Fed spokesman comments on Greenspan's speech.
biz.yahoo.com
I am beginning to think that everyone is getting painted into a corner. No rate cut: slam! Rate cut: the Fed is panicing, slam! Stocks move up: sell and short! Stocks move down, technical levels broken and kaos.
Rate cuts will take some time to kick in, and the energy costs being absorbed by industrial companies are going to wreak havoc on the G&A line. When Kaiser Alum can shut down their plants, still pay their employees and make a bigger profit selling their allocation of electricity...well, there is one heck of a shoe waiting to drop out there.
How Tinmen Smelt a Quick Profit
What's more profitable than selling aluminum? Selling the electricity you would normally use to make it--to California. That's what aluminum producers along the Northwest's Columbia River have figured out. They're buying electricity to run their plants from the regional power authority for $22 per kilowatt hour, then shutting down assembly lines, idling workers--and reselling the electricity for $405 per kwh.
The power authority, understandably, wants the companies--Kaiser Aluminum, Columbia Falls Aluminum, and Golden Northwest--to give back a quarter of their windfall--worth up to $1 billion for the next seven months of the current contract. But while the others agree, Kaiser says no and is pocketing the $383 difference. Complains a Bonneville Power Administration spokesman: ''They are taking advantage of the power crisis.''
But Kaiser defends its actions, saying it's merely exercising contractual rights to resell power. While it shut down two smelters, Kaiser still managed to pay 1,000 idled workers 75% to 100% of their wages. The plants are to remain closed for the contract's duration. Without the windfall, the Houston-based aluminum maker would have lost 19 cents a share in the fourth quarter. But thanks to the deft arbitrage, Kaiser eked out a 14 cents-a-share profit. ''It didn't make sense to make aluminum,'' says a Kaiser spokesman.
With aluminum selling for 70 cents to 75 cents a pound and the power to make a pound of aluminum costing $1.50, he's got a point.
By Stanley Holmes
businessweek.com@@s8*xAWUQy03y3ggA/premium/01_09/c3721023.htm
We seem to be in a no win situation in terms of stabilizing the economy. |
