Wednesday, October 14, 2015 iBankCoin Conference starts
Stock advice in actual English.
Joined Sep 2, 2009
1,193 Blog Posts

What’s 15% To OMAB?

A cloudy day wafts across the window of the 9th Floor. The lingering smell of lunch sits in the air while the soft office sounds of my typing keep me company.

What is 15% to OMAB, I ask you?

15% is how much passenger growth OMAB had in September of 2015 over September 2014. The company was growing at a 17% clip. That has moderated 2% to a still impressive 15% annual growth rate.

After the second quarter, revenue growth stood at 36.41%. 19.74% of that was hiking sales prices, and the rest was volume of business.

The stock is in a state of permanent liftoff, and it’s one of the bright spots on my year.

OMAB strategically has two major things going for it. The first is a strong dollar which makes travel for nearby US residents much cheaper. And the second is ultra cheap fuel prices which are coming fast thanks to the crude implosion.

As it becomes more affordable for vacation travel, OMAB’s core business model is going to benefit directly.

I am waiting excitedly to hear how OMAB’s latest quarter shaped up. The company is on a tear.

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Oil Retakes $50 – Saudi Arabia Still Stupid

100816 EIA Oil Production Vs Consumption

Take a good look, because the oil price weakness is about to come to an end. I am not saying that just because the EIA is predicting the production/consumption balance to close (as predicted by everything to the right of the vertical delineation).

I am saying so because all the big players are starting to make very visible, very vocal moves designed to assure the market that they will get the imbalance under control. The Saudi’s have made some token production cuts, after biting off quite a bit more than they can chew with all of this. Shell has just abandoned the Arctic drilling – a project that, in for $4.5 billion, has been the proverbial chain around Shell’s neck – in the loudest and most attention getting way imaginable. And anyone with a pen is writing about how US Shale production is coming down (despite it not really happening yet).

But look close at the EIA historical chart above and realize how tame the production overrun has been. 2 million barrels a day is not the end all, be all of the oil market. In 2009 alone, just US demand for crude oil plunged 1.1 million barrels per day. Demand from all industrialized nations dropped by something like 2.2 million barrels per day. OPEC by itself had to slash production by 1.5 million barrels per day just to try and shore the market up.

Those were real production cuts responding to real demand destruction. By comparison, what we have here is production that’s gotten a little ahead of demand growth. So far, aside from some hiccups in Europe and China, there’s been no demand destruction to speak of. This is not cause for the end of oil; it’s a case of the need for some very weak, very adventurous hands to get flushed out. And that process is almost over.

And isn’t it interesting that the most adventurous, most weakly positioned oil plays all end up being Big Oil or State owned? Let’s be clear, the most expensive plays on the planet are in deep water or remote locations or involve tedious chemical and refinement processes. If you’re drilling 150 feet below the surface of the Atlantic Ocean, or in the middle of the Arctic circle, I have a feeling you’re not a $2 billion market cap company. You’re probably a Shell, or an Exxon Mobile, or the country of Norway, Russia or Brazil.

The Saudi’s haven’t killed the US oil boom; they’ve killed oil funded State welfare schemes. Including their own, I might add…

I will be the first to admit that I didn’t believe the Saudi’s were trying to get into a production war with the US – wrongly. But I didn’t believe it for a pretty good reason; because this was really, really stupid. The Saudi’s have set their own economy in tatters, and why? Because some new king wanted to claim Saudi Arabia was still the biggest oil exporter? Because this was somehow going to make them richer?

What the Saudi’s have done, effectively, is make it necessary for them to produce twice as much oil for the same amount of money. Who fucking does that?

If oil markets had accepted that $70 oil was the new floor price to extract tar sands or deep water fields, the Saudi fields would have been getting $150 a barrel for their extraction cost of – what is it even? – $20 a barrel? As the price had risen, the need for the Saudi’s to be the biggest producer would have just phased out. They could have gotten by on lower production, preserving their precious low cost oil for decades more.

Instead, they get shit. Their dollar reserves are flying out the door and their zero debt position is soon going to be a distant memory.

Well done, House of Saud. You morons deserve to be thrown from power for that.

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That’s More Like It

Hardly the stuff of redemption being made here, but still; BAS rallying 34% inside of two days feels good.

Crude oil is running higher; Brent is pushing back above $50 and WTI is chasing its tail.

I can’t tell if this is just a relief rally or the start of something special. The move is strong though, I’ll give it that.

We were so overextended; companies were going for peanuts. They can’t all fail, physically. I mean, oil demand is still growing folks. Someone is walking out of this alive.

Let’s give it a few more days and see what happens.

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I’ll Believe This Oil & Gas Rebound When It Sticks

Sure BAS is up 20% in one day of trading. And I’m a French Maid.

I’ve seen this enough times not to get my hopes up. As solidly convinced I am that long term everything is going to work out, I am not committing my emotions to any relief rally. This market is out to destroy me and letting me hope for salvation is just one especially heartless part of that process.

Today was fun…if I hold it completely out of context.

We are still in a major selloff and I am not calling any bottoms here.

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Icahn Conducts Hostile Takeover Of Trump’s Presidential Bid

I am busy watching CNN, where one Carl “Give me three seats on your Presidential Cabinet” Icahn is busy doing what Carl does best… knocking the microphone out of other people’s hands.

Icahn will not stand to be upstaged by a low earner like Donald Trump. If there’s personality to be thrown around, there is none more personable than Carl. This is obviously a prudent move to continue his CNBC fight with Bill Ackman from 2013 – Icahn will simply control the FCC, then tell Bill to go wherever the hell he likes.

I wonder what the other two cabinet positions will be? Will Icahn seize the FDA and give Herbalife immunity? Or better still, maybe Uncle Carl will own the FTC and attain status of Sole Dealmaker Of The American Union? The possibilities are endless.

Suffice to say with the Executive Branch at his back, one Bill Ackman is about to be recipient of some serious tax audits. I would cower in fear, if I were him.

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Sand Companies Dealt Instant Death

On Thursday evening, EMES withdrew distribution guidance. On Friday, shareholders were treated to a one day ~30% drawdown. HCLP and SLCA fell ~10% each, in sympathy pains. The whole sector was flayed.

The weekend has offered no respite, as HCLP and SLCA are both down another ~8% and EMES is off another ~12% on Monday.

Here’s a preview of what’s to come.

All three are going to slash their distributions. Of course they are…they’re yielding like 20% and it’s an industry freeze. They’ll walk it back to ~10% yield, those of us who’ve been here from the start will be back to what we were making two or three years ago, and all three companies will be better off for it.

Now things are getting out of hand. I cannot speak for SLCA or EMES, because I don’t own either. I never wanted to own either. But I do speak for HCLP when I say a great company is going for peanuts.

Now, I am not adding to my position. I restructured back in December, I ended up with about 1/2 my account in cash (after factoring in losses into this year) and it has been single handedly responsible for keeping me alive. My losses have been horrific; without that restructuring they would have ended me (and that is not an exaggeration).

So I’m not buying until the recovery is already well underway. If I had been so fortunate to be outside this fire, looking in, then I would be nibbling incrementally, every couple of weeks. But that is not a luxury I personally get to enjoy.

So far for the year, I’m down about 15% – that’s about 40% peak to trough if I’m counting from when this process all started a little over 12 months ago. I guess if I’m looking big picture, I’m fortunate that’s all that’s happened. There are people out there who have lost 70% because of this oil catastrophe.

For the moment, I am more than content to sit on lots of cash and wait this thing out. I’ve dug into my companies and am very confident they’re going to make it. But not everyone gets to say that.

There are vast expanses of the oil and gas industry that are about to be swallowed whole. We have a backwater culture that still crucifies people to thank for this.

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