Freeport-McMoRan (FCX)

[eddy2]

When tax’s are deferred interest is charged. If the tax’s owed are not secured by collateral then a higher interest charge is used. The capital used ie: depreciated assets is secured by lower tax’s to the corporation so in reality there is a slow drain on the deferred tax supporting capital.

As in every thing in live there is an anction and reaction.

Let’s look at what is tax able and what can be put on a lay away plan for payment down the road.

We pay tax’s on all purchases be it merchandise or services. We also pay tax’s on any revenue the company makes.

If the capital surplus exceeds EBDIA found on your bottom line on your income statement after adjusting for tax’s owed then the company is said to have a negative return on revenue.

If the stock is selling higher then zero it is said to be trading out of the money. Now there is a glimmer of hope that the tax’s owed can bring a turn around in the purchasing of new equipment. The risk is high. Additionally should there be new secured debt capital coming into the business secured on future earnings by having a first rights agreement in place to secure the debt after collateral debt is paid ie” preferred shares “ .

Now there are those that will say that the slow erosion of equity capital can take up too five years or longer giving plenty of time to see things turn around. I could agree as well but if past history is any indication the cards are staked against you.


Liability is risk and hope. From my experience more risk then hope. I introduced yesterday a web site saying your odds are 65% that you will have nothing in the end. At one time when revenue tax’s were lower it was a fifty percent chance. There has been a tax change brought into the United States that will lower that risk.

The web site yesterday was a Canadian site and has no bearing on this particular offering. What it does do is lay the grounds for investors to do additional DD if not already performed.


The bottom line is why is investors paying such a high premium too others when the companies financials hold so much risk. Eddy