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enviro111's Comments Stream Stats
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Algonquin Power: A Promising Renewable Energy Income Investment
As a result, it is high unlikely that any dividend growth will appear for long time (so get used to 2 cents per share per month - at best!). At current prices this isn't too bad (i.e., 10 - 12%). I doubt that Algonquin will have much capital for acquistions either. Power prices are quite low in Canada 2 - 3 cents per kilowatt-hour and rarely rise much.
The debt is also quite high because of the high distribution payout. In fact, for years they were merely borrowing or eating away at their capital just to pay the distribution (Can you say Bernie Madoff??). They were always in acquistion mode - never in shoring up the dam mode. Now these dummies are stuck with their finger in dike (almost literally!). The best thing that could happen is that alternative energy gets hot, hot, hot! and these dummies sell the company.
Over the longer term (> 5 years) if algonquin isn't sold off, the dividend should pay $1.25/share and the cash flow can pay down the debt and be used to fix the dams. I might get my money back in FIVE years and I purchased the stock at $4 canadian!!!!
I bet all this makes you want to just jump right into algonquin.
Algonquin Power: A Promising Renewable Energy Income Investment
After analysing 10 years worth of annual reports and looking at most of their acquistions and debt / equity issues (and after losing half of my investment - so far), I'm NOT so positive about Algonquin.
The management of this company is extremely poor. They took a business that a child could run and ruined it with poorly timed and dilutive acquistions. In the beginning it was water running over rocks to generate power. The only issue was -- how much water was there and how strong were the rocks. Not content with that business, they branched out into power plants that burn waste, water supply businesses and windmills.
They always issued too big of a distribution and ran up $500 million of debt in 10 years. The total cash flow is only about 90 million.
Also, Now the advantage of Trusts is gone in Canada so taxes will have to be paid.
If this turkey gets back to $4.00 canadian - I'm gone at least for awhile. Clean energy is UNPROFITABLE energy.
Will Chesapeake Outperform the United States Oil Fund ETF?
Some commodities can sell below the cost of production for years - even decades (witness silver - primary extraction without base metals is much, much higher than current prices) because of massive above ground inventories or because they are renewable (i.e., corn). However, oil CANNOT sell below its cost of production for very long.
Huge oil inventories do not exist (daily production is always a sizeable fraction of the total inventory) and oil is NON Renewable. Thus, no company can for very long pump and sell at a lower cost than it takes to produce. Fully paid for wells may be allowed to deplete, but new ones will not be drilled or they will be capped. The remaining reserves are way to valuable to just 'give' away.
With their stock trashed, CHK has few acquistion opportunites and less opportunity for capital. Thus, they must cut their development budget and wait for higher gas prices, and deliver into their hedges.
Gas and oil prices will rise when the hedges run out.
As an additional topic I would suggest a Google on "Hotelier's Oil Pricing model". Way back in the 1930's he worked on an elegant (and apparently incorrect) model for oil prices. There is no rhyme or reason to oil prices, but the cost of new production is a fair gauge as to the value of remaining reserves.
Oil: A Slippery Slope Ahead?
Clearly, then NO ONE factored in DEMAND! WOW!!!
Now the price is down, and the 'experts' are forecasting even greater loss of demand and gigantic increases in supply. What a crock! The loss of demand was about 2 million bbls per day. With gasoline back to $1.50/gal all of this demand will soon be back. Meanwhile supply is still declining due to depletion and few, if any, new supply is coming to market next year. We will soon be bumping back up against a peak oil supply of about 86 million bbls per day. If this goes on long enough, the world peak of 86 million bbls per day will NEVER be acheived again due to massive depletion of major oil fields.
Clearly, NO ONE is factoring LOSS of Supply into their equation! WOW!!
As for OPEC - history isn't going to repeat. This time around they will CUT and force the price back up, perhaps not instantly, but within six months to a year. Here are some good reasons why this will be the case.
1. OPEC has a larger marketshare than it did 25 years ago. The world is more dependent on them than ever before.
2. China and India are new customers than didn't exist 25 years ago to any great extent.
3. The Russian economy collapsed faster in the late 1980's than its oil production. This allowed for greater exports. Now both the Russian economy and oil production are falling due to depletion. This could still be a factor, but not the BIG factor it was 20 years ago.
4. The North Sea was new and a high producer then. It is now almost gone. If OPEC cuts, it cannot make up the difference.
5. Mexico and the Gulf of Mexico were new and high producers. These are now almost gone. If OPEC cuts, they cannot make up the difference.
6. The 1973-74, the 1979-80 and the 1991 oil price spikes were ALL political events and mostly War related. The 2005-2007 price spike was NOT War related. Iraq's oil production remained around 2.5 million bbls per day throughout the period. It fell briefly in 2003 at the start of the War, but was restored. The cause of the 2005-07 price spike was geological depletion - production could not be increased fast enough to keep up with demand.
Canadian Royalty Trusts in Need of an American Revolution
Gold Bugs Beware
However, here are few things I think I know...
1. The US and World economies are going to decline in real terms over the next FIVE years. This might happen fast (two years) or slower (5 to 10 years). The US economy needs to be completely restructured away from speculation, consumption, government and services and back into manufacturing, mining and agriculture. This of course doesn't mean the former are going to disappear, but only shrink some.
2. If deflation strikes hard, the stock market will fall faster than gold. The dow jones / gold ratio used to be 40 to 1. Now it is about 12 to 1. It is on its way to 2 to 1 or less. Under this scenario the dow jones would fall to about 1000 - 1500. This is the 1929-1934 scenario. Under this scenario a prudent investor should sell all and wait in cash or safe bonds. What constitutes safe is a good question.
If inflation strikes hard (1970's style), both the market and gold will likely increase. The market only marginally, but gold will skyrocket - $10,000 / oz.
If hyperinflation occurs (unlikely) ... we are all toast anyway.
Under inflation cash and bonds lose value, stocks are mostly stagnant.
3. Bottom Line - In five years I expect to be able to purchase up to 10 times as many shares of companies than I can now. These companies will be of higher quality than the current ones. In order to survive the fire, balance sheets will have to be deleveraged and management focused on short and long term survival rather than pure enrichment of themselves.
Silver Production Falls by 70%
Rather than produce an article with an unsubstantiated claim (apparently purposely false), why don't you spend the time actually researching the situation and make your best estimate of how much silver production is likely to decline as a result of base metal production drops?
Financially strong miners will close down the marginal mines. However, weak miner might not. The fixed costs may be huge and the variable costs might be small. Under those conditions the miner may 'have' to produce the commodity at or above cost for some time just to get the cash flow to pay fixed expenses. This kind of scenario makes it hard to make an accurate estimate of how much production will be shut in.
Canaccord Analyst: Distribution Cuts a Negative for Algonquin Power
During tight markets debt financing is virtually unavailable and a $2/share stock can't make any acquiestions. GROWTH - what a crock!! Who buys a utility for growth in this market - get real!!!
In fact, they should have just cut the dividend by 50% instead of 75% This would have preserved the stock. Prior to the cut it was trading at a 22% yield instead of the normal 12-15%. The market was expecting a cut, not a beheading.
Also, management is rewarding itself with big compensation packages while the ordinary investor is cleaned out. Once this stock gets back breakeven point (I bought at $4/share last week), I will be gone and never return. Crooks I do not need. Also, can you say lawsuits?
Management should have put the word out about their plan and made this a more orderly process. The extremly high distribution should have been cut back gradually long ago.
This business is really all about water - water flowing over a rock to make electricity and water purification. They also own a few windmills and a cogeneration facility. All the power is sold into long term contracts. This is a business as sharpe teenager could run. Yet this management screwed it all up. Stock has fallen from $10/share to $2.50 over a few years. What a bunch of dopes!
The only group which is worse is the Canadian government which killed the trust format a year or so ago. A bunch of greedy buggers! They killed their little golden goose because they needed a little more tax income. In the process the capital losses will be over $100 billion on these trusts and growing. I hope Harper and Flatherty (Flatulence) are happy.
Was 'Peak Oil' a Multi-Billion Dollar Hoax?
1. The head of the Saudi Aramco should know what he is talking about and at some level I'm sure he does. However, public statements must be taken with a grain of salt. If the public in Saudi Arabia ever finds out that the kingdom really doesn't have 100 years of reserves, it will be Aramco and the king's head on a platter. Saudi Arabia gets 2/3 of its oil from one oil field "Ghawar" and it is over 60 years old. Elephant oil fields live about as long as people and this one is a senior citizen! The Kingdom doesn't have any other fields that can take place of this one.
2. Peak oil doesn't mean that there will be NO more oil after a certain date. It merely means that production will peak and will slowly decline. At the top this is a slow process with decline of 1 or 2 percent overall. It is hard to clearly see these small declines and most people will 'miss' Peak Oil. It will only be visible in a 'rear view' mirror.
3. Peak Oil doesn't mean that oil prices will always rise forever and ever. Economic variables will play a role too. Peak oil does not repeal the law of supply and demand (many of the left leaning, socialistic commentators like to ignore supply and demand). Demand destruction due to a severe recession will cause the price of oil to decline (temporarily).
4. At some level Peak Oil will produce Peak Oil prices. At this level of production and this time, $140/bbl was the peak price. In the future, it might be higher or lower.
A Canadian Power Fund Could Be a Great Place to Hide
Algonquin also seems solid and is diversifed across segments. It is more dependent on water flows in the Canada, but unless there is a drought worrying about this is silly. Its yield is 20%+ right now. These two seem like solid buys without too much worry of distribution cuts. I think Algonquin also got bogged down in their attempted takeover of Clean Power Income trust.
Great Lakes Hydro is the premier company in the hydro business. The negative here is the low yield.
Boralex is weak sister who is NOT covering their distribution. In fact, they had to cut it about a year ago. I would avoid it.
Gold ETF Adds 36.5 Tonnes to Inventory On Rise in Demand
Note this is only for gold. Silver does not have huge central bank supplies and despite the low prices is really in short supply.
Oil Inventories
Worldwide oil production is falling - mexico, north sea, USA, even Russia. The middle east is reducing its exports and using more oil at home.
Demand has fallen only a little bit.
Supply will continue to fall through the fall and winter and surprize all the 'experts'.
right now the oil price is falling - not from fundamentals or even the 'dollar', but because funds are liquidating due to margin calls and over leverage. Once this overhang is gone, oil will be off to the races again.
iShares Silver Trust: Inventory Climbs as Metal Price Plunges
It's all about leverage, momentum trading and paper.
1. Futures contracts and comex are highly leverage products. SLV requires hard cash. A 50% fall in a leveraged product is DEADLY to everyone who holds it. A 50% fall in a fully paid position is an "inconvenience&qu... unless you need the money for something else right now. There is NO conspiracy here. Just heavy leverage in the silver futures that needs to be worked off.
2. Momentum Trading. Piling on and Piling out is the way the speculators work in futures trading. With apologies to Keynes "Everyone is a Turtle Trader now". Selling begets more selling. It ends when it doesn't work anymore. The momentum boys are not in the SLV trust - no leverage.
3. Paper silver can be created and destroyed at will. SLV cannot be 'grown' quickly or at a trader's whim. Also, if a government agent wants to manipulate the silver price they will not attack the SLV trust. They would have to buy it first.
$300/Barrel Oil Is Coming - Barron's Interview
$300/bbl oil is quite possible and likely before 2015. Here are two good reasons.
1. Supply -- production is falling in Mexico, USA, Europe and Most of the Middle East. Increases from Brazil, Africa and polar regions are not enough to offset the losses. Russia is a wild card, but it is likely that their production is also falling. No amount of drilling can reverse geologically determined depletion. Who cares if you can get production from a stripper well from 10 to 20 barrels per day. The world needs 85,000,000 barrels per day!!
Also, don't count on Windmills and solar to save you. They don't produce a liquid fuel. Massive penetration of electric vehicles is required first. This will take at least a decade to accomplish.
Finally, natural gas in North America is neither plentiful nor available for transportation fuel. The nat gas producers routinely drill wells that deplete 20% per year or more. North America is on a furious treadmill to keep the gas flowing. Forget about LNG either. There are only a few terminals to handle the stuff and NIMBY is blocking the construction of new ones.
2. Demand -- Despite $4.00/gal gasoline, demand is still rising in Asia and the Middle East. In fact, prices are quite low in the Middle East so demand will continue to explode! The Saudi's are going to supply their own market first! Worry about the USA secord or maybe even third.
Even in America demand has only weakened from 22,000,000 bbls per day to about 21,000,000 bbls per day. This is in spite of $4.00gal gasoline. It will take $8.00/gal or $300/bbl to really knock out the demand.
10 Financial Entities On the Brink
Thanks for the insight into some of these financial black holes. Some or all of them may fail in the future - who knows?
The key point is: this type of commentary and information - if you read the links should keep the uniformed investor (most of the commentators on this story) from bottom fishing in these dangerous waters.
If the poster here this this is all bull ... then fine. Buy these little gems now! See what happens.
The FED may come and bail you out and destroy the dollar in the process. However, the sensible thing might be is to let some of them fail. Corporate recklessness like this should not be rewarded with bailouts.