Deflation is an artificial term; it is used, mostly, as an euphemism, masking government inability or lack of desire to follow free-market policies. Oil price goes down now because of trivial oversupply, it has nothing to do with "deflation", though ironically it reflects fact that most of world oil is produced in countries far away from market economy.
Gold production cost goes down now because of lower oil (fuel) price. Also, gold producers make efforts to cut costs, e.g. by high-grading or cutting exploration expenses. It is temporary measures, base costs (labor, supply, etc.) don't go down and, obviously enough, taxes and royalties do not go down too; they present major part of actual costs.
Finally, gold price is not defined by gold production cost, not even in long term. It is one of basic differences between gold and other commodities.
Oil (i.e. fuel) is not a part of shipper's operating expenses, if you talk about shipping company like DSX. Fuel expense is carried by charterer, ship owner doesn't pay anything. It can be speculated that cheap oil is still good because it leaves more money in charterer's pockets thus making it kinder and so it can share few bucks with ship owner. You see, it doesn't sound too business-like and even if it plays some role then it is small one.
It can be assumed, in more serious way, that low oil price is beneficial to China, because it is a big oil importer. It seems to be more serious. Most of dry-bulk cargoes goes to China and so strength or weakness in Chinese economy is the main factor behind dry-bulk shipper fortunes.
I meant average selling silver price for Q3 comparing to present silver price. Many silver companies already reported earnings and their releases included the number. For example, CDE posted $19.46, HL posted $18.53, EXK - $18.78, AG - 19.10, etc.
By the way, average LME spot price was $19.74; it is also mentioned in some releases. Present LME silver price is $15.73. It is about 20% lower. Yes, it is too early to say whether average LME price for Q4 will be higher or lower than $15.73. However, Q4 is already half done, i.e. present price provides good estimate.
Trading bulk grain trade could present you with simple fact that Valemax ships won't be used for grain trade. Ultra-big ships are good for very few, very bulky routes. The rest goes to more flexible vehicles.
Saying it in general, this world will always have room for both globalization and specialization.
I think that market will definitely react to any dividend-related news, cut or cancel. Most of trading is computer-based and so it is driven (programmed by) formal criteria. Dividend numbers are on of them.
There are different ways how to calculate "all-in cost". Initially, when this term was introduced couple years ago, the idea was to get rid off blatant misrepresentations included in previously used "cash cost" and present something actually reflecting real cost of doing business.
It was a noble idea, but, naturally enough miners, started to "adopt" this term making it less and less correlated with real cost. It is quite possible that in few more years "all-in cost" will become no better than "cash cost", if used for serious investment purposes.
Regarding earning estimates, it would have to be taken as success if PAAS could be able to make 2-3 cents as it's written in present analyst estimates. Why? Read preceding earning release and see numbers there. Anyway, silver price is currently more than 20% lower than it was in Q3. It makes Q3 earnings awfully obsolete, just in case 2-3 cents could be perceived as a great number.
In general, when you estimate stock value it makes sense to base it on stock/company fundamentals, not on perception of message board postings. 2-3 message board posters can be bearish or bullish on stock price and, often enough, it has nothing to do with real factors affecting the same price.
PAAS is substantially stronger than CDE; balance sheet, cash, etc. It means that PAAS holders could start worry about dropping to $3 when CDE would be already in pennies. Needless to say, drop to $3 is not the only risk here. If it drops to e.g. $6-7; it's still painful.
Many retail investors made wrong choice with this stock (and other gold stocks too), and too many of them blame Letwin for this. Fair? If you know or knew so well that Letwin is the worst CEO around (quite mild assessment, if based on your messages) then why you bought this stock?
It simply gave up last week gains (made Thursday and Friday). In general, PM stocks have lost fundamental grounds; they run on hot air. One day it can lift them; another day they drop back to earth or even underground. The latter happens more and more frequently. Fundamentals (or lack of them) transpire in longer term.
My apologies. I was too optimistic, mildly speaking, about last week. Perfect market timing in never achievable :)
I still believe that stock is grossly undervalued taking into account present BDI rates. Hopefully, shipping rates do not go down and DSX starts re-chartering ships at profitable levels; present BDI level suggests it.
It is, usually, Ok to accuse companies/management when they miss earnings, i.e. deliver actual result less than their own guidance. On the contrary, accusing management in delivering guidance for next quarter less than analyst projections is too harsh approach. Management cannot be responsible for analyst projections about future quarters.
By the way, company guidance for next quarter is still about 10% better on year-to-year basis, i.e. comparing with actual revenue from December quarter 2013. KLIC business is seasonal, fact of life, and still they should be able to avoid losses in the coming quarter. In other words, they don't project disaster; actually they project year-to-year improvement. Forward guidance for 2015, given in general way, looks strong and anyway company is fairly profitable and balance sheet is exceptionally strong.
Probably, analysts took too optimistic approach and company needs a bit more time to reach their projections. In any case, this business is growing and so it makes sense for investors, imho, to continue sailing with this management. Please, note that Lemelson active stock promotion caused share price to go up strong in past few months; reasonable post-earning correction was overdue.
I agree with some of your points. For example, 7 cents/share is too small to justify $10 share price. By the way, I have serious doubts that they make 7 cents. It would be very strange if they could. I am less willing to accept any direct links between rise of statism and dire situation for PM miners. You know, every political factor has limits. PM miners are in trouble because they cannot produce silver with profit, i.e. it is pure economics. It is true that in some corners of this planet, governments raised mining levies to obscenely high levels making any mining there stupid. It didn't prevent miners from trying, but still it is just a great example of malinvestment, nothing more. On the other hand, some places still respect business rights and silver mining could proceed there, unless it is not profitable.
Returning back to PAAS, or better say, to beaten-down sectors, at some point earnings stop to be a decisive factor there, mostly because they don't exist anymore. Investment in beaten-down sectors is guided mostly by risk considerations. It is very costly to invest in a stock that can capsize in soon enough. On the other hand, if stock won't capsize (i.e. if you have credible argument that it won't) then one may start thinking about entry point. Please note, in most cases good entry points in beaten-down sectors are achieved when earnings do not appear yet.
By the way, imagine situation with PAAS having only two operating mines, Colorada and Dolores, both quite profitable at current silver price and still $300M cash in treasury. Would it be called "buy" at the point? In my opinion, yes. The main danger for PAAS is not that silver price is low now. The main danger is that they will continue burning cash (on dividend and support for money-losing operations). If this danger could be eliminated or, at least, diminished, then...
operations) for too long. If this danger could be eliminated or, at least, diminished, then...
PM miners raise funds from general public, not from venture capital. General public will be always attracted to invest in gold/silver rather than e.g. to hi-tech. It is a very simple notion: most people know nothing about hi-tech products, at least before they hit department store counters, while every Joe and his cousin know that gold and silver are valuable. That's the historical advantage of public awareness that gold/silver has in comparison with other industries. In this light, present situation with PM miners is not totally hopeless. The most blatant cases of malinvestment will be punished, but some miners will survive and in due time general public will start pouring money in gold/silver again. People never change.
Returning back to the first message of this thread: analysts have already reduced earning estimate number from 5 to 3 cents. Further reductions are underway, imho. PAAS will suffer along all other silver stocks, but it still has the "light at the end of the tunnel". This stock is stronger financially than peers. It can last longer and, inevitably, this sector will have its day to turn around.
It is impossible to predict exactly when turnaround comes and most indirect indicators point to down now. However, one should never believe in own infallibility, i.e. even if you made the best analysis (very commended mode of behavior) and this analysis results in bad conclusions, you can still try to see the "silver line" (no pun intended), just in case the analysis is wrong. Every analysis can be wrong, even if it is a very good analysis.
One of the ways to improve analytical accuracy is to make it flexible: it is not enough to say that stock should not be bought under present conditions; one could also define how conditions should change to make buy possible. In this respect, if PAAS makes serious cuts in dividend or production or, even better, in both, then it could be sufficient to buy this stock. Needless to say, it is a personal opinion.
Your message missed few important numbers: earnings, cash flow, market cap. It is not right to talk about share price without acknowledging them.
For example, present market cap is about $1.5B. I didn't check any numbers from 1997, in any case it was too many years ago. However, I may guess that market cap was substantially lower that time.
If your message meant that PAAS share price is unfairly low now then, sorry, it would be very hard to prove it using present numbers. Earnings are negative and cash flow too and silver price continue streaming downward. That's the reality. The only consolation is that PAAS is better than peers like CDE or AG, not even mentioning silver juniors. It will not go to zero in near and/or mid-term while many other silver stocks will.
I didn't read new technical reports submitted by PAAS last week regarding Peruvian operations. If someone did it then share your knowledge, please.
It is possible that filing of these documents, reflecting new silver price realities, indicates that company prepares to close these mines. By pure mining/geological factors, Peruvian operations are the most vulnerable to low silver prices and if company decides to cut production then these two mines could go down first.
In long-term, assuming that silver bear market continues, PAAS could end up with only two Mexican mines, Colorada and Dolores, that could be profitable even with silver in low teens. Supporting Argentinean operations could make some sense in case, eventually, political situation changes and company would be able to proceed on Navidad.
PM equities suffer collateral damage; they are on opposite side of economic cycle. It means that no "manipulators" responsible for the crash. It's normal economic and market development.
April 2013 was the most definite signal of bad things coming to this sector. The best investors left before April. The mainstream (sane retail) left right after April. It was suicidal to touch PM equities after the April and it is still the same around. Even the best, relatively stronger, PM equities, such as PAAS, are good now for only very speculative, risky plays.
BDI rates indicate it. Probably, share price was hold down last week for accumulation purposes. Waiting for earning release is not the best policy, imho. DSX earnings are well predictable, anyway.
You know, Carl, I wrote lengthy reply to your message and yahoo swallowed it :)
Let me just say that you made great analysis and hopefully I will be able to write more next time.
Why not... I can call it "real market", because, firstly, it is a market and, secondly, it is real.