Normal short: borrow shares, sell them, buy back at later date, return them with interest on value borrowed.
Naked short: sell shares that don't exist, buy back at later date, pay interest on loan.
In one study, about 1/3 of all shares traded were naked, but the SEC concluded it "wasn't significant" because the total dollar value wasn't large compared to the total dollar value traded since most naked shares were in penny stocks.
Real problems occur when someone buys all outstanding shares but the stock continues to trade (as happened in one case), or someone buys shares and asks for certificates but can't get them because the shares don't actually exist (as happened to the Overstock CEO and Chairman) or when all those phantom shares vote, the totals vastly exceed the actual share count, so are proportioned to fit the actual share count, causing actual shareholders to have their votes eliminated in favor of phantom shareholders. That happens all the time.
What if they separated out the rail subsidiary and distributed shares of it as a dividend? I know...pipe dream...but it's still amusing to think about what would happen in the scramble for all shorts.
Might the share price go to $1? Yep. Especially if you can naked short it there. Isn't that illegal? Yes, but the law is not enforced (justification: naked shorting bad companies out of existence does the market more good than enforcing the law). How do we know that? SEC's own internal reports, Overstock lawsuit, testimony of employees who quit, etc. Is the media owned/controlled by the shorts? Partially; we know that because the exact same attack piece appears in multiple media outlets simultaneously, and from various lawsuits. It sucks, but there's nothing you can do about it.
I believe the shorts have telegraphed their desired ending. If CLF issues enough additional shares to let the big shorts cover profitably, the shorts will grant CLF access to the capital it needs to grow (ie make BL happen). If it doesn't, most of the capital market dries up for CLF, which is deadly for a capital-intensive like mining. This is illegal hard ball, but as the folks at Goldman said to their Fed auditors, the law doesn't apply to people once they have sufficient wealth. Given the size of short, either this or taking the company under is likely the only way to cover at this point.
Might someone do a short squeeze? It would take some deep pockets, but yes, someone could. Will anyone? No. Almost everyone needs access to the capital markets, and since the banks that control those markets are the ones on the short side one way or the other, no one is going to squeeze them. Even Buffett doesn't mess with Goldman.He also turns a blind eye to Well's trading desk as long as it doesn't impact his reputation.
In the short term, I don't see the CLF common as anything other than a lottery ticket: you'll almost certainly lose money, but you might make it big. Sit on it for five years, and you'll likely do OK though. This industry is cyclical after all.
Short? Risky, but the odds are somewhat in your favor.
And that's my take on the Wall Street Casino, Bar & Grill, and Boiler Room.
If the price of tacos falls in Tijuana, that doesn't necessarily change the prices of tacos in Chicago. Seaborne iron ore prices don't affect Cliffs profits all that much. Cliffs problems are unique to itself:
* It borrowed a huge amount of money
* It bought good assets with that money (BL, ROF) but paid too much for them
* As a result, it didn't have the money to fully develop them into sources of profit
* So it's stuck with a large amount of debt, with no additional income to show for it
Questions for investors:
* Can the assets it is keeping service its debt at current and projected USIO prices? (Likely, yes.)
* Can the assets it is keeping pay off its debt at current and projected USIO prices? (Likely, no.)
* Will it continue to pay the dividend on its preferred shares? (Maybe.)
* Will it continue to pay the dividend on its common shares? (I expect it to be reduced, if not eliminated.)
* Might it be able to make BL and ROF profitable in the future? (Long shot at best)
If you're buying today, you're buying a modestly profitable company with a lot of debt with a real risk of a dividend cut. Yeah, it has a great moat, but with its debt, it can't turn that into a great profit. Likely scenario is below par profits for years to come.
Is the current price for the whole enterprise justified under the circumstances? Won't know for a few weeks until BL is decided.
Is the current price justified if you have the $1.2B additional to make BL profitable? It's attractive, but not an incredible bargain.
Is the preferred price good IF they continue to pay dividends? It's a steal!
Is the preferred price good IF they drop the dividend after the next payment? Nope, but it does buy you some more seats on the board.
Are the bonds a good deal? Yes, if you hold them to maturity.
Has the price been manipulated? Certainly looks that way. But in the end, it's the value of the enterprise as a whole that matters, not the share price.
Long shot you'll make a killing.
Interesting. Evidently you can't post links to BBC articles. My message with the link to the BBC's report on this disappeared.
Look at the demographic changes; follow the votes. Younger Cuban-Americans favor normalization. The old guard, the ones who (sometimes justifiably) had their assets seized, is dying off.
Still on trend. Best spot for shorts to cover would be sub $5, which would flush out the funds holding it and many margin players. The current oil and commodity price war is strategic between the US and Russia, so I don't see it ending this month. But then I'm a false prophet: I seem to only generate losses.
At that price, I get 5.5 watt-hours/day, 2 kwh/year. Assume 10 cents/kwh for utility power, they pay for 2/3 of themselves the first year and have a 20+ year lifespan. Do the math. At today's prices, solar kills every other form of residential power supply in the southern half of the country.
You don't follow solar, do you? Prices have been dropping faster than oil for several years now. I can pick up retail panels today at 34 cents/watt. No government incentives involved, just economy of scale.
If so, vetoed by Obama. Not enough support to override a veto even with the new congress. With current oil prices and global warming on the table, the pipeline isn't a good deal for the country overall. You want to see a real economic boost? Start a solar Marshall plan to free Europe from Russia's oil/gas grip.
SOS=Same Ol' Stuff. US continues with unstable, dysfunctional government in a limited state of war. US continues on modest economic recovery. USIO prices go down some (contract resets) but demand picks up a little bit. A year later we don't have BL, maybe we've sold a coal mine or two, but we're in much the same state as we are now.
A better exercise is to imagine a range of possibilities, rate each one on the likelihood, and then evaluate CLF for each possibility. Consider some options:
1. Bad global recession. Significant cutbacks on both US and AP IO and coal sales. CLF would likely stop dividends and might have trouble making interest payments Bankruptcy a possibility in dire scenarios.
2. War. Russia is currently massing both tanks and tactical nukes on its borders as well as inside Eastern Ukraine. Assume the seize Ukraine/Poland/Estonia/etc. NATO overrun. US and EU dragged into world war. Large sales in US IO as US military ramps up more than makes up for civilian losses. A really good year for CLF. Anyone know how much of CLF's iron sales is military-related?
3. Nuclear war. Same scenario above, but something leads to a nuclear exchange. (Could be a terrorist attack in Russia that triggers their "Dead Hand".) Almost everybody dies. CLF disappears.
4. More Middle East mess. US ramps up involvement. Hard to say how IO sales would turn out.
5. Sudden burst of sanity in Washington. Perhaps a bridge collapses and kills hundreds. Something triggers infrastructure reinvestment. Great for CLF.
6. No, no, no, no, no! Republican House and Senate unite in doing nothing to make Obama look bad. Government shutdown. CLF muddles through.
7. SOS, new day. CLF muddles through.
8. Somebody buys CLF! A few people break even. Most investors still lose money, but a lot less.
In most scenarios, CLF continues to drift lower before it recovers. Could hit $4 and then rally to $8. Or it could just bounce between $6 and $8. In only a few scenarios would we see a short squeeze, and those aren't very likely. Perhaps some lottery-ticket options and cash? Or buy the bonds instead.
If you compare the chart of CLF vs SB lately, you'll see an almost perfect correlation even though SB:
* doesn't have any of the drama of CLF
* doesn't have any news at all
* isn't even in the same business
That's because the market is pricing in a global commodities recession, with an attending drop in commodity prices and transportation. Everything associated with commodities and trade is dropping in tandem. No micro analysis of CLF is needed. This part of the market is falling, so everything tied to it is falling as well.
This means we won't see a dramatic turnaround in CLF based on company news until the market shifts. Short pop, sure, but no change in direction until market conditions change. It also means shorts won't cover any time soon.
Winter is here. Don't expect green shoots this season.
Out with huge loss. Held more CLV than CLF, bought more on margin recently hoping to trade on the volatility to make up my losses. Typical small investor...getting smaller.
See little direct short action now. Price moved by small investors bailing and ETF action. LOT of small investors in CLF: miners, partners (steel industry employees), neighbors (Cleveland and surrounding residents)...retirees being destroyed, selling now for fear of total loss. Look at companies like ACI, WLT, and SB (latter on nobody's radar but also crushed). High correlation, low volume, no news--suggests selling/shorting whole sectors via ETF.
Still value here, but huge amount of what I'd call "fine print risk," such as the Ohio statutory limits on dividends that's killing CLV today. Easy to say, "just bankrupt the Canadian subsidiary," but unless you're an expert in Canadian law, and know the details of various contracts, you can't say how it will play out. US Steel case is too recent and ongoing; no clear precedent. Hidden potential for large legal fees, not to mention collateral damage (eg customers with investments in Canadian companies CLF screws in the BK process). Known risks are reasonable, but just too many unknowns.
Where's entry with a reasonable margin for safety? Guessing $4 at this point, but I thought CLV was safe at $15. Don't see anyone buying company. Casablanca thought they knew what they were doing, and almost certainly has more resources and expertise than this whole board. Even with close to direct control, they still can't control the losses. Don't see bankruptcy in the cards, but with the pack mentality in finance, creditors could short stock, pull credit when needed, and push it into BK. If destroying a company brings more immediate value than restoring it, current teaching is to pull the trigger regardless of how many bystanders you shoot. Lesson from Microsoft: you don't need to be right, just have more/better lawyers.
"Sorry, just business."
To the Marcels' version of "Blue Moon", on youtube watch?v=v0fy1HeJv80
Ba ba ba bomb
Ba bomb ba bomb bomb
Ba ba bomb ba ba bomb
Da da damn da damn damn
Ga damn da damn damn
Ga damn that damn damn
We couldn't do it alone
Without a lot of partners
Without much cash of our own
We knew just what it was there for
You heard me saying a prayer for
Someone who could pay their share for
But then there suddenly before me
A few ones with cash enough and bold
I heard someone whisper, 'Can't afford thee'
And when I looked, interest had turned quite cold
We couldn't do it alone
Without a lot of partners
Without much cash of our own
Joe said we would make gold
But the story got quite old
With ore prices falling
It was all quite appalling
Casa said to 'em "Sell it all"
But Carrabba said "Hell, No"
They spent millions fighting
As the noose was just tightening
One More Red Nightmare
With the stock in the toilet
And bonds sold and then lent
There's value surrounding
If you can just take the pounding
But with Blue Lake all gone now
And no hope of a squeeze, ow
Twenty percent gone in one day
All we can do is to just pray
One More Red Nightmare
Oh, it seems in the green now
Though I can't really see how
While the market is quite mad
Paper gains makes me feel glad
Day traders are churning
But investors still spurning
You can buy, sell, or just hold
Volatility's quite old
One More Red Nightmare