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?

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

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What’s that you say?

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

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No?

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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?

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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)

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(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.

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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.

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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?

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Just today, did you hear?

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They…

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..no, no, I mean to say…

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

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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.

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Yes, very good!

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

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

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

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

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(chuckles)

(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)

(Scene)

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Earlier this summer, I tried getting weather forecasts but to no avail. It’s been a tough year for the meteorologists, I am told, because of some El Nino/La Nina uncertainty that was holding off high probability estimates. Not that it’s ever easy for meteorologists.

But, it appears the Almanac finally settled on a guess, and that guess is “cold”. So we will see what happens.

Natural gas prices have well near recovered from the spill they took over the last two years. Futures almost tipped back above $4 for forward months a while ago. A good cold spell and a hard inventory drawdown could do wonders for the price. If you’re interested, I’d look for a focused supply operation contained predominantly in the coldest expected regions, as they will reap the windfall profits if heating demand soars. An old favorite is PNY, but the weather should guide the buy.

Meanwhile, today I continue experiencing my private little bull market. HCLP continues unabated towards its destiny of higher valuations.

Tesla received a bit of a jolt recently; a German magazine casted doubt upon the heretofore unquestionable ascent of Musk as a major global auto manufacturer. This is the kind of doubt that will sow the seeds of triumphant gains. My put options are cheap and have almost no tradeoffs. I just need blood in the water.

I added to NRP today for $20.26, because I’m not that worried about the EPA, especially as it pertains to an operation that gets much of its royalties from metallurgical coal.

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My HCLP position is up another 5% this morning, pressing gains. The agreement to settle the Baker Hughes lawsuit coupled with a six year supply agreement was a big deal.

This partnership is one of the rare examples of me buying into an expensive equity position. I normally toe the line within certain valuations. However, I was willing to pick up the “pricey” HCLP partnership units because I like the prospects going forward. The partnership is small and the fracking revolution is young.

My expectation is for the HCLP and BAS positions to transform into cash cows over the next five years.

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My latest position, the partnership HCLP, raised its distribution last night by 3%.

The partnership is on a tear, and I expect that trend to continue well into the future, as fracking kicks into high gear.

We have an energy revolution here. It’s time for the pig-dogs of OPEC to lick our boots.

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In the aftermath of this one sided game of chicken, I’m opting to take a minute to veer directly into the heart of politics. You see, I am a political zealot at my core. And while most of the time (sans elections) I do my best to keep it to a dull roar, this compels a direct response.

You see, when I go to the voting booth, I cast a straight Republican ticket. The first time I have ever voted for a Democrat occurred in the last election cycle, interesting enough, when I marked the ballot for one President Barrack Obama.

Mind you, I didn’t vote for him because I thought he would do a good job. To the contrary, I voted for him precisely because I knew he would do a bad one.

And in that respect, he has not disappointed. His management style is soft and lacks executive interest. His underlings run amok. The men and women he entrusts with delicate tasks are incompetent and generally corrupt. And because of that, less than a year after the last elections, we’re up to our necks in scandals that would have otherwise broken quietly out of the view of the public.

And then, just a few weeks ago, the federal ACA exchanges were rolled out; and it has been nothing shy of a complete disaster.

To put it bluntly, I voted for Obama to stack a Royal Flush for the GOP next cycle.

But there was one element of this plan I could not foresee. The Tea Party.

There was going to be a point in time when the GOP was supposed to go all in. That goes without saying. I just would have liked them not to go all in on the first bet. But as tasteless as that choice was, the Tea Party’s other major blunder is just inexcusable.

The Tea Party were dealt a Royal Flush, you jackasses. You had one job to do – one God damned job – show up, and keep your heads down. So what did you do?

You were dealt an unbeatable hand, so you burned the ace!?

Sure, I mean, why not introduce some help for everyone else at the table? That makes perfect sense. It’s not like Obama was so roiled by scandals his presidency had basically come to a screeching halt. It’s not like the exchange launch was the culmination of failure that, if left undisturbed, would have been a launching point as evidence of all the criticism government run healthcare has been receiving up until now.

No, it made complete sense to interrupt the entire process and distract everyone from these legitimate criticisms just so you could remind the entire planet what a stupid bunch of schmucks you are.

And who knows, maybe you’ll even be dealt a same suited ace? That would give you a Royal Flush. That’s an unbeatable hand!

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Alright, it seems like the benevolent Tea Part folk have decided to share their complete inability to grasp simple concepts with the world, by forced contrition on the populace. It is time to eat our peas. Following the line of Obama’s hatred for those damn jet plane flying 1%-ers, the Tea Party have chosen to one up him, by destroying the 1% in its entirety. An unfortunate and slight side effect may be to destroy the other 99% of the country in the process, but hey…sometimes sacrifices must be born for the good of everyone. So making moves for the ill of everyone is the only logical course of action.

In an attempt to honor Argentina’s dim witted socialist president Fernández de Kirchner for her blood clot, the Tea Party have magnanimously extended a show of us revisiting that countries darkest moment, a point from which it has never recovered: elective default.

Remember that one time the global economy nearly collapsed because a single line of business for US banks bet large sums of money that non-creditworthy citizens would default at abnormally low rates in exchange for paper thin margins on those loans?

Well the entire global economy and all of finance has bet gargantuan sums of money that this non-creditworthy country will never default for no fucking margins.

By all means, how do you think this ends?

Frankly, I don’t care anymore, and am all in. Lay your neck under the axe, and taunt these pussies with all your hatred. See if they have the sack to swing.

What’s the alternative? You can turn all short doubling your money with the end of civilization, just in time to burn it to stay warm? You can barter that paper desperately for some precious metals that aren’t for sale? You can get shot by rioters and have it taken off your corpse?

Because if we actually default, it’ll be to late to go out and prepare. Just think of all the mechanisms that are tied to treasuries. There will be bank failures. And a slow, agonizing process as US spending on interest careens towards $1 trillion annually.

In the meantime, staying in our means would require we basically slash in half one of the following:

The entire defense budget OR
The entire non-defense budget

The point of the matter is that if we default, this place is going to get so screwed up anyway, what does it matter? At some point if the decision were not reversed, the man you know as Cain Hammond Thaler would simply cease to exist. His 9th floor office would be deserted; the only clue that he was ever there at all being an empty safe that used to house his silver and firearms and row upon row of cleaned out bookshelves.

I would simply take up my favorite pocket watch and walking stick, and slip away into the night…never to be heard from again.

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