Matthew Simmons’ Latest Wake Up Call on Energy Downright Scary
Matt Simmons, fresh from schooling Henry Blodget on the definition of peak oil, is making the rounds and getting his 2 cents in. The legendary head of Simmons & Company International turned a few heads yesterday on CNBC's Fast Money. His thoughts on tele-commuting and other topics make sense, and it is too bad nobody acted on his recommendations years ago, although the panelists looked bewildered by his most strident statements:
Fast Money July 11th
JP Morgan Defends Steel Stocks as Mo-Mo’s Go-Go
Originally Published In the News July 8, 2008 12:59 AM
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The pell mell rush by momentum investors into anything to do with steel or coal is leading to some confusion. These folks know a good chart when they see one, but do not know the stories very well, and are getting their facts confused, according to JP Morgan:
How many tons of thermal coal does it take to make a ton of steel?
Zero, but this is a question many recent steel shareholders may have been pondering while they were selling their steel stocks today. In our opinion, it’s clear that many non-traditional steel investors (growth, tech and even healthcare) have recently been attracted to the steel stocks given their outperformance and earnings growth. As a result, the volatility within the steel stock group has increased, as a greater proportion of its shareholders are unfamiliar with industry/company fundamentals and have a difficult time interpreting macro and industry-specific news.
The selloff in steel stocks last week, including Arcelor Mittal (MT-NYSE) prompted this Monday morning rebuttal from JP Morgan, and with markets melting down investors are shooting first, and then circling back to see if they got it right. Will the July 7th bounce in steel stocks hold up?
We believe the extreme sell-off in steel stocks today can be largely attributed to a Bloomberg story Tuesday – “ArcelorMittal Says Half of Customers Rejected $250 Surcharge” - quoting Lou Schorsch, head of MT’s Flat Carbon Americas. The market interpreted this information as the steel producers are unable to pass through higher raw material prices with higher steel prices. In our opinion, this story and line of thinking contributed to the sell-off in the European thermal coal market on Wednesday in which thermal coal prices dropped 9% intra-day to $200/t before closing at $214/t. It should be noted that thermal coal prices rose 75% in 2Q, hitting a record high of $225/t on Tuesday and that thermal coal is not used in the production of steel, but rather met coal is. It seems as though some of the same non-traditional investors of steel stocks may have also owned some thermal coal contracts as well.
It should also be noted that the $250/t raw material surcharge, or as MT likes to call it “cost recovery program,” was implemented for their fixed price contracts which represent less than 50% of shipments and not for MT’s spot market shipments. We view the program as a success by achieving a 50% success rate given this unprecedented move in altering fixed price contracts. Furthermore, we view the rapid rise in spot prices as a true indicator that steel producers have been able to not only pass along rising raw material costs, but also expand margins. Domestic steel producer fundamentals are still very attractive, in our view, with low imports, low inventories, the dollar weak, strong emerging market demand, and the ability to export any weakness in domestic steel demand overseas given the low cost position of domestic steel producers. JP Morgan
Back in the day, when momentum investors would trample into my stocks, I would gradually start scaling out of the positions. I never once regretted selling, although maybe this time its different for coal and steel sector analysts.
What do you think?
How many tons of thermal coal does it take to make a ton of steel?
JP Morgan (PDF)
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Positions
SellSide Confidential: Hedge Funds Are More Fun
Hedge Funds are reaping the rewards of their superior risk management skills and cultures, where rogue traders are presumable shot on the spot.
Yes, the inflows to Hedgistan have slowed, but they have the pick of the litter as the SellSide, outside of Goldman, implode:
The biggest hedge funds are on a hiring binge, taking advantage of cutbacks at investment banks to recruit star traders, senior executives and whole teams to help them expand.
On Monday Goldman Sachs lost Driss Ben-Brahim, one of its top traders, to GLG Partners, London’s second-biggest hedge fund. This follows high-level recruitment from banks by Citadel, Tudor
“The environment in investment banks is such that they don’t feel as secure where they are,” said Peter Clarke, chief executive of Man Group, the biggest listed hedge fund manager. “It is materially helpful to us.” FT
Citadel and some of the other alternative shops can sift through the wreckage. Goldman employees might be off limits, but everythng else is fair game:
“You can get whomever you want,” said the head of one large London hedge fund.
“Goldman is in good shape but it is the easiest time ever to hire people from Merrill Lynch, Morgan Stanley, even Deutsche. Forget about everything else: at these banks it is just not fun any more.”
No fun, indeed. With capital commitments to SelllSide proprietary traders being reduced, the exodus will continue well into 2009.
Hedge funds hit troubled banks with a hiring binge
FT
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Jamie Dimon Calls for SEC to Shut Down Rumor Mill
The rumor mill never sleeps. A little over a year ago it spun constantly with news of impending takeouts, few of which actually took place. But tombstones announcing deals are one thing, tombstones announcing Bear Stearns' demise are another. Jamie Dimon's interview on Charlie Rose makes his position clear; spreading false rumors is a crime:
"This is even worse than insider trading. This is deliberate and malicious destruction of value and people's lives," Dimon said. "They shouldn't go to jail for a short period of time. If I was the SEC, I'd find out who made the money and I'd investigate like they do when they come after us all the time, emails, phone records, you name it, and I'd find out." Charlie Rose
Full Video of Jamie Dimon's appearance on Charlie Rose after the jump...
