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Furiously Scribbling, Blood Boiling

I made a small spread today, with AEC, BAS, and MAA up and everything else down.

MAA hiked their dividend yesterday but a couple tenths of a percent.

We are well into the banal month, so I don’t know why I’m bothering to write. I suppose I want to give the shadows something to read. The 9th floor is deserted, but my work somehow remains busy.

The healthcare situation is a fiasco. Little shits on the internet, working for pasty ThinkProgress-type blogs, are heralding the triumphant relaunch of the HealthCare.gov website. Meanwhile, we’re still basically 7 million people shy of where we thought the enrollment process would be right now. And there are <28 (27 now??) days now on the clock.

I want to make this very clear to you right now – this is not some technical difficulty. This is a big fucking deal.

Suppose you got kicked off your plan. You go to the website and can't enroll. At this point, you don't have health insurance any more.

"But Cain, they can just enroll with the insurance companies directly now."

Except they can't, no, not really. The HealthCare.gov website is the primary mechanism for pushing the subsidies that are supposed to help make this law affordable. Those subsidies come in two flavors: benefits enhancements and cost reductions. And without the fancy linking that's supposed to occur through the website, you are left looking at the non-subsidized cost of coverage.

That means signing up through any place other than the website will be very expensive relative to what you were paying before. How many people do you know that will be able to readily absorb a several hundred dollar a month hit to their budgets? I'm guessing not many. The other option is to slash your coverage away to nil. Which isn't much of a choice if you're sick.

Of course, lots of schmucks are trying to say the subsidy issue isn't an issue, by pushing subsidy calculators from secondary sources and suggesting the uninsured just roll with it. Just how bad are these secondary sources? I know of one instance already with a six figure income showing subsidy eligibility.

So I'm gonna say pretty damn bad…

And that's not even talking about the garbled nonsense being reported getting delivered to carriers. Let me just lay out a few very real situations that are likely to crop up over the next six to twelve months.

There will be people who cannot sign up in time.

There will be people who think they've signed up only to discover (God willing not in a life threatening situation, but yes, probably) that they were never processed.

There will be people who sign up for coverage that has become unaffordable to them, only to be forced insolvent.

There will be people who took benefits reductions to keep their premium in line, to avoid insolvency, only to become sick, be unable to meet the higher cost sharing, and become insolvent anyway.

There will be people who think they know what they're paying, only to have subsidy restatements issued that render them with unaffordable, unchangeable insurance coverage.

There will be people with terminal illness who learn after the fact that their network no longer includes their providers.

There will be insurance companies that experience major system failures, dropping God knows what, where. (Rumors are a quarter of Blue Cross of Michigan's system already crashed in October)

You are in for a year of horror stories slowly seeping to the surface, like a tar pond.

And of course, there will be winners. There will be people who make out like bandits because of this law. There will be people who are so much better off, while it slowly dawns on the 80%+ of Americans that were just fine with their healthcare that the reason their neighbors are being raked across the coals is to provide those winners with better coverage than any of them could buy in the same circumstance.

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Monday Review

AEC is the latest stock I own to go bananas on nothing. It’s up over 10%, shrugging off the indices.

BAS is the only notable correction I’m experiencing. NRP and silver are both down a bit, but nothing really leading a charge lower.

TSLA meanwhile is rolling over hard, as a multitude of technicians knife one another in an attempt to call the next bounce point. If I had to put my money on one of them, it would be our own ChessNWine.

If TSLA can dip below $100, there is a strong likelihood that I will sell my $100 puts (reserving final judgment for such time) and use the gains to zero out the cost of my other puts (expiring between 2014 and 2015 with strikes around $35-45). That would give me essentially free options to make huge gains out of nothing.

Like a modern day Rumpelstiltskin, I adore spinning gold out of straw more than almost anything else – unless it’s the blood of your firstborn.

For the moment, the TSLA position is still a money loser. But at just 3-4% of my account, how can you pretend that I care?

In summary, the Tesla fanatics are getting quiet, and many a junior in college is starting to sweat.

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Pared Down BAS

I had purchased additional shares of BAS in late July through early August, between $11.55 and $12.40. Those shares were up 30-40%, so I sold off half of them. The remainder is added to my permanent position.

I love the name, but having followed it for quite some time, it’s normal deviations are in the 20-30% range. I’m happy to see it breaking out to new highs, as that jives well with my own expectations. While buying the initial stake in BAS, I called for a price target of $18 at the time, and feel this company is well positioned to experience above average growth for the next 5-10 years.

However, back to the wild price swings, I don’t trust this stock at all. So taking a bit of money off the table makes sense. If I can’t buy back in lower, I still make a fat spread on a major position. But in all likelihood, the stock craters back to $14, and I load up all over again.

My current positions are CCJ, BAS, HCLP, AEC, MAA, NRP, RMCF, TSLA puts, and physical silver.

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AEC – And Then The Money Started Rolling In

(A dark lit room gives to a crescendo of light. Cain Hammond Thaler is seated in the middle of a high back chair adorned with geometric patterning. A long hookah pipe wraps around the side of the arm and the stem is curled between two long fingers of his right hand.)

Welcome my child, to the creature comforts of my 9th floor office. Sit yourself in that plush chair – may I get you a stiff scotch or gin?

(You silently move around the front of the Bergère and drop into the cavity with a soft *crinch)

I was just talking about AEC with some other visitors. Have you heard of them?

Why yes! It is true that they just bashed earnings estimates with nary an effort.

What’s that you say?

Oh, yes, quite right. They defiantly rose beyond revenues expectations also.


Well, at any rate, it was quite the quarter for them. I say their management continues to prove themselves most capable stewards of my money.

And what would have happened, had I listened to the naysayers and complainers?

Hah! Yes, quite right. Good show, old sport.

(Cain lifts the stem of the hookah to his lips and draws, closing his eyelids momentarily. Somewhere in the background, the bubbling sound of rolling water is heard)

(an exhale of breath brings forth a cloud of swirling white air scented with fruit)

True, FFO did hold steady this quarter. Of course, with no acquisitions, there was no increased depreciation to apply to cash flow.

My thoughts?

Well, I believe the company was concerned with visibility of the future. They wanted to see some resolution on the state of the housing market and bond yields, among other things, before proceeding with any long term decisions.

Of course, now they’re back to buying up properties and landing deals.

Yes, I had heard of their latest seven asset, $324 million acquisition. Why, that more than makes up for the few quarters of biding their time, doesn’t it?

Just today, did you hear?


..no, no, I mean to say…

…well sure, but never mind that. They just issued another $115 million in notes this quarter. Their debt is quite secure.

I would agree with that, good man.

Did you see that property occupancy remains at an astounding 95.8%!?

And they keep cutting expenses, at the same time as rates for their apartments continue to rise.

Yes, very good!

What do I think of the analysts that have harped on the company??

Why I think they’re a very dilapidated lot…not much use from their work at all, is there?

Hah! A shabby pack of uncongenial scabs!? That’s rich.

oh my, I don’t believe I can write that which you just said…


(Cain sets aside the hookah pipe on a nearby table)

Now, you simply must try a sample of that de Jerez I was telling you about…

(Cain arises to barely conceal the seigneurial embroidery in the fabric of his seat. Before the image can be made out, the room darkens)


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Friday Afternoon Run Through Of Thoughts

It’s a Friday, and my heart isn’t in this right now. Rather, my imagination keeps running away outside to whatever’s left of Summer slipping away. This is most inopportune, since work is a runaway train.

So, here’s a brief list of things going through my mind right now.

1) War is overrated and oil is begging to get taken down a notch. Tell me when these geopolitical type scares have actually panned out? The last time was under what, Carter? The oil market is well supplied; a few oil traders are just gaming the system to make their year’s. Meanwhile, a US energy revolution is sweeping accross America.

2) Multifamily REITs selling off alongside broader REITs is as careless an act as I can think of. These companies are all 95% plus occupied with rising rates and numerous projects in the pipeline. Tell me who was forecasting that two years ago, other than myself and a handful of others? Yields are only a problem on a case by case basis. Sellers slamming the whole space here are irresponsible.

3) Coal prices and associated companies are unnecessarily low. Natural gas prices have come back nicely from the death throes they were convulsing in last year. The EPA can only do so much to legitimate, legal owners of coal producing assets. There’s this power grid we have that demands base load, after all. And even the most eco-friendly of Californian millionaires will not tolerate their precious Tesla batteries running dry. Even with natural gas transitioning taking place, there’s a price point where coal comes back online Everyone hates coal, making it pretty attractive right now.

4) I still fear for the wellbeing of Tesla longs, but I can only care so much. On a different note, there was a Seeking Alpha article about battery supply problems that made no sense. It was trying to argue that batteries will constrain Tesla production, but it pointed out that Tesla’s primary competitors are transitioning away from using the kinds of batteries that make up Tesla’s product. At most, I could see competition for batteries pushing up Tesla’s costs, keeping their vision of an affordable mainstream electric vehicle at bay (for longer than longs could survive, I might add). But at some point, Tesla forcing helping to force battery prices higher causes the electronics manufacturers to convert to the newer battery options, freeing up capacity. Besides 100,000 vehicles a year for Tesla isn’t exactly a plague of rats.

5) The natural gas and fracking boom will run further than any of you can possibly fathom. There is no reason not to buy into this. The go to corporations are the specialists who make the backbone of the extraction process (like BAS) and coporations or partnerships supplying the materials that make it all possible (I like HCLP). Risks that the frackers will saturate the market with so much gas and oil that it will collapse profits have blown over. Chesapeake energy was last year. Aubrey McClendon’s ass has been fired.

6) I’m not sure I can like this DRI position if prices for commodities keep pushing higher. But there was plenty of opportunity for the resturant business to line up cheap access to the raw foodstuffs they need for any number of months into the future. So I’m going to hope for the unexpected. Meanwhile, the job market is humming along. Now go eat at Red Lobster tonight.

7) The uranium market disgusts me. I knew it would blow out again. So far CCJ is taking the damage in stride. There’s a major fuel supply issue looming, but reactors just use up fuel so slowly, it takes forever for it all to wind its way through the system. It would be nice if the Japanese could get off their culturally slow-as-shit asses and maybe do something expediently for once in their lives. No, no, please, by all means continue to import oil and coal to your resource depleted island for sky high prices. Who needs an economy, especially with the egregious demographics problems of a nation like Japan?

8) I would rather lick an ant hill than let the sequal to the Catholic Church circa 12th century France come back to power – whether it’s crosses painted on the walls or crescents. To hell with both sides of the Syria civil war. If we’re going to let loose the arsenal, we should at least do it indiscriminately.

9) We are going higher.

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Upset On What Should Be A Solid Day

This shouldn’t even be a problem. I’m very long into a solidly green day, as short sellers and any longs who bailed on the ship last Friday get taken out back. But, AEC for whatever reason is having a horrendous day.

The only news is that the CEO, the great Mr. Jeffrey Friedman, sold 40,000 shares of stock.

This isn’t news at all. AEC’s CEO is probably getting ready to leave. He’s helmed this company since the ’90’s, almost uninterrupted. But, as usual, analysts hate the company so they throw insults and pressure the stock whenever possible.

I am in a sour mood, and will probably buy more if it dips into the $12 range.

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