2013

First post of 2013.

All's Fair

NYTimes covers the Assad regime's involvement in the booby-trapping of rebel ammunition.  The very brief Op-Doc on the history of this practice is well worth viewing.

24.6%

At 24.6 percent, "Spanish unemployment hit its highest level in the second quarter since the Franco dictatorship." - Reuters

Never a good headline to wake up to...

4 Minute Warning

1'06" mark, Josh Fox's GasLand (2010): Radiohead's "4 Minute Warning" eerily begins to play.

Of course, the chemical-infested frozen rabit corpse has been preserved in a WalMart bag. If you're looking for a powerful amalgamation of emotions, this is it.

Have yet to finish the documentary, but will certainly return to this EID article.

Refranchising Gains and Losses

Are YUM's refranchising losses cause for concern? The company "[does] not allocate such gains and losses to [its] segments (China / YRI / U.S. / India) for performance reporting purposes." RT's FY2008 10-K provides a decent definition of the concept:

Refranchising Gains (Losses)
Refranchising gains (losses), included in other restaurant operating costs, include gains or losses on sales of restaurants to franchisees. All direct costs associated with refranchising are included in the calculation of the gain or loss. Upon making the decision to sell a restaurant to a franchisee, the restaurant is reclassified to assets held for sale at the lower of book value or fair market value less cost to sell and any anticipated loss is immediately recognized. When the sale occurs, any loss not previously recognized is recorded concurrently with the sale. Any gains to be recognized are recorded when the sale closes.

To be continuted...

Risk Factors...

How could anyone feel comfortable with a PEIX common equity/convertible debt investment? I've never seen a more terrifying "Business Risks" portion of an annual filing.

From "Risks Related to our Business," 2011 PEIX 10-K...
"The results of operations of the Pacific Ethanol Plants and their ability to operate at a profit is largely dependent on managing the spreads among the prices of corn, natural gas, ethanol and WDG, the prices of which are subject to significant volatility and uncertainty."

If only 2006 wasn't the peak...
"In early 2006, the spread between ethanol and corn prices was at an historically high level, driven in large part by oil companies removing a competitive product, methyl tertiary butyl ether (MTBE), from the fuel stream and replacing it with ethanol in a relatively short time period. However, since that time, this spread has fluctuated widely and narrowed significantly. Fluctuations are likely to continue to occur."

Terrifying chart for PEIX investors...
Extracted from CBOT/CRB's 7/9/12 Ethanol Outlook Report, this chart bluntly exhibits the soaring input costs (corn) alongside near-month ethanol futures. Sep corn prices +36% in just 3 weeks, touching a 10-month high of $7.14. Severe heat and drought conditions have shattered the summer's corn supply outlook: Sep ethanol-corn margin remains negative at -11.5c/gallon.

Absolutely Stunning

Zero Hedge via NY Fed

Of course, Professor X mentored Emanuel Moench as a doctoral student at Penn. I've been thinking about the significance of this study nearly all day, and have yet to fully comprehend the results. I've shared with coworkers with 20+ years of market/investing experience, all of whom are stunned.