Thursday, August 25, 2016

FRMO On Increasing Difficulty in Trading OTC Listed Companies

In the most recent shareholder letter:

Indeed, the valuation disparities are not always caused by margin-related issues. For example, the Polestar Fund owns shares in a successful company that trades at 40% of book value with a very liquid balance sheet of considerable size. Recently, as an experiment, one of us tried to buy $600 worth for a personal account held at a major brokerage firm. This transaction could not be processed since it was asserted that the company did not disclose audited financials. Naturally, we objected that audited financials did exist and were available on the company website. The financial results are audited by one of the biggest, internationally recognized accounting firms. Unfortunately, we did not reckon with the definition of “available” in the modern cloud-based universe. Available means available on a certain database. Thus, to “protect us from ourselves” and to control risk, the purchase was prohibited.

Trinity Industries Reported Much Lower Tank Barge Construction

In its Q2 results:

Revenues decreased for the three and six months ended June 30, 2016 by 37.0% and 32.8%, respectively, compared to the same periods in 2015 primarily from lower volumes of tank barge shipments. Cost of revenues decreased by 29.6% and 26.3% for the three and six months ended June 30, 2016, respectively, when compared to the same periods in 2015 due to lower volumes and product mix changes. Selling, engineering, and administrative costs decreased for the three and six months ended June 30, 2016 compared to the same periods in 2015, primarily due to lower compensation costs.

As of June 30, 2016, the backlog for the Inland Barge Group was $251.0 million compared to $454.0 million as of June 30, 2015.

Thursday, August 18, 2016

Sea Levels, Soros, and the Warmism Scam

A correspondent writes,

There are sea walls, boat moorings and harbor structures all over the world whose elevation above sea-level has not changed since they were built. Some of these were built several thousand years ago. One such ocean-side structure is a seawall that Alexander the Great constructed to invade an island city off the coast of present-day Israel.

Several years ago, I talked about this seawall with a marine archaeologist who specializes in the coast of Israel. I was gathering information about whether sea levels have risen or fallen during the Industrial Age. They have not.

I started by by noticing, soon after Al Gore introduced his global warming swindle, that an ocean mooring made somewhere near Australia had not changed its elevation with respect to sea level since it was installed in the 1840s.

So the sea has not risen from melting ice. (The temperature of the earth has fallen for 80 years, possibly because Earth is heading into an Ice Age.)

Here is a chance for you to watch knowledge of the Gore's global warming swindle spread. Soros gave $30 million to Gore to support his global warming swindle
Previously on climate and warmism.

Wednesday, August 17, 2016

Distressed Watch: Bonanza Creek Energy

The 6.75% note (due 4/15/2021) trades at 43, ytm of 30%. The 5.75% note (due 2/1/2023) trades at about the same dollar price, ytm of 24%. As you can see the yield curve is inverted, and in fact the notes seem to be trading at estimated recovery value. This makes sense since the company missed its August 1st interest payment and before that had hired restructuring professionals.

Those two unsecured notes total $800 million at face value. The company also had $273 million drawn on a line of credit at the end of the second quarter.

Compare the total debt of $1.073 billion with the value of the Company's reserves. The PV-10 at the end of 2015 (using $50.28 per Bbl WTI and $2.59 per MMBTU HH) was only $329 million, down from $1.1 billion at the end of 2014.

The market cap is down to $50 million from $144 million the first time we mentioned the company.

Going concern uncertainty from 10-Q:

  • Since the first quarter of 2016, the Company’s liquidity outlook has deteriorated due to the borrowing base reduction that occurred in May 2016, the inability to sell assets given current market conditions and counterparty concerns about the Company's liquidity and current capital structure, continuation of depressed commodity prices and the possible inability to access the debt and capital markets.
  • While the Company is currently in compliance, based on the Company’s estimates and expectations for commodity prices in 2016, the Company does not expect to remain in compliance with all of the restrictive covenants contained in its revolving credit facility throughout 2016 unless those requirements are waived or amended.
Production will probably be falling significantly:
  • We estimate capital expenditures for the remainder of 2016 to range from $7.5 million to $17.5 million. We ceased our drilling program at the end of the first quarter of 2016 and do not have any active drilling planned for the remainder of 2016. Consequently our production will decline in line with our normal decline curves, and we will experience further reductions in revenues, profitability and cash flows.
The crude oil volumes fell 23% between Q2 2015 and Q2 2016! During the year ended 6/30/16, the company completed 67 wells. During the year ended 6/30/15, the company completed 145 wells. With drilling dropping to zero, production will probably plummet further.

The bonds do not seem like a good deal to me at 40 cents.

Out of the Money Puts?

Ridiculously overpriced garbage that might be worth owning puts on:

Tuesday, August 16, 2016

On Inflation and Indexing (Buy & Holdism)

From a correspondent,

Indexing makes perfect sense in a long term inflationary environment. Inflationism is guided by the idea of buying things regardless of their value. Indexing follows the same logic.

China Helping the Lion of Damascus

A correspondent writes,

China is going to strengthen its military role in Syria.

I was expecting this to happen eventually, but it is astounding that it has happened, even so.

The US/Israel/Saudi effort to overthrow the Syrian government has given rise to the military alliance of Russia/Syria/Iran/China, with more Syrian allies to come. This may be the motive for the departure of Turkey from NATO.
In the aftermath of the fake coup, Turkey does seem to be moving away from Europe/NATO and toward Russia.