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XMFSinchiruna (27.75)

Coal Sell-off is a Head Fake

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October 03, 2008 – Comments (9)

Compare charts of spot prices with charts of coal miners. There is a disconnect based upon expectations for a correction in coal that have not materialized. Given that, and the fact that the miners are paid according to annual supply contracts that were priced in April at all-time highs... I see coal stocks as an absolute steal here.

9 Comments – Post Your Own

#1) On October 03, 2008 at 3:11 PM, XMFSinchiruna (27.75) wrote:

Hopefully a larger image:

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#2) On October 03, 2008 at 10:41 PM, Nigel1234 (< 20) wrote:

I agree.  I believe this disconnect exists in other commodities, especially the metals - gold and silver.  Every piece of silver is being bought across the US.  The markup on the US Silver Eagles are about 25% because the demand is at an all time high eventhough the exchange rate is very low.  I think there are going to be serious shortages in actually obtaining physical gold and silver in a few years...about the same time the dollar either collapses or has no purchasing power what-so-ever.  I am loading up right now and stand to make a zillion dollars (real money not, paper I.O.U. US paper crap) if this occurs.

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#3) On October 03, 2008 at 11:13 PM, XMFSinchiruna (27.75) wrote:

Nigel1234

I couldn't agree more.

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#4) On October 04, 2008 at 9:59 AM, dexion10 (27.57) wrote:

I think thre is a possiblity that coal stocks are a bargain here - never thought I'd say that because I've been a bit of a coal skeptic for about a year and a half.

you are correct that coal is priced via long-term contracts but I'm trying to balance that with the fact that they benefited from a few temporary events (like power shortages in south africa).... over the next 2-3 years global coal supply should recover and that is a risk for these guys. 

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#5) On October 05, 2008 at 10:21 PM, goldminingXpert (29.44) wrote:

according to my bloomberg feed (which I can't get screenshots of for you guys) Coal stocks have a -6.5x beta vs. the US Dollar. When the dollar rises 1%, coal stocks lose 6.5% when the dollar falls 1%, coal stocks gain 6.5%. Clearly, with the dollar on a tear (Euro is barely clinging to 1.36 this evening, 1.33 is next support of value), coal stocks will get cheaper. As soon as the dollar strength turns (DX 85 or so) these are screaming buys. Not yet though, the euro is capitualting as we speak, wait for buyers to arrive on the euro before touching the smog rock.

Disclosure: Deeply tempted to buy Arch Coal (ACI) here and now, but will resist and watch it drop another 10/15% and then buy. 

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#6) On October 06, 2008 at 11:42 AM, goldminingXpert (29.44) wrote:

KOL down 10% today... must be even more of a steal now, eh?

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#7) On October 06, 2008 at 11:42 AM, goldminingXpert (29.44) wrote:

KOL down 10% today... must be even more of a steal now, eh?

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#8) On October 06, 2008 at 12:13 PM, Nigel1234 (< 20) wrote:

How about KOL today ;-)

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#9) On October 17, 2008 at 12:26 AM, awallejr (83.80) wrote:

PVR anyone for an income producing conservative coal play?

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