Welcome back and how I did miss you all while I was away. My 9th floor office had that cold air of abandon wafting through it for the better part of forty-five minutes, before the warmth of the hearth drove it out.

The recent days have brought a correction in my positions, with BAS diving back below $10, HCLP testing $30, and some others also wallowing. It is hard for me to read too much into this, at the moment. The EURUSD is running back to test 1.10 and bonds are rallying again. At hand is the question of whether we are to retest the lows of the damage or will find support.

But for me this question is superficial in a sense. BAS in particular was up a great sum and so though we have corrected significantly, it’s nothing I wouldn’t expect from a distressed asset. My positions are derived from non-technical details mostly so while it’s difficult to watch this sort of thing play out, it’s not material.

The summer months are upon us now.

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Hello all and good morning. Welcome to the 9th floor, where Cain Hammond Thaler has returned for a few hours in this dreary rainy afternoon to work through some paperwork, before gathering his coat and hat and heading out the door again.

The big news for the 9th Floor out last week was earnings out of HCLP and ALDW.

HCLP took a hit on news that they offered some concessions to customers, who are all hurting from low oil prices and desperate to get their operating costs down. It’s unclear what the value of those concessions are to me, at this point, but the trade off here is that for momentary pricing concession, HCLP got customers to lock into greater volumes and contract durations. Provided those customers survive (and HCLP is obviously betting that they will), HCLP is sitting on a pretty payoff down the line.

Outside of that, HCLP also entered into a partnership to develop an energy rail hub in the Permian and DJ basins. Does this sound like a company prepared for US fracking to dry up? HCLP is betting directly that we’ll be back to good times in the US oil market by the second half of this year.

ALDW announced a solid earnings beat, with earnings per share rising to $0.39 per share, up from just $0.01 per share from the same quarter in 2014. Income available to shareholders rose to $0.30 per share, up from $0.06 year over year.

ALDW is benefitting greatly from the lower WTI prices. This company is the hedge to my positioning, should I prove dreadfully wrong. If oil prices keep spiraling lower, ALDW should help keep my head above water as their operations outpace from cheap input costs.

The beauty about ALDW is that yes they are doing great because WTI prices are way down, but when I looked through their books I liked them so much I would have bought them even if it wasn’t.

That’s all for now friends. I shall see you later this week (turns the light off).

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In December, for like two days, I sold out of BAS. I was done.

And then I was right back in again. I think now I can finally give a small sigh of relief. I mean, my chest is still tight, but at least BAS is a +50% winner for me again (my cost average is somewhere in the $7 range).

I’m sticking around in these names for longer yet. I understand that you do not believe. But I have this strange conspiracy theory ringing in my ears.

That this is all just one big gigantic attempt to fuck retail investors and make off with their toys.

One day, we’re all going to wake up and it will be like oil was never in trouble. The Saudi’s will flip a switch, toast to their good friends in Iran (who will perhaps be sunbathing with Exxon Mobile executives) and everything will be ’90’s summer fun again.

It doesn’t make sense, I know. I don’t have any proof, or evidence, or even anything that looks like “sanity”. But it’s going to happen, mark my words.

Anyway, I’m +16% for the year, sort of 1/3rd-ish of the way out of the hole I made in 2014.

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Will you look at the AEC headlines on Yahoo?

Following the buyout offer for the company, every shark and his brother is trying to get in on the feeding frenzy.

There is bound to be a comment section retort that “well, this is the job of law firms, to weed out the bad deals.”

Shareholders just got bought out for a 20% premium above market, and I have followed AEC long enough to know they are getting a great deal on this.

You and I both know, somewhere in the back of our minds, that this is not about protecting shareholders. There will be a time and a place for that discussion, and it is not now.

This is about blackmailing a corporation by pigeon holing them into a godless court system we have erected, whereby they can have two very unsatisfactory choices: 1) spend years jumping over capricious judicial hurdles or 2) pay off the law degrees.

The tasteless recourse is to pay the law firms, even when there is no real fair claim in play, just to tidy things up. Tell, what is more dangerous to shareholders; a couple percent on buyout offers orchestrated by people you can theoretically fire and overrule, or an environment where any jackass over the bar can hold you up for vast sums of money on a whim?

I am sorry if I’m mistaken, as I don’t follow the legal landscape very closely for reasons best described as “contempt”, but I don’t remember it always being this bad. It was just one or two suits, a few years ago.

Now, a board of directors can barely do anything without having eight class-actions stuffed down their throats.

I’ll take the MBA’s over the Juris Doctor’s, thank you. Someone needs to get this under control.

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BAS is up 12% right now following their earnings report. They lost a ton of money on paper and the market isn’t falling for it.

Basically, despite idling equipment and firing 20% of personnel, BAS wrote off more in depreciation than the same quarter a year ago. But properly stored and idle equipment isn’t really depreciating, is it? So there was about $20 million there over my fair guess for what the company’s actual depreciation probably looks like, best estimate. Then they wrote off another $5 million or so in non-cash items tucked into expenses for employee retention and such.

You pull out the write downs and the company lost may $0.19 per share, compared to a gain (after one time items) of $0.11 per share in Q4 of 2014.

Let’s look big picture here; the company saw revenues plummet 35%. I mean, Completion and Remedial Services alone plunged 45%. All of that cost me $0.19? (Cue crude jerking motion of the arm)

I don’t care. We’re fine here. Management knows what they are doing. The company just renegotiated their credit facility, lowering the issue amount by $50 million to $250 million outstanding in order to strip some undesirable covenants, but adding an accordion feature that can get them to +$50 million or $350 million total if it’s an emergency. They have headcounts under total control, and they are defending market share vigorously. They’ll get cash flows to balance in the next 6 months and we go forward from there.

I’m not worried about BAS. BAS’ competition should be panicked.

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Associated Estates Realty just announced a deal to sell itself to Brookfield Asset Management for $28.75 a share. The stock is up 16% today on the news.

A unit of Brookfield Asset Management Inc. agreed to buy U.S. apartment landlord Associated Estates Realty Corp. in a deal valued at $2.5 billion, including debt.

Brookfield offered to pay $28.75 a share in cash for the Richmond Heights, Ohio-based company, according to a statement Wednesday. The price is about 17 percent more than Associated Estates’ closing price on Tuesday.

This concludes a long and contentious battle over the proper valuation of AEC. I missed out on about the last 20% of upside (riding it from $15 to above $22), but still feel very happy for AEC shareholders nonetheless.

This company was treated so poorly by analysts for some sin that the CEO had committed in the 90’s. Was it an actual sin, or were the analysts being stupid? I don’t know.

What I do know is that AEC just unlocked major value for shareholders after laudable performance for the past five years. Nice work and congratulations to each of them.

That’s the match.

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