Author Topic: ALS.TO - Altius Minerals  (Read 1745558 times)

Studesy

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Re: ALS.TO - Altius Minerals
« Reply #810 on: September 17, 2012, 04:29:09 PM »
Basing a buy decision on such macro commentary is basically trying to predict the bottom as opposed to a purchase based on a sufficient discount to IV. If such macro events do occur, it would be a good time to add to the position. 


GlennAS

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zerohedge - itsavaluetrap
« Reply #811 on: September 17, 2012, 04:31:24 PM »
Wow, lot's of negativity re: zerohedge apparently. I really appreciate their macro analysis. Go figure. ...

I linked to the zerohedge post not as a comment on commodities per se, more a comment on the fraudulent nature - in China and globally - of credit and collateral. Plus, the reference to "rehypothecation" is priceless - an analogy to the MF Global rehypothecation crisis.

The bearish case for commodities is simple - and the one that Michael Pettis (and Hugh Hendry) makes. That is simply overcapacity built for a unsustainable credit boom - complete with consequent misallocation of capital. I personally don't believe we're looking at hyperinflation. Even the recent QE-to-Infinity risk on trade seems way overblown to me. The Fed and central banks can print money and use it to buy crappy assets from banks (which is essentially what the unsteralized QE is), but they're having a much harder time stimulating the real economy and aggregate demand because the consumer is deleveraging - at least throughout the developed world. To me, a Minsky moment appears more likely than hyperinflation.

Of course, the alternative thesis is that unrelented central bank money printing will  cause hyperinflation, will somehow also stimulate aggregated demand, and this will support the price of commodities. It's not a view I share - at least not in the short-to-medium term. But it seems to be the consensus view IMO, and if I see evidence that's it's working in the data points, I'll be more than happy to change my view.


Yeah, you could argue that ficticious inventories of steel is bullish for steel. But I would argue that the negative implications for the credit system in China outweigh the bullish implications for steel.

Fascinating times to be sure.

Regards,
glenn
« Last Edit: September 17, 2012, 04:33:23 PM by GlennAS »

GlennAS

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Macro investing - Studesy
« Reply #812 on: September 17, 2012, 04:40:44 PM »
Studesy. So I know this is a value investor forum, and the macro picture is often treated as background noise compared to "underlying value", margin of safety, and other core value investing metrics.

But in my experience, combining value investing with macro credit analysis has been very fruitful. Like value investing, it can require a lot of patience, because just like Mr. Market can bee irrational when pricing a stock, he can be extraordinary irrational when pricing assets in the midst of a credit bubble.

Of course, the big problem when credit bubbles burst is the impact the lack of liquidity can have on the prices of financial assets - even assets with good "underlying value". Furthermore, the impact credit busts have on commodity prices, the cost of credit, etc. can really change underlying fundamentals.

Anyway, I view macro credit analysis as another tool in my toolbox to buy great businesses at distressed prices. So not so different really.

Regards,
glenn

Studesy

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Re: Macro investing - Studesy
« Reply #813 on: September 17, 2012, 04:56:24 PM »
Studesy. So I know this is a value investor forum, and the macro picture is often treated as background noise compared to "underlying value", margin of safety, and other core value investing metrics.

But in my experience, combining value investing with macro credit analysis has been very fruitful. Like value investing, it can require a lot of patience, because just like Mr. Market can bee irrational when pricing a stock, he can be extraordinary irrational when pricing assets in the midst of a credit bubble.

Of course, the big problem when credit bubbles burst is the impact the lack of liquidity can have on the prices of financial assets - even assets with good "underlying value". Furthermore, the impact credit busts have on commodity prices, the cost of credit, etc. can really change underlying fundamentals.

Anyway, I view macro credit analysis as another tool in my toolbox to buy great businesses at distressed prices. So not so different really.

Regards,
glenn

Glen.  My comment didn't clarify the fact that this is just my opinion.  I'm not stating that your method is wrong, but rather that I'm not smart enough to apply such detail to my own process.  If I could, I wouldn't have to sit on positions for many years to assume sufficient returns.  With the massive amounts of macro commentary out there, I would go crazy trying to merge it into my decision making pocess......I think it would pull me away from what I think is a disciplined approach.   I would rather buy with what I think is a sufficient MOS.......and wait.....not time.

GlennAS

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Macro - studesy
« Reply #814 on: September 17, 2012, 05:07:09 PM »
((Glen.  ... I think it would pull me away from what I think is a disciplined approach.  I would rather buy with what I think is a sufficient MOS.......and wait.....not time.))

Completely understand your pov. Tis' true. Security analysis is difficult enough without decyphering the complicated and challenging macro domain.

Best wishes,
glenn

ItsAValueTrap

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Re: ALS.TO - Altius Minerals
« Reply #815 on: September 17, 2012, 07:01:02 PM »
Quote
Wow, lot's of negativity re: zerohedge apparently. I really appreciate their macro analysis. Go figure. ...
Sorry I didn't mean to crap on Zerohedge like that.  They do post interesting stuff from time to time.  However, I take their articles with a grain of salt because they are always bearish.

2- As far as the macro picture goes, I personally believe that it's better to stick to the more obvious macro calls.  Otherwise you might be focusing too much on the noise?

The biggest risk that Altius faces is not a massive, terrible collapse in the Chinese economy (which is unlikely anyways... they are a creditor nation).  Their biggest macro risk is probably iron ore prices... supply has gone up dramatically in the past several years and more supply is coming online (everybody is expanding production).  Eventually there will be a wave of overbuilding and things could get ugly, like what happened in the drybulk sector.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

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GlennAS

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China, iron ore, etc. - ItsAValueTrap
« Reply #816 on: September 17, 2012, 09:10:05 PM »
(smile) No problem on the zerohedge front. They certainly do have a persistently bearish undertone.

((As far as the macro picture goes, I personally believe that it's better to stick to the more obvious macro calls.))

A lot of different ways to invest/speculate/manage risk. I like to make timely bets on tail events. If I stuck to what was obvious, I'd never make any money! LOL!

((The biggest risk that Altius faces is not a massive, terrible collapse in the Chinese economy (which is unlikely anyways... they are a creditor nation). ))

I think that is a flawed statement. The US was the world's largest creditor nation in the 1920's too. There were those that argued in the 1920's that "the US cannot face a terrible collapse in their economy because they are a creditor nation". The problem in the US in the 20's - and I think a case could be made re: China today - is that the US supressed interests rates in the 1920's (to artifically support the British pound) which led to a massive speculative bubble, massive overcapacity, and a huge amount of misallocated capital. China is showing many of the same problems in their banking sector (official and shadow).

I agree that additional supply is already in the pipeline which could contribute to overcapacity (although many of these projects may not see the light of day). But in China, there's already been significant misallocation of capital in infrastructure and real estate - Hugh Hendry has a nice piece on this from April: http://www.scribd.com/doc/91764042/April-2012-TEF-Commentary.

Anyway, I'm not religious the trajectory of China one way or another. I do, however, think there's downside risk that may not be fully appreciated by the market. But maybe I'm wrong. Maybe money printing can truly solve all the world's problems. ;)

FWIW.
glenn

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #817 on: September 18, 2012, 12:08:53 PM »
"The biggest risk that Altius faces is not a massive, terrible collapse in the Chinese economy (which is unlikely anyways... they are a creditor nation).  Their biggest macro risk is probably iron ore prices... supply has gone up dramatically in the past several years and more supply is coming online (everybody is expanding production).  Eventually there will be a wave of overbuilding and things could get ugly, like what happened in the drybulk sector"

iron ore prices have dropped in half....we had tsunami in japan that destroyed the uranium market....that is why Altius is trading where it is...so short term these are negative factors because the market gives 0 valuation on the huge iron ore and uranium deposits that they stand to collect royalties on..."they have had the risk happen"...that is why they held on to their cash...

These are big events and they both together have surpressed the future production that everyone was suspecting in iron ore market (the market expected expanding production...it is being curtalied!) and the uranium market well that fell off a cliff. This what Jim Rogers has been talking about....it is not that world is in great shape.

His Bet
A)If the world economies slowed down governments would print money and future mine production would be curtailed. B)If the world economy was strong they would use the commodities in demand.

A) happened. They are printing money while massive production cuts in iron ore accross the globe have happened....uranium is already 18 months into the curtailment of uranium...and quite frankly I am quite excited by the uranium dynamics.

Altius has fortress of cash to wait it out and possibly benefit more from increased investment...either way the share count will be way down when both Paladin and Alderon begin production...

You want to bring a mine on during low prices...and sell your product at high prices...that is what we are looking at...the stimulus of all central banks will take time to kick in...Altius will stand to benefit when this happens....

dazel.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #818 on: September 18, 2012, 01:31:08 PM »
http://www.ft.com/cms/s/0/677bd13a-01a9-11e2-8aaa-00144feabdc0.html#axzz26r10M5hI


we are hoping that the quick rebound in pricing does not change the announced curtailment of iron ore production and the our scenario in the previous post plays out...


Dazel.

Dazel

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Re: ALS.TO - Altius Minerals
« Reply #819 on: September 18, 2012, 02:01:53 PM »
http://www.resourceinvestor.com/2012/09/17/uranium-fundamentals-are-at-tipping-point-alka-sin?page=2

good interview on the uranium market.

her top pick Paladin Energy.

Dazel.