Glencore vs. Google

First, I bet you don't know who or what Glencore is, but they generate revenue and income comparable to the likes of Google and it is not a tech company and it is private. But I guess not as private since the front page article on the WSJ. They are the largest commodities traders on the globe. Their specialty is in dealing in unhospitable climes and acquiring their commodities at a fair price. They have recently expanded by being large shareholders of publicly traded companies such as XSTRATA (nickel and coal) and CENX (aluminum).

Google and Glencore's public perception is completed misaligned with fact. "Do know evil" is Google's mantra, yet they want to monitor everyone's viewing habits that may get into the government's hands. Glencore is known as "doing evil" with rogue regimes, but I think people (more likely jealous) suspect something illicit in making such outsized profits in a business so few know-and do people know tech that well either?. It is a demanding 24/7 environment in harsh climes; unlike sunny CA. Google's employees have all been amply rewarded mostly through stock options grants which not only dilutes the shares but is being paid for by the public. In contrast, Glencore pays bonuses through income received what in the old days was considered "working for it." Additionally, many of the employees are shareholders of the company where the company buys out the employees stake when they leave-again from the company's treasury.

But Google and Glencore are similar in one respect: they know their business! Google went public seeing the future of web search. And they have been printing money ever since going public. Now Glencore is going "public" by issuing billions in debt, especially in a precarious time for debt, to buy as many commodity related industries possible before, according to them, it's too late; especially with the public perception that commodities are played out. For me, I don't like to go against people who put their money where their mouth is and margin that stake by borrowing large amounts of money, and even allowing the WSJ and Bloomberg to have articles written on them. They are borrowing money at 6% (their bonds are junk rated) and expect to get returns in excess of 10%-not a bad deal and what if commodities ramp again? It's called the sweet spot. In conclusion, Long commodities especially ones where India and China lack.

AA seems really cheap in light of the aluminum consolidation. I am looking to speculate on this one. But with option LEAPS.

If Xstrata couldn't buy Alcan, why not buy the better one, Alcoa? The company that started the aluminum business.

A side note:
And what about the bondholders, they should be buying what Glencore is buying, commodities and industries that deal in them. But if they are satisfied with 6% to help payoff their other junk bond rated debt so be it. The irony is that ALT-A mortgages as well as some subprime were rated AAA by the ratings agencies, yet the entire financial structure was built on a deck of cards. While Glencore deals in commodities not debt. They get paid and have a history of making money in even the harsh commodity climate of 2000-2002. The irony.