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The king's jester

The king's jester
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  • A record quarterly drop of 23% in gold prices in Q2 to $1,223.80 has exposed miners' massive debts, which have increased to a high of $21B at 55 top gold and silver producers from under $2B in the past 10 years. Gold has now become cheaper to buy than to extract for many firms. If prices stay below $1,300 for over two quarters, S&P reckons downgrades could be on the cards. Barrick Gold (ABX) is particularly exposed with debts of $14.8B. [View news story]
    I got burned with rare earth before (not big but enough to cause some pain). Many gold miners has large debts (long and short) and with profitability a big issue now and stock prices taking a beating. How could they fund future projects? While the fact that gold is getting more difficult to mine could benefit the metal in the long term. I don't see how that will help the miners. Newmont for example sold gold at $1631 per oz last quarter but with free cash flow of -71 million. Now with gold average less than $1500 during Q2. Guess where the free cash flow will be? The average all in mining cost for large players between $1200-1400 is correct. If gold stays is this price area, than all the dividends will likely be cut or eliminated. Yes, the best will survive and possibly thrive, but this is an industry that failed to use the high gold prices to create better value for shareholders but rather spending like a sailor on risky & expensive projects to inflate book values (with some assets eventually got written off).
    Jul 1 03:15 AM | 1 Like Like |Link to Comment
  • Herbalife: Putting Bill Ackman's Arguments In Perspective [View article]
    @hudget

    Yahoo message board bashing is not good enough for ya? FTC usually comes in when a so called "pyramid scheme" has been promptly tumbled by its own doing. Why? It's for the easy W to pad one's career. These guys do have a career after the FTC you know. Look how they catched Enron, Worldcom, etc....After much of the damage has already been done guaranteeing zero blow back. Even if Herbalife is a pyramid scheme, there is no assurance that they can win. If the do. So? The company is registered in the Bahamas and the FTC will have to go over there and pound sand and good luck with trying to shut Herbalife in the other 87 countries. Billy the Kid and some of the amateur shorts are out there to make a buck, but all of the sudden it's not so easy anymore thanks to Carl Icahn. His short thesis sat in the closet for a while until Einhorn started talking and then that get him going. It's a cheap shot you know. But look who's being KO'ed now? It's poetic justice that the shorts are making out like bandits in JCP.
    Mar 6 01:01 AM | 1 Like Like |Link to Comment
  • Molycorp Up On 'Takeover Rumor' And Irrational Exuberance [View article]
    Didn't the market already discount most of the negatives? It might move up or down a little from here if there's no news. But once something meaningful hit the news wire than it will take off again. It was supposed to go down even more after the negative announcement on 1/10. But it didn't because the current price has value. For the love of god, beside resources, the other have declined partially to lower demand but also partially due to the lower cost of raw materials which MCP is passing some of the savings to the buyers. In essence the decline is modest and demand will catch up with supply before long. If they're just barely losing with weak demand, what do you think they'll do when demand come back?

    The rumor talk is here, but management probably will not entertain selling their enterprise unless they get an offer they can't refuse.

    The reason that it's selling under ten is the cash flow. Otherwise, it could be easily $20. You will not get this price once they begin to solve their problems.

    Do you think it will be under $10 if there's any kind of consistent take over talk? So it's not really moving on take over rumors.

    As the matter of fact, the take over chatter will create a price floor for the shares while they sort out their issues. This is the best insurance for current investor IMO. At the current price of under $9 I failed to see any "irrational exhuberance".
    Jan 17 01:56 PM | Likes Like |Link to Comment
  • Molycorp: 'The Pain' Is Here [View article]
    Have been in and out of this stock for the past year and a half mostly long. So far I'm down a little but haven't lost an arm and a leg yet. I agree that there's still more price erosion in store for RE. They have no choice but to hold off phase 2 CK was clear on this while Smith skirted around the issue. Stop the bleeding got to be the first priority while cost cutting is the second. I believe that the low price environment will make them more fit for future operations due to all the cost cuttings/efficiency increase that they have to implement if they could hang and survive until they reach the break even point. The best part about being both upstream and down stream is they can afford to run a mid size crew at Mountain Pass while waiting for prices to improve. The revenue from Mt Pass is at best 10-15% of the over all revenue so it will not break them.

    I have been saying in the past that the Chinese have utilized low priced RE as one of the gimmicks to get Western companies to build factories in China and to monopolize the market as well. This has essentially created a price floor (with minimum or no profit) that even the Chinese are suffering today because of the artificial price they created in the past. And the recent boom in RE prices has enticed a lot more smuggling as well. Why pay for high official prices while you can buy on the black market for maybe half to two third of that cost?

    The Chinese have created this saga for themselves (but they did gain a lot from this small lost). Now that the companies are "in" they tried to turn the table but so far it has yet to work. As they would say there's nothing wrong with loosing the pawn to get the rook.

    Considering the circumstances, MCP efficiency level is not bad as they only register a small lost while the Chinese are just a tad higher than break even in terms of profit wise. Form their presentation they are showing the cost would eventually come down due to certain facilities going online at Mt Pass so my guess is they're still not loosing big if the price drop more.
    Jan 10 11:46 PM | 1 Like Like |Link to Comment
  • 8 Highly Shorted Stocks Insiders Are Buying [View article]
    Serious short squeeze over at MCP today. Run up back to $10 will be imminent
    Nov 20 11:47 AM | Likes Like |Link to Comment
  • Molycorp Management Discusses Q3 2012 Results - Earnings Call Transcript [View article]
    Just bought some this past week with average price around $9. Already down 20%+ not I smart move, but I'm in it for the long haul. They will be an acquisition target sooner than you think but it's a wild guess as to how much they're willing to pay for it. I'll say $10-12 if the current prices hold. The lawsuit is just icing on the cake for short sellers. MCP could go up a couple of bucks just due to the covering alone. Like they always say, the time to buy is when there's blood in the street. Blood is flowing now for MCP and the market in general. If they could get an eleventh hour deal on the Fiscal cliff, it will lift everything up especially MCP. RE prices will improve quite a bit just due to the crack down on illegal mining alone. Numbers show that up to 40% or more of RE from China came from illegal mining. Stopping this will be easier said than done but if they could slow illegal mining down to 25-50% that would bring even more price stability in conjunction with the RE plants closing. For those holding at a much higher price, the game might be semi-over. If you're just buying recently, chances are. This POS will eventually rebound. It will take a lot of patient/gut to hold or add more at lower prices. Until sentiment changes, you will be at the mercy of the market.
    Nov 13 05:34 PM | 1 Like Like |Link to Comment
  • Amazon.com, The Devil In The Details: Gross Margin [View article]
    Bezos is a former Wall Street exec. He knows how to spin the situation for the funds to bite.

    The share price is a reflection of the grandeur regarding how well AMZN will be able to further penetrate the retail arena, which only compose of around 8% online sales at this point. It's anybody's guess when online sales will reach market saturation. Based on some surveys, 50% is the ultimate limit. So it's likely in the future that Amazon annual revenue will be more than the stock's market cap. Crazy, yes I know. I believe people are still buying the revenue growth story hoping that Amazon will turn very profitable at some point and bring down the PE multiples lower via improve in efficiency or reduction in competition (not likely). So maybe further gross margin decline or earnings weakness will sway the current beliefs and slow down the beast? Probably, but until the revenue growth is near its zenith, Wall Street will continue to buy (or appeared to buy) into this so called miracle.

    Sentiment could be changing now, next year, or longer. Who knows. But just make sure that you're ready, when the wind changes direction. I'm sure there will be many signs. The longer the numbers did not add up, the higher the chance of Amazon collapsing. Since this is still a strong momentum stock, it'll probably take more than one earning miss to take down the bulls.
    Oct 29 02:05 PM | Likes Like |Link to Comment
  • Amazon: Analysts Bury Their Heads In The Sand [View article]
    Amazon prices are not the lowest online especially for some middle to high end items. Ebay auctions from smaller online shops and mom and pops provide much better price due to the non-existent overhead and most of the time tax free. Now that sales tax are being levied in many states and more states in the future, the competitive edge is now diminished somewhat. What they've done is just creating a retail "race to the bottom" similar to currency debasement. In the end all retails will be loser when the customers are become "conditioned" to primarily buy only discounted items. Look what that did to some of the department stores? By expanding they're using a lot of their cash reserves while not showing a profit and it shows in the earnings report. They can't keep expand if there's no money left as their cash balance is now 5.2 billion down from 9.5 billion 9 months ago and where's the earnings to replenish that? So it's likely that they will need further financing in the long run while still trying to grow more revenue at around break even price. Essentially, they have become the "bottom feeder" of the retail world but what are they feeding on? Loses? Somebody will pay dearly at the so called "inflection point" when investors (funds) begin to change their mind set that Amazon is no longer a "growth story" but a has been. The current valuation is 14x price to book value, even if it drop to a generous 5x price to book, the share price would be around $85, a far cry from the previous high of $264. The game of musical chairs will definitely live on with Amazon.
    Oct 29 11:37 AM | Likes Like |Link to Comment
  • Molycorp: Looks Highly Attractive After The Recent Sell-Off [View article]
    From May to Oct light RE were dropping between 15-20% while heavy RE were dropping on average 0-5%. Price decline have indeed slowed down. Since MCP used REO to produce value added products, they're not that susceptible to just the raw RE prices. My guess is their margin got hit by half that amount so it remain to be seen if the step up in production could keep the company in the black. Eventually, an equilibrium in price will return but if they can't stay profitable then than the investment is just dead money or worse. I'm long here but is very skeptical at this point.
    Oct 15 01:35 PM | Likes Like |Link to Comment
  • Avoid Molycorp Until Its Liquidity Position Improves [View article]
    MCP is coming back down again, now at sub 11. I'm in at 11.30 (2/3 position). I'm guessing $20-25 by next year once they're in full production. I do feel sorry for the earlier investors but they should have known better about the RE bubble. It's impossible to predict the bottom so I'll take anything around this area (maybe more if it drop lower). As the saying goes, when the stock is at it's weakest is actually when it supposed to be strongest and vice versa. Just make sure that you're doing your DD. This is a better investment, in term of risk and reward profile, than say LNKD or even AMZN. Sure they're at their all time high but one or two slip ups and they're at the mercy of the sellers. If you want to make the buck, you have to take some risks. As another saying goes, it is always the darkest just before dawn.
    Oct 2 10:17 PM | Likes Like |Link to Comment
  • U.S. CEOs are less optimistic about the economic recovery than at any time in three years, a new Business Roundtable survey says. More CEOs expect to cut jobs (34%) over the next six months than to raise capital spending (30%); in the previous quarter's survey, those expecting more spending outnumbered those seeing job cuts by two to one. [View news story]
    Wait...did the Fed just went all out with the last open ended QE? The basic message from Corporate America is "thanks for the dough but I'm not spending/hiring because economy is weak"

    Prime example showing trickle down is DOA. As far as the FED is concerned, they're as clueless as your average Occupy New York protester.
    Sep 26 08:16 PM | 1 Like Like |Link to Comment
  • Molycorp Down Nearly 11% In One Day - What Happened? [View article]
    I'll guess we'll have better indications next year if they actually could deliver as promised when everything is fully online. But here is a run down of their products (from MCP website):

    1) XSORBX class 100/200 used for water purification - they're saying that this will used up most of the Cerium produced at Mountain Pass. They might not have to worry about low Cerium price if it's being used up here. In this case low CE price is actually help them if XSORBX is in high demand and they need to buy extra.

    2) Magnets for various applications like wind turbines, clean energy vehicles etc...

    3) General raw material supplier for other RE elements in powder/rigid form can be custom engineered for various applications.

    My estimate is if they can market 1) and 2) well than they can be profitable even with RE prices crashing much more. In essence they're not as dependent on RE prices as one might think. At this point they're more than just a mining company IMO.

    As RE prices come down far enough, many manufacturers will realize that using RE will not damage their profit margins and expanded the use of RE will not cause a large price jump due to a steady flow of supply from China, MCP, Lynas etc... than prices will finally stabilize. They key is to stay profitable at the equilibrium point on the supply/demand curve. We'll have a better estimate when their plants is fully online (mid/end of next year) and more full production/cost data is available relative to RE prices at that juncture and beyond.
    Sep 26 05:46 PM | 1 Like Like |Link to Comment
  • Molycorp Down Nearly 11% In One Day - What Happened? [View article]
    Many naysayers are so infatuated with the RE supple and demand, RE bubble bursting etc..that they forgot about the diversity of MCP product mix and like you mentioned, the integration of all phases of the production cycle and MCP's objective which is being a low cost producer. Now they have access, via Neo Materials to even sale RE to China if future demand pick up (yes the Chinese might even be a net importer someday). I for once like companies thinking beyond quarter by quarter earnings catering to Wall Street and more about the future well beings and development of the company. Wall Street is very near sighted/shallow thinking as shown by the recent financial SNAFUs. It's no wonder there's little love between MCP and WS. Speaking of valuation, there are many more garbage companies out there with even emptier promises that WS is showing a lot of love for like FB for instance.

    It's easy to put MCP in the same bin with NFLX, GMCR, SODA, and some other has been hi-flyers stocks based on the share price performance but every business is different and should be judged on a case by case basis.

    Thinking outside the box, the insiders especially the Chairman Ross Bahppu has sold and profited around $500 million dollar off MCP last year. In principle, the chairman alone has this personal extra cash to offer MCP additional money if he's really that committed to the company. With the recent purchase he's still has 16 million shares left so he's not completely cashed out.
    Sep 26 04:31 PM | Likes Like |Link to Comment
  • Molycorp Down Nearly 11% In One Day - What Happened? [View article]
    It's our money that are at stake. Not some smuck who will analyze the stock at the behest of fill in blank_____.
    Sep 25 07:57 PM | Likes Like |Link to Comment
  • Molycorp Down Nearly 11% In One Day - What Happened? [View article]
    "Several shareholders attributed the sharp decline to an article from Shock Exchange which hit the Internet just before the market opened"

    Really funny, what about, MCP being a everyday short play for the last year or so? Funds window dressing at the end of Q3?

    What do you expect when the RE bubble popped?

    Now the real question is can and will MCP stay profitable when the plant is up and running fully even with the subdued RE prices? I don't think when they have plans to reopen Mountain Pass, it would be idiotic for management to based the operating income on RE prices at or near bubble level. What happened is Wall Street speculated (as usual) on MCP future (RE future altogether) and send the stock price to fantasy level. Of course, insiders saw this gift courtesy of WS and cashed out and everything else is history. Now that prices have fallen to a more realistic level, it doesn't surprise me that they're buying in again. MCP will also poised to rise once the bears is done playing as well. Instead of old news can you tell us common folk what is a good buy in price?
    Sep 25 05:55 PM | 1 Like Like |Link to Comment
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