Friday, July 25, 2014

NII Holdings Subscriber Trends Compared to Competitors' $NIHD

"The Admiral" writes in,

"NIHD's user base across Argentina, Brazil and Mexico has decreased 4.6% from 9.62 million as of 3/31/13 to 9.18 million as of 3/31/14. By contrast, the combined user base of NIHD's (publicly-traded) competitors for the same period in the same regions has increased 3.5% from 409.29 million to 423.41 million."

Moody's Comment on Met Coal Market and U.S. Miners' Cash Burn

Article mentioning Moody's comments:

BHP Billiton, the world’s largest miner, recently announced record metallurgical coal production of 45 million t for the year to June 2014 on the back of record Australian production. A further 30 million t of capacity is due to come online over the next three years in the country from projects that have already started or preparing to commence construction.

This growth will offset any capacity curtailments in Australia in the next twelve months and will lead to growing exports after that, said Moody’s. As a result of this continued downward pressure, Moody’s expects only a small increase in prices to US$135 – US$145/t by the end of 2015 with prices struggling to rise higher than that for three years after that.

At that level, Moody’s believes US miners will continue to struggle: “We believe that as a group, key US met producers [including Peabody, Alpha Natural Resources, Arch Coal and Walter Energy] will [burn] well over US$1 billion in cash in 2014.” Only when benchmark prices reach the US$160 – US$170/t range will the group become cash positive.

Walter Energy Interest Expense $WLT

WLT has $2.58 billion of cash-interest paying indebtedness, with a total annual interest cost of $218 million. They have a $350 million PIK note which given the 12% PIK option will have a noncash annual interest cost of $42 million. The total annual interest expense going forward looks to be $260 million.

Thursday, July 24, 2014

Conrad Trendline Break - Reduced Position


NII Holdings Competitors $NIHD

The NIHD 10% "capco" bond traded at a 99% yield to maturity today. They are @27 and have a 5 cent coupon on 8/15 - maybe not going to make it?

Here is a list of mobile network operators in the Americas - need to look at competitor reports to see if they are saying anything about taking market share from Nextel in their countries.

Argentina
- Claro, owned by America Movil (AMX)
- Movistar, owned by Telefonica (TEF)
- Personal, owned by Telecom Argentina (TEO)
- NEXTEL (NIHD) is number 4, about 3% market share

Brazil
- Vivo - Telefonica
- TIM - Telecom Italia
- Claro - America Movil
- Oi - Oi joint venture, Oi is (OIBR) on NYSE
- Algar, Grupo Algar
- Nextel (NIHD), has way less than 1% share

Mexico
- Telcel - America Movil
- Movistar - Telefonica
- Iusacell - Grupo Salinas
- Unefon - Grupo Salinas
- Nextel (NIHD) - has about 3% market share

Wednesday, July 23, 2014

More on "Fund Managers' Current Asset Allocation - July"

Bond sentiment charts from the BAML asset allocation report (earlier post).





Bearish on bonds and on the 10 year. They'll be singing a different tune with the 10 year at 1.25% someday.

Comment on China's "History of Recurring and Traumatic Financial Crises"

y0ungmoney posted this as a comment on the China "History of Recurring and Traumatic Financial Crises" post.

I think the lack of property rights in China (and emerging markets more generally) will become a big issue when we have a real EM downturn. It will lead to widespread revulsion-- people will think, "Not only are my EM stocks down 85%, they're going to screw me out of whatever I have left!"

It's the kind of thing that's easy to ignore in a bull market and impossible to ignore once things go bad.
One principle of social mood is that it isn't news that drives market valuations, it's people's mood-based reactions to existing news. Everything needed for the Shanghai index to trade at zero is already known; but people's extraordinarily positive mood prevents them from properly incorporating the information. I wrote about this in my Review of Benjamin Graham and David Dodd's Security Analysis:

--
"One frequent observation about Graham and Dodd's era is that they had it kinda easy, what with being able to buy lots of net-nets - companies selling for less than their current assets minus total liabilities. Here's how common these opportunities were:
'Our computations indicate that over 40% of all the industrial companies listed on the New York Stock Exchange were quoted at some time in 1932 at less than their net current assets.'
I have never heard anyone stop to reflect on why valuations were so low during the Great Depression. Why didn't anyone buy those compelling values? Those valuations indicate revulsion, which Hussman defines as:
'A growing impatience among investors who conclude that stocks are simply bad investments, that the economy will continue to languish, and that nothing will work to help it recover. Revulsion is not based so much on fear or panic, but instead on despair and disillusionment. In a very real sense, investors abandon stocks at the end of a bear market because stocks have repeatedly proved themselves to be unreliable and disappointing.'
Impatience also with fraud. Shame with being scammed by a flimflam mortgage guarantor or a stock scam.

To read the Lehman Brothers bankruptcy examiner's report, or the New Century Financial report, is to realize that we might reach 1932 valuations before this is over.

If you can't trust a financial institution's balance sheet and you can't rely on the auditors or the bank regulators to do anything, you are going to demand a huge risk premium for the surviving institutions' securities."