"Cycles Zac, cycles."
puden, you couldn't have said it better in so few words.
This stock is not for someone who doesn't understand commodity cycles or leverage. The trick is to buy, or average down, during the low cycle, be very patient, and then ride the up cycle, being sure to get out a little too early before the peak. The cash flow is used to reduce debt and financing costs so as to increase cash, etc.
In control system terminology, it's a positive feedback system.
If you think this will be dead money for a long time, you can also lower your cost basis by selling out of the money call options.
Disclosures: I am a (self declared) Sergeant in Ultra's army of pumpers. He pays me $1/post. I only use 8 aliases.
I'm in large with TC as well.
Fortunately I've been selling 30 day calls for the last 18 months and haven't had any calls thereby lowering my cost basis below $2. I was "shook up" by Perron's statement of cash neutral for 2015, and hoping Cu price increases will generate some free cash. Otherwise it's dead money for awhile. With increased pessimism it's tougher to get decent call premiums.
Thanks puden. Excellent Bloomberg article re copper. Also makes me want to buy some Freeport stock for the long term.
Ok, I read the indentures over the week-end while watching the Masters, and I also agree with both ultra's legal interpretation, and more importantly his practical understanding that you shouldn't get into a legal battle with your secured creditors, because it's a no-win situaton for the debtor who is preparing for a re-fi.
That's just basic Business 101!
mike, I think it's priced in for every investor who understands finance. I have a backgrond commercial in real estate and every deal we look at examines projected cash flow including gains gains from refinancing.
I personally don't care about reported earnings when looking at mining or O&G companies. It just free cash flow, ROE, reserves to insure continuation or expansion of cash flow and finally potential cash flow increases from refinancing.
I'm 100% on board with ultra's last post, "Cashflow.....should be good. We want CF to be good."
This is the big news we've all been waiting for. They increased their target price from US $1.52 to $1.60.
That should be the trigger to send the stock sky rocketing this morning. (Sarcasm intended.)
mike. you're absolutely correct. Using cash to pay down debt and reduce high interest expense is a given. But, everyone has already factored that into the price. It's not a question of IF, but WHEN. Since we have no control over the timing why get our shorts twisted? The only other unknown for the refinancing besides the timing are the rates. That should be a topic of great significance. So, for me, the refinance rates and commodity prices are the only things I'm concerned and think about about. (I almost said worry, but I'm a big fan of Alfred E. Neumann. ""What, me worry!")
Management knows what the indentures permit. They also estimate their cash flow and cash position. So, they'll use their cash for the highest return. We have no control over their actions. Further, their purchase of debt with existing cash, if permitted, will have a negligable effect on the stock price.
So, if it doesn't affect the stock price, let's stop talking about it.
We don't have control over the prices of copper and gold, but the stock price will vary significantly as a function of those changes and the subsequent changes in cash flow.
So let's stick to that topic and only those topics whose outcome will affect the price of the stock.
For example, ultra's estimates of the supply and demand side.
First the downgrade from Deutshe Bank and one day later CIBC.
You think that may have been a factor in the price weakness?
But, even with that, their target prices were a higher than the current price.
dragon. surface ice is increasing in antarctica, while subsurface ice is decreasing. Net result is that the total ice volume is decreasing. Therefore more water is being released.
The mechanism causing this is the sub surface ice melting during the day and then the surface ice refreezes at night increasing a thinner layer of surface ice.
I talked woith the Captain of the National Geographic Explorer whose been traveling the waters of Antarctica for 16 years. He says he now has access to areas he was never able to reach before.
But what does he know!
"US dollars are only good to buy stuff in the US?"
Maybe I misunderstand you, but US dollars are good to buy stuff anywhere in the world. Oil, copper breakfast, shoes, you name it. I've never seen US currency turned away.
Further, the 30 days of "risk" you imagine in the Chinese buying copper, is always currency hedged.
That's how commodity markets originated a thousand years ago.
It's obviously not necessary when the commodity is pegged to the dollar as the yuan used to be and is still loosely tied. Some countries even use US currency as their own like Equidor.
Don't mind these long suffering holders.
You can't say anything remotely negative about another mother's baby without receiving a nuclear response.
They're all very angry and frustrated. That will end when the share price starts to rise.
It's like trench warfare in WWI, if you keep your head down it's not going to get blown off.
Monday, March 30, 2015
Today's Spotlight Market
The Climate Prediction Center’s 8- to 14-day weather outlook for the U.S. has nearly 2/3’s of the country expecting above average temperatures. The exception to the warm weather outlook is the northeastern sections of the U.S,. from the upper Midwest and Great Lakes region through the Mid-Atlantic coast and up through New England. The most recent Commitment of Traders report shows large speculators continuing to hold a large net-short positon in Natural Gas, with non-commercial traders net-short nearly 212,000 contracts for the reporting period ending March 17th. While both non-commercial and commercial traders have been lightly reducing their positions of late, the non-reportable traders, which are small speculative accounts, have been adding to their net-long positions as prices tumble, with hopes of trying to pick a bottom in this multi-year bear market.
Judging by the snow we received here in Chicago on Friday, one would never know that spring has arrived. However, for Natural Gas traders the winter heating season has “unofficially” come to a close, with the Energy Information Administration reporting the first Gas storage injection for 2015. In its weekly Natural Gas storage report on Thursday, the EIA reported a Gas storage build of 12 billion cubic feet (bcf) last week. While the build was not unexpected by market participants, storage injections in March are unusual, as the first week of April is normally considered the end of the winter heating season. U.S. Gas inventories now total 1.479 trillion cubic feet (tcf,) which is over 60% higher than this time last year, although storage levels are over 11% below the 5-year average. The market reaction to the storage build was negative, with the lead month May contract falling to lows not seen since early February, as Gas bears continue to hold the upper hand. While it may seem difficult to be short Natural Gas with prices well below $3, we should remember that prior to the year 2000, Natural Gas prices with a $2 handle were the norm, and many years saw prices dip below $1.50 when supplies were ample. So who says that history does not repeat itself?
A private Swiss Bank has a more shorter term bullish view of the US dollar. His argument:
ECB policies are set to have a disproportionately large impact on
markets, with consequences experienced in the far corners of the world
• A shortfall in the supply of liquid euro government bonds is likely to
push up bond prices to unrealistic levels, while a shortage of safe assets
could distort global asset prices
• The euro will continue to undershoot its fair value, combining with
ongoing Japanese QE-induced yen weakness to provide dollar strength
for a while longer
hd, not exactly.
1. The bonds pay interest not dividends.
2. The bond current yield is only 9.28%.
The yield to maturity in 3 years is 11.3%
The A preferred's have a current yield of 10.1% and a yield to call of 13.8%.
The B preferred"s have a current yield of 11.2% and a YTC of 12,0%
Since it's unlikely that either of the preferred stocks will ever be called, they should be valued on their current yield. Therefore my opinion is that the B's with their current yield of 11.2% are probably a better buy than the bonds since you aren't locked in for 3 years to gain the added cap gain from the bonds.
While the bonds rate higher on the security ladder, they're still rated C as junk bonds and their liquidity is not as good as the preferred.
Those numbers are if the stock isn't called. If it is, the numbers drop to 4%, 6% and 9%. Still very respectable for a one month return.