Kind of a misleading headline. No one said anything when the Chinese market more than doubled from Nov to June, but now that it's pulled back 30% in one month, it's being called a "manipulated crash."
Buried in the article was this statement:
"Some funds have closed their copper positions to send funds back to China, in order to meet their margin payments on stock indexes," said one metals broker in Hong Kong.
It didn't state whether these were long or short positions.
Any of you guys got guesses relevant to its effect on copper prices?
I was taught long ago that you should periodically look at each stocks in your portfolio and ask yourself, "Would I buy this stock today at this price?" If the answer is yes, keep it. If the answer is no, sell it.
When I look at TC, I give it an emphatic YES.
When I bought the 100K shares for a buck and sold options for a dime, I never expecvted the stock to fall below 90 cents. In fact I expected to be taken out. So, I'll keep the shares for which I'll have paid 90 cents net.
Deutsche's stated reason for downgrading was the same as we've all talked about. The cash flow has turned "neutral", a euphemism for zero, and concerns about their ability to deleverage. Sounds like a good reason to me.
When any reputable financial institution like Deutsche Bank downgrades a stock, it's for a very good reason. Downgrades require several levels of internal approvals. That's worrisome. I'd like to see their report in detail.
I'm sure everyone is remembering the analyst with the 50 cent target.
armchair, if China's GDP growth rate declines from say 7% to 4% this year as forecasted, doesn't that imply that their consumption of copper will be even 4% larger this year than last year? And if their growth rate the next year is only 2%, that means that two years from now, they will be buying 9% more. Since, as you pointed out, they consume 35-40% of the world's output, that's a pretty healthy increase in consumption, even at their reduced growth rate. There would be a problem if their growth rate turns negative which is not likely for some time. They still have a lot of tools left to stimulate the economy.
Speaking of deleveraging, I just bought into an 8 story commercial real estate building on 11 acres.
The property had been neglected for many years, vacancy rate was over 30% and the cash flow negative.
See how this is analogous to TC.
Rents have also decreased below the norm due to the rundown nature of the building.
There is a huge shopping center being expanded across the street which will be the biggest in the state of California and a huge expansion of a hospital complex about half a mile away.
The long term plan is to update the building and convert a lot of the rental space to higher value medical suites. The projections are to be cash flow positive in two years because of higher rental rates and increased occupancy. (Gradually.)
In addition, by building a multilevel parking garage, we'll free up about 4 acres to build upscale senior housing which will be near shopping and medical facilities.
TC has everything in place, except for the crusher and all it needs is higher copper prices, etc. to complete the deleveraging scenario.
I've run through similar real estate, banking and mineral scenarios like this many times.
All that's required is patience, patience and more patience.
I'm sitting on half a million shares with an average cost of $1.42. No sweat. And, I don't even drink!
By being delayed I was referring to the lower cash flow than had been forecasted with higher copper prices of $3+. That number you may recall was somewhere between $100 and $200 mill/year. Now that we're at zero, deleveraging is going to be a long slog. We absolutely need better pricing/ throughput, ore quality, etc.
I'm buying the higher price copper argument.
Regarding the 200K share buy, it really wasn't that big a deal. It just showed a buyer who wanted in NOW.
Maybe he knows something. Or maybe he knows someone who knows someone who knows someone, etc.
If it had been a million shares it would definitely be a factor.
The stock is just a commodity play, pure and simple.
More significant was the higher overall volume, even without that single trade.
For those of you without Level 2, the final two trades I saw were 200,712 shares that drove the price from 0.8142 to 0.8499, a 4.4% increase. It then fell back to 0.8400 on 100 shares.
Obviously, the trade was on the demand side. Which gets back to one of the basics of speculating. If you decide to enter a stock because you see it as a multibagger, it doesn't matter whether you buy it near the bottom or within 20% of the bottom. If TC goes to $3 or $4 during it's deleveraging, any price below $1 is a bargain. People who try to hit the absolute bottom more often miss buying the issue at all.
This deleveraging scenario has changed only in its timing.
arnold, stop it.
Ultra is not a fraud. He's the most valuable asset this board has. The only mistake he's made is guessing wrong for the direction of the price of copper. He's not alone. A lot of smart people have been predicting rising commodity prices due to the expansion of the money supply. They've also been wrong wrong wrong.
But, that doesn't make them frauds.
Finally, as to his multiple ID's. If you can direct me to even one person on this board whose writings come close to resembling ultras, I'd like to know who that is. Please name names. Thank you.
why can't I get this "ear worm" to shut up?
I keep hearing Paul Simon's "Slip Sliding Away."
This next quarterly report has to say something encouraging. Almost anything will do.
I remember doing a paper on reverse splits about a billion years ago. Maybe more.
Anyway, the results surprised me. Basically, for those companies that were sound and continued as successful entities, their prices initially decreased on the announcement of the reverse split, but then recovered that loss within a very short time, like months. Those companies that looked hopeless and were doing the reverse split out of desperation, dropped on the news of the reverse split, never recovered and continued their death spiral to BK.
Doing blind back studies, MBA students were able to separate the two classes with a high degree of accuracy. TC is clearly in the former class. They have a solid business based on good assets.
Commodity pricing is the single most important variable for their survival and success.
Don't be afraid of a reverse split. That's not the problem.
The last time a candy bar cost 5 cents, before it was raised to 10 dents was 1965-69.
The same candy bar in 2009 costs $1.10.
That works out to a compound interest rate of 3.1%.
In 1969, gold was $35.50.
In 2009 it was $1087.
Compound increase of $7.4% .
Do is right. Winner is gold!
How do you think that compares to something like apples or chicken?
You're forgetting one thing. All the companies you mention are financed with equity not debt. Their stock price may implode, but they aren't in danger of going BK like heavily debted companies like TC. That being said, I prefer to speculate (not investing) in highly leveraged companies like TC over the others.
Consider Amazon with levered cash flow on enterprise value of a fairly steady 2%. TC on the other hand can vary from less than 0 to 20% or more based on commodity prices.
Unlevered cash flow is expected to be around $75 mill, but levered CF after paying for debt, capex, etc is gong to be a negative $122 mill. How do you expect them to raise that money? Sell property, issue more preferred's, bonds, line of credit at bank? Note that I left out sell stock. Don;t think anyone would be interested after the secondary sold at $6.25 a short while ago.
I've seen papers challenging the importance of the Transports in today's economy, where the service, entertainment, telecommunications, etc., industries are a much bigger part of the economy than in the first half of the 1900's. I'm not saying the transports aren't important, just not as important.
On a purely anecdotal level, my observation of manufacturing and service industries in Southern California seems to be improving rapidly and looks to be the best since the bottom in 2008.
I'm optimistic for the business outlook for the first time in seven years.
Just a reminder that Friday is option expiration.
No one likes to "loose" money!
Funny how the bread man bases his analysis on Graham and then starts babbling about technical indicators.
Graham (and Dodd) were strict fundamentalists and never used technical indicators.
Bread Man, if you want to throw around tech talk, y'all better read Edwards & Magee.
It's easy to spot a phony. As a professor once said to me in a class where I hadn't prepared and was trying to BS, "Gatr, how can you speak with such authority about a subject about which you know nothing?"
A lesson well learned. I never did it again. I just say, "I don't know."
This ws a Reuters FACTBOX - Oil Production report from July 25, 2009.
I've posted the web reference, but they sometimes don't transmit.
I'll do it twice. :-)