & market dreariness.

    The math: .09 x 193 (This is the approximate BP equity @ $60/sh) billion = 17.3 billion. Alpha (Macondo) valued at 50 - 17.3 or 32.7 billion?!?!

    Hmmm... a deep sea completion like this costs what? $500 million? Relief well another 500? Replacement another 500? Cost of a dead (and soggy) semisubmersible? 600 million Cleanup 2 billion? Lawsuits? 1 billion?

    Other cleanup #'s I've seen: $5 x $7 billion. Exxon Valdez in 2010 $:
    Settlement in 1991, all figures are millions USD:

    Environmental fine: $150
    Forgiven <$125>
    Criminal Liability $100
    Civil Settlement $900, structured over 10 yrs.
    Reopener $92
    Total (w/o discounting) $1,117

    CPI in 1991: 136
    CPI today: 215
    Postulated cost: 215/136 x 1117 = 1,766 Still way less than 33 billion. Point is: NO WAY to get to 33 B.


    I'm not saying you buy it today. I'm just saying that it's WAY overdiscounted, and it bears watching. Once the momentum traders get tired of jumping on it, it sure looks cheap 2 me.
    May 19 10:38 AM | 4 Likes Like |Link to Comment
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