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Increasing ammonia prices should be a good thing now that LXU is making their own ammonia. Now, LXU is a net seller of ammonia. Natural gas prices are not the key thing to look at. The key factor is the spread between natural gas and their products (fertilizer and ammonia). If you look at refiners, oil goes in, and gasoline comes out. The refiner makes money on the spread. It is the same thing here. Nat gas goes in and fertilizer/ammonia comes out. What that spread looks like is a little harder to determine. The US nat gas based facilities are low-cost producers. Chinese fertilizer is higher cost and is made using coal. Therefore, there is a tug of war between high-cost Chinese production based on coal and Chinese excess capacity that refuses to die. Also, there is additional US capacity coming online. LXU has claimed that urea is not interchangeable with ammonium nitrate. I think this is likely BS. This plays into the spread evaluation as well.

I have a long background in quant funds. My thoughts: 1) Simons properly solved the research part of running a quant fund. Most quant funds do not setup research as a collaborative organization; therefore, the knowledge base of the whole organization is lower. This is much more important than non-researchers recognize. 2) Simons could have open research by pairing it with a never-work-in-finance-again non-compete. 3) Medallion strategies can only handle a limited amount of capital. I'm surprised it is working with the amount of capital currently invested in it. 4) If they are running 20x leverage, they are doing a good job. He mentioned in one interview that the risk management was the mathematically most complex aspect of their strategy. 5) I suspect the strategy has a base in hidden Markov models.

Like you, I have been tempted on this one. Unfortunately, I don't feel like I understand the supply/demand situation in coal as well as I do in oil/gas. Does all of the anti-coal legislation significantly impact things going forward? Will power plants converted to nat gas convert back to coal if the nat gas oversupply ever resolves itself? I'm interested to hear the insights others have on such things.

The basic ideas are fairly simple: Terribly run business run by horribly incompetent people. Fertilizer explosion destroys part of your factory. Start building a new factory without blueprints. Tell investors it will cost more than you thought. Activists come in. Tell investors it will cost more than you thought. Activists fire a bunch of people. Tell investors it will cost more than you thought, as you borrow a lot of money at high rates and give away 20% of the business. In theory, the recent funding will cover them through getting the plant operational (2016Q2) -- and they even have blueprints this time. If your mental model extrapolates, the management will look for more money and will fumble. If your mental model mean reverts, the management might finally get something right for once.

It isn't a great situation. On the positive side, they locked up financing to complete the project. On the negative side, they took on a lot more debt and gave away 20% of the business. Reading the earnings call would have been comical had I not owned any of this. It appears they began building the plant without any engineering work. They basically made up their estimated completion price and did not give error bars on it. With guys like this running businesses, it is very clear how Ichan has made a fortune by pushing them out.

On the ObamaCare exchanges, there is a battle for market share. The companies that got a lot of market share last year by offering a low prices raised their prices in hopes of making money. The companies that didn't get volume the first year dropped prices in hopes of getting filled. You are basically forced to change carriers to get a consistently low price.

I was following a similar business a few years ago that ended up with a similar low ball offer. A collection of shareholders sued and blocked the offer. I can't remember the ticker. ALN?

I can't say for sure, but there are about half a dozen class action suits being announced. I'm sure that doesn't improve market emotions.

It looks like Leidos is offering short term financing of $50M so that LSB doesn't have to borrow under adverse conditions. This would cover the upper bound on estimated required liquidity. After construction is completed, LSB has a month or so to borrow the required funds. I expect issuing debt or stock will be much easier with completed construction. Overall, this doesn't eliminate the chance of dilution, but it does reduce the odds. LSB's maximum gain from the lower markup is less than the additional it is paying in overhead. Maybe this is a hidden fee to extend the financing. I'm not sure what the motivations for this change were.

In grad school at Caltech, I played a game of Monopoly with a group of Chinese nationals. From that game, I learned that some Chinese can be clueless about some financial details we consider obvious -- even if they are extremely intelligent and educated. That game of Monopoly helped me understand a bunch of bizarre things I see the Chinese do. I don't know if SORL is a fraud (I haven't looked at it), but it is still possible they don't know they should buy back shares.

Some general advice: - Minimize your expenses. It increases the odds you will be around later. - Get fixed cost agreements from your 3rd party providers. Avoid by-the-hour quotes.

I've seen other weird stuff this last week. My email notifications have been broken a few days.

You'll get no pushback from me on how terrible the previous management was. I think Starboard is doing a good job getting better people in place.

An equity raise is not for sure. If you take the high end of their current cost estimates, they need to come up with a little cash. If you look at the history, they came out with one revised cost estimate and then another, much higher, a few weeks later. I suspect they may have high-balled the second estimate as part of the house cleaning.

I think you first need to decided if you are going to work for yourself or someone else. If you are working for someone else, how you look on paper is worth a lot... so an MBA may be good. If you are going to work for yourself, what you know matters most. Having said that, you can learn a lot trying to invest or start a business with the $50+k that business school would likely cost.