Saul Sterman's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/940/comments http://seekingalpha.com/article/98887-tarp-alternative-acronyms-edition?source=feed#comment-275802 275802
@gha
Your's is funny as well.
Just one problem with all of this; most investors are in the mood for a good cry, not laugh. I'm annoyed that this entire leg down we weren't allowed to short. GS and the old boys club had already purchased their short positions and are sitting pretty.

Perhaps "Shorts Highly Intelligent Team" (SHIT) would better describe Paulson and the old boys club from GS.]]> Tue, 07 Oct 2008 11:45:01 -0400
@gha
Your's is funny as well.
Just one problem with all of this; most investors are in the mood for a good cry, not laugh. I'm annoyed that this entire leg down we weren't allowed to short. GS and the old boys club had already purchased their short positions and are sitting pretty.

Perhaps "Shorts Highly Intelligent Team" (SHIT) would better describe Paulson and the old boys club from GS.]]> http://seekingalpha.com/article/97149-aig-closing-my-long-position?source=feed#comment-263826 263826
Your lucky that I had a quiet day! Last reply...
I don't know where you are getting your info from. I read the same MarketWatch article that you did. The government owns 79.9% of AIG. Any further dilution doesn't come from the government's 79.9% stake but from your stake (20.1%).
Apparently AIG can issue preferred without a shareholder vote but not common. The commitment is to issue the common and replace the preferred.

That's all the article is saying.
BTW, If shareholders vote against, then AIG files for bankruptcy! Shareholders have no choice.]]> Wed, 24 Sep 2008 14:02:19 -0400
Your lucky that I had a quiet day! Last reply...
I don't know where you are getting your info from. I read the same MarketWatch article that you did. The government owns 79.9% of AIG. Any further dilution doesn't come from the government's 79.9% stake but from your stake (20.1%).
Apparently AIG can issue preferred without a shareholder vote but not common. The commitment is to issue the common and replace the preferred.

That's all the article is saying.
BTW, If shareholders vote against, then AIG files for bankruptcy! Shareholders have no choice.]]> http://seekingalpha.com/article/97149-aig-closing-my-long-position?source=feed#comment-263760 263760
I take it that after reading the MarketWatch article it is clear that the Government holds an 80% equity stake in AIG.

I see how the format can be a bit confusing, but the reason it is being done this way is because of company bylaws. A shareholder vote is probably still needed before common can be issued.]]> Wed, 24 Sep 2008 13:36:24 -0400
I take it that after reading the MarketWatch article it is clear that the Government holds an 80% equity stake in AIG.

I see how the format can be a bit confusing, but the reason it is being done this way is because of company bylaws. A shareholder vote is probably still needed before common can be issued.]]> http://seekingalpha.com/article/97149-aig-closing-my-long-position?source=feed#comment-263751 263751
Appreciate your comment.

The way I look at this is simply that there is a reasonable chance for a 'national' bailout of sorts, whether it is $700B or $500B is not a major factor.

This will create enough of a safety net that will create a 'bottom' value for CDO, CDS and other instruments. In other words, if the value falls enough, the government will buy.

Having said this, think how much potential upside there is for AIG. Compare this with let's say ABK as mentioned in the article. Because of the 80% equity stake, AIG has limited upside whereas ABK that does NOT have an 80% dilution can hit the $12 target that VivaVegas is looking for. ABK is depressed because of a possible Moody's downgrade. Once the 'national' bailout is completed, both should appreciate. The reason for a possible downgrade disintegrates into thin air as well. The big difference is, whereas AIG shareholders transferred 80% equity to others, ABK shareholders did not.

In other words, should the $700B plan go through, ABK will benefit far more than AIG. Should the plan fail, AIG's rescue is at risk as mentioned in the article. ABK on the other hand can dilute by 20% and stay in business. As it stands now, ABK is pricing in a 20% dilution and no bailout. In other words, no downside and only upside. I think the chance of some sort of 'national' bailout is pretty good...but waiting to see what the market says. Just like with AIG, I didn't get in at $2 and change but waited a bit. Likewise with ABK. If it jumps and I miss it, no sweat...there is always another. Just be patient.]]> Wed, 24 Sep 2008 13:29:25 -0400
Appreciate your comment.

The way I look at this is simply that there is a reasonable chance for a 'national' bailout of sorts, whether it is $700B or $500B is not a major factor.

This will create enough of a safety net that will create a 'bottom' value for CDO, CDS and other instruments. In other words, if the value falls enough, the government will buy.

Having said this, think how much potential upside there is for AIG. Compare this with let's say ABK as mentioned in the article. Because of the 80% equity stake, AIG has limited upside whereas ABK that does NOT have an 80% dilution can hit the $12 target that VivaVegas is looking for. ABK is depressed because of a possible Moody's downgrade. Once the 'national' bailout is completed, both should appreciate. The reason for a possible downgrade disintegrates into thin air as well. The big difference is, whereas AIG shareholders transferred 80% equity to others, ABK shareholders did not.

In other words, should the $700B plan go through, ABK will benefit far more than AIG. Should the plan fail, AIG's rescue is at risk as mentioned in the article. ABK on the other hand can dilute by 20% and stay in business. As it stands now, ABK is pricing in a 20% dilution and no bailout. In other words, no downside and only upside. I think the chance of some sort of 'national' bailout is pretty good...but waiting to see what the market says. Just like with AIG, I didn't get in at $2 and change but waited a bit. Likewise with ABK. If it jumps and I miss it, no sweat...there is always another. Just be patient.]]> http://seekingalpha.com/article/97149-aig-closing-my-long-position?source=feed#comment-263691 263691
I've been in business for well over two decades and I know how to read an 8K. It is not by coincidence that I posted the S&P understanding of the 8K above.
Sorry my friend, but your understanding of what is transpiring is incorrect. Don't feel bad, others are confused as well. If your understanding was remotely true, AIG would be trading much higher and the S&P target price wouldn't be $5.50.
Think of it this way, there isn't a single analyst out there that has a $12 target price.]]> Wed, 24 Sep 2008 12:48:30 -0400
I've been in business for well over two decades and I know how to read an 8K. It is not by coincidence that I posted the S&P understanding of the 8K above.
Sorry my friend, but your understanding of what is transpiring is incorrect. Don't feel bad, others are confused as well. If your understanding was remotely true, AIG would be trading much higher and the S&P target price wouldn't be $5.50.
Think of it this way, there isn't a single analyst out there that has a $12 target price.]]> http://seekingalpha.com/article/97149-aig-closing-my-long-position?source=feed#comment-263677 263677
See stocks.about.com/gi/dy...

"In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG."

The equity stake is not contingent on whether the loan is paid back or not. The stake is for giving the loan in the first place. This is precisely what the twelve largest shareholders are attempting to avoid.

Trust this clears things up a bit. Also see SEC filing here:
stocks.about.com/gi/dy...

"The summary of terms also provides for a 79.9% equity interest in AIG."

Saul Sterman ]]> Wed, 24 Sep 2008 12:39:43 -0400
See stocks.about.com/gi/dy...

"In return for providing this essential support, American taxpayers will receive a substantial majority ownership interest in AIG."

The equity stake is not contingent on whether the loan is paid back or not. The stake is for giving the loan in the first place. This is precisely what the twelve largest shareholders are attempting to avoid.

Trust this clears things up a bit. Also see SEC filing here:
stocks.about.com/gi/dy...

"The summary of terms also provides for a 79.9% equity interest in AIG."

Saul Sterman ]]> http://seekingalpha.com/article/97149-aig-closing-my-long-position?source=feed#comment-263641 263641
From Standard & Poor's research:
"09/23/08 02:46 pm ET ... S&P REITERATES HOLD RECOMMENDATION ON SHARES OF AMERICAN INTERANTIONAL GROUP (AIG 5.08***): The shares have more than doubled from their September 17 close of $2.05 but are down over 90% year to date. We tie the recent strength to enthusiasm that AIG's credit default swap assets may suffer less of an impairment if the Treasury's bailout plan is passed. But we note AIG's 6/30/08 tangible equity of some $26 a share. Adjusting for the 79.9% stake in AIG the Fed is expected to receive under terms of its loan, tangible equity would equal about $5.23 a share. Our target price of $5.50, raised today by $0.50, assumes the shares trade at about 1X adjusted tangible equity. /C.Seifert "

In plain English, the 'Fed' as you call it, takes an equity stake. The article is correct.

Saul Sterman]]> Wed, 24 Sep 2008 12:06:31 -0400
From Standard & Poor's research:
"09/23/08 02:46 pm ET ... S&P REITERATES HOLD RECOMMENDATION ON SHARES OF AMERICAN INTERANTIONAL GROUP (AIG 5.08***): The shares have more than doubled from their September 17 close of $2.05 but are down over 90% year to date. We tie the recent strength to enthusiasm that AIG's credit default swap assets may suffer less of an impairment if the Treasury's bailout plan is passed. But we note AIG's 6/30/08 tangible equity of some $26 a share. Adjusting for the 79.9% stake in AIG the Fed is expected to receive under terms of its loan, tangible equity would equal about $5.23 a share. Our target price of $5.50, raised today by $0.50, assumes the shares trade at about 1X adjusted tangible equity. /C.Seifert "

In plain English, the 'Fed' as you call it, takes an equity stake. The article is correct.

Saul Sterman]]> http://seekingalpha.com/article/96870-why-i-bought-aig-last-week?source=feed#comment-263518 263518 See
www.crossprofit.com/ar...

It's not that simple at all.
Disclosure: no current position.]]> Wed, 24 Sep 2008 10:44:53 -0400 See
www.crossprofit.com/ar...

It's not that simple at all.
Disclosure: no current position.]]> http://seekingalpha.com/article/13642-the-u-s-economy-finding-the-balance-between-production-and-consumption?source=feed#comment-236424 236424 Saul ]]> Fri, 22 Aug 2008 10:21:18 -0400 Saul ]]> http://seekingalpha.com/article/91583-would-genentech-be-better-off-left-alone-by-roche?source=feed#comment-234213 234213
See: DNA - Genentech Inc: Roche Buyout Valued at $113 to $118
www.crossprofit.com/ar...
by Steven Davidoff (New York Times) / CrossProfit]]> Tue, 19 Aug 2008 16:09:52 -0400
See: DNA - Genentech Inc: Roche Buyout Valued at $113 to $118
www.crossprofit.com/ar...
by Steven Davidoff (New York Times) / CrossProfit]]> http://seekingalpha.com/article/88739-what-price-might-roche-pay-for-dna?source=feed#comment-234208 234208 The author is pointing out that the options market is saying;
1) the deal will close sometime after 09/20/2008
2) probably in October, latest November 2008
3) price will be above $98.00

For more on DNA, see
www.crossprofit.com/ar...

Saul Sterman
CrossProfit ]]> Tue, 19 Aug 2008 16:03:45 -0400 The author is pointing out that the options market is saying;
1) the deal will close sometime after 09/20/2008
2) probably in October, latest November 2008
3) price will be above $98.00

For more on DNA, see
www.crossprofit.com/ar...

Saul Sterman
CrossProfit ]]> http://seekingalpha.com/article/89721-houston-to-obama-smell-the-oil?source=feed#comment-228007 228007 Short reply re:source now, the rest later.
Source:
1) en.wikipedia.org/wiki/...
2) www.answers.com/topic/...
3) financial-dictionary.t...
4) www.britannica.com/EBc...

"a tax levied on profits in excess of a stipulated standard of “normal” income. There are two principles governing the determination of excess profits. One, known as the war-profits principle, is designed to recapture wartime increases in income over normal peacetime profits of the taxpayer. The other, identified as the high-profits principle, is based on income in excess of some statutory rate of return on invested capital." ]]> Mon, 11 Aug 2008 14:44:58 -0400 Short reply re:source now, the rest later.
Source:
1) en.wikipedia.org/wiki/...
2) www.answers.com/topic/...
3) financial-dictionary.t...
4) www.britannica.com/EBc...

"a tax levied on profits in excess of a stipulated standard of “normal” income. There are two principles governing the determination of excess profits. One, known as the war-profits principle, is designed to recapture wartime increases in income over normal peacetime profits of the taxpayer. The other, identified as the high-profits principle, is based on income in excess of some statutory rate of return on invested capital." ]]> http://seekingalpha.com/article/89721-houston-to-obama-smell-the-oil?source=feed#comment-227722 227722 See: online.wsj.com/article...

The American public needs to be educated about this and understand the difference between 'excise tax', 'excess profit tax', ('windfall tax' - non U.S. term - which is the Government giving back!) and 'windfall profit tax'. The term 'windfall profit tax' has been misused many times.
The Carter (1980) "windfall profit tax" as it was called was NOT a windfall profit tax at all! It was an excise tax. Today people are confusing this with 'excess profit tax'. In other words, Senator Obama is using the term incorrectly when talking about a 'windfall profits tax' when he really means to say an 'excess profits tax'. The latter is reserved for wartime etc.]]> Mon, 11 Aug 2008 10:24:33 -0400 See: online.wsj.com/article...

The American public needs to be educated about this and understand the difference between 'excise tax', 'excess profit tax', ('windfall tax' - non U.S. term - which is the Government giving back!) and 'windfall profit tax'. The term 'windfall profit tax' has been misused many times.
The Carter (1980) "windfall profit tax" as it was called was NOT a windfall profit tax at all! It was an excise tax. Today people are confusing this with 'excess profit tax'. In other words, Senator Obama is using the term incorrectly when talking about a 'windfall profits tax' when he really means to say an 'excess profits tax'. The latter is reserved for wartime etc.]]> http://seekingalpha.com/article/89721-houston-to-obama-smell-the-oil?source=feed#comment-227674 227674
Thank you for clarifying your first comment with the last. There seems to be a disconnect between the meaning of capitalism and state run communism.

Monopolies are the mantra of communism. Free competition is the norm for capitalism. A windfall profits tax is not a dirty word in capitalism IF and WHEN used correctly and for the purpose that capitalism intended it for.

Whenever competition is stifled, this occurring for any number of reasons, inevitably the first symptom is obscene profit margins. Not all abnormal net margins dictate an underlying monopolistic structure, as most are not. However, it needs to be scrutinized.

There are several ways to 'break up' a monopoly so that we DON'T become a communist style economy. One of them is applying a windfall profits tax to the monopoly and assisting the future competition either directly with the proceeds or through indirect methods.

Throughout the entire article, including the quote in your second comment, the analysis is linked to COMPETITION, as in - no monopoly.

You would be correct had you said that this is NOT what you have been hearing from Senator Obama. My opening paragraph spells this out. The fact that I am being polite and not calling Senator Obama all sorts of names does not detract from the essence of the article where I clearly explain what a 'kosher' application of the windfall tax would be TO PROTECT CAPITALISM.

Also, note that I have intentionally not gone into the argument whether or not windfall tax methods actually work as compared to a break-up when necessary.

The bottom line is that just like XOM, CVX and COP are not even close to being monopolies, RIG when looked at on a global basis is far from one as well. There is no reason to intervene regardless of method as they do NOT pose a threat to CAPITALISM.

As an aside, there is no concept of 'windfall taxes' in a communist or totalitarian regime. The monopoly is owned by the state or party. Think about it.

Saul]]> Mon, 11 Aug 2008 09:41:00 -0400
Thank you for clarifying your first comment with the last. There seems to be a disconnect between the meaning of capitalism and state run communism.

Monopolies are the mantra of communism. Free competition is the norm for capitalism. A windfall profits tax is not a dirty word in capitalism IF and WHEN used correctly and for the purpose that capitalism intended it for.

Whenever competition is stifled, this occurring for any number of reasons, inevitably the first symptom is obscene profit margins. Not all abnormal net margins dictate an underlying monopolistic structure, as most are not. However, it needs to be scrutinized.

There are several ways to 'break up' a monopoly so that we DON'T become a communist style economy. One of them is applying a windfall profits tax to the monopoly and assisting the future competition either directly with the proceeds or through indirect methods.

Throughout the entire article, including the quote in your second comment, the analysis is linked to COMPETITION, as in - no monopoly.

You would be correct had you said that this is NOT what you have been hearing from Senator Obama. My opening paragraph spells this out. The fact that I am being polite and not calling Senator Obama all sorts of names does not detract from the essence of the article where I clearly explain what a 'kosher' application of the windfall tax would be TO PROTECT CAPITALISM.

Also, note that I have intentionally not gone into the argument whether or not windfall tax methods actually work as compared to a break-up when necessary.

The bottom line is that just like XOM, CVX and COP are not even close to being monopolies, RIG when looked at on a global basis is far from one as well. There is no reason to intervene regardless of method as they do NOT pose a threat to CAPITALISM.

As an aside, there is no concept of 'windfall taxes' in a communist or totalitarian regime. The monopoly is owned by the state or party. Think about it.

Saul]]> http://seekingalpha.com/article/89721-houston-to-obama-smell-the-oil?source=feed#comment-227036 227036
Can someone please take the time and explain to forwodenboats my article. Apparently my writing skills are inadequate.

1) No one is picking 'a company'. The Dem/Republican argument was stated fair and balanced, Dem's being: monopoly intervention etc.
2) High net margins are a symptom calling for further diagnosis.
3) Article concludes that though it may smell like a monopoly, RIG is not a true monopoly, more in line with the drug industry...new technology etc.
4) RIG needs to establish itself before we "wake up to a new crude reality" as in 'supply side' state owned competitors that will change RIG's landscape (or is that oceanscape!).

Perhaps if someone could summarize the article in a few sentences using your own words, perhaps forwoodenboats and others will understand why I say we need to keep a watchful eye on RIG, but by no means kill it!

It appears to me that some readers are accustomed to reading articles that present a single side of an argument and are lost when both sides are presented in an abbreviated fashion. To complicate matters, I tend not to delve into secondary outcomes and stick to the primary basis of the logic on each side. Not to say that I can't do it, but who wants to read a ten page article? I don't!

Thanks,
Saul ]]> Sun, 10 Aug 2008 08:13:34 -0400
Can someone please take the time and explain to forwodenboats my article. Apparently my writing skills are inadequate.

1) No one is picking 'a company'. The Dem/Republican argument was stated fair and balanced, Dem's being: monopoly intervention etc.
2) High net margins are a symptom calling for further diagnosis.
3) Article concludes that though it may smell like a monopoly, RIG is not a true monopoly, more in line with the drug industry...new technology etc.
4) RIG needs to establish itself before we "wake up to a new crude reality" as in 'supply side' state owned competitors that will change RIG's landscape (or is that oceanscape!).

Perhaps if someone could summarize the article in a few sentences using your own words, perhaps forwoodenboats and others will understand why I say we need to keep a watchful eye on RIG, but by no means kill it!

It appears to me that some readers are accustomed to reading articles that present a single side of an argument and are lost when both sides are presented in an abbreviated fashion. To complicate matters, I tend not to delve into secondary outcomes and stick to the primary basis of the logic on each side. Not to say that I can't do it, but who wants to read a ten page article? I don't!

Thanks,
Saul ]]> http://seekingalpha.com/article/89721-houston-to-obama-smell-the-oil?source=feed#comment-227030 227030
Thank you.]]> Sun, 10 Aug 2008 07:52:50 -0400
Thank you.]]> http://seekingalpha.com/article/90159-chicken-and-egg-a-currency-called-the-oil-dollar?source=feed#comment-227026 227026 "Each 1% change in the dollar as measured against a basket of currencies causes oil to correct by about $4 in the opposite direction. A three percent dollar appreciation would result in oil coming down by $12."

Nothing has changed. I have been posting this since late 2006. Basically, the price of oil in dollars follows the dollar; true since oil hit the 60 level which is supply/demand based.

Price levels over 60 is currency devaluation which in turn creates global inflation which can feed upon itself for quite some time.
I'm not going to rehash here all the articles I have written on the topic.

The bottom line is that the next time we see oil at 140 it could be fundamental and NOT due to currency devaluation. In such case the price increase sticks until new technology that can substitute oil is proven to work (and implemented).

Saul Sterman]]> Sun, 10 Aug 2008 07:18:23 -0400 "Each 1% change in the dollar as measured against a basket of currencies causes oil to correct by about $4 in the opposite direction. A three percent dollar appreciation would result in oil coming down by $12."

Nothing has changed. I have been posting this since late 2006. Basically, the price of oil in dollars follows the dollar; true since oil hit the 60 level which is supply/demand based.

Price levels over 60 is currency devaluation which in turn creates global inflation which can feed upon itself for quite some time.
I'm not going to rehash here all the articles I have written on the topic.

The bottom line is that the next time we see oil at 140 it could be fundamental and NOT due to currency devaluation. In such case the price increase sticks until new technology that can substitute oil is proven to work (and implemented).

Saul Sterman]]> http://seekingalpha.com/article/89721-houston-to-obama-smell-the-oil?source=feed#comment-225169 225169
Read the article again. No one is saying that XOM or RIG have no competition. The argument is that whereas there is seemingly efficient competition for XOM - based on margins, at first look it seems that there is lack of efficiency in the rig sector.

The conclusion is that this is an aberration brought on by new deep water fields requiring new technology etc.

Dare I say that if you can't follow a trend of thought for a few paragraphs perhaps it would be wise to leave investment advice to others! All in good spirits!

As an aside, I'm not sure that readers realize that the picture is of the Four Horsemen of the Apocalypse as described in the Christian Bible. In essence this is meant to reflect my ambivalence regarding RIG. On the one hand I say let them be as they fight our battle, but do so with a watchful eye on conquest, war, famine and death. You must admit it is truly amazing how oil can embody all four. No offense intended towards anyone; being that I'm not Christian, I wasn't certain if an elaborate comparison/ parallel would be considered offensive…so I'll leave it to the readers to fill in the blanks. The link to the Metallica lyrics "The Four Horsemen" pretty much hit the nail on the head.
]]> Thu, 07 Aug 2008 11:53:06 -0400
Read the article again. No one is saying that XOM or RIG have no competition. The argument is that whereas there is seemingly efficient competition for XOM - based on margins, at first look it seems that there is lack of efficiency in the rig sector.

The conclusion is that this is an aberration brought on by new deep water fields requiring new technology etc.

Dare I say that if you can't follow a trend of thought for a few paragraphs perhaps it would be wise to leave investment advice to others! All in good spirits!

As an aside, I'm not sure that readers realize that the picture is of the Four Horsemen of the Apocalypse as described in the Christian Bible. In essence this is meant to reflect my ambivalence regarding RIG. On the one hand I say let them be as they fight our battle, but do so with a watchful eye on conquest, war, famine and death. You must admit it is truly amazing how oil can embody all four. No offense intended towards anyone; being that I'm not Christian, I wasn't certain if an elaborate comparison/ parallel would be considered offensive…so I'll leave it to the readers to fill in the blanks. The link to the Metallica lyrics "The Four Horsemen" pretty much hit the nail on the head.
]]> http://seekingalpha.com/article/81994-huntsman-buyout-of-hexion-is-dead?source=feed#comment-188934 188934 seekingalpha.com/artic...
]]> Fri, 20 Jun 2008 06:35:00 -0400 seekingalpha.com/artic...
]]> http://seekingalpha.com/article/81994-huntsman-buyout-of-hexion-is-dead?source=feed#comment-188931 188931 seekingalpha.com/artic...

A lot of questions, after the fact though. The above linked balanced article is from before it happened. As you can see from the article, all your questions are answered.

In a nutshell, the price was too high to begin with and the chances that a downturn would trigger a MAC were very real. This is why Matlin Patterson cashed out below the Basil offer price (competing first bid).

Normally you are correct in stating that deals are structured so, that the chances of a severe downturn triggering a MAC are nil or close to it. This just wasn't the case here from day one.

It pays to read Seeking Alpha!]]> Fri, 20 Jun 2008 06:22:47 -0400 seekingalpha.com/artic...

A lot of questions, after the fact though. The above linked balanced article is from before it happened. As you can see from the article, all your questions are answered.

In a nutshell, the price was too high to begin with and the chances that a downturn would trigger a MAC were very real. This is why Matlin Patterson cashed out below the Basil offer price (competing first bid).

Normally you are correct in stating that deals are structured so, that the chances of a severe downturn triggering a MAC are nil or close to it. This just wasn't the case here from day one.

It pays to read Seeking Alpha!]]> http://seekingalpha.com/article/82062-killed-by-the-huntsman?source=feed#comment-188930 188930 seekingalpha.com/artic...

Nice reporting, after the fact though. The above linked balanced article is from before it happened.]]> Fri, 20 Jun 2008 06:12:09 -0400 seekingalpha.com/artic...

Nice reporting, after the fact though. The above linked balanced article is from before it happened.]]> http://seekingalpha.com/article/58533-huntsman-corporation-is-this-deal-real?source=feed#comment-188929 188929 Hexion may not have to pay a break-up fee. Also the CCU contract had different language regarding the financing so from a legal perspective the two are not the same.

Saul Sterman
CrossProfit]]> Fri, 20 Jun 2008 06:07:30 -0400 Hexion may not have to pay a break-up fee. Also the CCU contract had different language regarding the financing so from a legal perspective the two are not the same.

Saul Sterman
CrossProfit]]> http://seekingalpha.com/article/76531-wall-street-breakfast-must-know-news?source=feed#comment-188279 188279 HUN), see article beneath 2008 chart here:
www.crossprofit.com/vi...

As stated in article, no position was taken in this arbitrage. As the title suggests, there were just too many question marks popping up. Upon this last earnings miss, Apollo called a MAC yesterday effectively nullifying the acquisition agreement. There may NOT be a break-up fee though HUN has gone to court!

HUN should have negotiated a new price tag though the whole scenario is very problematic as certain shareholders already cashed out. This deal looks dead; funeral dance (courts) to follow.

Saul Sterman
]]> Thu, 19 Jun 2008 08:12:57 -0400 HUN), see article beneath 2008 chart here:
www.crossprofit.com/vi...

As stated in article, no position was taken in this arbitrage. As the title suggests, there were just too many question marks popping up. Upon this last earnings miss, Apollo called a MAC yesterday effectively nullifying the acquisition agreement. There may NOT be a break-up fee though HUN has gone to court!

HUN should have negotiated a new price tag though the whole scenario is very problematic as certain shareholders already cashed out. This deal looks dead; funeral dance (courts) to follow.

Saul Sterman
]]> http://seekingalpha.com/article/81804-restoration-hardware-class-action-payout-still-leaves-shareholders-short?source=feed#comment-187597 187597
"However RSTO is NOT an investor friendly company and comes with a ‘high risk’ warning label."
See article from 03/2007:
www.crossprofit.com/ar...

More than warn SA readers about the person/people at the helm, there is nothing I can do. Sorry to hear that you had to learn the hard way.

Saul]]> Wed, 18 Jun 2008 09:22:47 -0400
"However RSTO is NOT an investor friendly company and comes with a ‘high risk’ warning label."
See article from 03/2007:
www.crossprofit.com/ar...

More than warn SA readers about the person/people at the helm, there is nothing I can do. Sorry to hear that you had to learn the hard way.

Saul]]> http://seekingalpha.com/article/81519-oil-hits-140-what-could-trigger-a-reverse?source=feed#comment-187387 187387
I fail to comprehend your comment.
You are entitled to your opinion as I am entitled to mine.
If it annoys you that I think that a correction is forthcoming ONLY when certain conditions are met, then so be it.
If it annoys you that I disagree with Lien's assertion that the correction will last forever and oil will never go up again ("will result in a sharp and lasting reversal") then so be it.

Since I seem to have gotten your attention, here's how I see it playing out...

1) Eventually there will be a major correction once there is evidence that there is a surplus supply of oil OUT OF THE GROUND that has no takers. This in turn will force the hand of the speculators.

2) I first noticed in May that a large number of mutual funds and institutions were selling XOM aggressively. I then realized that there are actually two opposing forces at play. First, the expectation that oil and NG prices would drop. Second, though seemingly contradictory, there was a marked increase in drilling activity. My conclusion was and still is that the drop will not be back to 45 or 60 but closer to 85/100.

3) Using XOM as a benchmark, when oil is on the rise, XOM trades at a 1.15/1.20 multiple to oil. This means that if oil is selling at 60, XOM will trade at 60x1.15=69. When oil is stable, XOM trades at a 1 to 1 ratio. When oil is coming down, XOM trades at a 0.85/0.90 multiple. XOM is now trading at 88, so this would be 88 divided by 0.9 = 97. This is how I know that oil is going to correct to 97 or there abouts. This isn't a pure science and I wouldn't bet the house on it, just for the past 25 years has been a reliable directional indicator like brokers use the DIA, which is a totally flawed weighted index...

4) As an investor, fund manager, sell side analyst or whatever title you want to apply, I couldn't care less about GS or Morgan Stanley ripping off the public as long as I can legally, ethically and morally read the market trend ahead of time and use my analysis to the advantage of my clients and myself.

5) As a private citizen, I would demand that anyone who has committed a crime, regardless of stature, be held accountable and reconciled with in accordance to established legal procedures.

6) On a personal level I am a Liberal Democrat which includes the belief that all are innocent until proven guilty. I do not bend my convictions when it is inconvenient for me. I have mentioned to Phil Davis in the past to show more respect to President Bush, not that disagreeing is disrespectful, it is how it is done that matters. If this bothers you, then so be it.

7) Last but not least - just to annoy you ;) - even if I was 100% certain that GS is the mastermind behind this horrific energy bubble and have colluded with certain U.S. politicians, selling out the country to certain Middle East partners and perhaps helped orchestrate the housing bubble with or without the assistance of the former or present Fed chairman, I would still say "innocent until proven guilty".

If we get an undeniable physical surplus, the game is over - at least for now. However, this mini crisis is a sign of things to come. The next time will be for real, no bubble.

Saul Sterman]]> Tue, 17 Jun 2008 19:52:31 -0400
I fail to comprehend your comment.
You are entitled to your opinion as I am entitled to mine.
If it annoys you that I think that a correction is forthcoming ONLY when certain conditions are met, then so be it.
If it annoys you that I disagree with Lien's assertion that the correction will last forever and oil will never go up again ("will result in a sharp and lasting reversal") then so be it.

Since I seem to have gotten your attention, here's how I see it playing out...

1) Eventually there will be a major correction once there is evidence that there is a surplus supply of oil OUT OF THE GROUND that has no takers. This in turn will force the hand of the speculators.

2) I first noticed in May that a large number of mutual funds and institutions were selling XOM aggressively. I then realized that there are actually two opposing forces at play. First, the expectation that oil and NG prices would drop. Second, though seemingly contradictory, there was a marked increase in drilling activity. My conclusion was and still is that the drop will not be back to 45 or 60 but closer to 85/100.

3) Using XOM as a benchmark, when oil is on the rise, XOM trades at a 1.15/1.20 multiple to oil. This means that if oil is selling at 60, XOM will trade at 60x1.15=69. When oil is stable, XOM trades at a 1 to 1 ratio. When oil is coming down, XOM trades at a 0.85/0.90 multiple. XOM is now trading at 88, so this would be 88 divided by 0.9 = 97. This is how I know that oil is going to correct to 97 or there abouts. This isn't a pure science and I wouldn't bet the house on it, just for the past 25 years has been a reliable directional indicator like brokers use the DIA, which is a totally flawed weighted index...

4) As an investor, fund manager, sell side analyst or whatever title you want to apply, I couldn't care less about GS or Morgan Stanley ripping off the public as long as I can legally, ethically and morally read the market trend ahead of time and use my analysis to the advantage of my clients and myself.

5) As a private citizen, I would demand that anyone who has committed a crime, regardless of stature, be held accountable and reconciled with in accordance to established legal procedures.

6) On a personal level I am a Liberal Democrat which includes the belief that all are innocent until proven guilty. I do not bend my convictions when it is inconvenient for me. I have mentioned to Phil Davis in the past to show more respect to President Bush, not that disagreeing is disrespectful, it is how it is done that matters. If this bothers you, then so be it.

7) Last but not least - just to annoy you ;) - even if I was 100% certain that GS is the mastermind behind this horrific energy bubble and have colluded with certain U.S. politicians, selling out the country to certain Middle East partners and perhaps helped orchestrate the housing bubble with or without the assistance of the former or present Fed chairman, I would still say "innocent until proven guilty".

If we get an undeniable physical surplus, the game is over - at least for now. However, this mini crisis is a sign of things to come. The next time will be for real, no bubble.

Saul Sterman]]> http://seekingalpha.com/article/81519-oil-hits-140-what-could-trigger-a-reverse?source=feed#comment-186871 186871
Thanks for the reply.
I am aware of the calls by several brokerage houses as you mentioned. My point was, why should it stop at $200? The brokerages gave a time related price increment based on current pricing models whereas Lien is talking in conceptual terms not relative to a time factor.
In theory, based on Lien's hypothesis, the price of oil should be rising continuously without limit.
In summary, either Lien should state a time frame for her $200 assessment and either base it and/or peg to other analysis, or say 'to prevent oil from rising continuously'.

Saul]]> Tue, 17 Jun 2008 03:35:56 -0400
Thanks for the reply.
I am aware of the calls by several brokerage houses as you mentioned. My point was, why should it stop at $200? The brokerages gave a time related price increment based on current pricing models whereas Lien is talking in conceptual terms not relative to a time factor.
In theory, based on Lien's hypothesis, the price of oil should be rising continuously without limit.
In summary, either Lien should state a time frame for her $200 assessment and either base it and/or peg to other analysis, or say 'to prevent oil from rising continuously'.

Saul]]> http://seekingalpha.com/article/81519-oil-hits-140-what-could-trigger-a-reverse?source=feed#comment-186567 186567
Now for the crux of the matter:
The Saudi announcement means nothing. In the past, Saudi has stated increases and decreases only for the market to find out months later that they did the opposite of what they said they were going to do.
This time around the market will be looking for tangible evidence that there is an actual surplus of refine-able crude building. Once that happens, we will get a correction. By how much and how quickly is another story.
We are still at the 'prove the production' stage and 'show us that you really understand that you are destroying your customers (worldwide) ability to continue buying your product'.
The market also takes into account the Chavez wild card. He just might CUT to match any Saudi increase...then what? Bottom line, it isn't happening until it happens.
Will it happen - yes. The question is - when and for how long will it last?

Saul Sterman]]> Mon, 16 Jun 2008 14:23:11 -0400
Now for the crux of the matter:
The Saudi announcement means nothing. In the past, Saudi has stated increases and decreases only for the market to find out months later that they did the opposite of what they said they were going to do.
This time around the market will be looking for tangible evidence that there is an actual surplus of refine-able crude building. Once that happens, we will get a correction. By how much and how quickly is another story.
We are still at the 'prove the production' stage and 'show us that you really understand that you are destroying your customers (worldwide) ability to continue buying your product'.
The market also takes into account the Chavez wild card. He just might CUT to match any Saudi increase...then what? Bottom line, it isn't happening until it happens.
Will it happen - yes. The question is - when and for how long will it last?

Saul Sterman]]> http://seekingalpha.com/article/80997-nyt-smears-david-einhorn-again?source=feed#comment-184720 184720
People who live in glass houses shouldn't throw stones! :)

If you really want to look up the information you so desperately seek, Google it. It takes a few seconds!

As an aside, there are numerous articles on SA selling long rumors regarding acquisitions that don't exist and are the imagination of the authors holding long. Would you like me to name a few or would it be politically correct to leave it at that and you can look it up if you so desire.

Saul Sterman]]> Fri, 13 Jun 2008 05:17:58 -0400
People who live in glass houses shouldn't throw stones! :)

If you really want to look up the information you so desperately seek, Google it. It takes a few seconds!

As an aside, there are numerous articles on SA selling long rumors regarding acquisitions that don't exist and are the imagination of the authors holding long. Would you like me to name a few or would it be politically correct to leave it at that and you can look it up if you so desire.

Saul Sterman]]> http://seekingalpha.com/article/80204-valero-energy-the-price-of-oil?source=feed#comment-183948 183948
As an aside, have you noticed how many institutions have sold XOM during the month of May? Last count it was over 850! Now, either they know something that I don't or they are all raising cash for some other reason. I'm still looking into COP and CVX to see if there is a similar trend.]]> Thu, 12 Jun 2008 07:12:35 -0400
As an aside, have you noticed how many institutions have sold XOM during the month of May? Last count it was over 850! Now, either they know something that I don't or they are all raising cash for some other reason. I'm still looking into COP and CVX to see if there is a similar trend.]]> http://seekingalpha.com/article/80204-valero-energy-the-price-of-oil?source=feed#comment-183947 183947
Point well taken.

The problem is that the 'speculation factor' really is an unknown. In any event, in terms of dollar devaluation, this was taken into account.

In terms of a price equilibrium based on supply and demand, this too is highly speculative based on the fact that the market has been out of sinc since the beginning of the year. If you can find any model/formula that has worked anytime in the past two decades that yields true results today, please let me know. This is indicative of a top (bubble?) or a nasty correction. However, I must caution that few have been able to predict accurately any major correction in the past. Luck is far more the norm than any analysis.

One can do a true analysis ONLY when normal market conditions persist.

Saul Sterman]]> Thu, 12 Jun 2008 07:08:23 -0400
Point well taken.

The problem is that the 'speculation factor' really is an unknown. In any event, in terms of dollar devaluation, this was taken into account.

In terms of a price equilibrium based on supply and demand, this too is highly speculative based on the fact that the market has been out of sinc since the beginning of the year. If you can find any model/formula that has worked anytime in the past two decades that yields true results today, please let me know. This is indicative of a top (bubble?) or a nasty correction. However, I must caution that few have been able to predict accurately any major correction in the past. Luck is far more the norm than any analysis.

One can do a true analysis ONLY when normal market conditions persist.

Saul Sterman]]>