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Our MissionTo Provide Uncompromising Investment Research
Company ProfileJOHN TUMAZOS VERY INDEPENDENT RESEARCH, LLC (JTVIR LLC) is registered as an investment advisor in the State of NJ. We have 30-odd institutional clients in New York, CT, Massachusetts, California, Wisconsin, Minnesota, and Florida. We do fundamental research on commodities markets and common stocks in the metals and forest products sectors. For example, in the second-half of 2007 we traveled abroad five times to visit mines and smelters, and published 92 investment reports. We collected our first revenue on September 20, made our first email communications seeking revenue September 4 and 10, became registered August 27, filed for registration August 10, formed our LLC on July 6 and "changed course" on June 6, 2007 when the former Prudential Equities Group shut down. We sent reports "developmentally" to our former mailing list from July 8 to August 27, 2007 "not for compensation" while we completed registration and through mid-November in a "grace period" as our clients engaged us.We are regulated like a money manager, but we manage no client funds as our business is to advise active money managers. We are not a broker-dealer, but deliver the same basic research services that we had since 1981 as an employee at major brokerage firms. In our business model we sell our research direct payments and deliver it via email and our www.veryindependentresearch.com web site. Our clients pay us via direct checks, wire transfer, commission sharing agreements or soft dollar payments. Initially we have had no sales force, and our clients learn of us from our existing reputation, existing relationships and "word of mouth." Please click on the "Become a Subscriber Member" button to the left or simply phone or email us if you want to buy our research Special Events Webcast for Nov 12: http://www.wsw.com/webcast/vir2/ December 2, 2008 Dear Friend, We completed a detailed review of the steel industry and U.S. Steel, which is attached. Steelmaking ingredients have been in oversupply, paced by an estimated 8% gain in iron ore output this year, while global steel output fell 13% in October. The era of "marking up" ingredient price shortages is over, and the easy profits are gone. The $196 record share price is a memory. We estimate that pension and VEBA medical trust assets have lost about $5 billion in value in 2008, which reduces the balance sheet to a deficit tangible net worth. We estimate revenues will fall from $22.5 billion in 2008 to $14.5-$15.0 billion for the foreseeable years, and that a portion of the 25% or $5 billion in needed cost reductions will come from volume declines and "automatic" declines in moly, steel scrap or profit-sharing costs. However, higher pension expense and met coal contracts expiring near $80 per ton will increase costs in 2009. We estimate the company needs to cut discetionary costs by $1.75 billion in order to contain net losses under $100 million. We esimtate a $3+ loss for 2009, and that U.S. Steel needs to cut flat-rolled variable costs by 14%, tube by 27% and European costs by 21%. We rate U.S. Steel Underweight with a $25 price target because we believe other companies or markets have better upside potential. For example, global copper, nickel and gold mine outputs fell in 2008, and prevented larger oversuppplies. Specialist Allegheny Technologies benefits from silicon transformer alloys, titanium, high-nickel jet engine and other special alloys. Other markets appear more poised to rebound or retain a degree of profitabiliy. Faithfully, John C. Tumazos
Contact InformationPlease Contact us with any questions.
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Copyright © 2008 John Tumazos Very Independent Research, LLC
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