The analyst who projected $200 oil should have lopped off a zero.

Commodities Collapse: Fast, Big and Still Going - WSJ.com.

The WSJ article linked above (sub. required) show how wrong the analysts were on the commodities bubble then gives some new predictions on how far down (much farther, of course) the prices will fall. Then they compare the commodities bubble to the dot com bubble to get parallels on price losses.

If I remember correctly many of the dot com bubble stocks never had any real revenues or profits and were just over sold ideas. Commodities are a real part of the world wide economy and have significant supply constraints. I believe price recoveries in many commodities will come pretty soon. Just my opinion.

To conserve cash Star Bulk Carriers (SBLK: 1.89 -0.22 -10.43%) has elected to pay half of the 3rd quarter’s 36¢ in cash and the remainder in company stock. Star Bulk Carriers owns a dozen dry bulk cargo ships which it leases out on long terms contracts. Dry bulk shippers have been hit hard in line with the Baltic Dry Index losing 95% of its value over the last 8 months. Theoretically, the lower spot rates should not affect the revenues of a company like Star Bulk which leased out its ships when rates were much higher and should have steady cash flow.

The problem arises when one of the company’s customers declares bankruptcy and drops the lease as happened in October. A ship that was earning $106,000 per day will now probably earn less than 10% of that amount. For a small company like Star Bulk it would only take another contract cancellation or two to put them into bankruptcy.

So it makes sense to give the shareholders some cash to keep them happy. They bought the stock in the first place to get what was supposed to be a steady, high dividend. Paying half the dividend in stock conserves some cash and the management team is taking their entire dividend payouts in stock to show their belief in the company. I have less faith in management when you take a look at their use of cash earlier in the year. In January the company announced a $50 million stock repurchase plan and they have spent $12.9 million year to date. So far in the 2nd half of 2008 they have purchased almost 1 million shares at an average of almost $8 per share. Now they are issuing over 4 million shares in lieu of cash dividends at a value of $2.30. It looks like they just threw away most of the money spent so far on the stock repurchase plan.

Jeff Matthews has repeatedly pointed out the stock repurchase programs loved by Wall Street analysts often have severe negative long term impact on the companies with buy back programs. I think this is a graphic example.

Note: I do not have a position in SBLK.

The NEX gained 0.8% for the week ending December 1. Note this includes the big decline on Monday, 12/1. The NASDAQ and the S&P 500 were down 5% and 4.2% for the same period. AMEX Oil declined by 6.1%. Maybe this is the glimmer of hope that the renewable and clean energy can resume market beating performance. Time will tell.

Power storage was the top sector, gaining 5.2% as companies from the U.S. and China had gains on government sponsored investments. The two largest sectors in the NEX were both in negative territory. Solar energy lost 2.1% pulled down by German manufacturer, Conergy. Wind energy was down 0.8% in spite of Babcock and Brown Wind Partner’s big gain. BBW was selected by the Canadian province of Manitoba to build a 300MW project worth up to $800 million.

Here are the top gainers and losers from the index for the week:

NEX top gainers since 25 Nov 08
Meidensha 6508 + 38.0%
Aventine Renewable Energy Holdings AVR + 37.5%
Babcock & Brown Wind Partners Group BBW + 37.1%
SMA Solar Technology S92 + 20.3%
Rockwool International ROCKB + 19.5%

NEX top losers since 25 Nov 08
Conergy CGY - 33.7%
Maxwell Technologies MXWL - 17.4%
Sao Martinho SMTO3 - 14.2%
Solon AG fuer Solartechnik SOO1 - 12.6%
Acciona ANA - 12.4%

Inergy, L.P. (NRGY: 14.27 +0.05 +0.35%) has released their 4th quarter and year end results. The company had a nice year and was able to increase distributions by 7% over 2007. Inergy has increased the distribution for 28 consecutive quarters. The company has two main business lines: Retail propane distribution and midstream natural gas processing. I found several items in the press release linked above to be of special interest:

The midstream business is entirely fee based. This allow them to avoid the fate of the product sales based midstream companies like Atlas Pipeline Partners (APL: 6.05 -0.62 -9.30%). For the year, Inergy’s gross profit on midstream operations increased 59% to $92 million.

Annual propane sales of 331.9 million gallons were 30.3 million gallons less than in 2007. The primary cause was customer energy conservation due to significantly higher prices. In spite of the lower volume sales, Inergy still generated propane sales and service profits of $410.3 million was $11.7 million higher than for 2007.

The most interesting revelation in the press release was the reiteration of 2009 EBITA guidance of $277 to $294 million. This is a very nice increase over the $239 million earned in 2008. The low end of the 2009 projection is a 15% improvement over 2008 and the high end represents a 23% bump.

It appears Inergy will be able to continue its streak of growing distributions for the forseeable future. The current distribution at the current share price give a better than 15% yield. I would consider this stock an excellent value for those looking for long term growing income. When the market realizes after a couple more dividends that the growth will continue, this will be a $25 stock again.

Note: NRGY is a component of this site’s hypothetical Income Portfolio.