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Third quarter IPHS results.
For those interested:
http://biz.yahoo.com/e/091104/iphs10-q.html
(By the way, anyone know what is with all the automatic highlights and hyperlinks that went on my last post - or how to eliminate them?)
Thanks
InnoPhos is looking interesting. (Nasdaq: IPHS)
Haven’t posted much. We were lucky enough to develop an over-the-counter treatment for MRSA staff infections, also effective for Herpes, Hepatitis and swine flu. (Tried beer John, but the FDA wouldn’t let us license it.) Anyway, been a bit busy since stores are now interested in it (we’re currently at inspirednutrition.com).
In the meantime, IPHS has attracted my attention. I haven’t entered it yet since I think there is a good chance of a sharp market decline between mid-Nov and the end of the year. That will make a nicer entry point. If not, I’ll have to pay more. This is what I know about it.
IPHS is a fertilizer-commodity company that is both a processor and value-enhancer for phosphate products. Trailing PE is 2, future PE (at current phosphate prices) is around 9.
They reduced net debt from $550m to $150m now – important in today’s market. Last year revenue was around $900m, this year will be around $680m due to drop in phosphate price. (This bodes well for pricing.) As the people on this board know, prices of semi-processed phosphate compounds dropped only 15-30% y/y (compare that to potash 1, POT, MOS, etc.).
The reason for this relative price stability can be found in a simple fact: phosphate is an essential input into many industries, including many noncyclical ones - whereas potash is mainly used as fertilizer. Phosphates are a part of our everyday life: pharmaceutical pills contain phosphates as do processed foods and baking mixes. In addition, phosphates are used in fertilizer.
Some analysts have given them "declining estimates", but this is from low predicted phosphate prices. We are all familiar with this, but I don’t agree that this will continue - how low can food demand go? As economic growth gets back on track, AG product and fertilizer commodities’ pricing will also.
When this materializes, IPHS stands to benefit with materially higher cash flow potential. (Actually, Q3 numbers are already CONSIDERABLY better than analysts had expected! It is not surprising that the stock is up recently!)
http://finance.yahoo.com/news/Innophos-Holdings-Inc-Reports-prnews-2779996672.html?x=0&.v=1
I also like their safety vs potential rise. So far, they have hedged their forward raw material supply. However, they also have the option to mine their own phosphate rock if raw material prices escalate. So they hedge from outside sources when material is cheap but they will develop their own captive resources when prices escalate.
I also have learned that the PROCESSING of phosphate may be as important as the mining - and IPHS owns existing phosphate processing plants all over North and South America. When global growth resumes on the AG side, phosphate prices will be the first to benefit from it. In the meantime IPHS holders capture a nice dividend. They also serve many niche markets where they are leader, (pharma, food ingredience, asphalt modification) giving them better pricing than many of their competitors will obtain
The most recent presentation can be obtained here:
http://files.shareholder.com/downloads/IPHS/740358753x0x263254/F9943B4F-791C-4790-9965-D7AC3EC27EC8/Investor_Pres_for_website_Jun_2009.pdf
Business as usual!
Greets to the few still in there. It’s been quite awhile since I've posted.
Nothing has changed with management since my last observations. Still too conservative in PR - and that affects stock and money gathering ability - which affects the ability to get ahead.
I still have some long positions but haven't added any. Looks like I won't either for awhile. Still think the process will work but I have noticed that the dollar / barrel estimate has dropped considerably since the last time I looked.
The possibilities have increased but the incentive to implement them is less than enthusiastic. No wonder! One has to keep in mind that a real but somewhat marginal refining advantage has to be weighed against the substantial cost of restructuring a plant. Substantial cost in the sense that we are in a repressed credit market where money is taking a much harder look at what to invest in.
Might see an order soon, might be quite awhile yet. Larry, as usual, was way too non-committal. It was an insult to hear him side-step any real answers to the questions – even with them being hand-picked. I was worn out by the end of the call trying to pick out any meaningful answers from all the generalities. Sounded like a politician!
The market seems to agree – and I don’t think it is manipulation this time (though it has happened in the past). Either deliver the goods, or have more concrete answers for people to make decisions on.
Forbes agrees John!
Potash is a little easier to skip a year than nitrogen. Don't know how the government would react and/or try to interfer with a POT take-over though.
The State Of The Farm
Alexandra Zendrian, 09.03.09, 06:00 AM EDT
http://www.forbes.com/2009/09/02/farm-agriculture-commodities-intelligent-investing-fertilizer.html?partner=yahootix
The recession is hitting the American farm. Agricultural investments likely reflect these dismal numbers already.
The U.S. Department of Agriculture forecasts that the American farm's profits will drop precariously this year. As the down economy strikes the farm, investors shouldn't take this as a reason to drop agriculture-related commodities and other investments. Just be cautious, do your research and don't bet the farm.
The USDA expects net farm income this year to be $54 billion, down 33.2% from last year. So what does less money in farmer's pockets mean to you? Vince Farrell, chief investment strategist at Soleil Securities, notes that stocks of fertilizer companies, such as Mosaic ( MOS - news - people ), Potash ( POT - news - people ), Intrepid Potash ( IPI - news - people ) and Monsanto ( MON - news - people ) would be affected first.
Since farmers can skip the fertilizer for a little while without noticing too much of a difference, if their wallets are pinched, they'll likely buy less fertilizer. Most of these company's stocks already reflect some of the negative projections for farms, with Potash, for example, trading at $86, down from its high of $179.58 last September. "Don't buy a full position today," Farrell says, adding that these stocks are "more of a buy than a sell."
If farm profits are down for a longer period of time, then it might start to impact farm equipment companies such as Deere & Co. ( DE - news - people ). Since items such as new tractors are a bigger investment for farmers to make, these stocks are less likely to be affected by one year's bad crops.
Good article Sumisu. A key statement: "in the 12 months to this June, food prices were up 5.5%, during a recession, when the key cost in the agriculture sector — energy — was falling."
What happens if/when oil continues up? The current rise hasn't even been reflected in food prices yet. Unless the world goes vegitarian next year (right), it could get nasty!
More likely, the new Asian meat rage will back off a little to give us another year or two. That is, of course, barring any radical weather or political developments.
Sad thing is that it is only a matter of time. In spite of investing opportunities for those aware, it is going to make a much uglier world!
Vale may have competition from BHP for MOS
http://www.onn.tv/videos/sidewinder/virgin-media-inc-vmed-and-mosaic-co-mos/
(Been awhile, but:) "Market chatter is suggesting that BHP Billiton has finalized a takeover bid for MOS – this is unconfirmed, but rumors suggest that the bid is $72 per share for all outstanding shares."
Who knows - but I will be watching closely since I still have some 2010 options that I may cash in early if it jumps to the $65+ range.
I agree with Aaron (by the way, congrats Aaron) and am long DBA. It bypasses the credit/finance/political ag stock risks, and food IS bottom line.
Rain could be a problem for Canada. I am in the westerly air flow in the Pacific NW and we have had record heat and projected continued dry. It's headed your way.
Obamanomics and grain
The US is only part of the world grain market, and the results of Obama's budget proposal will take time to unfold, but it looks to add to the long-term grain crunch coming up. Here is and excerp:
http://seekingalpha.com/article/124562-how-obama-s-budget-will-affect-commodities?source=yahoo
"Last week President Obama released his proposed budget for FY 2010 and beyond. Since then, there has been much scrambling to figure out what it all means for investors.
The President's stated objective is to get the economy on the road to recovery by emphasizing green technology, health care, education and infrastructure. To do that, President Obama has proposed many changes to the status quo. While there's no convenient chapter heading in the tens of thousands of words in the budget called "Commodities," there will be huge impact on the commodity space, at least in the long term.
In a market often driven more by perception than reality, understanding what everyone else thinks about tomorrow is often at least as important as understanding what's actually happening now.
Here is your primer.
Round 1: Agriculture
Farm subsidies get headlines. In Iowa, they play well. In urban America, they're anathema. And the budget tackles them straight on, with a number of proposals that will directly affect agricultural commodities:
A phase out of direct payments to farmers with sales revenues over $500,000 a year. The phase-out would happen slowly over the next three years.
A $250,000 commodity program payment limit (a cap on any kind of direct payments, no matter how big you are).
A reduction of crop insurance subsidies.
The elimination of cotton storage credits.
A decrease in funding of 20% for the Market Access Programs (MAP) - the overseas agriculture marketing programs.
As you might expect, the various agricultural lobbying groups are up in arms about all of these, because these proposals, while complicated, all mean the same thing: less money for farmers (especially BIG farmers).
On the subject of direct payments, the National Wheat Growers Association points out that while only 5% of the farms counted by the USDA have sales over $500,000 they are responsible for 74% of all agricultural sales. They also argue that the direct payments help farmers qualify for the financing they need for operations - equipment, seed and fertilizer. Reuters put it this way:
"Farmers say the direct payments help them maintain credit with local banks as a form of dependable cash flow, and help farmers who lose crops to drought or disease. They are considered trade friendly, non-distorting to price or production, and so small in sum in comparison to other budget items that farmers and their advocates say there is little upside to eliminating them."
For the ag investor, of course, the real question is how this actually hits supply and demand, and thus prices, should all of this get finalized in the 2010 budget?
If direct payments are truly "non-distorting to price or production" then the elimination of the payments should have no impact on commodity prices. Of course, if the programs actually have zero impact on price or production, it bears the question: what they heck good are they doing anyway?
Regardless, if in the long run farmers are unable to get credit for the purchases they need, then inevitably some level of production will suffer, either through smaller harvests of starved crops or due to lower crop plantings. Of course, if that happens, commodity prices will rise and farmers will once again have incentive to plant larger crops.
It comes down to just how pointless you think the subsidies were in the first place. Totally pointless? No impact. Actually relevant? This makes prices go up, long-term.
Net-net: Possibly bad for farmers and consumers; good for commodity investors.
"Peak Farming"
Here is an interesting slant on peak oil/banking/farming that I don't think I have appreciated enough. I may have been a touch early a week ago on DBA, but I think this is another angle on why a perfect storm may be coming this year in grain - especially with very low storage levels!
http://clicks.whiskeyandgunpowder.com//t/AQ/DMo/EA8/Cvs/AQ/AsAykw/8J7p
Some excerps:
"There was a popular theory among Peak Oilers the last decade that the world would enter a “bumpy plateau” period when the global economy would get beaten down by peak oil, would then revive as “demand destruction” drove down oil prices, and would be beaten down again as oil prices shot up in response — with serial repetitions of the cycle, each beat-down taking economies lower — the only imaginable outcome being some sort of quiet homeostasis. This scenario did not play out as expected. It was predicated on a mistaken assumption that all systems would retain some kind of operational resilience while ratcheting down. Anyway, the banking system was mortally wounded in the first go-round and the behemoth is dying hard.
"My guess is that the disorder in agriculture will be pretty severe this year, especially since some of the world’s most productive places — California, northern China, Argentina, the Australian grain belt — are caught in extremes of drought on top of capital shortages. If the US government is going to try to make remedial policy for anything, it better start with agriculture, to promote local, smaller-scaled farming using methods that are much less dependent on oil byproducts and capital injections.
"This will, of course, require a re-allocation of lands suitable for growing food. Our real estate market mechanisms could conceivably enable this to happen, but not without a coherent consensus that it is imperative to do so. If agri-business as currently practiced doesn’t founder on capital shortages, it will surely collapse on disruptions in the oil markets. Surely the US Department of Agriculture already knows about it, but the public may not be interested until the shelves in the Piggly-Wiggly are bare — and then, of course, they’ll go apeshit.
Guess the market agreed!
We'll see what happens.
John, know what Aaron is up to??
La Nina vs the economy
John and boo boo, below are some Feb updates on the continuing development of the La Nina pattern. Net result is:
1. A moderate cold-wet pattern from the Ohio-Tenn valleys northward up into Canada (with the Pacific NW and Alaska patterns confirming the air stream patterns feeding it),
2. A dryer and warmer S. & SE US, (though that doesn't affect fertilizers as much),
3. A dryer southern half of S. America - not enough to be a full pledged drought, but very important to the world fertilizer, corn and grain markets,
4. A wetter W. Australia but probably just enough to make Aaron smile!
However, all this could be enough to prevent a huge drainage of fertilizer inventory enough that the suggestion of a sudden supply crisis may not develop.
This has me holding off on adding any fertilizer for a little bit - but adding more grain (through DBA) as the 3-6 month out grain demand may jump considerably in a La Nina development.
The only fly in the ointment that I may miss is that the fertilizers are begging to jump up if the stock market has a substained rally (like this morning) - regardless of weather!
At least our current positions will enjoy that. However, there is a substancial risk of more downward movement if people's view of reality overcomes the political efforts to patch the economy.
By the way, what is Aaron up to lately???
http://www.cpc.ncep.noaa.gov/products/predictions/90day/fxus05.html
http://sciencenow.sciencemag.org/cgi/content/citation/2009/108/1
http://www.cpc.noaa.gov/products/analysis_monitoring/enso_advisory/ensodisc.html
Say John...
Who/where is Montgomery?
The only long area I see holding its own lately is grain, so playing it with some DBA leaps. I would think gold and silver will do good in the future with all the money being printed so have some of that - but they seem to be following commodities a lot right now.
I don't short much but doing it a little through SKF and FAZ (financial shorts ETFs). It helps but is not enough to make up for the fertilizer and oils.
Only thing that hasn't lost its flavor is suds and wine - and having a bit more than usual lately to stay sane.
Potash One still a go!
(I still think credit access is a big problem for most explorers/small developers - as per my "grains, oilseeds" post. KCL is one of the few I have been adding to the last few weeks. It might bite me if banks go south some more, and it is a long term hold. But I think they will pull it off.)
"Potash One Announces Engagement of SNC-Lavalin to Participate in the Completion of the Legacy Pre-Feasibility Study
Monday December 15, 9:00 am ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Dec 15, 2008 -- Paul Matysek, President and CEO of Potash One Inc. (Toronto:KCL.TO - News) (the "Company" or "Potash One") is pleased to announce that it has engaged SNC-Lavalin to provide Pre-Feasibility Study services on its Legacy Project in Southern Saskatchewan.
Following the creation of its Solution Mining and Process Technical Leadership Teams (see News Release dated November 6, 2008), Potash One created a Request for Proposal for Pre-Feasibility Engineering and Management Services. In a competitive bid situation with three senior engineering firms, Canadian-based SNC-Lavalin has been awarded the work following submission of a strong proposal, which was emphasised by a highly-qualified project team featuring key personnel previously involved in SNC-Lavalin's feasibility study mandates for similar projects in Africa and elsewhere. Additionally, SNC-Lavalin nominated a peer review team consisting of strong senior technical and management individuals with solid and recent experience in solution potash mining and evaporation/crystallization processes and technologies.
The SNC-Lavalin team mobilized on December 8th and its key personnel participated in kick-off meetings held in Saskatoon on December 9th and 10th. Initial schedules indicate that the Pre-Feasibility document will be completed by the end of the second quarter 2009.
Potash One, SNC-Lavalin and other consultants will each contribute work related to specific elements of the study scope, which collectively includes all aspects of the project from mining to inter-connecting pipelines, the process plant, site development, on-site and off-site infrastructure, product storage, transport and logistics as well as operating and capital costs. As part of its services SNC-Lavalin will include the work of other consultants in the final report, specifically in the areas of solution mining, processing and product transportation and logistics.
Paul F. Matysek, President and Chief Executive Officer of Potash One Inc., said: "We are delighted to move forward to the pre-feasibility stage of the Legacy Project with SNC-Lavalin. As one of the world's leading groups of engineering and construction companies, SNC-Lavalin will provide great synergy for Potash One's world class team that we have assembled to complete our Pre-Feasibility study. Their contribution to recent potash solution mining projects demonstrates the expertise and technical experience they provide and we are confident they will add significant value towards producing a high quality study for the Legacy Project."
ON BEHALF OF THE BOARD OF DIRECTORS,
Paul F. Matysek, M.Sc., P.Geo., President and Chief Executive Officer
About Potash One Inc.
Potash One Inc. is a TSX listed Canadian resource company engaged in the exploration and development of advanced potash properties amenable to solution mining. The Company owns 100% of more of 330,000 acres of contiguous Potash Subsurface Exploration Permits in Saskatchewan, Canada. It includes the 97,240 acre Legacy Project which has NI 43-101 compliant Inferred Mineral Resource of 391.5 million tonnes of K2O and Indicated Mineral Resource of 40.8 million tonnes of K2O and is adjacent to the largest producing solution potash mine in the world.
Contact:
Contacts:
Potash One Inc.
Paul F. Matysek, M.Sc., P.Geo.
President and Chief Executive Officer
(604) 331-4431
(604) 408-4799 (FAX)
Email: info@potash1.com
Website: http://www.potash1.com
Money crisis for (especially) developing miners.
(This is long and not for everyone. But it is the best summery of the current credit crisis I have seen. It helps to see the difficulties underfunded ferilizer, and all developing mining companies, will have getting money. Therefore, which ones might be good to invest in - and which might not.)
Stolen goods--The Economic Crisis, getting the history right
Behind the debate over remaking U.S. financial policy will be a debate over who’s to blame. It’s crucial to get the history right, writes a Nobel-laureate economist, identifying five key mistakes—under Reagan, Clinton, and Bush II—and one national delusion.
Joseph E. Stiglitz, a Nobel Prize–winning economist, is a professor at Columbia University.
Treasury Secretary Henry Paulson and former Federal Reserve Board chairman Alan Greenspan bookend two decades of economic missteps.
There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history—a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it’s crucial to get the history straight.
What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road—we had what engineers call a “system failure,” when not a single decision but a cascade of decisions produce a tragic result. Let’s look at five key moments.
No. 1: Firing the Chairman
In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.
Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000–2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown—as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation—or “liar”—loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn’t have the tools, he could have gone to Congress and asked for them.
Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen—for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk—but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else—or even of one’s own position. Not surprisingly, the credit markets froze.
Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn’t put it as memorably as Warren Buffett—who saw derivatives as “financial weapons of mass destruction”—but we took his point. And yet, for all the risk, the deregulators in charge of the financial system—at the Fed, at the Securities and Exchange Commission, and elsewhere—decided to do nothing, worried that any action might interfere with “innovation” in the financial system. But innovation, like “change,” has no inherent value. It can be bad (the “liar” loans are a good example) as well as good.
No. 2: Tearing Down the Walls
The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act—the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn’t its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee. I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest—toward short-term self-interest, at any rate, rather than Tocqueville’s “self interest rightly understood.”
The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can’t, in any case, identify systemic risks—the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once.
As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation—a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant—and successful—in their opposition. Nothing was done.
No. 3: Applying the Leeches
Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease—the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil—money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.
The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly—and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending—not that American consumers needed any more encouragement.
No. 4: Faking the Numbers
Meanwhile, on July 30, 2002, in the wake of a series of major scandals—notably the collapse of WorldCom and Enron—Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can’t have faith in a company’s numbers, then you can’t have faith in anything about a company at all. Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy—that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.
No. 5: Letting It Bleed
The final turning point came with the passage of a bailout package on October 3, 2008—that is, with the administration’s response to the crisis itself. We will be feeling the consequences for years to come. Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner. As America’s banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.
The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn’t address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction. The bailout package was like a massive transfusion to a patient suffering from internal bleeding—and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, “cash for trash,” buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.
The other problem not addressed involved the looming weaknesses in the economy. The economy had been sustained by excessive borrowing. That game was up. As consumption contracted, exports kept the economy going, but with the dollar strengthening and Europe and the rest of the world declining, it was hard to see how that could continue. Meanwhile, states faced massive drop-offs in revenues—they would have to cut back on expenditures. Without quick action by government, the economy faced a downturn. And even if banks had lent wisely—which they hadn’t—the downturn was sure to mean an increase in bad debts, further weakening the struggling financial sector.
The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems—the flawed incentive structures and the inadequate regulatory system.
Was there any single decision which, had it been reversed, would have changed the course of history? Every decision—including decisions not to do something, as many of our bad economic decisions have been—is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You’ll hear some on the right point to certain actions by the government itself—such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.
The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
Joseph E. Stiglitz, a Nobel Prize–winning economist, is a professor at Columbia University.
OIL AND GAS AFFAIRS MINISTER RECEIVES SULPHCO OFFICIAL
date: 29 10, 2008
MANAMA, OCT. 29 (BNA) -- MINISTER OF OIL AND GAS AFFAIRS AND CHAIRMAN OF THE NATIONAL OIL AND GAS AUTHORITY (NOGA) DR. ABDUL HOSSEIN BIN ALI MIRZA RECEIVED AT HIS OFFICE TODAY DEPUTY BOARD CHAIRMAN OF POWERTON COMPANY ISSA MUSSA SALMAN WHO INTRODUCED TO HIM US AMIRA GROUP INTERNATIONAL SULPHCO PRESIDENT, CURRENTLY VISITING BAHRAIN.
THE MINISTER WELCOMED THE GUEST AND EXCHANGED WITH HIM TALKS ON ECONOMIC AND INDUSTRIAL ISSUES MAINLY THOSE PERTAINING TO OIL AND GAS. DR. MIRZA WAS THEN BRIEFED ON ALL THE COMPANYS PROJECTS AND PLANS NOTABLY THOSE RELATING TO MODERN TECHNOLOGIES, OIL REFINING, PETROCHEMICALS AND ENERGY, EXPRESSING NOGAS READINESS FOR COOPERATION WITH SULPHCO TO AVAIL OF ITS EXPERTISE. ON HIS PART SULPHCO PRESIDENT EXPRESSED DELIGHT TO MEET THE MINISTER AND DISCUSS WITH HIM THE POSSIBILITY OF COOPERATION IN OIL AND GAS SECTORS AS WELL AS REFINING AND PETROCHEMICALS. MTQ 29-OCT-2008 18:47
Don't know how I missed it, John.
Here I am surrounded by liberal left-handers (which I interpret as shaking your hand with the right while the left hand is in your pocket). Now I get your rural Albertan "ownspeak".
Anyway, as I understand it, the primary reasons for POT and AGU being off so much when fertilizer prices and demand remain strong are:
1. Hedge funds having to sell whatever is most liquid to meet cash demands. And, as fertilizer is an excellent investment, they were all in them (as well as oil - but oil had a bit of demand destruction to also blame).
2. General fear (and people selling to lock in profits). I now have a greater respect for stupidity ruling over facts. I made the mistake holding through it - and even adding some fertilizer a little bit ago. Thought there is no way it could go lower. I guess it would have been nice to know in advance but can't help feeling ok about the long term.
On the plus side, the plots of farmland we purchased the last few years, without residences, (Michigan is usually in field corn, Oregon in hops and grass seed) are now leasing out for more than the mortgages.
Those with houses are doing even better. The largest is only 100 acres so it is not like your Canadian farms, but still better than nothing. (We're not farmers, just dabble in some grapes).
You've got to be feeling good owning a lot of farmland yourself! Good call.
Collected comments:
CC summery:
Cash through 2009 including for new hires
Talented, experienced new hires already on the team
Marketing continues including with Kuwait National Petroleum Company and Houston customer
Consistent, repeatable lab results
Existing patents are valid even for new advances
50%+ sulfur reduction (repeatable)
API and viscosity benefits (repeatable)
Existing equipment continues to work
Operating test facilities in UAE and Houston
PR/IR advances
They haven't said much about API. I assume that's because it is still unpredictable and, while trying to establish a revenue stream, they are working with higher APIs in the range that don't benefit much from upgrade.
The fact that the probes are lasting was a pleasant suprise; a big plus. That is a tricky design issue. Flexed metal fatigues, even if you are staying inside the statically measured elastic limit. If they are at 20,000 Hz, that, in a few weeks, is a lot of cycles.
That they get different results with different oil was, of course, to be expected. There are a lot of variables hence a lot of testing to do. But they claim to have their little lab setup at the stage where they can duplicate results with the 5,000 bbl/d customer test system. As experience grows, they will be able to reduce the variable count for optimization.
IMO, their greatest opportunity is in the future with viscous, high sulfur oils (read elevated temperature operation) but until they have income, they will (IMO) be wise to stick with the path they are currently on.
Sorry John, I'm probably too old to know what you mean by "left coasters", so I missed it.
Anyway, I envy you rural Canadians. You may be far better off to weather what I fear is coming to the US and the rest of the world. The political blunders your politicians make is child's play to the stupidity our politicians (they have Phd's in it). I fear for my children and grandchildren for the world they will inherit.
I'd move to New Zealand or, dare I say it, Aaron's territory if it weren't so far from my kids.
In the meantime, I try to do my best and wash it down with a glass of wine.
"To use vertical or rooftop gardens to take more land out of agriculture is dead wrong,"
It would seem to me that vertical farming has the advantage of longer growing seasons and locally grown food (less fuel), but:
1. Growing dirt has to come from somewhere (farmland?) unless it is a aquatic farm (makes nice looking tomatoes, but less nutrition).
2. In a constrained space, it would need considerable fertilizer - unless they shipped manure+ in, which lowers the supply elsewhere, therefore requiring more fertilizer elsewhere.
3. It might economically viable if they used cheap (condemned for living) existing buildings. However, it would probably have to be organic to bring higher, speciality prices for profit reasons. This would make it a nitche market. Interesting but small (prices).
And on the plus side:
SUF:
(1)has approximately $21.1 million of cash on hand as of September 30, 2008, and is well funded to meet operating needs well into the latter part of 2009;
(2)has been able to produce consistent, reliable and commercially relevant reductions in sulphur content of up to 50% in our Houston laboratory on a number of prospective customer crude samples; and
(3)has scheduled field trials within the next few weeks at a prospective customer's site in the Southeastern United States, the purpose of which is to duplicate, on a commercial scale, the positive results produced in its Houston laboratory. (Tech210)
Potash One Inc.: Legacy Project Update
http://biz.yahoo.com/iw/081007/0440766.html
Tuesday October 7, 8:00 am ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Oct 7, 2008 -- Paul Matysek, President and CEO of Potash One Inc. (the Company or "Potash One") (Toronto:KCL.TO - News) states, "Potash One remains committed to the rapid development of the Legacy Project as management believes that:
- the fundamentals for a Greenfield potash solution mining opportunity in Saskatchewan continue to be strong;
- the solution mining approach to potash production provides many benefits, not the least of which are: lower capital cost to production, shorter timeline to production and significantly reduced technical risk in mining when compared to conventional potash mining techniques;
- despite the current challenging financial market conditions, the Company has sufficient funds to meet its corporate objectives for 2008 and 2009."
Significant developments are underway, including:
1) Development of a world-class technical team, centered on two areas:
- Solution mining: A team is being built to ensure the well, cavern and mine designs are leading edge with minimal technical risk. A key aspect of the mine design is that production is scalable, providing early KCl-rich brine production with greatly reduced capital expenditures.
- Processing: An experienced technical team is being assembled to complete several key trade-off studies (ie., natural gas versus electricity use), select the most appropriate technologies (ie., mechanical vapor recompression versus multiple effect thermal evaporation) and create the basic process designs and data. The process team will also create a scalable processing facility to provide finished product to the market at the earliest possible date.
2) Development of the Legacy Project as follows:
- 2D seismic work has been completed on the southern portion of Legacy Project;
- Baseline environmental data collection for EIA have been underway since January 2008; and the studies and communications required to support an EIA submission to the regulators are on track;
- Resource confirmation drilling program is in progress as announced September 12, 2008;
- Solution mining and processing designs are being prepared.
3) Development of a scalable solution mining economic model, so that, if necessary, the Company can avail itself of lower CAPEX requirements in a credit challenged financial environment.
4) The Company is in the due diligence phase with a number of strategic partners with the objective of structuring an operational and/or financial partnership for the rapid development of the Legacy Project.
Mr. Matysek also states, "I am pleased to report that management, directors and new appointees have recently purchased in excess of 475,000 shares in the open market, demonstrating their confidence in the Legacy Project which is owned 100 percent by Potash One."
Hi Cougar - yes, some thoughts:
As some of you know, I have been with SUF since the early days of Erose (the original pumper/expert). Bulljames has taken over that roll on most boards. I don’t know his motivations but have enjoyed many of his informative posts. I have been the major poster on I-Hub.
I wouldn't have gotten involved if I did not think that SUF had potential. My posts have generally been positive but I have not hesitated to mentioned things I don’t like when appropriate. I have had gradual changes in my appraisal of SUF and thought I’d share them.
The recent cc confirmed what I have been thinking and posting:
1. The LONG term potential for SUF continues to be a good probably vs risk. However, it is definitely LONG term – and Larry has NOT been up front, or communicative about this. The PR’s have been too far apart and definitely not informative enough – especially about the shortcomings of getting the results needed to possibly interest customers!
2. Larry is definitely NOT the CEO they need. He might be a good CEO for an established stodgy product like ivory soap, but not for an innovative new product. He has no concept of investor PR – and good (not exaggerated) PR and communication is definitely needed in new processes and companies.
3. The cc provided some general technical updates that were encouraging. However, 90 % of it, and the answers to questions, was generic, way too general and full of nondisclosure. He also avoided directly answering the effect of the bankruptcy issue (as per “legal” advice). Sorry, but you have an innovative product that REQUIRES more disclosure than that for high risk stock investors. There were problems that they waited a long time until they had possible answers before telling us. This isn’t GE who can say ‘trust us for awhile on this product’ and people will. This is SUF and, thus, the continued drop in pp as people wonder what they are not telling us now.
As a result, the long term potential is still good so I am retaining my 2010 Leap options – but I am not sure even that will be long enough. I have eliminated all short term and trading positions the last 2 months. (My holdings in 5 portfolios, while substantial, would not even budge the pp.) I will keep a light touch on developments but will not be adding anything until there are contracts in place. I suspect I may be waiting awhile.
Best to all,
Terry
An apology and explanation for the US debacle:
(A brief summary for people in other countries not yet in this position.)
1. Politicians will never admit it but our current mortgage problem started way back in the Carter days. Back then, some liberal thinkers thought that it was unfair that many of the welfare and homeless people couldn’t own their own house. So they convinced some congressmen to get the votes and support of these people by passing some laws requiring banks to change the requirements to loan money to these unqualified people. Those laws have been expanded over the following years.
2. Banks didn’t want to do that but the politicians threatened to withhold money supply and/or press discrimination lawsuits against them if they didn’t do it. Thus, the banks came up with some creative qualifications (no interest, no down, sometimes not even any ID) to qualify non-qualified people for loans.
3. The banks didn’t want to keep these loans, of course, and Wall Street was only too willing to help them out. They packaged these “qualified” mortgages together for people who like to get a little higher interest than money markets with the “security” of real estate backing it up. These trillions of dollars of packaged mortgages were then sold to all sorts of investment institutions – who were often not aware of what they were buying (Wall Street non-disclosure was usually necessary to sell these mortgages).
4. President Clinton (to his credit) and President Bush BOTH warned Congress every year of office that this was getting out of control. Congress never made much effort to regulate or control this abuse. WHY? Because mortgage and Wall Street entities CONTRIBUTE MORE MONEY TO THEIR WAR CHESTS THAN ANY OTHER SECTIONS OF THE ECONOMY!
5. So we have many people share some responsibility for what is happening, but the primary group has to be the POLITICIANS for their selfish-gain motivations.
However, a warning for any other countries that haven’t done it, but are considering it:
This all started from government FORCING banks to give a lot of money to people not qualified to receive it!
A P/E of 5 for CF, 8.5 for MOS???
Insanity!
Well, I might have been too anxious, since they dropped a few points after jumping in, but I have to think the would will not stay insane forever.
If it does, I'll have to grab a canoe and paddle over to EF's where down-under makes you up-right. (Just calculated the water it would take to make it from the US and I'd have to tow quite a barge behind me - and that doesn't even allow for the wine! Such goes life.)
TR
How can a person NOT jump in and add fertilizers today?
This forces the House of Representative's hand to approve the bailout. Things move up tomorrow. ("That's my story and I'm sticking to it!")
Even if things move lower, I have to feel good about adding this morning.
Best
Terry
Thanks, I check him out!
Aaron, on cattle prices...
Most everything I've read the last few months about cattle is that ranchers and dairy farms are lightening up on cattle.
In some cases, it is the price of grain that is forcing a downsizing.
In other cases, it is because of converting some of the land resources over to grain production because of grain prices (Argentina is a classic example).
This has been keeping the feedlots, etc., full of cattle - at least enough to keep the prices down. However, the supply of cattle is not exhaustible. At some point, then, the remaining supply of cattle will not be able to meet the demand.
I have been waiting for this point to happen before committing more investment money in cattle. However, the downsizing has continued longer than I expected. I don’t have the experience or knowledge in this area to gauge how much the ranchers might or can continue this. Wondering if you have a read on it?
Thanks,
Terry
(Still read and appreciate the considerable input you and John place in this site.)
SulphCo Announces Investor Conference Call
Friday September 12, 9:00 am ET
(We'll see - big announcement or headed lower.)
HOUSTON, Sept. 12 /PRNewswire-FirstCall/ -- SulphCo, Inc. (the "Company" or "SulphCo") (Amex: SUF - News) will be holding an investor conference call on Thursday, October 2nd at 4:30 p.m. (EDT), hosted by senior management. The content of the call will include a 15-20 minute review, including updates of the Company's recent and ongoing activities over the past several months. The line will then be open for questions for approximately 25-30 minutes.
The call can be accessed in the U.S. by dialing 877-407-0778 and outside of the U.S. by dialing 201-689-8565. A teleconference replay of the call will be available through October 7, 2008, beginning approximately 1 hour after the conference call ends, by dialing 877-660-6853 in the U.S., or 201-612-7415 from outside of the U.S. To access the replay, the account number is 286 and the conference ID number is 297187.
Listen to the live webcast by visiting http://www.investorcalendar.com/IC/CEPage.asp?ID=134031 . The webcast replay will be available until December 30, 2008.
Amira Due Diligence
(Some good dd by Hans Freylich:)
http://www.govexec.com/dailyfed/0903/090903ti.htm
"McAdams is the general counsel for the Amira Group, a firm with long-standing ties to Iraq. The company began business in the early 1960s making heaters and air conditioners, and over the course of nearly three decades diversified into oil and natural gas production and personal computer manufacturing."
"Following the Iraqi invasion of Kuwait in August 1990, however, Amira's business collapsed in the wake of a United Nations-imposed trade embargo. The company abandoned its Iraqi facilities and focused on venture capital financing. Today, Amira is billing itself as a one-stop shop for companies looking to get into business in post-Hussein Iraq. The consultancy introduces foreign firms to Iraqi partners and groups, and publicizes companies' work once they've landed on the ground."
Current website does not list company's clients but archived versions do:
http://www.amiragroup.com" target="_blank">http://web.archive.org/web/*/http://www.amiragroup.com
http://web.archive.org/web/20051214194933/www.amiragroup.com/index.cfm?fuseaction=section.home&object=13
Oil companies listed:
International Petroleum Corporation -oil and gas, energy services
Coastal Corporation -oil and gas
Fortune Oil & Gas Company -oil and gas
Channel Oil -oil and gas
Coastal Corporation is El Paso (http://www.elpaso.com/)
Fortuna Oil & Gas Company website does not work (http://www.fortuneoilandgas.com/)
International Petroleum Corporation is unknown (multiple companies with this name)
Channel Oil may be http://www.channeloil.com/ (does not appear to be a producer)
On March 19, 2004 Ferrostaal Incorporated (http://www.global-steel-network.com/) a holding of MAN AG (http://www.man.eu/MAN/en/) was listed as a client but listing is removed by April 7, 2004.
Note absence of major Mideast players like Aramco and "many of the world’s leading Fortune 500 companies" as mentioned at http://www.amiragroup.com/index.cfm?fuseaction=section.home&object=13.
Appears that company may be using Regus virtual office:
http://www.regus.com/locations/US/DC/Washington/DistrictofColombiaWashingtonCBDPennsylvaniaAvenue.htm
Other companies using this address:
http://www.google.com/search?q=%221001+pennsylvania+avenue+suite+600%22
Company phone number (202) 742-6575 associated by Dun & Bradstreet with Amira, Inc. incorporated in 2006 and located at 1650 Tysons Blvd Ste 610, Reston, VA 20192-0001. Estimated annual sales listed as $65,000 and estimated employees listed as 1.
Others using this address:
http://www.google.com/search?q=%221650+Tysons+Blvd+Suite+610%22
Virginia Secretary of the Commonwealth business entity search:
http://s0302.vita.virginia.gov/servlet/resqportal/resqportal?&rqs_custom_dir=scccisp1
"AMIRA, INC." good standing indicator - "N".
"AMIRA GROUP COMPANY, LLC" formed on 06/17/2008.
"AMIRA-SULPHCO COMPANY, LLC" formed on 06/16/2008.
Company COO Jahan Moghadam associated with ICC, Inc.:
http://www.bizearch.com/company/Icc_INC_210553.htm
Websites:
http://www.iccincltd.com/
http://iccoeoc.com
Company claims to be registered in Iran (http://www.iccincltd.com/contact.asp).
Virginia Secretary of the Commonwealth shows inactive/purged records for ICC, INC.
ICC-OEOC, INC. shows active status. Company registered agent is Abe Moghadam. Abe Moghadam is director of Amira Group:
http://www.amiragroup.com/index.cfm?fuseaction=section.home&object=2
Address listed for company on website and with Secretary of the Commonwealth is a private residence in Reston, VA.
US/Iran embargo information:
http://www.treas.gov/offices/enforcement/ofac/programs/iran/iran.pdf
"U.S. persons may not trade in Iranian oil or petroleum products refined in Iran, nor may they finance such trading. Similarly, U.S. persons may not perform services, including financing services, or supply goods or technology, that would benefit the Iranian oil industry."
"In general, unless licensed by OFAC, goods, technology (including technical data or other information subject to Export Administration Regulations), or services may not be exported, reexported, sold or supplied, directly or indirectly, from the United States or by a U.S. person, wherever located, to Iran or the Government of Iran. The ban on providing services includes any brokering function from the United States or by U.S. persons, wherever located. For example, a U.S. person, wherever located, or any person acting within the United States, may not broker offshore transactions that benefit Iran or the Government of Iran, including sales of foreign goods or arranging for third country financing or guarantees."
"Corporate criminal penalties for violations of the Iranian Transactions Regulations can range up to $500,000, with individual penalties of up to
$250,000 and 20 years in jail. Civil penalties of up to $50,000 may also be imposed administratively."
http://iccoeoc.com/news.asp
http://erhc.blogspot.com/2006/08/upstream-onlines-morgan-says-drilling.html
"Operatorship of Block 5 has gone to private Iranian outfit ICC-OEOC..."
This information is provided for research purposes only and does not constitute investment advice.
This announcement is nice!
When they start announcing actual production contracts, today's move will look anemic!
SulphCo Announces Exclusive Distribution Agreement
with Amira Group Company LLC
Thursday July 10, 9:00 am ET
The Company Expands Outreach in the Middle East and North Africa
HOUSTON, July 10 /PRNewswire-FirstCall/ -- SulphCo, Inc. (the "Company" or "SulphCo") (Amex: SUF - News) announced today that it has entered into an exclusive distribution agreement with Amira Group Company LLC ("Amira") granting Amira an exclusive distributorship in certain regions of the Middle East and North Africa and certain customer specific opportunities (the "Sales Territories").
Mark Asmar, CEO of Amira commented, "We have been aware of SulphCo and its Sonocracking(TM) process for some time and I am delighted that we have now finalized an agreement that will enable us to bring this valuable technology to our clients. We are confident in the technology and the enhanced value it will provide -- particularly to those clients that currently produce, distribute, and refine oils high in sulphur content. I look forward to a long and fruitful relationship between our organizations."
Said Dr. Larry Ryan, CEO of SulphCo, "I am delighted that we will now be working with such a prestigious group as Amira to bring our technology to their customers. Amira's relationships, contacts, and reputation are second-to-none in the industry and they have already shown a strong commitment to helping commercialize this technology in the Sales Territories. We thank Mark and his team for the due diligence they have performed and for engaging with us in this milestone agreement."
About SulphCo, Inc.
SulphCo has developed a patented safe, environmentally friendly, and economic process employing ultrasound technology to desulfurize and hydrogenate crude oil and other oil related products. The Company's technology is designed to upgrade sour heavy crude oils into sweeter, lighter crude oils, producing more gallons of usable oil per barrel.
About The Amira Group
Founded in 1966, Amira is an international Venture Capital Group and oil trading and oil services provider with offices in Washington, D.C., Dubai and Doha. Amira leverages its own capital in partnership with others through joint venture.
The Amira team has demonstrated experience in negotiating opportunities that require governmental, business, and technology experience. Amira's current partners include industries such as construction, oil and gas, telecommunications, utilities, transportation and equipment leasing.
Through understanding the external dynamics of the changing environment, and leveraging the synergies and strengths of Amira and its partners, Amira has demonstrated positive results on investment opportunities in the Middle East and North Africa (MENA) economies.
Amira currently boasts relationships with a number of the world's top 1000 corporations and has over 75 strategic joint ventures with leading U.S. and European Union based corporations for the Middle East and North Africa.
From time to time, the Company may issue forward-looking statements, which involve risks and uncertainties. This statement may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as actual results could differ and any forward-looking statements should be considered accordingly.
Witness the power of PR!
Those that have been around know that I like most parts of SUF and am very involved.
I have gotten a bit of flak for repeatedly pointing out the horrible PR's. "Hey, rather this than Gunnerman's.." My point is that BOTH are bad - and hurt the PP.
I can't just write off bad PR presentations. You need a good product / service, management - and to SELL YOUR PRODUCT!
This is why I factor in PR's - and why SUF remains limited to high risk money.
It will eventually pull out - but only when coin is there. They can't sell the vision.
Interesting post:
(Keep in mind that my comment about PR is only one aspect of evaluating a company. I'm here because I think most of the other cylinders are firing. This little summery by Bulljames is fun!)
"What's the TRUTH re. Sulphco???
Well, you're NOT going to get it from anonymous, skeezy bashers and fake "longs" who pee in the punch bowl here everyday, LOL. You know, the ones here everyday in deadful agony, "still holding" for years, but with a laundry list as long as your arm of problems and "fraud" at SUF- please.
Better would be Sulphco's SEC filings, combed-over by a crack legal team, and in full compliance with SEC regulations- For starters, have a look at the presentation from last week's annual shareholders' meeting, as presented by SUF CEO Dr. Larry Ryan:
http://www.sulphco.com/PDF/SulphCo_2008_...
Page 15 illustrates how SUF testing has derived a figure of $3.00-7.00+/bbl for expected uplift for heavy and/or sour-crude oil. On the next page (16), you can see that operating costs are expected to fall in the .50/bbl range, and SUF expects to retain 40% (JV business model) of the net uplift (after distributor's take).
For EACH 30k bbl/day Sonocracking unit, using the CONSERVATIVE figure of $3.00/bbl:
Net uplift:______________$2.50/bbl
x40%=________________$1.00/bbl
NetRevenue/yr__________$10.M/yr
1st yr net/net____________$_6.5M
(no tax/accum deficits $90M)
/100M shares=EPS________$0.65/share
x50_P/E=_______________$3.25/share (per 30K bbl unit)
_____________________________________________________ ___
You can see that three of these 30K units have been shipped (pages 17-18) to Singapore, in anticipation of a deal with ISIS Megah's (SE Asia distributor) client there- this would mean:
3x $3.25=____________$9.75/share
_____________________________________________________ ___
Pages 19-20 illustrate the potential for deals in the short to mid term in N. America and Europe... placement of the additional 3 Sonocracking units with these clients would mean and additional $9.75/share...
$9.75 + $9.75 = ______$19.50/share
_____________________________________________________ _____
However, that's just for the first year... with the Sonocracking unit paid for, we would make $10M/year per unit... meaning:
______________________$29.25/share
_____________________________________________________ ______
These numbers are ALL based on the CONSERVATIVE figure of $3.00/bbl uplift...
but Dr. Ryan said SUF expects a range approaching $7.00 on the high-end (page 14), so keep that in-mind!
And.... HERE's the beauty part:
On page 13, Ryan presented the 10% market-penetration goal for SUF... upgrading heavy/sour crude oils. The 50M bbls/day worldwide would mean 1.5 BIILION bbls annually for SUF, that's the goal, anyway-
How does THAT pencil-out?
It's 137 (30K bbl/day) Sonocracking units to start, NTG in Germany will still have their hands full for awhile- I think it takes a month to make a unit currently-
137 units x $2.15 PPS/unit (then paying 35% corp tax rate) (1st year unit in operation)
= _____________$274/share PPS (you read that right, LOL)
With the market penetration at 10%, the P/E might be something more like 25..._____$137/share works for me-
But, hey... that's just the first year. With the units paid for, expect_________$ 200/share
Once again, based on $3.00/bbl uplift... the range (based on the feedstock's sulfur %, API, etc) extends towards $7.00/bbl on the high-end... and Ryan has stated on numerous occasions that these (high sulfur) clients were the ones being pursued first, and that means right NOW-
Hi Conservspec,
As per my last post, I stated that everyone is waiting for a development. Not much to do until then. No major changes have happened. I expected it to be late summer until major news happened.
I was wrong! They had a CC.
I have mentioned it more than once on this board; Good PR is IMPORTANT!
When I look at long-shot investing, there are several to consider. PR is one of them. On one end of the scale, there is the hype jobs (Gunnerman). On the other end of the scale, there is what the current management does. BOTH are wrong!
I disagree with those who say they like the "honesty" approach. Well, you can choose how to present that honesty.
Their recent CC's have been horrible!!! With a stodgy blue chip or utility company, it would be ok. With a new company and product, it is disaster. There is that fine balance of encouragement and presenting a positive vision of the future, with a careful (not 'fibs') presentation of the present. They don't have that.
All this doesn't mean I'm selling. It is one factor that counts in my evaluation of a company. Next run up, I'll probably let some go, keeping most of my long term section intact.
Hummm...wonder what happens to the sulphur...
SUF removes from the oil???
Sumisu, since MOS is my second largest position I have become increasingly aware of sulphur's importance to phosphate. Couldn't find anything I was happy with to invest in sulphur that hadn't already gone throught the roof. Can't win them all, but...
It probably isn't the foremost issue on SUF's mind, but I'll see if I get a response to who has the rights to the sulphur removed from the oil. Down the road, could be substancial pocket-change and another "Shell Canada" story.
"The best of times, the worst of times."
The rise in SUF has been exciting lately. The reasons keep one on the edge.
There is no significant real news I've found, so this is in anticipation of developing news. The most probable is another contract or two. A lessor immediate possibility is a technical development or results. "The best of times, the worst of times."
Is this insider indications or just rumor excitement? We'll find out. The risk is that nothing develops soon - or that it is less than the excited people want. The fun is if it is something really signficant.
If significant, I'll hold on for the races (the REALLY big moves being still a ways off). If moderate, I'll short a bit for the inevitable short term fall. Then add some more in a month or so (it helped build my position last time).
Either way, my total commitment will remain the same until I see the green. Then the wallet comes out again.
First significant news in awhile.
The two major concerns driving this down lately (ammo for shorts) has been:
1. Contracts - where, what when?
2. Can they afford to do it even if they get contracts?
This is a major step in answering the second, and gives more assurance to companies (and investors) that they can follow through with contracts.
Not sure of the immediate reactions and would like to see the fine print terms of the financing, but is still a long term big positive if they can really produce!
SulphCo Secures $60 Million
HOUSTON, April 30 /PRNewswire-FirstCall/ -- SulphCo, Inc. (the "Company" or "SulphCo") (Amex: SUF - News) announced today that it has secured a commitment for up to $60 million in equity financing under a common stock equity financing facility with Azimuth Opportunity Ltd. ("Azimuth"). During the eighteen month term of the commitment, SulphCo may issue up to $60 million dollars of its registered common stock to Azimuth at a small discount to market price. Under the terms of the agreement, SulphCo will determine, at its sole discretion, the timing and amount of any issuance of its stock, subject to certain conditions. The shares are being offered pursuant to a shelf registration statement declared effective by the Securities and Exchange Commission on September 4, 2007.
SulphCo intends to use the proceeds from the offering to fund the commercialization and further development of the Company's patented Sonocracking(TM) technology and for general corporate purposes, including working capital.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities. There shall not be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.
Potash too lofty?
When you look at PE into the 60's for a large company, a person can think of it topping. I can see it getting to 250 if the market holds up. May lighten up then but will add with any large pull-backs. Long term (my investing preference) fertilizer (and potash) is good for years to come.
A observation by Geo12ar:
"This is a huge increase.
First of all the terms are FOB Vancouver which means that China absorbs the cost of transportation which I understand is around $125 so the real price is $700 when compared with India(comparable $675).
China as the largest customer used to get a giant discount and that has evaporated, In addition the quantity was reduced to 1M tons because others had already placed orders. That's why China paid more not less than India. This transaction is comparable
to a supplier of products to Wal*Mart that last year sold them product for $100 now asking for over $225 for the same exact item. I've never heard of such pricing power which shows
that the demand far exceeds the supply.
Moreover this is not a temporary issues(as might be the case with coking coal whose supply was disrupted because of weather
issues in Australia). I suspect that next year's demand will also exceed supply and prices will increase from current levels.
I don't know the exact numbers but if you assume that POT
and the others were selling for $200/ton and making $40/50 profit and now they are getting $700 for the same product-almost all that $500 is pure profit(probably an over statement their costs have probably increased somewhat-higher energy, royalties
etc).
Lets say conservatively pre-tax profits increased from $50 to$500.In the case of POT that's something approaching $6B extra pre-tax profits which probably translates into an increased EPS in the order of $10 per share(which IMO means the stock is a steal even at today's price).
Heck you don't have to believe me-just look at the chart.POT is now by market cap the largest co traded on the TSX. A year ago I had never heard of it or potash for that matter but I bought some shares at $50. Now it is $200. I've never seen such a
meteoric rise especially considering that it was not some start up speculative stock but an entity with a market cap was far in excess of $10B then.
"We have scheduled a MEETING IN APRIL"
Dr Ryan said in the last report below (caps mine). "We are looking forward to this meeting" and so am I. A good PR comapny would share the results with us - or keep us posted on what is happening. Looking forward to it.
"During the 4th quarter we continued our testing program with our European validation partner and announced the results from two rounds of testing in early January. Among the results we received, under certain processing conditions, we achieved up to 2 points of API gravity improvement, ~10% viscosity improvement, and shifting of the distillation components from higher to lower boiling (more valuable) components. For example, under one set of conditions, the crude fraction boiling above 432C, was reduced by ~15%, while the crude fraction boiling below 432C was increased by ~8%. Changes like this in the distillation curve distribution can have positive impact on refining economics, depending on the desired product slate.
I want to stress two points regarding these test results. To begin with, the crude we tested had an insignificant Sulphur content by weight, so we did not see, nor did we expect to see, any meaningful sulphur reduction in this crude.
Second, a 2 degree improvement on a 16 degree API crude represents a 12.5% shift in API, which is not an inconsequential number to a refiner.
Finally, I should also point out that we were able during one of these runs to successfully operate our equipment, without interruption, and at flow rates as high as 110% of design capacity, for 19 continuous hours using a Sulphco Series II design probe.
As I will discuss in a moment, our latest ultrasonic probe design (Series III) incorporates a number of new features, which we believe will achieve greater reliability and performance than the earlier generation probes.
We have scheduled a MEETING IN APRIL to meet with our European validation partner to discuss
1) the results from all of the trials to date,
2) further data collection and testing using updated probes, and...
3) potential commercial opportunities and terms. We are looking forward to this meeting and the opportunity to continued progress with our validation partner"
Proof in the pudding.
Didn't expect SUF to get back down to here again. However, it makes sense. People want to see results. No more delays. "Show me" and its over $20 in a flash. I doubt even another contract will cause a huge move - unless the partner is willing to put in a lot of developmant money.
I'll wait - but if SUF has to put in more money in pipeline, etc., we'll see another short attack.
Haven't seen anything else worth reporting.
About stocks: ABHPF.PK - AGOGF.PK - AGU - CF - IPI - KCLOF.PK - MAAFF.PK - MOS - POT - TNH - TRA - TRXMF.PK
(Interesting brief summery of the above.
http://www.theinvestar.com/potash.html )
A sample:
"In the potash industry today, investors are faced with two options when picking out a suitable investment: purchasing shares in a current producer or shares in an explorer. There are currently three large producers of potash who derive large percentages of their revenue and profits from it. They are Potash Corp. of Saskatchewan, The Mosaic Co. and Agrium Inc., and all possess mines in Canada's prolific province of Saskatchewan.
Coming to market soon via an IPO in the United States will be Intrepid Potash (IPI), which mines its potash in the Western United States (two mines in Utah and one in New Mexico). Other options include CF Industries (CF), Terra Industries and Terra Nitrogen Company, LP. Terra Nitrogen pays rich dividends- one that will be lower next year- and requires one to spend a bit more time on their tax return due to the unique nature surrounding how its payouts are accounted for under U.S. tax code.
There are a handful of explorers out there who hold promise, yet none is currently constructing a mine and it will be years before the first comes online. To be specific, the first new Canadian potash mine (not run by one of the 'Big Three') will open no earlier than 2013, or five years from now. The two companies vying to bring mines into production in 2013 are Athabasca Potash (ABHPF.PK) and Potash One (KCLOF.PK) with Anglo Potash, formerly Anglo Minerals, (AGOGF.PK) gunning for 2014. These are the most advanced explorers and ones which have a large following among investors.
http://www.theinvestar.com/potash.html