June 17, 2010
– Comments (5) |
RELATED TICKERS: GM
Fools grab a beer, a seat and STFU, as Chanos speaks.
The one integrated that should have been shorted (BP) he doesn't, yet wants to short the sector. He might be right with regards to companies replacing reserves, but most of the majors' cash flow and earnings more than cover their dividends. BP's aggressive reserve replacement was one of the reasons why I originally liked the company as an investment. We all know that the easy oil is gone, and oil remains the name of the game for decades and decades. So higher prices, means more cash flow and earnings off less reserves.
As for F, I think it is gutsy to short that company. I didn't expect this company to return to profitability until maybe 2011. They are already there now and growing.
China is a concern. There is a legitimate argument for a housing bubble in the works there. China is trying to "soft land" it but I suspect they need to raise interest rates in the end to do so. On the flipside there really are a buttload of people there, and with talk of doubling workers' salaries, that could continue to spur housing projects for awhile.
Good "listen" though. + rec.
He has found a hole bigger than Enron...perhaps people will listen to him this time
Lowest Reserve ratios replacements from worst to best1. Shell2. Exxon3. Chevron4. EniU.S. Securities and Exchange Commission released updated and modernized oil and natural gas reserves reporting rules that went in effect Jan. 2010The now permit(1) use of a 12-month average price (instead of a single-day price at year end) to calculate reserves;(2) use of new, unspecified technologies to estimate reserves instead of specific field tests currently prescribed;(3) classification of bitumen (the “tar” in tar sands) and other non-renewable natural resources from which synthetic oil and gas can be extracted as oil and gas reserves, rather than as mining reserves;(4) “reasonable certainty” rather than “certainty” to be a criterion for establishing proved undeveloped reserves; and(5) the optional disclosure of probable and possible reserves.The icing on the cake will be Cap and Trade added to these glaring holes in the balance sheet will become the biggest complex regulatory scheme by hiding the true cost of compliance and creating the biggest fraud investors will ever face.As for China...it is a developing country developingHe thinks China is not a bubble but a Ponzi Scheme...while I think if Li Keqiang every had I fan club I would probably wait in line for my membershipThere will always be a western view and an Asian view of ChinaI heard how backwards and bankrupt China was when I worked in Japan back in 1993I heard the same about Hong Kong real estate collapse when I worked in Hong Kong during their handoff....never happenedChina has a savings rate over 40%2nd home 40% down is the min.If you do not live is China....you must pay the entire home with no loan...cashI am thankful the CCP picked up the tab via foreign fiat paper......They bought the dollars low....are switching to the Euro after the US dollar was way overprices all the while picking up ever natural resource on the way....call me stupid but that is a balance sheet of envy. All the while being bashed by the countries they were bailing out.China is positioning themselves to be stronger than I think most people will ever realize...and give them credit.Somewhere between real estate & rice speculators, taxing residence permits, and a few political flash points you get a brilliantly branded crisis...heck they can even find time to give yuan talking points about Taiwan and Tibet...I bet a cup of green tea with someone about their dismal real estate loans on their banks balance sheets that every Weijian Shan, Frank Tang, Richard Ong will sell these pieces of paper to someone who lives within a 10 mile radius of that paper....wont happen until Fred Hu gets back from his book tour.Their bubble burst problems will come via an internal problem of gender...in the meantime they are doubling down and taking advantage of this crisis....while we are too busy pointing fingers but too afraid to change our leveraged ways
There has been some rumors going around that the oil major is Exxon. I think it's more likely to be Shell. Some key phrases he used are:
"...their capital spending eats up all of their cash flows" - If taken literally, this means the company has low or negative FCF. Exxon has positive FCF while Shell's is negative.
"...they are borrowing their dividend" - The company is borrowing a lot. According to the cash flow statements of the oil majors, only Shell has borrowed more money than they are paying out in dividends. Exxon has relatively very little debt and has taken on barely any debt recently.
"...that's why their yields are so high". Shell has the highest yield with 6%, much higher than Exxon's 2.7%.
Personal opinion.... his largest short positions would be found in the following