Sterlite's 1Q08 Breakdown By METAL

Sterlite Industries (SLT) is India's Largest publicly traded Copper and Zinc producer. For my reference + Per Sterlite's 1Q08 Financial Results for the quarter ending March 31st, 2008:


* SLT's Sales Breakdown By Metal:
1.) Copper --> 48% of Total Sales
2.) Aluminum --> 17%
3.) Zinc and Lead --> 33%
4.) 'Others' --> 2%


* SLT's Pre-Tax Profit Breakdown By Metal:
1.) Copper --> 17% of Total Metal E.B.I.T. (earnings before interest + taxes)
2.) Aluminum --> 25%
3.) Zinc and Lead --> 62%
4.) 'Others' --> -4%

* SLT's 1Q08 Profit Margin was 19.5%...SLT's 1Q08 Sales increased by 8% year over year...1Q08 Profits rose by 15% yoy

http://www.sterlite-industries.com/admin/financial/SterliteDocument/F000000082.pdf

http://www.sterlite-industries.com/pdf/SIL_Q4_2008_Press_Release.pdf


A Sterlite copper smelter:

Data Courtesy: Sterlite's Investor Relations
Full Disclosure: I own shares of SLT.

BIO - Lakshmi Mittal, CEO of ArcelorMittal

Lakshmi Mittal, the CEO and Founder of the World's Largest STEEL company, ArcelorMittal (MT), is the world's 4th richest man for a reason.

For a brief recap on Mr. Mittal's career + successes, please refer to the link below for Richard Wachman's excellent write-up :


http://www.guardian.co.uk/business/2008/jun/29/11


Interesting quotes from the the link above:

* 'About 10 years ago, Mittal was the visionary who saw that the fragmented international steel industry, serving local markets, was crying out for consolidation,' says a London-based metals analyst. 'Many firms were owned by national governments where the phrase "entrepreneurial flair" was missing from most people's vocabulary. True, some companies had been privatised, but the sector was poleaxed by chronic overcapacity, high indebtedness and steel prices that had hit rock bottom.'

* (Lakshmi Mittal) in 2006 took on and beat the European establishment when he acquired Arcelor (for $26.9 Billion Pounds or approx $54 Billion Dollars), the steel company that was created through the merger of firms from Spain, France, Luxembourg and Belgium. Its chairman, Guy Dolle, was famously forced to eat his words after controversially dismissing Mittal Steel as 'a company of Indians' paying with 'monkey money'. In the end, Arcelor's shareholders decided to sell out despite opposition to the deal from politicians including former French President Jacques Chirac.

* ArcelorMittal was the first company to produce more than 100 million tons of steel a year; that could double in a few years as Mittal goes on another buying spree, extending his empire to Africa, Australia and China...Today, ArcelorMittal employs 300,000 people in 60 countries, but accounts for 'only' 10 per cent of global output, so it could grow much bigger before attracting the attention of the anti-trust authorities. 'Certainly, there is the opportunity to grow,' Mittal said recently. 'To what size? You could go up to 150 or 200 million tons a year,' he said.

* Mittal's family owns a 44% stake in ArcelorMittal...his son, Aditya Mittal, a graduate from UPenn's Wharton Business School, is the company's CFO.

* ...Mittal is plotting his next move. He wants to secure deposits of coking coal and iron ore, which have doubled in price in the past four years and which are vital for the production of steel. He is in talks to acquire coal mines in Australia and Russia, while expansion elsewhere means that ArcelorMittal now meets 45% of its iron ore requirements from its own supplies. Mittal has also invested in shipping and rail to cut transport costs. The only part of the supply chain that remains outside his control is oil and gas.

* At the age of 26, Lakshmi set up his first steel mill, in Indonesia, producing 26,000 tons and generating annual profit of $1m

* Mittal's Kazakhstan move 'propelled the company into the 'big league of international steelmakers'...In the clapped-out former Soviet Republic, larger than Western Europe and on the brink of bankruptcy, Mittal bought the country's Karmet Steel works in Temirtau for the knockdown price of $400m. Kazakhstan shared a border with China, where demand for steel was about to take off, and the acquisition would soon pay for itself many times over


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* Somewhat related, Lakshmi Mittal was recently elected to Goldman Sachs (GS) Board of Directors as an independent director:


http://ap.google.com/article/ALeqM5j5fNg5YCCfmnGePlYUGRlJ5jGw2gD91JTVP80


Goldman Sachs CEO, Lloyd Blankfein on Mittal joining GS's board: "Lakshmi Mittal has reshaped a global industry and, in the process, has engineered new modes of production, identified unrealized value and sparked remarkable growth...He has a keen understanding of the global economy, having operated in virtually every corner of the world. Lakshmi's experience, judgment and independent thinking represent an important addition to our board of directors, and will be of tremendous value to our people, our shareholders and our clients."


Data Courtesy: Richard Wachman + The AP
Full Disclosure: I own shares of MT and GS.

RTOB: FOOD vs FUEL - A New WORLD WAR ?

Are we in the early stages of a New COMMODITY based WORLD WAR ?

Is the United States playing a DANGEROUS GAME with the Middle East by COUNTERING worldwide OIL price hikes with worldwide increases in the cost of FOOD ? I'm no 'conspiracist' but consider some quick observations :


The FUEL Side
* Supply Manipulation ? --> Crude oil supply is primarily controlled by the Middle East via the OPEC Cartel. Per Wikipedia, the 13 members of OPEC control about 2/3 of the world's crude oil reserves + approx 36% of the world's total current crude oil production. FYI, OPEC members include many countries that fundamentally dislike the United States for many reasons including its often criticized ties to + support of Israel...OPEC 'troublemakers' include countries like Iran, Libya and Venezuela.

* Principle Fuel Commodity --> About 40% of the total energy consumed in the U.S. in 2007 was crude oil. The U.S. is the world's largest consumer of oil and consumes about 21 million barrels of crude oil a day - 3 times the daily amount consumed by 2nd place China (for a top 5 list on the largest consumers of crude oil please refer to my 5/21/08 reference post titled 'REF - World's Largest Oil Consumers). The U.S. imports about 70% of its annual crude oil needs and at $140 oil, is primed to spend over $700 Billion this year on importing Oil into the U.S. (this is 5 times the annual cost of the Iraq war!!).

* PRICE Manipulation ? --> The price of Crude Oil has risen over 700% since November 2001...from $17.50 a barrel to about $140 a barrel today.


The FOOD Side
* Supply Manipulation ? --> The U.S. is the world's largest producer and exporter of Corn. According to Wikipedia, the U.S. is responsible for producing about 40% of the World's total annual corn supply (in 2005 the U.S. produced 280 of the World's total 692 ton harvest). Due to subsidies following the U.S. government's 2005 ethanol from corn 'flex-fuel' mandate, the U.S. now allocates about 30% of its total annual corn crop to the creation of corn-based ethanol...a fuel that supplies less than 5% of the country's annual automotive energy needs.

* Principle Food Commodity --> Corn is a principle food commodity used by farmers for feeding the world's livestock (cattle, chickens, etc.)...therefore an increase in the 'input' cost of corn results in higher costs for maintaining livestock and ultimately results in higher prices for foods like beef, chicken, ham, goat, etc. While the average U.S. consumer spends about 15-20% of their disposable income on FOOD and groceries, the average consumer in emerging nations like Iran, Venezuela and even Saudi Arabia (minus the royal family of course) spend roughly 40-50% of their total disposable income on food. Therefore, while food price inflation in the U.S. is annoying, it's downright CRIPPLING for a majority of emerging countries that often have high levels of income disparity among their respective populations.

* PRICE Manipulation ? --> The price of Corn has risen 250% since September 2006...from $2.25 a bushel to today's price of around $7.86 a bushel.





Data Courtesy: Wikipedia + previous posts

U.S. Electricity Consumption By Source

* 2007 U.S. Electricity Consumption By Source:

1. COAL -- 50.0%

2. NATURAL GAS -- 20.3%

3. NUCLEAR -- 20.1%

4. HYDROELECTRICITY -- 6.0%

5. OIL (PETROLEUM) -- 3.6%



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* U.S. Coal Consumption by Industry:



Data Courtesy: EIA

U.S. Coal Exports GEO BreakDown

2007 U.S. Coal Exports Geographic BreakDown :

*Total 2007 U.S. Exports - Up 19% from 2006

Exports To Country - % Change from 2006

1.) Europe: Up 30% to 27.1 million tons
Slovakia - Up 424%
Netherlands - Up 118% to 4.6 m tons
Croatia - Up 116%
France - Up 47% to 2.4 m tons
Germany - Up 41% to 2.3 m tons
United Kingdom - Up 31% to 3.4 m tons
Romania - Up 28%
Turkey - Up 18% to 1.5m tons
Sweden - Up 14%
Italy - Up 8% to 3.5 m tons
Belgium - Down 3% to 2.1 m tons
Portugal - Down 4%
Spain - Down 9% to 1.5m tons
Slovenia - Down 39%
Bulgaria - Down 42%
Finland - Down 60%
Denmark - Down 79%

2.) North America: Down 7% to 19.2 million tons
Canada - Down 8% to 18.4 million tons
Mexico - Down 4%

3.) South America: Up 46% to 7.2 million tons
Brazil - Up 44% to 6.5 million tons
Argentina - Down 14%

4.) Africa: Up 229% to 4.5 million tons
Morocco - Up 768% to 2.4 million tons
Egypt - Up 113% to 1.5 million tons
South Africa - Up 101%
Algeria - Up 45%
Other - Down 47%

5.) Asia: Down 40% to 1.2 million tons
Japan - Down 98%
South Korea - Down 61%
India - Down 17% to 0.883 million tons
Other - Up 90%


http://www.eia.doe.gov/cneaf/coal/quarterly/html/t7p01p1.html


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The Obvious Observations:

* The U.S. exported a total of 59 million short tons of Coal in 2007...19% growth over 2006 !

* The U.S. does NOT currently export coal to China (and very little to Asia overall...probably has to do with the transportation costs)

* Europe is the U.S.'s largest international customer region + consumed 46% of all U.S. coal exports in 2007

* The U.S.'s largest export customer BY FAR is Canada (down 8% yoy)...Canada consumed 31% of all U.S. coal exports in 2007

* The U.S.'s 2nd largest export customer is Brazil...exports to Brazil increased by 44% year over year and totaled 11% of all U.S. coal exports

* Europe's growth is ACROSS THE BOARD + led by the larger players - Netherlands (+118%), UK (+31%), France (+47%), Germany (+41%), etc.

Data Courtesy: EIA

REF - BP's 2008 Statistical Energy Report

British Petroleum (BP) just recently released their annual WW Energy Report (aka the BP Statistical Review of World Energy, June 2008) and inside are some interesting charts + data related to the WW Reserves + Consumption trends of Crude Oil, Natural Gas, Coal, Nuclear, etc. If you're curious (and you probably should be because ENERGY is inve$tible) then check out the impressive Adobe file per the below link:

http://www.bp.com/productlanding.do?categoryId=6929&contentId=7044622

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*For reference's sake I'm including below a couple of the more interesting charts I found on page 42 of the report (Double-click the images for a much needed larger view...per the color key below, Grey = Coal...Blue = Hydroelectricity...Orange = Nuclear...Red = Natural Gas...Green= Crude Oil):

*A couple of notes/observations per the Above Charts + Report:

A.) Ranking WW 2007 Consumption by Source (from most to least):

1. Crude Oil - 36%

2. Coal - 29%

3. Natural Gas - 24%

4. Hydroelectricity - 6%

5. Nuclear Energy - 5%

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B.) REGIONAL Consumption by Source Breakdown:

* CRUDE OIL accounted for: 51% of the Mid East's 2007 energy consumption...46% of South America's...40% of North America's...40% of Africa's...32% of Europe's and 31% of AP's 2007 energy consumption

* COAL accounted for: 50% of the Asia Pacific's 2007 energy consumption...31% of Africa's...22% of NA's...18% of Europe's...4% of SA's and 1% of the Mid East's 2007 energy consumption

* NATURAL GAS accounted for: 47% of the Mid East's 2007 energy consumption...35% of Europe's...26% of NA's...22% of SA's...22% of Africa's and 11% of AP's 2007 energy consumption

* NUCLEAR accounted for: 9% of Europe's 2007 energy consumption...8% of NA's...3% of AP's...0.8% of SA's...0.8% of Africa's and 0% of the Mid East's 2007 energy consumption

* HYDROELECTRICITY accounted for: 28% of SA's 2007 energy consumption...6% of Europe's...6% of Africa's...5% of NA's...5% of AP's and 0.9% of the Mid East's 2007 energy consumption

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C.) B.R.I.C, U.S. + Canada Consumption by Source:

BRAZIL: 45% Oil, 39% Hydro, 9% NGas, 6% Coal and 1% Nuclear

RUSSIA: 57% NGas, 18% Oil, 14% Coal, 6% Hydro and 5% Nuclear

INDIA: 51% Coal, 32% Oil, 9% NGas, 7% Hydro and 1% Nuclear

CHINA: 70% Coal, 20% Oil, 6% Hydro, 3% NGas and 1% Nuclear

UNITED STATES: 40% Oil, 25% NGas, 24% Coal, 8% Nuclear and 3% Hydro

CANADA: 32% Oil, 26% Hydro, 26% NGas, 9% Coal, and 7% Nuclear

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D.) Other Misc. Regional notes:

- The Asia Pacific region consumes much more coal than anyone else (by far)...about 50% of AP's total 2007 energy consumption was coal (as noted above, India = 51% and CHINA = 70% COAL!)

- Europe consumes more nuclear energy than anyone else...about 9% of Europe's total 2007 energy consumption was nuclear (North America runs a close second with 8%)

- Relative to their total energy consumption, South America consumes much more hydroelectric power than anyone else...about 28% of SA's total 2007 energy consumption was hydro power (mostly Brazil as 39% of Brazil's total 2007 energy consumption was hydroelectricity)

- The Middle East is almost exclusively reliant on Oil and Gas (surprise, surprise) with both fuels accounting for a total of 98% of the Mid East's energy needs in 2007

Data Courtesy: BP Statistical Review of World Energy, June 2008

KASS - Pop Goes The Credit Bubble ?

Doug Kass, reknowned investor and hedge fund manager for Seabreeze Partners, penned a pretty insightful blog today for TheStreet.com and I wanted to post it here for the sake of sharing that delicious juice called 'PERSPECTIVE'. While the situation sounds pretty dire (he's definitely not afraid to be BEARish), as a student of the 'Game' I appreciate his viewpoint + the context he provides to readers regarding the Recent Popping of the 'Credit Bubble' and its potential ramifications to the broader investing markets including Stocks, Housing, etc. Information IS power and whether or not you agree with his ideas, at the very least, they should provoke some all-important thinking...without further ado:

--------------------------------------------------------------------------------

Investors Have Lost Their Innocence
By Doug Kass
6/23/08

" For over two decades, with the possible exception of the aftermath of the speculative bubble of the late 1990s, equity investors have been comforted by the notion that nearly every dip has been a buying opportunity as the U.S. economy has typically recovered relatively swiftly from economic and credit, geopolitical, systemic and assorted exogenous shocks. And for over two decades, fixed-income investors have been comforted by the tailwind of disinflationary influences, which provided excellent absolute and relative returns in bonds.

Stated simply -- similar to Edith Wharton's brilliant The Age of Innocence, when "being was better than doing" -- stocks and bonds were no-brainers to most. After all, investors' intermediate- to longer-term experiences in the capital markets were universally solid.

The media insisted that investors buy stocks and bonds for the long run as the sky was the limit. Even James Glassman and Kevin Hassett's (book) Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market seemed within reach.

As we entered the New Millennium, the U.S.'s economic moorings became unanchored as unprecedented low levels of interest rates produced a second wave of speculation in housing and daytrading in homes replaced the daytrading in stocks. The generous availability of low-cost capital and debt formed the foundation of an unprecedented boom in consumer borrowing, a massive spending binge and a desperate institutional search for yields.

A shadow banking industry emerged as the helter-skelter move into derivative products (which were unregulated, unwieldy and intentionally seemed to circumvent banking capital requirements) rapidly materialized. And an eager hedge fund community joined the happy hour of leveraging while unquestioning investors seemed to sanction the generation of common returns that were produced by taking uncommon risks.

At the epicenter of the leverage was the housing market, which was confidently embraced by owner non-occupied investors, who stretched housing prices and affordability (home prices divided by household incomes) to unsustainable levels. Expectations of a long, uninterrupted boom in residential real estate became the newest paradigm.

Generally speaking, the availability of cheap credit made the notion of debt more acceptable and institutionalized leverage, serving to enrich a small cabal of originators who sliced and diced housing mortgage products. With the benefit of hindsight, however, it is clear that the mass marketing of debt began to poison the world's financial system.

That was then and this is now.

Last week, we saw a tsunami of selling, which was in marked contrast to my expectations for some stability.

We now face the aftermath of a bygone credit cycle gone ballistic. The world's financial system is, to some important degree, crippled and in a workout mode now. In all likelihood, the pendulum of credit will swing to an opposite extreme, and availability (the lifeblood of economic growth) will become dear, which is in marked contrast to the freewheeling decade of the past.

Regardless of short-term direction, we continue to be in an investing environment that argues in favor of erring on the side of conservatism. Most should maintain smaller-than-typical investing/trading positions and should keep conviction on the back burner.

The experience of the last 12 months has exacted a toll on investors. The average household net worth has taken a hit from the depreciation in stock and home values, confidence in our politicians and corporations (especially of a financial kind) have rarely been lower, and, importantly, investors' innocence has been lost.

While, at some point (maybe sooner than later), the equity markets will rally from the current oversold readings, an extended period of investor disinterest and apathy seems likely to follow."

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Related..A couple of interesting Charts re 'Derivatives' I found on the Internet:

*Chart below courtesy of the BBA:

*Chart below courtesy of The Economist:

Data Courtesy: Doug Kass, TheStreet.Com, BBT + The Economist

RTOB: COAL Play (My Favorite Band) !

My COAL investing thesis is killing me. It's killing me because even though I've been hip to the the$is for several months now I've still managed to miss out on the GIGANTIC run made by COAL Stocks (over the past 3 months, BTU is up 72%...MEE is up 175%...PCX is up 250%...ANR is up 160% and ICO is up 120% !!!). Worse yet, I'm STILL having trouble deciding on which coal stock I want to own for the LONG TERM (at least 3-5 years) moving forward. Therefore, in an effort to temporarily clarify my often cluttered, investing mind I decided to take a Quick Look at 6 popular U.S. Coal Producers because I PASSIONATELY believe the EXPORT (International) component of their Earnings Growth is only going to gain traction (think $$$) in the midst of a new market reality/norm consisting of (over) $100 Crude OIL. (FYI, Please refer to my April 22nd post titled ' RTOB: No Coal For U.S.? ' for more of a background explanation on my current COAL investing thesis.)

*COAL PLAYS BREAKDOWN :

1. Peabody Energy (BTU): $22 Billion mcap, 92 P/E, 15 F '08 P/E, 0.3% Div Yield
* Stock is Up 30% YTD, Up 63% YOY...4% OFF its 52 Week High
* Peabody is the largest private-sector coal company in the world; its coal is responsible for 10% of the total electricity generated in the U.S. and 2% of the total electricity generated worldwide (this is a large amount considering that 40% of the world's electricity is generated via coal power)
* As of December 31, 2007 BTU had 9.3 Billion tons of proven + probable Coal Reserves (3.3 Billion of which located in Wyoming's Powder River Basin)
* Sells Coal to over 340 electricity generating + industrial plants in 19 countries
* Operates a total of 31 mines out of the U.S. and Australia (BTU owns 11 mines in Australia w/ total provable reserves of around 1.1 Billion)
* During the year ended December 31, 2007, the Company sold 237.8 million tons of coal (59% or 139.8 million tons were produced/sold in Wyoming)
* On 10/31/07, BTU spun off portions of its Eastern U.S. mining operations to form Patriot Coal (PCX)

2. Arch Coal (ACI): $11 Billion mcap, 47 P/E, 13 F '08 P/E, 0.49% Div Yield
* Stock is up 63% YTD, Up 107% YOY...3% OFF its 52 Week High
* Arch Coal is the second-largest coal company in the U.S.; its coal is responsible for 6% of the electricity generated in the U.S., a large amount when considering that above 50% of U.S. electricity comes from coal power.
* ACI has 2.6 Billion tons of proven + probable Coal Reserves
* Operates 18 mines out of the U.S. (Wyoming, Colorado, Utah, West Virginia, Kentucky and Virginia)
* Sells Coal to power plants, steel mills and industrial facilities in the U.S.
* During 2007, the Company sold approximately 135 million tons of coal, including approximately 8.6 million tons of coal it purchased from third parties
* As of December 31, 2007, the Company had a sales backlog, including a backlog subject to price reopener or extension provisions, of approximately 377.5 million tons (almost 3 times its total sales in 2007).

3. Massey Energy (MEE): $7 Billion mcap, 70 P/E, 14 F '08 P/E, 0.22% Div Yield
* Stock is up 150% YTD, Up 229% YOY...3% OFF its 52 Week High
* MEE is the U.S.'s 4th largest coal producer by 2007 Sales
* MEE had 2.3 Billion tons of proven + probable Coal Reserves per a Dec 2005 SEC Filing
* Operates 47 mines out of the U.S. (West Virginia, Kentucky and Virginia)
* MEE generates sales through the mining, processing and selling of steam and metallurgical grade coal, as well as through other coal-related businesses, including the management of material handling facilities and a synfuel production plant.
* MEE's steam coal is primarily purchased by utilities and industrial clients as fuel for their power plants...MEE's metallurgical coal is used primarily to make coke for use in the manufacture of steel.
* During 2007, MEE sold 40 million tons of coal

4. Alpha Natural Resources (ANR): $7 Billion mcap, 138 P/E, 13 F '08 P/E, No Yield
* Stock is up 192% YTD, Up 380% YOY...6% OFF its 52 Week High
* ANR is the leading exporter of metallurgical coal from the U.S.
* ANR owns or leases about 617.5 million tons of Coal Reserves
* Operates out of 58 mines in the U.S. (Virginia, West Virginia, Kentucky, Pennsylvania)
* Sells steam and metallurgical coal + sold a total of 28.5 million tons in 2007

5. Patriot Coal (PCX): $4 Billion mcap, N/A P/E (IPO'd on 10/31/07), No Yield
* Stock is up 261% YTD, Up 325% since 10/31/07 IPO...7% OFF its 52 Week High
* Spun off (IPO'd) by Peabody Energy (BTU) on 10/31/07
* PCX has 1.3 Billion tons of proven + probable Coal Reserves (Patriot’s proven and probable coal reserves include coking coal, and medium and high-British thermal unit (Btu) steam coal, with low, medium and high sulfur content.)
* Operates 10 mines out of the U.S. (West Virginia, Virginia, Illinois and Kentucky)
* Sells coal to electric utilities, industrial users and metallurgical coal customers
* During the year ended December 31, 2007, the Company sold 22.1 million tons of coal, of which 77% was sold to domestic electric utilities and 23% was sold to domestic and global steel producers.

6. International Coal Corp. (ICO): $2 Billion mcap, N/A P/E, 22 F '08' P/E, No Yield
* Stock is up 135% YTD, Up 106% YOY...7% OFF its 52 Week High
* According to management estimates as of December 31, 2007, ICO owned or controlled approximately 316 million tons of metallurgical quality coal reserves and approximately 649 million tons of steam coal reserves.
* Operates 26 mines in the U.S. (Kentucky, Maryland, West Virginia and Illinois)
* During the year ended December 31, 2007, ICG sold 18.3 million tons of coal...Of the tons sold, 17.9 million tons were steam coal and 0.4 million tons were metallurgical coal.
* ICG's 3 largest customers during 2007 were: Georgia Power Company, Duke Energy Corporation and American Electric Power and derived approximately 43% of its coal revenues from sales to its five largest customers...Revenues from sales to Georgia Power Company accounted for more than 10% of coal revenues in 2007.

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Random
Thought
Of
Brilliance:

...After taking a closer look at the above companies I'm leaning towards PEABODY ENERGY (BTU) as my favorite Long Term Risk/Return COAL play for various Reasons INCLUDING:

1.) LARGEST NAME IN THE GAME --> BTU has the Largest proven Coal Reserves in the United States aka the 'Saudi Arabia of COAL' !...Below is a chart showing the WW Geographic Split/View on WHERE BTU's Coal Reserves are Located :



2.) DIVERSE, INTERNATIONAL PRESENCE --> BTU has the Largest International Presence with 11 mines and 1.1 Billion Reserves located in Australia (fyi, Australia is the WORLD's LARGEST Coal Exporter...Australia also boats the World's 5th Largest Reserves of COAL - Please refer to my 4/30/08 post titled 'REF - World's Largest Coal Reserves' for the List). As also mentioned above, Peabody's business is geographically DIVERSE and not limited to the U.S. as the company sells its coal to 340 customers located in 19 countries.

3.) SWEETSPOT LOCATION (WYOMING) --> BTU has the World's Largest exposure to Wyoming aka the 'Bread-Basket of COAL' ! (FYI, for more info regarding the significance of Wyoming to U.S. Coal Reserves please refer to my June 21st post titled 'REF - U.S.'s Coal Production + Wyoming' ).

4.) RELATIVE VOLATILITY + TIMING --> As the largest U.S. coal producer this stock should trade + act less volatile than its much smaller peers noted above...BTU's mere 63% year over year gain PALES in comparison to some of the much smaller (and therefore more speculative) players like PCX and ANR which are up over 300% from July/Oct 2007! I'm hesitant to invest or recommend PCX and ANR because they've already had substantial runs...Who knows how much upside is left in these smaller names ? More importantly, given the market's recent volatility, who says these small cap stocks can't get knocked down for a quick 50% in the next 6 months ??? I like BTU because its actually up LESS than 100% year over year (imagine that), therefore its short-term downside should be a whole lot less vs. the other, smaller and more speculative players.

Data Courtesy: Reuters + Google Finance

GS 2Q08 Earnings Recap

GOLDMAN SACHS 2Q08 Earnings Report Stats:

Beat ?: YES ! (reported $4.58/share vs. analysts' consensus of $3.42/share)

Profit--> down 11% to $2.09 Billion (from $2.33 Billion)
Sales --> down 7.5% to $9.42 Billion (from $10.2 Billion)

Sales By Business Unit:
A.) Trading and Principle Investments: net revs of 5.59 billion (down 16% yoy)
*Fixed Income, Currency + Commodities (FICC): net revs of $2.38 Billion (down 29% yoy)
*Equities: net revs of $2.49 Billion (unchanged yoy)
*Principle Investments: net revs of $725 million (down 8% yoy)

B.) Asset Management + Securities Services: net revs of $2.15 Billion (up 18% yoy)
*Asset Management: net revs of $1.16 Billion (up 10% yoy)
*Securities Services: net revs of $985 million (up 30% yoy)

C.) Investment Banking: net revs of $1.69 Billion (down 2% yoy)
*Financial Advistory: net revs of $800 million (up 13% yoy)
*Equity Underwriting: net revs of $616 million (up 72% yoy)
*Debt Underwriting: net revs of $269 million (down 59% yoy)

Other Highlights + Guidance:
*Marks the 12th straight quarter GS has exceeded analyst estimates
*Goldman Sachs currently ranks #1 WW in 2008's year to date announced Global M+A sales volume
*GS earned 57% of its 2Q08 revenues in the U.S. (43% overseas)
*GS's 'global core excess liquidity' (a pool of cash + liquid securities) increased to an avg of $88 Billion in the quarter from about $64 Billion in 1Q08
*Operating Expenses decreased by 2% yoy to $6.59 Billion
*Goldman reduced employee headcount by less than 1,000, or 1%, quarter over quarter to 31,495 during the quarter.

*The 29% drop in Fixed Income (FICC) revenues was negatively affected by $775 million worth of writedowns and credit market losses

*Assets Under Management --> Assets under management increased by $22 Billion to $895 Billion during the quarter ($16 Billion due to market appreciation and the remaining $6 Billion via new client inflows)

*Tax Rate --> Effective Tax Rate for 2Q08 was 26.3%, down from 29.5% for the first quarter of 2008 and 34.1% for fiscal year 2007 (the decreases in the tax rate were primarily due to changes in the geographic mix of earnings)...the lower than expected 2Q08 tax rate accounted for about 35 cents of GS's $1.16 earnings 'beat'...GS expects a fiscal 2008 annualized tax rate of around 27.7%

*Book Value --> Book Value Per Common Share was $97.49 and Tangible Book Value Per Common Share was $85.16, an increase of 5% and 6%, respectively, during the quarter

*Return On Equity --> The annualized return on average common shareholders' equity, a measure of how well the firm reinvests stockholders' money, was 20.4%, compared with 14.8% in 1Q08 and 26.7% in the second quarter of 2007.

*Buyback Program --> GS repurchased 1.2 million shares at an average cost per share of $173.85, for a total cost of $203 million during the quarter...remaining share authorization under the firm's existing buyback program is 62.4 million shares.

*Loan Committments (LBO Loans) --> At the end of 3Q07, the bank had $52 Billion worth of open LBO Financing Loan Commitments...GS has now brought that number down to $11 Billion

*Mortgage Related Assets --> Goldman ended 2Q08 with $15 Billion in Residential Mortgages (down from 1Q08's $20 Billion)...$8.5 Billion in Prime, $4.7 Billion in Alt-A and $1.8 Billion in Subprime mortgages...GS ended 2Q08 with $17 Billion in Commerical Mortgages (vs. 1Q08's $19.4 Billion)

*Leverage --> GS cut its Gross Leverage Ratio to 24.3 times in 2Q08 vs. 27.9 times in 1Q08...the 'adjusted' leverage ratio fell to 14.7 from 18.6 in 1Q08.

*Level 3 Assets --> GS's Level 3 Assets (those balance sheet assets which are the most illiquid and therefore most difficult to value/price) decreased from 8% of the firm's total assets to 7% during 2Q08 from 1Q08 (from $96 Billion to $78 Billion)

"...it’s pretty obvious that March was a really difficult period in the financial markets. And so the world has certainly improved since March. And I said again on a call before, someone asked me and I said, March was definitely the low point through now. I can’t tell you it’s going to be the low point going forward. But it certainly has been the low point through now." - Goldman Sachs CFO, David Viniar

"We are realistic about the market challenges we face, but times of market dislocation also produce opportunities, and we will continue to take advantage of the most attractive of these as they arise." - Goldman Sachs CEO, Lloyd Blankfein

Full Disclosure: I own shares of GS.

U.S.'s COAL Production + Wyoming

As mentioned numerous times in previous posts, the U.S. has the WORLD's LARGEST COAL Reserves and is often referred to as the 'Saudi Arabia of Coal'. Recognizing the 'investability' of COAL as a super cheap, viable alternative energy solution in the face of $140 Crude OIL, I decided to dig deeper into the U.S.'s production of the fossil fuel courtesy of 2006 data provided by the EIA:

* Coal is produced domestically in 26 states encompassing 3 Major Producing Regions:

1. Appalachian (34% of total production - Texas, Indiana, Illinois, etc.)

2. Interior (13% of total production - West Virginia, Kentucky, Pennsylvania)

3. Western (53% of total production - Wyoming, Montana, Colorado)

* The bulk of coal production domestically comes from the Western Region and the state of Wyoming...the Western Region accounted for 53% of total U.S. coal production in 2006

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WYOMING is by far the Largest Coal Producing State in the U.S...some interesting Wyoming coal production stats:

* 38.5% of the U.S.'s TOTAL Coal production in 2006 was mined in WYOMING (next largest state producer is West Virgina with 13% share...3rd is Kentucky with 8% share...and 4th is Pennsylvania with 6% share)

* Wyoming’s “Black Thunder Mine” mine individually produced more coal than 23 other coal producing states

* Wyoming accounted for about 72% of the Western Region production total

* Wyoming produced 56.9 million short tons more than the entire Appalachian Region in 2006

* Wyoming's 2006 production was almost 3 times the production of the Interior Region

Data Courtesy: EIA

Top U.S. Crude OIL Producing States

Top U.S. Crude Oil Producing States + Marketshare per 2006 EIA data:

1. Texas: 21% domestic U.S. share
2. Alaska: 15%
3. California: 12%
4. Louisiana: 4%
5. Oklahoma: 3%
6. New Mexico: 3%

Data Courtesy: EIA

Saudi Arabia's Daily Crude OIL Capacity

Saudi Arabia's current daily crude production capacity is 11.3 million barrels of oil a day.

At today's Jeddah Energy Meeting in Saudi Arabia, Ibrahim Al-Muhanna, a senior advisor to Saudi Arabia's Minister of Petroleum, stated that crude oil production would increase significantly with the goal of raising Saudi production capacity to 12.5 million barrels of oil a day by the end of 2009. (FYI, 98% of Saudi's oil production is high sulfur, SOUR Crude. It should be noted that SOUR Crude is much more expensive + difficult to refine vs. the more ideal variety of crude oil - SWEET crude)

* FYI + as mentioned in previous posts, Saudi Arabia has the WORLD's LARGEST crude oil reserves equating to about 260 Billion barrels or approx 1/4 of the world's TOTAL proven reserves. Saudi Arabia is also currently the U.S.'s 3rd largest supplier of Crude OIL (Canada is #1 and Mexico is #2).

http://www.cnbc.com/id/25298153

Data Courtesy: CNBC

China's #1 Industrial Metal Consumption

According to a 6/20/08 CNBC interview with the CEO of Rio Tinto (RTP), Tom Albanese:

* CHINA is the World's Largest CONSUMER of Steel, Copper and Aluminum.

* Over the past 5 years, China has been responsible for 95% of the incremental growth in Copper consumption...Two years ago China was consuming 1/4 of the world's copper, now China is consuming 1/3 of the world's copper.

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* United States-based Freeport Mcmoran Copper & Gold (FCX) is the world's largest publicly traded COPPER company...England-based Rio Tinto (RTP) is the world's largest publicly traded ALUMINUM company...Luxembourg-based ArcelorMittal (MT) is the world's largest publicly traded STEEL company.

Data Courtesy: CNBC

Full Disclosure: I own shares of FCX and MT.

U.S. Internet Browser MarketShare

According to research firm Net Applications, U.S. Internet Web Browser Marketshare (as of May 2008):

1. Microsoft's Internet Explorer (MSFT): 74% (79% a year ago)


2. Mozilla's Firefox: 18% (15% a year ago)


3. Apple's Safari (AAPL): 6% (5% a year ago)

Data Courtesy: Net Applications
Full Disclosure: I own shares of AAPL.

ArcelorMittal's Voracious STEEL Appetite

ArcelorMittal (MT), the WORLD's LARGEST steel company, outlined the following Long Term Production Goals during an investor conference on Tuesday, 6/17/08:


* STEEL PRODUCTION --> ArcelorMittal expects its steel shipments to total 153 million tons in 2012 vs. 116 million in 2007 (30% production growth in 5 years...this seems enormous considering the current assets + size of the company - $150 Billion marketcap)

* IRON ORE PRODUCTION --> MT expects its iron ore production to reach 110 million tons by 2012 (iron ore is a raw material required for steel production)

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSL1754904620080617

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NOTE some of the recent GLOBAL growth actions/steps taken by ArcelorMittal to keep up with its aggressive steel production goals + Ultimately RULE the WW STEEL markets ! (ps: they are a very intelligent + BUSY company) :


* 25% Stake in Turkey's Erdemir --> On 6/16/08, MT announced they spent $869 million to raise their ownership stake in Turkey's Erdemir (Turkey's largest steel producer) to 24.99%...Per Bloomberg, "Erdemir, which has plants on Turkey's Black Sea and Mediterranean coasts and another in Romania, produced 5.4 million metric tons of steel last year and plans to invest $4.2 billion by 2012 to increase capacity. Ordu Yardimlasma Kurumu, or Oyak, an army pension fund, controls Erdemir after buying a 49 percent stake in the steelmaker from the government for $3 billion in 2005. Oyak Chief Executive Officer Coskun Ulusoy said June 14 that the fund subsequently increased its stake in Erdemir to more than 50 percent, without giving an exact figure...Turkey's biggest steelmaker earlier this month posted a 57 percent gain in first-quarter profit."


* Acquisition of U.S. Bayou Steel --> On 6/16/08, MT announced their acquisition of U.S. steel producer, Bayou Steel, for $475 million...Per Bloomberg, "Bayou operates from Louisiana and Tennessee. It produced about 510,000 tons of steel in 2007 and had sales of about $331 million. The company was acquired in June 2006 by Black Diamond Capital Management LLC for $180 million."


* Acquisition of Canada's Bakermet --> On 6/09/08, MT announced their acquisition of Canadian scrap metals recycler, Bakermet. Terms of the deal have not been disclosed...Per MT's press release, "Bakermet, which specializes in all types of ferrous and non-ferrous metal, processed approximately 130,000 short tons of ferrous and 40 million pounds of non-ferrous metals in 2007. The plant, located near Ottawa, will secure upstream self sufficiency in shredded metal for ArcelorMittal's Contrecoeur mill (ArcelorMittal Montreal)."


* 15% Stake in Australia's Macarthur Coal --> On 5/21/08, MT announced they owned a 14.9% stake in Australia's Macarthur Coal worth approx $605 million...Per Marketwatch, "The stake purchase spurred speculation ArcelorMittal may be making a takeover bid for the miner as part of strategy to secure raw-material supplies. Coking-coal prices have tripled in the past five months...Macarthur produces about 35% of the global pulverized coal used to make steel. Control of Macarthur would make ArcelorMittal self sufficient for about 10% to 15% of its coking coal needs, according to reports."...Clearly MT is looking to secure the raw materials it needs (coking coal) to produce steel and support its current long term production plan of record.


* 50% Stake in Gonvarri Brasil --> On 4/03/08, MT announced their 50% stake and joint venture with Gonvarri Brasil. Per MT's press release, "Gonvarri Brasil is one of the major players for servicing automotive, industry and distribution customers (in Brazil). ArcelorMittal and Gonvarri group have had a close relationship for many years - ArcelorMittal holding a significant stake in Gonvarri Holding and being a major supplier...With this acquisition, ArcelorMittal intends to build a strong presence in the Brazilian flat steel downstream segment, in line with the leadership of its Tubarão (Vitoria) and Vega do Sul plants. Synergies will also be realized with ArcelorMittal Belgo's existing distribution network in Brazil, active both in flat and long products...Today the company (Gonvarri Brasil) is one of the leaders of the flat steel processing in Brazil and its activities include pickling, slitting, blanking, cutting to length, with a total processing capacity of around 1.3 million tons of steel. The Company has 320 employees and owns more than 80,000 square meters of facilities."

http://www.bloomberg.com/apps/news?pid=20601085&sid=a32CMRQlNSMw&refer=europe

Data Courtesy: Reuters + Bloomberg + MT
Full Disclosure: I own shares of MT.

UNTAPPED U.S. OIL + Gas Reserves

A couple of interesting charts showing some of the Price and Supply dynamics of Crude Oil:

* PRICE --> Check out the below graph depicting CRUDE OIL's 'bubblicious' spike since the beginning of 2008:

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* SUPPLY --> The below graph is a snapshot showing 2007's drop in oil exports amidst historically high 2007 crude prices...partially demonstrates my belief that oil is a long term SUPPLY problem/concern (you'd think with prices so high exporters would be churning out max supply...maybe they are churning out max supply and that STILL isn't enough to meet rising WW demand):

*Lastly, speaking of SUPPLY, check out the below U.S. map showing WHERE the country has their largest 'potential' undeveloped (non-drilled) Reserves of Crude OIL + Natural Gas:


Data Courtesy: EIA + Barchart.com + U.S. Geological Survey

BANK Stocks - Weapons of MA$$ Destruction

In order to to build some market perspective 6 months into 2008, I decided to do a 'Performance' Check on some of the Financial + Homebuilder stocks I follow.

BEHOLD the HORRID Year To Date (1/01/08 - 6/16/08) and year over year returns (...the graph to the left is courtesy of Societe Generale equity research + shows the marketcapitalization of the Financial sector as a proportion to the marketcap of the entire S+P 500 index...currently financials make up about 17% of the entire S+P 500):

Company (Ticker - Mcap): Year To Date Change, 1 Year Change

* Large U.S. Banks (Ticker...Marketcap): Returns
Bank of America (BAC - $135B): -27%, -39%
Bank of New York (BK - $48B): -14%, -6%
BB&T Corp. (BBT - $15B): -11%, -35%
Citigroup (C - $109B): -29%, -61%
Deutsche Bank AG (DB - $48B): -26%, -36%
JPMorgan (JPM - $137B): -9%, -21%
Northern Trust (NTRS - $16B): -7%, +9%
PNC Financial (PNC - $21B): -8%, -19%
Soverign Bancorp (SOV - $5B): -19%, -59%
Sun Trust Bank (STI - $16B): -29%, -51%
Wachovia (WB - $39B): -52%, -67%
Washington Mutual (WM - $7B): -50%, -84%
Wells Fargo (WFC - $87B): -13%, -27%
U.S. Bancorp (USB - $55B): -1%, -8%

* Brokers + Asset Managers:
AIG (AIG - $85B): -42%, -53%
Barclay's (BCS - $43B): -36%, -56%
Bear Sterns (formerly BSC): DEAD
Credit Suisse (CS - $49B): -20%, -35%
Goldman Sachs (GS - $72B): -15%, -20%
Jefferies Group (JEF - $3B): -16%, -31%
Legg Mason (LM - $8B): -26%, -46%
Lehman Brothers (LEH - $15B): -58%, -66%
Merrill Lynch (MER - $38B): -27%, -57%
Morgan Stanley (MS - $47B): -20%, -52%
Piper Jaffray (PJC - $0.75B): -12%, -34%
Raymond James (RJF - $4B): -5%, -5%
State Street (STT - $29B): -15%, -1%
UBS AG (UBS - $49B), -47%, -61%

* Stock Exchanges:
CME Group (CME - $23B): -39%, -24%
Intercontinental Exchange (ICE - $9B): -36%, -22%
NYSE Euronext (NYX - $16B): -32%, -25%
Nasdaq OMX Group (NDAQ - $7B): -33%, +4%
Nymex Holdings (NMX - $9B): -33%, -37%

* Other U.S. Financials:
Ambac Financial (ABK...$0.7B): -91%, -97%
Berkshire Hathaway (BRKA...$195B): -11%, +15%
Charles Schwab (SCHW...$26B): -11%, +5%
Countrywide Financial (CFC...$3B): -44%, -87%
Downey Financial (DSL...$0.125B): -84%, -93%
E Trade Financial (ETFC...$2B): +7%, -84%
Fannie Mae (FNM...$25B): -36%, -63%
Freddie Mac (FRE...$16B): -30%, -63%
MBIA Inc. (MBI...$2B): -67%, -91%
Metlife (MET...$42B): -4%, -12%
Moody's Corp. (MCO...$10B): +11%, -42%
PMI Group (PMI...$0.4B): -66%, -91%
Sallie Mae (SLM...$12B): +23%, -57%
TD Ameritrade (AMTD...$11B): -6%, -9%
Thomson Reuters (TRI...$30B): -12%, -15%

* International Banks:
Australia and New Zealand Banking (ANZBY...$34B): -23%, -25%
Banco Bilbao/Argentina (BBV...$77B): -15%, -17%
Banco Bradesco/Brazil (BBD...$66B): +3%, +28%
Banco de Chile (BCH...$6B): +2%, -1%
Banco Itau/Brazil (ITU...$66B): +7%, +21%
Bancolumbia/Columbia (CIB...$7B): +4%, +6%
Banco Santander/Spain (STD...$120B): -11%, +2%
Bank of Ireland (IRE...$11B): -30%, -51%
Creditcorp/Peru (BAP...$8B): +13%, +45%
HDFC Bank/India (HDB...$12B): -34%, +3%
HSBC Holdings/UK (HBC...$195B): -3%, -12%
ICICI Bank/India (IBN...$21B): -40%, -21%
Kookmin Bank/South Korea (KB...$20B): -18%, -36%
Lloyd's TSB Group/UK (LYG...$40B): -27%, -40%
Mitsubishi UFJ/Japan (MTU...$105B): +8%, -14%
Mizuho Financial/Japan (MFG...$61B): +9%, -29%
National Australia Bank (NABZY...$209B): -21%, -24%
National Bank of Greece (NBG...$24B): -25%, -8%
Royal Bank of Canada (RY...$64B): -5%, -9%
Royal Bank of Scotland (RBS...$77B): -47%, N/A
Shinhan Financial/South Korea (SHG...$17B): -19%, -23%
Toronto-Dominion Bank/Canada (TD...$54B): -4%, -2%
Unibanco/Brazil (UBB...$38B): -2%, +21%
Westpac Banking Corp./Australia (WBK...$39B): -16%, -5%

* U.S. Homebuilders:
Beazer Homes (BZH...$0.2B): -27%, -83%
Centex (CTX...$2B): -40%, -65%
DR Horton (DHI...$4B): -8%, -43%
Hovnanian (HOV...$0.5B) -7%, -67%
KBH Home (KBH...$2B): -12%, -57%
Lennar Corp (LEN...$3B): -11%, -62%
MDC Holdings (MDC...$2B): +13%, -20%
NVR Inc. (NVR...$3B): +17%, N/A
Pulte Homes (PHM...$3B): +1%, -57%
Ryland Group (RYL...$1B): -10%, -40%
Standard Pacific (SPF...$0.2B): -4%, -83%
Toll Brothers (TOL...$3B): +2%, -25%

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*According to the New York Times, "Between early 2004 and mid-2007, a period of unprecedented wealth on Wall Street, seven of the nation’s largest financial companies earned a combined $254 billion in profits. But since last July, those same banks — Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley — have written down the value of the assets they hold by $107.2 billion, gutting their earnings and share prices. Worldwide, the reckoning totals $380 Billion, much of which reflects a plunge in the value of tricky mortgage investments."

http://bigpicture.typepad.com/comments/2007/12/underwriting-th.html

Data Courtesy: Bloomberg, New York Times, Barry Ritholtz

Full Disclosure: I own shares of GS and IBN.