iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,452 Blog Posts

Is Coal Cheap or Just Stupid?

Earnings from coal producers have been abysmal. The culprit is two fold: one coming from stricter regulations at 0bama’s EPA and the other is natural gas. Before you step into these coal stocks, understand the risk. From ACI to ANR to WLT, they are idling plants in response to weak demand for low quality met coal from domestic utilities. Their canned prayer is for miraculous Asian demand to come back online. For some odd reason, even the Chinese are saying “no” to low quality black shit.

I am tempted to get long ANR here off an early morning reversal, post earnings. KOL is trending higher and these stocks, on paper, are value. The problem with value is the obvious: it is a trap. All of the coal producers are taking supply offline, similar to what natty producers have been doing over the past two years. Did cut backs in supply help the price of natty?

Exactly.

People don’t cut supply when shit is going good. So, you have to understand, coal companies are heavily burdened with debt and their underlying business is getting raped by T Boone Pickens (natty).

Of course a trade is a trade. And maybe China will start importing dumbass coal, in order to help out a few losers in West Virginia. But the more likely scenario is coal stocks will remain cheap until natural gas spikes and spikes hard.

http://www.youtube.com/watch?v=-6ebutx-Fww

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25 comments

  1. JakeGint

    No, but your boy Zero is trying to make it a controlled substance equivalent to crack cocaine.

    __________

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    • drummerboy

      i hear he’s hoarding it for moochele,seems she likes to grind it up and do lines on saturday nights after the kids are asleep

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    • pjdempsey

      That dumb shit is talking about making fuel from algae. Does he even think about this stuff or just read whatever the prompter tells him to? Petroleum doesn’t just go into gas President Asshat. How about as part of our “investment” we all get a Chevy Volt? Oh, that’s right, they suck.

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  2. Trading_Nymph

    TWIW, I am not sure if any news channel covered this in the USA, But EL may get worried if it does, it was the lead story last night in China Presses, from a UK Story http://www.shanghaidaily.com/nsp/Metro/2012/02/24/Cosmetics%2Bfound%2Bto%2Bhave%2Btoxic%2Bmetals/ not sure why it hasn’t gone mainstream press here yet?

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    • Subcomandante Natural Boy
      Subcomandante Natural Boy

      The fashion mafia is suppressing this story.

      BUT A LA ZOOLANDER, THEY CAN DERELICTE MY BALLS!!!!

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    • Geoduck

      1.1 milligram per kilogram; a milligram is 1/1000th of a gram; a kilogram is 1000 grams, so it’s one part per million (1000X1000). Not that it’s good or anything, but that’s a pretty small %. And lead is heavier than most of the other atoms in the make-up so it’s probably a lesser % than that by some measures.

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    • mickeyd

      talc is the one you have to look out for..the other shit is well. just shit. MAC is schweet..

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  3. Juice

    considering natgas names (chk/swn … ) have bounced 25%, it wouldn’t be unreasonable to see the same from anr aci btu wlt .. et al

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  4. Sikander

    The association of American Railroads (www.aar.org) reported a 13.9% drop in coal tonnage last week.

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  5. Geoduck

    There’s 100 other things to invest in other than coal. I’d probably pick something else.

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  6. Pirate Smile

    Seen this movie before, boom and bust is the nature of the coal biz, cant think of a more out of favor group right now. ANR is interesting because of the production mix of met coal vs steam coal, also the stock is printing an outside day on big volume after a terrible earnings report. Classic contrarian play? BTU looks good too.

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  7. riggedgame

    The USA is being CRUSHED by an oversupply of coal (warm winter- the utilities don’t need it); we are being SUFFOCATED by an oversupply of natural gas (fracking); we are DROWNING in an oversupply of oil (production has been ramping up for 3 straight years under Obama) and we are being ASPHYXIATED by gasoline fumes from out gasoline glut.

    And USA gasoline prices are rising BY COLLUSION because big oil doesn’t want Obama re-elected.

    Obama should call their bluff: Slap a $25 per barrel Export Tax on oil and gasoline, done in the name of “national security”.

    And tell Big Oil and the refiners: When USA gasoline drops below $3 retail, I will lift the Export Tax because domestic gasoline supply will no longer be a “national security” issue.

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    • Fly Leech

      Truly, the only way out of this is mass suicide and this is your opportunity to be the leader!

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    • jimmy_two_times

      Maybe it 0Bama letting this rise in an election year, then going after big oil for tax revenues. This could be played either way. Just depends on who gets the better spin. My $$ are on 0Bama and him getting in.

      FYI politically agnostic, just an observation.

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  8. rru2s

    Coal is very cheap compared to 2011 highs and relative to other energy industry P/E’s. That was why at the December low’s I bought the bigger coal names that didn’t seem to have equally big debt elephants in the living room – WLT, CLF, BTU, and YZC. Most of these names were up over 20% from late December, but they have all been zig-zagging for the last 3 weeks – all up 4% one day, down 4% the next day. Coal isn’t going away, and the charts still read as a chart play, if not quite as high of profits this spring, nevertheless they are all making enough dollars to support their recent acquisitions and should do well over the medium term into next year. However, I am not overweight this sector, either, as it is not exactly on fire, just volatile.

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