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  • 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
  • Super Committee Failure: Is The U.S. Political System Broken? [View article]
    I've given a lot of thought to the so-called failure of the "super committee". From the Republican perspective, the outcome (as it now stands) is not too far from optimal. Consider:

    a) No new taxes were enabled.
    b) Considerable spending reductions were set in motion
    c) While the cuts were from some cherished Republican areas (defense), that's not too bad if we are winding down Iraq/Afghanistan.
    d) Obama has vowed to not allow any reversion on the cuts in place.

    Like I said - not so bad when you think about it.
    Nov 23, 2011. 04:12 PM | 1 Like Like |Link to Comment
  • Mortgage Market Still Lost At Sea Despite Record Low Rates [View article]
    I refer to your earlier article quoting Bill Gross at length: "PIMCO's Bill Gross: New Fangled Love Songs". Specifically, the chart depicting FLAT wage growth. Housing is a consumer good. Post mortgage debacle, we're reverting to historic means on the % of households owned vs. rented. Shrinking pool of owners times lack of income = SICK housing market. IMHO, the solution exists outside the realm of interest rates. As for the fortunate that have decent jobs & balance sheets (and I'm one of them, thankfully) - take the freebie and refinance every time the numbers look right. Then say: Thanks Ben! But that doesn't build more houses.
    Sep 8, 2011. 11:57 AM | Likes Like |Link to Comment
  • How to Invest When Your Country Is Going Bankrupt [View article]
    I've pondered this one (same as all the other folks that read S.A. with regularity).

    I come back to this question: What has survived wars, recessions, riots, etc?

    An answer (not necessarily THE answer for you): Top quality Corporate Equities. Shell Oil, Procter & Gamble, etc. Not spectacular returns, but a fairly decent dividend. Me? I'm just trying to hit'em on a market collapse so I'm in cheap.

    That, and get debt paid down. Mortgages may only be 4.5%, but that's a heck of a lot more than you can earn on bonds or cash. Pay yourself first. Mortgage interest as a tax exemption can't last that much longer.
    Aug 3, 2011. 09:54 AM | 1 Like Like |Link to Comment
  • Chesapeake Energy Is 'Priced to Perfection' [View article]
    Well, I suspect that you've simply proven that the market is efficient. FCF models only value the intrinsic value. CHK (or most any growthy company) has tremendous extrinsic option value, if you think of unexplored lands as the option to drill (or not drill).

    Add to that the obvious: CHK is a proxy for a long stream of NG, which will wiggle over time.

    CHK is really more of a market call on the commodity, and your view of their growth prospects.
    Jul 27, 2011. 12:36 PM | 1 Like Like |Link to Comment
  • IEA Oil Release: A Counterproductive Idea and a Market Opportunity [View article]
    Personally, I see election politics at work. Oil is heading down anyway, given the softening of the economy. This action is "piling on" by the U.S. administration - allowing the election claim that "See - we broke the backs of the oilcos and OPEC". I agree that the action is conflicted as this does have a stimulative effect on the economy, but the primary motivator is probably political
    Jun 24, 2011. 12:22 PM | 3 Likes Like |Link to Comment
  • FirstEnergy (FE +4.9%) leads S&P 500 gainers, as Citigroup raises its price target to $46 following a "large positive surprise" in the capacity auction at wholesale power market PJM: a 2014 price of $125.99/megawatt-day, up from a year-ago $27.73. (earlier: ENOC)  [View news story]
    Not so sure, youngman. Lots of coal plants leaving the grid with the advent of MACT regulation...
    May 16, 2011. 02:25 PM | 1 Like Like |Link to Comment
  • Why Oil Is Not Going to $200 [View article]
    Short term, oil is inelastic, long term very elastic, which is your point. I'd be a bit careful with respect to electricity, however. In the U.S., we are at the sunset of cheap electricity. Legacy powdered coal power plants given their highly depreciated state, often produce power for 2¢/kWh. As environmental regs close these units, the nearest replacement (Nat. gas CCGT's) are coming in at 6¢/kWh. Wind? 12¢. Nuclear? 13¢+ kWh. Electric cars are no panacea.
    Mar 8, 2011. 08:48 AM | 2 Likes Like |Link to Comment
  • Contrarian Ideas: The Most Underestimated Companies Trading Near 52-Week Lows [View article]
    John Maynard Keynes said: "Successful investing is anticipating the anticipations of others."

    You've constructed a nice watch list - but absent a sign of incipient upward momentum, this list is, to use another cliche, catching a falling knife.

    Gotta have momentum. We all dream of catching a stock at the absolute bottom, but its dumb luck and really risky.
    Mar 4, 2011. 09:35 AM | 2 Likes Like |Link to Comment