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Arkansas Best Corporation Message Board

kjvaske 2 posts  |  Last Activity: Sep 10, 2014 11:05 PM Member since: May 4, 2004
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  • kjvaske kjvaske Sep 10, 2014 11:05 PM Flag

    For the record I do have shorts on DE also, but part of the reason I think this is such a good trade with my PUTS is because the stock market could easily have a 10% correction...if that happens all stocks will likely go down equally...even the good I have a double chance of this trade working...either the farm economy sinks it or stock correction sinks it. Since DE pays a great dividend compared to AGCO I feel AGCO will likely drop the most since in the case of falling stocks, those that pay high dividends will likely drop the least. As for a buyout I also have that covered...I keep enough short-dated CALLS to cover my premium in the case of a buyout. Since I am already up 100% on the PUTS this trade is working out just as I have planned.

    Your case about global farmers is irrelavent and is actually one of the reasons I am more confident about this trade. Other countries continue to get more efficient at production each year in part because of AGCO equipment and profits from recent years production. The more money these developing farmers make, the more land they can afford to put into production and thus add to the crop stockpiles. Just about every farmer I know and myself included have cleared every inch of ground of trees and debris to gain more acres. I just returned from southern Iowa tonight and I saw lots of acres that used to be pasture and instead those farmers gave up raising cattle and put in crops because its a lot easier to sit in a tractor a couple months a year than to raise cattle all year long 7 days a week. My point is that a lot of the extra production across the world is not going to end this fall...all this extra land will be in production until enough farmers lose money the loses make them take the marginal ground out of production.

  • kjvaske kjvaske Sep 9, 2014 9:33 PM Flag

    I grew up on a farm and then got an engineering and business degree...I also hobby farm a few hundred acres. What I can tell you is that farmers hate to pay taxes...they will buy whatever it takes at the end of the year to use the section 179 depreciation tax break to get rid of income. My dad bought a couple tractors for over $250k and he brags that he doesn't even use them and follows that by saying how much he saved on taxes. AGCO has benefitted from this behavior in the past, but that is now gone. Every farmer I know already has all the shinny new equipment they need for a few years. If they are already losing money because crop prices are below break even, why do you think they would need to buy new equipment for a writeoff. This year may be somewhat ok because some probably sold some high-price crops early this spring and they may still need the write-off. But next year will be a disaster...absolutely no need for equpment purchases next year and given the fact that the seciton 179 depreciation is almost completely gone in the current tax code. This industry is dead for years expecially if we have a normal crop next year on top of the monster this year. I have a lot of Feb15 puts at $40 that I expect to be worth 6 to 10 times their value by expiration. I'll take that cash and short some actual stock on any bounce. Anyone with enough cash to buy this company already knows everything I just don't look for some knignt to bail out this industry...just go short and be happy...Look at this chart on an overlay of the S& will notice the only time this stock has gone up lately is on big upswings in the general market, but then loses steam and drops again.

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