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Amazon.com Inc. Message Board

chl94611 12 posts  |  Last Activity: Jul 28, 2014 9:41 PM Member since: Dec 3, 2004
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  • chl94611 chl94611 Jul 28, 2014 9:41 PM Flag

    enormous returns from these levels. But ACI is also on the razors edge regarding bankruptcy, based on both market signals (price of bonds and stock), and their ongoing cash burn against their dwindling cash position. Personally, I like the bet, but it is a very levered bet, that has a significant chance of going to zero (stock), and uncertain recovery rates (bonds). ACI as an entity will come out the other side. The billion dollar question is whether any current stakeholders, other than management, will receive any return on their money, or even their money back.

  • chl94611 chl94611 Jul 28, 2014 9:38 PM Flag

    The natural gas revolution and the success of fracking is the subject of another piece, but it is the driving force behind this apparent mispricing of coal. Given the relative abundance of shale gas, due to Marcellus "success" in the short term, the price of gas has stayed well supplied and low, as have the complacency of their consumers, namely utilities. Despite the near record shortage of coal and the rising use still in today's electricity generation, utilities have not panicked into sending the price of PRB coal higher. Why would they, when they feel exceedingly confident about their ability to procure just in time natural gas. Except what happens when whether shortages hit? The price of gas for immediate delivery skyrockets, as it did this past winter. Faced with this occurrence a few more times, the utility customers may start to get more concerned, and feel the urgency of rebuilding coal supplies. Delivery constraints will still exist due to a number of ongoing factors. So what will happen to the deliverable amount of PRB coal, albeit in lower volumes? The price will go much much higher.
    This doesn't even account for the possibility of materially higher natural gas prices in the future, due to a combination of demand and a realization that current supply is highly frontloaded, with less and less reliable supply coming in the future. WHEN this happens, which is almost a certainty given the current decline dynamics of natural gas drilling, both NG and Coal will price higher. This also does not include the option of renewed China demand, which will eventually come and work off the oversupply of met coal. But that is less valuable to a company like ACI, which is highly levered to the PRB price and natural gas by extension.
    The only question with ACI and the other coal plays, like ANR, BTU, and CLD, is who will be around to prosper the most when the turn in NG and coal come. ACI is a highly levered bet on that outcome, and could produce

  • chl94611 chl94611 Jul 28, 2014 9:24 PM Flag

    I agree about many of the things you point out regarding the coal super cycle, and have noticed a few more that indicate the return of pricing power. Your timing has stunk regarding this cycle however, in large part due to your failure to recognize the debt burdens that most coal companies are struggling to overcome. As a result of mistimed acquisitions into the met coal market, almost every coal company is slogging around a debt load that may sink their companies into bankruptcy. But that said, there are many good and peculiar things surrounding the coal industry that indicate a potential pricing bonanza that is coming.
    Let's take the PRB issue itself as a means of one of the most peculiar. By almost every PRB company and the railroads that service them, there appears to be a real rail issue which is delaying shipments. Why exactly that is could be due to several known factors, such as coal loading problems and subsequent pollution/damage to the tracks themselves, or other unknowns not yet revealed. What is certain is that bottleneck issues at loading and delivery are causing delays in revenue and shipments.
    What is odd about this however is the falling price of PRB coal in the face of bottlenecks/shortages and dwindling supplies at customer facilities. Coal inventory levels are down to multi-decade lows, even with the cool summer. Shouldn't economics be causing prices to go in the other direction, and possibly rapidly?
    Say what you want about the relative climate effect of coal burning and CO2 emissions, but coal still supplies around 40% of US electric energy needs. Despite future regulations which may or may not be implicated, coal is still very much needed today, in the US, by US utilities. So why is the price of the commodity falling in the face of shortages and dwindling deliverable supply?
    I think this is a tremendous mispricing, one which is ultimately linked to the price of natural gas in the US, and the "relative abundance" of shale gas supplies

  • Reply to

    ACI Forecasting Bankruptcy?

    by chl94611 Jul 21, 2014 9:57 PM
    chl94611 chl94611 Jul 21, 2014 9:59 PM Flag

    Shutting down the Cumberland mine will preserve ACI's money for longer. Shedding unprofitable met coal sales, while still preserving the option for the future, is a smart decision. So why is the market treating ACI like it is headed for bankruptcy next week? Something is wrong with this price action.

  • ACI's trading over the last 5 days has been a little strange, even for an unloved company in an unloved sector, with significant bankruptcy risk. Over the last 5 days, leading up to all the major coal company earnings announcements, both ACI bonds and stocks have traded off meaningfully.
    The actual earnings announcements are actually insignificant to the big picture. All of the coal companies will lose money this quarter, since coal prices have not recovered, and met coal in particular, continue to decline on global steel weakness. I'm not saying there won't be a knee jerk reaction on the news, but the story in coal is all about when the turn will come, and who will be around to survive.
    This is the strange part about ACI trading. It has traded off on above average volume, as if somebody in the know was dumping ACI risk in the bond and stock market. But the news for ACI has been non existent. Natural gas prices have fallen, as have gas related names. And since ACI is a gas related option, this makes some sense.
    The heavy selling seemed to come before today's announcement about the closing of the Cumberland Mine, which is actually a positive for ACI. ACI is best thought of as an option on higher nat gas prices, since higher gas prices make coal more competitive, and really higher gas prices will roll back much of the anti-coal regulations now being proposed. Look at Australia and how quickly they backtracked on their carbon tax. Carbon taxes may sound nice to the environmentalists and the left, but they do nothing to slow down global climate change, save for putting higher costs onto the economy and the backs of consumers. Climate tax sounds nice in the abstract. Not to struggling workers who are already having enough trouble paying for groceries and transportation.
    Cutting production is actually a good thing for ACI. Remember, they are an option on the turn in natural gas prices. Will they be around for the turn, or will they run out of cash first?

  • Reply to

    Bezos: Con Man and Genius

    by chl94611 Jul 17, 2014 3:40 PM
    chl94611 chl94611 Jul 17, 2014 3:52 PM Flag

    meaningful shift, but books and audio books are already available for the casual consumer in many forms. And that doesn't even include libraries.
    Bezos is a true PT Barnum. He can fool some of the people all of the time. But in the end, his reach to do everything may spread even his message too thin, and create real financial distress for AMZN along the way. They are already running dangerously low on capital. The last debt offering was not received poorly. A second debt offering, of considerably larger size, may cause a different reaction.

  • Having just finished watching "The Wolf of Wall Street", I can't help but see the similarities between the main character and Jeff Bezos, minus the drug addiction. In the movie, Jordan Belfort builds a "new" brokerage firm to compete against the established investment banks, but it is nothing more than a high pressure sales organization. Belfort and his cohorts make millions for themselves, but little for the investors they represent. Sound like Bezos?
    Bezos, like Belfort in the movie, is a genius con man who has turned the model on it's head. Since the outset of his company, Bezos has used a huge tax loophole and the promise of better tomorrows to keep his stock rising, and keep Wall Street, employees, and even consumers happy. But it is built on a model that never generates any real returns. The cost of running the "everything store" rise faster than profits. Period. And nothing about that will change.
    Instead, Bezos is a marketing machine, constantly dangling the carrot of riches just beyond the hill. Wall Street is "paid" not to look too closely at the numbers, so they go right along with every marketing charade, whether it be drones, movies, tablets, phones, or cloud services.
    The one business that Bezos and AMZN have had success in truly up-heaving is the book business. That distribution model has changed, largely due to the effect of Bezos and AMZN. Unfortunately, that is a dying business. Reading books is going the way of slot machines. Fewer and fewer players for more and more competition. Ask most people how many books a year they read and the answer is zero. And that zero population is growing all the time, as younger generations become adult consumers. They simply have no interest in reading books in the era of Facebook, Instagram, Twitter, NFLX, and the internet.
    Offering a new "a la carte" menu for reading books makes a nice story, but probably only cannibalizes their existing PRIME customer base. It may add some incremental margin if they can get any

  • chl94611 chl94611 Jun 23, 2014 8:58 PM Flag

    Where are you tracking your PRB prices? How current are the prices, and what purchases/contracts are they based on?

    Thanks.

  • Bezos is either a genius, or a con man, or both.

    The AMZN phone is a mystery, as is the timing of the announcement, and the stock market reaction.

    This was the most telegraphed announcement in the history of announcements. No surprises, several disappointments, and a lack of a coherent strategy for AMZN to move the needle or materially improve its profitability. Although details of the kickback relationship with ATT were not revealed, it is almost certain to add to AMZN's accelerating losses in short and intermediate term.

    And yet, the stock went up.

    The markets have very few truisms, but one of the few is BUY the rumor, SELL the fact. Today's AMZN announcement was telegraphed weeks in advance, and failed to deliver on a special data plan or other such game changer. Providing free storage for photos is hardly a game changer. The phone is extraordinarily expensive, at either $200 subsidized or $700 unsubsidized. It is hard to imagine even the most devoted AMZN fans wanting to get "locked in" to an only AMZN shopping option, let alone pay huge prices for the privilege to do so. An underwhelming announcement if ever there was one.

    And yet the stock went up.

    Most of the rally was due to the FED and chase for beta. Also a bit of a surprise, since the FED continued to reduce liquidity AND lowered their growth forecast. But that is a story for another post. It still provided almost all of the fuel for the rally. AMZN was falling into the FED announcement.

    AMZN will be the first beta name to falter as soon as the FED induced reaction is over. AMZN is headed sub 325 in the next three weeks, and probably much lower after that

  • Reply to

    Bezos: Con Man or Genius?

    by chl94611 Jun 18, 2014 8:51 PM
    chl94611 chl94611 Jun 19, 2014 10:33 AM Flag

    I will be happy to respond if i am wrong. Will you?

    Based on your smug response, i dont think you will.

    Do you plan to buy a 700 AMZN phone? I dont think so either.

  • Bezos is either a genius, or a con man, or both.

    The AMZN phone is a mystery, as is the timing of the announcement, and the stock market reaction.

    This was the most telegraphed announcement in the history of announcements. No surprises, several disappointments, and a lack of a coherent strategy for AMZN to move the needle or materially improve its profitability. Although details of the kickback relationship with ATT were not revealed, it is almost certain to add to AMZN's accelerating losses in short and intermediate term.

    And yet, the stock went up.

    The markets have very few truisms, but one of the few is BUY the rumor, SELL the fact. Today's AMZN announcement was telegraphed weeks in advance, and failed to deliver on a special data plan or other such game changer. Providing free storage for photos is hardly a game changer. The phone is extraordinarily expensive, at either $200 subsidized or $700 unsubsidized. It is hard to imagine even the most devoted AMZN fans wanting to get "locked in" to an only AMZN shopping option, let alone pay huge prices for the privilege to do so. An underwhelming announcement if ever there was one.

    And yet the stock went up.

    Most of the rally was due to the FED and chase for beta. Also a bit of a surprise, since the FED continued to reduce liquidity AND lowered their growth forecast. But that is a story for another post. It still provided almost all of the fuel for the rally. AMZN was falling into the FED announcement.

    AMZN will be the first beta name to falter as soon as the FED induced reaction is over. AMZN is headed sub 325 in the next three weeks, and probably much lower after that.

  • Reply to

    I'm Amazon put holder but I like the phone

    by ginjomushi Jun 18, 2014 7:41 PM
    chl94611 chl94611 Jun 18, 2014 8:50 PM Flag

    Bezos is either a genius, or a con man, or both.

    The AMZN phone is a mystery, as is the timing of the announcement, and the stock market reaction.

    This was the most telegraphed announcement in the history of announcements. No surprises, several disappointments, and a lack of a coherent strategy for AMZN to move the needle or materially improve its profitability. Although details of the kickback relationship with ATT were not revealed, it is almost certain to add to AMZN's accelerating losses in short and intermediate term.

    And yet, the stock went up.

    The markets have very few truisms, but one of the few is BUY the rumor, SELL the fact. Today's AMZN announcement was telegraphed weeks in advance, and failed to deliver on a special data plan or other such game changer. Providing free storage for photos is hardly a game changer. The phone is extraordinarily expensive, at either $200 subsidized or $700 unsubsidized. It is hard to imagine even the most devoted AMZN fans wanting to get "locked in" to an only AMZN shopping option, let alone pay huge prices for the privilege to do so. An underwhelming announcement if ever there was one.

    And yet the stock went up.

    Most of the rally was due to the FED and chase for beta. Also a bit of a surprise, since the FED continued to reduce liquidity AND lowered their growth forecast. But that is a story for another post. It still provided almost all of the fuel for the rally. AMZN was falling into the FED announcement.

    AMZN will be the first beta name to falter as soon as the FED induced reaction is over. AMZN is headed sub 325 in the next three weeks, and probably much lower after that.

AMZN
323.56-4.20(-1.28%)10:50 AMEDT

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