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Mesabi Trust Message Board

  • booleansearcher booleansearcher Jan 7, 2011 1:02 PM Flag

    Mesabi already lost 1/2 of its

    gain since my last post - I just don't see this move up having any legs.....the risk is rising for a sharp sell off to low 30 to high 20's.....and then it may not be over then could be and we would have to reassess at that time. Boolean.

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    • I think I understand the source of your confusion.

      1. hope the put expires out of the money
      2. buy the put back
      3. provide stock if the put is exercised.

      What you describe here is a call option, not a put option...substitute the word call for the word put everywhere and it would be correct.

      Your confusion stems from the fact that you haven't understood the difference between calls and puts.

      And it also explains why you keep harping about naked puts. You are thinking that I am committing to deliver stock which I don't own (an uncovered or naked call).

      But even naked calls are nothing insidious, just more risky. If you sell uncovered calls it simply means that if exercised you need to buy at market price and sell at the call strike price, thus the loss is potentially unlimited. There is still no comparison to naked shorting, however.

      Stay away from options until you can figure out the difference between a call and a put.

      I could also argue that those 3 ways are not the only ways the call/put can be resolved. My usual approach, if the option would be in the money, is to roll it over to a later month at a more favorable (to me) strike price. But that could be considered a special case of buying back the option.

      As for me, I have never yet sold uncovered (naked) calls, which you object so strenuously to. Simply because the stocks I am using as my vehicles are in uptrends, selling puts works better for me (less likely to end up in the money). Now that I have purchased a position in MSB, I am selling naked puts (simply meaning using margin) and also selling covered (not naked) calls in order to lower my cost basis. I expect to manage the calls such that my position will not be called away (roll the calls forward to a higher strike price if they would be in the money close to expiration).

      I would suggest that you become familiar with your subject matter before engaging in arguments on topics where you clearly haven't even grasped the basics.

    • you may also want to look at rick's cabaret right now - see how that looks....yes I am invested in them and it has been building momentum here after a long consolidation period with the lowered economy - but it is very interesting and I am long again on own dd of course - I don't do options so you can tell me what that looks like. I am very good at stocks but options just ain't my game. Boolean.

    • It is wrong because you have this backwards
      "3. provide stock if the put is exercised."

      If exercised, the put seller has to buy the stock, not "provide" it. It's entirely the opposite of your understanding.

      If anyone is bearish it is the put buyer not the seller. The buyer thinks a decline in price is sufficiently likely that he buys puts to protect against it.

      The put seller generally expects the price to hold steady or increase so he gets to keep the premium. The put seller would not be rooting for the price to crash as then he may be forced to buy shares at higher than market price.

      I strongly suggest you stay far away from options as you seem quite unable to get your head around them.

    • And how is that wrong-mo, read every word?
      Come on, you know, don't tease.

    • Lisa, you have studied this stock more than myself, but I have difficulty with your senario of the price going to $30. The reason I say this is it appears to me that the stock price is determined by the price of iron ore which already corrected I believe. Am I correct in making this assumption?

      • 2 Replies to mrkory2002
      • It may not go to $30 but I am not buying until the May distribution is announced in April as that is the time when the final drop is most likely to occur.

        Yes, price of ore is important. But in Q1 each year they hardly ship any ore because the waterways are closed for winter. Thus Q1 distribution is likely to be much lower. I expect the coming distribution to be somewhat lower (jduade has estimated $0.63), but the following one to be much lower ($0.25 or less).

        Yield is the main thing that drives the price of these investments (except when momentum traders take over like recently). So when the apparent yield suddenly takes a dive in April/May, that is when short-term or less informed holders may dump their units. That will be my timeframe for buying. If it doesn't get down to my target price, I may buy anyway but will not chase the price upwards. I will have gained ~$5k in the meantime by selling puts (Dec, Jan, Feb, Mar and will be selling April, all of which will probably expire without being exercised) so that will lower my eventual cost basis even if I have to buy at a slightly higher price than my target.

      • gutowskido Jan 12, 2011 12:55 PM Flag

        In a small way you are correct. The major determination of MSB's price is in the number on tons shipped per month and per annum.
        What good is a high price per ton if there is very little shipping? I do not know if MSB ships any ore to China. I believe most goes to the USA and Canadian mills.

    • I am not expert in MSB, the closing of the Soo Locks have come up several times on this MB, it mint have been one of your previous post. I check the winter MSB price drop going back 2008 and the drop is significant. 46% in 2009 and 16% in 2010. It does make sense that the export in stopped for several weeks in the winter.
      I am suspicious of China good business practice, any one too dependent on China will be, at some point, be disadvantage. China does not do business the way we do. Having dealt with Chinese I can attest to negotiating tactics quiet interesting to even be absurd.
      Demand drive prices, today china is the demander of choice. Since the US is not any longer, manufacturing anything, as compared with the 1980's, MSB is doing well, What will the post 2016 bring? Now days, 5 years is what it takes for any project to see its completion.
      As for the Australians? They are pro Australians, I wish the US was pro US.

      • 2 Replies to ousaouparis
      • The evidence of "naked" is in your own words--"sold uncovered puts"--uncovered puts are "naked" in that the seller will be "put upon" to deliver stock the the put buyer if the put is executed.

        Evidence of "naked" short stock trades.
        Short interest new 481,000 shares.
        Short interest prior 384,000 shares
        Short interest 24.41%.

        Interesting 'L' sold, in her own words uncovered puts and got net of four grand---better than a company distribution--. Late she reports gains og 25 grand from uncovered put sales. Fly on the Wall reported there was a negative bias based on imncrease in put sales! And soon after there was a big sell off.

        Was 'L's' uncovered put sales part of the negative bias? Maybe not, or maybe yep!

      • "As for the Australians? They are pro Australians, I wish the US was pro US."

        So do I!!

    • Liza your are so right that these morons have nothing left between you know what. In all your analysis the cold weather shut down was not mentioned. That is the primary stock going south this time of year. China is rethinking it economy. The Rear Earth export is down by 11%, the currency is under attack. Will China import as much Iron Ore as in 2010? Also I read that the Australians have taken a position on the iron ore producer? The real competition to MSB is the Australians?
      Previous data show that March is the possible reentry in MSB.

      • 1 Reply to ousaouparis
      • <<In all your analysis the cold weather shut down was not mentioned. That is the primary stock going south this time of year.>>

        The closure of the Soo Locks and small April distribution is only relevant to short term traders, and its effect on unit price is far from consistent. Look back more than 5 years.

        Essar Algoma and Arcelor Mittal had to inform CLF of their desired pellet delivery schedule for 2011 sometime toward the end of 2010. The accelerated shipping MSB saw in March-June 2010 were shipments those companies had deferred from 2009. They've both tried to have the 2010 scheduled shipments reduced, and I think we can infer from that that they will elect reduced shipments for 2011.

        In the worst analysis, 2010 shipments represent ~6.2 M tons represents a combination of 4.7M contractual tons and 1.5M tons deferred from 2009. (Electing to defer prevents them from changing the total volume of annual shipments, so you can guess the contract volume by averaging the 3.2M 2009 shipments with the ~6.2M 2010 shipments.) If Arcelor and Essar didn't want those deferred tons at all, then they may elect to reduce 2011 shipments to 3.2M tons. More likely, they'll elect a smaller reduction that will be substantially offset by a rise in the ore price.

        Regardless, the schedule of shipments for 2011 is now known by insiders at CLF, Essar, and Arcelor. Historical precedent, for 2007-2010, is 4.7M tons (farther back than that it drops off into the lower 4's), and I expect something in that neighborhood. At an ore price of $80/ton, that should yield around $2.30/unit, but I don't think we'll find out 2011 pricing until April.

        If the April announcement reveals a substantial increase in pellet pricing, then you may see a substantial increase in unit price, even if the distribution is $0. If the January distribution includes much of an adjustment due from the Essar arbitration, it could be a nice bonus on top of the quarter's shipments.

        All this just to say that people expecting a deep discount in unit price may find themselves disappointed. Such short term movements are, to me, little more than a horse race, though. Especially in a security as simple as MSB.

        <<Also I read that the Australians have taken a position on the iron ore producer? The real competition to MSB is the Australians?>>

        Are you kidding? Australia and Brazil are responsible for almost all of the international iron ore trade. India used to be a major exporter, but they now consume a much larger portion domestically. American iron ore is essentially all consumed domestically. MSB's entire production is delivered according to contracts that don't expire until 2016.

    • "Most stocks do not go straight down"

      Most stocks do not go straight up either like MSB did for about 6 months. But when they do, they often go straight down again. Just like tech stocks went straight up in the late 90s and then went straight down again for a few years. Just like house prices went straight up in 2005-2007. Then have been going straight down ever since. That's what happens when things get overvalued.

      "I have not read anything so negative for an explanantion for the decline."

      I don't think anybody has said anything very negative or that there is any big problem for the company. All the people (including me) who say it is going back to 30 have only said that the price went up too high and it became significantly overvalued, based on current valuation metrics. That is not so bad, except for the people who bought in in the $50s. They might have to wait a year before they get back to break even. We all wouldn't be saying we would buy in at $30 (or whatever) if we didn't believe the price may rise again later in the year. It may remain weak for a few more months but by summer it will probably be in uptrend again (so long as global economy is OK).

    • Forgive me if I writing something wrong,but my point remains that the reading of these articles or posts on or elsewhere are not always accurate with advice or many times with facts. I am just trading this stock and new to this stock,but I have not read anything so negative for an explanantion for the decline. Most stocks do not go straight down so to state that MSB is going to 28 as I have read on google is not a sure thing. If it does, there will probaly be a news event following this decline. As for the market being effient, I know it is not!

    • of course markets are manipulated - everything is manipulated - that is just one big fact of life and you best learn how to deal with it as whining ain't gonna do it. Mesabi ran up like a wild man and it has done so before - I have been in the stock for a long time and learned that it ran up and then crashed down ran up and crashed down but it has never run like this before and I bailed out with solid profits as I noted before. Now did I know that the stock for sure was going to drop NO.......but history and market logic says it could so I never lose money taking a huge profit so I took it. I still see the market having huge run up to 14500-15500 or so and I will be selling hard into that rally as a big DROP will be following that. I still have leveraged russell and s/p 500 I am running with and won't sell yet at these highs YET. I will also add some new leveraged plays for this run so I do hope this downward adjustment goes a little more. Mesabi will have another run but it may still drop from here to my target of upper 20's to low 30's...........I still say the risk is too high here and I will not step back into it YET. I have been buying fallen angels and bruised companies now as I reposition my winners....just sold a railroad as well after a huge run from 2009.......I am cautious ALWAYS. Boolean.

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