GlennAS Posted September 17, 2012 Share Posted September 17, 2012 On the topic of China, here's this post today from zerohedge: How China's Rehypothecated "Ghost" Steel Just Vaporized, And What This Means For The World Economy http://www.zerohedge.com/news/how-chinas-rehypothecated-ghost-steel-just-vaporized-and-what-means-world-economy. While annecdotal in its broader implications, it wouldn't surprise me at all that underneath it all, China is equal part the credit-based casino that is the western financial system/economy. BTW, I really like Altius as a management team and investment. But view the macro scene very bearishly. glenn Link to comment Share on other sites More sharing options...
Guest Dazel Posted September 17, 2012 Share Posted September 17, 2012 thanks for the input on China.....we will all see how things play out there over a number of years... dazel. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted September 17, 2012 Share Posted September 17, 2012 Well first of all Zerohedge is always bearish. Secondly, I'm not sure it logically follows that you should be bearish on commodities. If steel inventories are being falsified, then technically that is bullish for steel. If hyperinflation occurs, technically that is bullish for real assets. On a practical level, the ghost inventories of steel suggest a high level of fraud in China. In practice, we've seen from the Chinese reverse mergers that frauds are rampant and that there is adverse selection going on. (Little penalties for committing fraud, not surprisingly, leads to rampant fraud.) Link to comment Share on other sites More sharing options...
beerbaron Posted September 17, 2012 Share Posted September 17, 2012 Well first of all Zerohedge is always bearish. Secondly, I'm not sure it logically follows that you should be bearish on commodities. If steel inventories are being falsified, then technically that is bullish for steel. If hyperinflation occurs, technically that is bullish for real assets. On a practical level, the ghost inventories of steel suggest a high level of fraud in China. In practice, we've seen from the Chinese reverse mergers that frauds are rampant and that there is adverse selection going on. (Little penalties for committing fraud, not surprisingly, leads to rampant fraud.) I was just thinking the same thing. I was mad to have wasted 5 minutes of my time reading ZeroHedge. BeerBaron Link to comment Share on other sites More sharing options...
Studesy Posted September 17, 2012 Share Posted September 17, 2012 Basing a buy decision on such macro commentary is basically trying to predict the bottom as opposed to a purchase based on a sufficient discount to IV. If such macro events do occur, it would be a good time to add to the position. Link to comment Share on other sites More sharing options...
GlennAS Posted September 17, 2012 Share Posted September 17, 2012 Wow, lot's of negativity re: zerohedge apparently. I really appreciate their macro analysis. Go figure. ... I linked to the zerohedge post not as a comment on commodities per se, more a comment on the fraudulent nature - in China and globally - of credit and collateral. Plus, the reference to "rehypothecation" is priceless - an analogy to the MF Global rehypothecation crisis. The bearish case for commodities is simple - and the one that Michael Pettis (and Hugh Hendry) makes. That is simply overcapacity built for a unsustainable credit boom - complete with consequent misallocation of capital. I personally don't believe we're looking at hyperinflation. Even the recent QE-to-Infinity risk on trade seems way overblown to me. The Fed and central banks can print money and use it to buy crappy assets from banks (which is essentially what the unsteralized QE is), but they're having a much harder time stimulating the real economy and aggregate demand because the consumer is deleveraging - at least throughout the developed world. To me, a Minsky moment appears more likely than hyperinflation. Of course, the alternative thesis is that unrelented central bank money printing will cause hyperinflation, will somehow also stimulate aggregated demand, and this will support the price of commodities. It's not a view I share - at least not in the short-to-medium term. But it seems to be the consensus view IMO, and if I see evidence that's it's working in the data points, I'll be more than happy to change my view. Yeah, you could argue that ficticious inventories of steel is bullish for steel. But I would argue that the negative implications for the credit system in China outweigh the bullish implications for steel. Fascinating times to be sure. Regards, glenn Link to comment Share on other sites More sharing options...
GlennAS Posted September 17, 2012 Share Posted September 17, 2012 Studesy. So I know this is a value investor forum, and the macro picture is often treated as background noise compared to "underlying value", margin of safety, and other core value investing metrics. But in my experience, combining value investing with macro credit analysis has been very fruitful. Like value investing, it can require a lot of patience, because just like Mr. Market can bee irrational when pricing a stock, he can be extraordinary irrational when pricing assets in the midst of a credit bubble. Of course, the big problem when credit bubbles burst is the impact the lack of liquidity can have on the prices of financial assets - even assets with good "underlying value". Furthermore, the impact credit busts have on commodity prices, the cost of credit, etc. can really change underlying fundamentals. Anyway, I view macro credit analysis as another tool in my toolbox to buy great businesses at distressed prices. So not so different really. Regards, glenn Link to comment Share on other sites More sharing options...
Studesy Posted September 17, 2012 Share Posted September 17, 2012 Studesy. So I know this is a value investor forum, and the macro picture is often treated as background noise compared to "underlying value", margin of safety, and other core value investing metrics. But in my experience, combining value investing with macro credit analysis has been very fruitful. Like value investing, it can require a lot of patience, because just like Mr. Market can bee irrational when pricing a stock, he can be extraordinary irrational when pricing assets in the midst of a credit bubble. Of course, the big problem when credit bubbles burst is the impact the lack of liquidity can have on the prices of financial assets - even assets with good "underlying value". Furthermore, the impact credit busts have on commodity prices, the cost of credit, etc. can really change underlying fundamentals. Anyway, I view macro credit analysis as another tool in my toolbox to buy great businesses at distressed prices. So not so different really. Regards, glenn Glen. My comment didn't clarify the fact that this is just my opinion. I'm not stating that your method is wrong, but rather that I'm not smart enough to apply such detail to my own process. If I could, I wouldn't have to sit on positions for many years to assume sufficient returns. With the massive amounts of macro commentary out there, I would go crazy trying to merge it into my decision making pocess......I think it would pull me away from what I think is a disciplined approach. I would rather buy with what I think is a sufficient MOS.......and wait.....not time. Link to comment Share on other sites More sharing options...
GlennAS Posted September 18, 2012 Share Posted September 18, 2012 ((Glen. ... I think it would pull me away from what I think is a disciplined approach. I would rather buy with what I think is a sufficient MOS.......and wait.....not time.)) Completely understand your pov. Tis' true. Security analysis is difficult enough without decyphering the complicated and challenging macro domain. Best wishes, glenn Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted September 18, 2012 Share Posted September 18, 2012 Wow, lot's of negativity re: zerohedge apparently. I really appreciate their macro analysis. Go figure. ... Sorry I didn't mean to crap on Zerohedge like that. They do post interesting stuff from time to time. However, I take their articles with a grain of salt because they are always bearish. 2- As far as the macro picture goes, I personally believe that it's better to stick to the more obvious macro calls. Otherwise you might be focusing too much on the noise? The biggest risk that Altius faces is not a massive, terrible collapse in the Chinese economy (which is unlikely anyways... they are a creditor nation). Their biggest macro risk is probably iron ore prices... supply has gone up dramatically in the past several years and more supply is coming online (everybody is expanding production). Eventually there will be a wave of overbuilding and things could get ugly, like what happened in the drybulk sector. Link to comment Share on other sites More sharing options...
GlennAS Posted September 18, 2012 Share Posted September 18, 2012 (smile) No problem on the zerohedge front. They certainly do have a persistently bearish undertone. ((As far as the macro picture goes, I personally believe that it's better to stick to the more obvious macro calls.)) A lot of different ways to invest/speculate/manage risk. I like to make timely bets on tail events. If I stuck to what was obvious, I'd never make any money! LOL! ((The biggest risk that Altius faces is not a massive, terrible collapse in the Chinese economy (which is unlikely anyways... they are a creditor nation). )) I think that is a flawed statement. The US was the world's largest creditor nation in the 1920's too. There were those that argued in the 1920's that "the US cannot face a terrible collapse in their economy because they are a creditor nation". The problem in the US in the 20's - and I think a case could be made re: China today - is that the US supressed interests rates in the 1920's (to artifically support the British pound) which led to a massive speculative bubble, massive overcapacity, and a huge amount of misallocated capital. China is showing many of the same problems in their banking sector (official and shadow). I agree that additional supply is already in the pipeline which could contribute to overcapacity (although many of these projects may not see the light of day). But in China, there's already been significant misallocation of capital in infrastructure and real estate - Hugh Hendry has a nice piece on this from April: http://www.scribd.com/doc/91764042/April-2012-TEF-Commentary. Anyway, I'm not religious the trajectory of China one way or another. I do, however, think there's downside risk that may not be fully appreciated by the market. But maybe I'm wrong. Maybe money printing can truly solve all the world's problems. ;) FWIW. glenn Link to comment Share on other sites More sharing options...
Guest Dazel Posted September 18, 2012 Share Posted September 18, 2012 "The biggest risk that Altius faces is not a massive, terrible collapse in the Chinese economy (which is unlikely anyways... they are a creditor nation). Their biggest macro risk is probably iron ore prices... supply has gone up dramatically in the past several years and more supply is coming online (everybody is expanding production). Eventually there will be a wave of overbuilding and things could get ugly, like what happened in the drybulk sector" iron ore prices have dropped in half....we had tsunami in japan that destroyed the uranium market....that is why Altius is trading where it is...so short term these are negative factors because the market gives 0 valuation on the huge iron ore and uranium deposits that they stand to collect royalties on..."they have had the risk happen"...that is why they held on to their cash... These are big events and they both together have surpressed the future production that everyone was suspecting in iron ore market (the market expected expanding production...it is being curtalied!) and the uranium market well that fell off a cliff. This what Jim Rogers has been talking about....it is not that world is in great shape. His Bet A)If the world economies slowed down governments would print money and future mine production would be curtailed. B)If the world economy was strong they would use the commodities in demand. A) happened. They are printing money while massive production cuts in iron ore accross the globe have happened....uranium is already 18 months into the curtailment of uranium...and quite frankly I am quite excited by the uranium dynamics. Altius has fortress of cash to wait it out and possibly benefit more from increased investment...either way the share count will be way down when both Paladin and Alderon begin production... You want to bring a mine on during low prices...and sell your product at high prices...that is what we are looking at...the stimulus of all central banks will take time to kick in...Altius will stand to benefit when this happens.... dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted September 18, 2012 Share Posted September 18, 2012 http://www.ft.com/cms/s/0/677bd13a-01a9-11e2-8aaa-00144feabdc0.html#axzz26r10M5hI we are hoping that the quick rebound in pricing does not change the announced curtailment of iron ore production and the our scenario in the previous post plays out... Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted September 18, 2012 Share Posted September 18, 2012 http://www.resourceinvestor.com/2012/09/17/uranium-fundamentals-are-at-tipping-point-alka-sin?page=2 good interview on the uranium market. her top pick Paladin Energy. Dazel. Link to comment Share on other sites More sharing options...
Liberty Posted September 25, 2012 Share Posted September 25, 2012 Some news from Alderon: http://www.alderonironore.com/_resources/news/2012-09-25-NewsRelease.pdf Link to comment Share on other sites More sharing options...
Guest Dazel Posted September 30, 2012 Share Posted September 30, 2012 http://www.grandich.com/wp-content/uploads/2012/09/ADV092512.pdf On Alderon. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted October 1, 2012 Share Posted October 1, 2012 Dazel, I am curious. #1- What's your opinion on all the analysts on being so incredibly bearish on iron ore prices in the long term? Most analysts do this for gold too... which I find to be weird. And then on the oil side, apparently analysts are very bullish. I'm not sure if the mining analysts factor in higher production costs in the future... but together they are saying that iron ore prices will crash and production costs will go up. And they are telling clients to buy! What a bizarre world. #2- Does Grandich being a shill bother you? Is this a value investing message board or a pump and dump message board? :P Link to comment Share on other sites More sharing options...
Guest Dazel Posted October 1, 2012 Share Posted October 1, 2012 It's a value trap, #1. And #2. We do our own work....I had no comment on the Dundee piece on Alderon....they are hardly bearish with a target price of $6...but the information posted is for people to make their own opinion...(grandich) we take newsletter writers and analysts with a grain of salt. We like facts to make our own decisions...unfortunately there is not a lot of information on companies like Altius or their assets so we are trying pass on information that's all. In fairness a lot of the negativity in the industry has been related to short selling...Some of it warranted some of it not...either way it is hype....the investor has to be able to sort through the bullshit and make a decision for themselves. Compared to to he absolute travesty of analyst pushing the "Groupons of the world"....Morgan Stanley et all....the entire junior mining market would have been lost in the $8 billion market cap evaporated by the Groupon scam! Sorry you have me ranting. Back to the point.... So in this case what is the Alderon assets worth and how much is the royalty worth to Altius. That is all we care about. My next post is fact....a takeover offer rejected from steel producers...that is what we like...what are the assets worth to a business...not newsletter, analysts, hedge funds...Posco owned by Warren Buffett has made the offer....that gives a barometer of what we think The Alderon asset and subsequent Altius royalty is worth now and what it will be worth as a producer. Hope that helps. Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted October 1, 2012 Share Posted October 1, 2012 http://www.iol.co.za/business/companies/australia-s-arrium-rejects-1bn-bid-1.1393090#.UGlUHaN5mSM Some takeover action in the steel market....we like to see that it is Posco (steel producer from Korea owned by Warren Buffett) doing the bidding with the Korean pension funds...operators are seeing some value in the iron ore industry. Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted October 10, 2012 Share Posted October 10, 2012 http://www.canadianinsider.com/node/7?ticker=ALS Altius share count continues to fall. Dazel Link to comment Share on other sites More sharing options...
Guest Dazel Posted October 10, 2012 Share Posted October 10, 2012 http://www.reuters.com/article/2012/10/10/markets-ironore-idUSL3E8LA18B20121010 Iron ore Spot price is back above $110.... Dazel. Link to comment Share on other sites More sharing options...
FFHWatcher Posted October 10, 2012 Share Posted October 10, 2012 http://www.canadianinsider.com/node/7?ticker=ALS Altius share count continues to fall. Dazel If these shares that they repurchase come through public markets (I assume), why aren't they showing up or matching up in daily volumes? Perhaps they buy small amounts daily and then cancel them at the end of each month? For example, that report shows the trade date as Sept 30th at 103,464 shares. 1/ Sept 30th was Sunday. 2/ 103,464 is more than the daily trading volume for everyday except for Aug. 28th. Perhaps they are issuing shares internally for options, etc. and then simply using cash to buy back the shares at market prices, although Sedi.ca does show them as Public Market transactions. Altius is coding the transactions as "NCIB - returned to Treasury" which makes sense. Either way, good news that share count is falling Link to comment Share on other sites More sharing options...
jjsto Posted October 10, 2012 Share Posted October 10, 2012 If these shares that they repurchase come through public markets (I assume), why aren't they showing up or matching up in daily volumes? Perhaps they buy small amounts daily and then cancel them at the end of each month? For example, that report shows the trade date as Sept 30th at 103,464 shares. 1/ Sept 30th was Sunday. 2/ 103,464 is more than the daily trading volume for everyday except for Aug. 28th. Perhaps they are issuing shares internally for options, etc. and then simply using cash to buy back the shares at market prices, although Sedi.ca does show them as Public Market transactions. Altius is coding the transactions as "NCIB - returned to Treasury" which makes sense. Either way, good news that share count is falling It seems what is happening is that Altius is reporting share redemption and shares acquired in the open market one time at the beginning of each month. Those are most likely monthly totals under their repurchase plan. There is generally a slightly different amount reported (103k/87k this month and 64k/69k last month) which might be related to purchase date/settlement date differences. If there are +/- 20 business days in a month then 5k shares per day would be around 100k shares per month. This fits with both the daily volume, and the price support at 10. It seems like whenever the share price is below 11 they buy back close to their daily limit which I think (no link) is around 5k shares. Like you said whatever the details, the important point is share count continues to fall. Link to comment Share on other sites More sharing options...
Guest Dazel Posted October 10, 2012 Share Posted October 10, 2012 http://altiusminerals.com/press-releases/view/259 Altius has an automatic purchase program so they are able to purchase shares while management is in possession of material information.... Brokers are only allowed to buy a certain percentage of daily volume and the shares repurchased are redeemed at months end.... Dazel. Link to comment Share on other sites More sharing options...
Eric50 Posted October 10, 2012 Share Posted October 10, 2012 Dazel - I'm surprised Altius hasn't used the steep correction in the Canadian resource sector this spring/early summer to take new positions and make its cash work. I think that's also something you expected as per your previous comments. It's not that I don't like the buybacks at this price. I'm just surprised they haven't used their cash earlier this year to take advantage of the opportunities that were there and I'd be curious to get your opinion on that. thanks in advance Eric Link to comment Share on other sites More sharing options...
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