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You're at a fruit market. But, instead of just being able to buy apples at this fruit market, you can also sell fruit.
You're not a farmer, so you come to the market to buy some apples and you see two fruit stands. Fruit Stand A on the left
is buying and selling apples at 50 cents apiece. However, Fruit Stand B on the right is buying and selling apples at 53 cents
apiece. People are buying and selling apples at these two stands all the time, and the price at a stand could change at any
moment. But, while you're there, apples are 50 cents and 53 cents, respectively.
You're a smart person, and you quickly
realize that you can buy apples from Stand A and then sell them across the street to Stand B and make a 3-cent profit. But
you have to do it now; you can't wait. So you buy all the apples at Stand A and then run to sell them all to Stand B.
Congratulations.
You've committed fruit-stand arbitrage.
Arbitrage is exactly that: the selling of the same item between two different
markets to make a profit off the mathematical differences in price. However, it's not apples that are traded--the goods in
question are usually stocks, currencies and other securities. Arbitrage happens when you get a stock, usually a common one
like General Electric that's traded on multiple markets (Japan, Hong Kong, U.S., etc¿). The stock is usually worth within
fractions of a penny the same on each of those markets. However, there are often some minor variations.
People who
participate in arbitrage take advantage of these variations--and make a ton of money doing it. As seen in the fruit stand
example, you can make a "riskless profit" from buying and selling apples between different markets.
There are some
big hedge funds that make almost all their money off arbitrage. But, despite this simple example, arbitrage is mathematically
complex--and involves a good portion of risk if you don't know what you're doing. You probably won't be able to participate
in arbitrage directly, but you can always invest in a mutual fund that does.
Home / Markets / Industries / Energy
Wednesday, May 14, 2008
Massey Energy CEO Says Company is 'Positioned to Win': Reserves May Prove Most Valuable in North America
Comtex
RICHMOND, Va., May 14, 2008 /PRNewswire-FirstCall via COMTEX News Network/ ----Massey Energy Company (NYSE: MEE) Chairman and Chief Executive Officer Don Blankenship addressed stockholders at the Company's annual meeting on Tuesday, May 13, 2008 and said that he believes Massey's reserves "will prove to be more valuable than those of any other North American coal company." Citing 20 years of successful execution of a "Position to Win" strategy, Blankenship spoke of Massey's increasing share of the coal reserves in Central Appalachia. "We have nearly tripled our reserve base" and "our reserve share has increased from less than 7%, when this management team began to lead the Company, to nearly 38% today." Blankenship added that had the Company predicted this growth 20 years ago, "no one would have believed it."
(Logo: http://www.newscom.com/cgi-bin/prnh/20071031/MASSEYENERGYLOGO )
Looking ahead, Massey's Chairman expects the Company's position to improve even further. "If the current trends continue, Massey is on track to be in control of more than two thirds of the remaining Central Appalachian coal reserves in just 10 years," he stated. The Company currently owns or controls more than 2 billion tons of high quality coal reserves in Central Appalachia. It produces some of the highest quality coal in the world with diverse characteristics that enable it to meet the demands of nearly any coal market in the world. Approximately 800 million tons of Massey's reserves are considered to be of metallurgical quality.
"We are very excited about this year as we believe we are just beginning to realize the benefits of our strategy. As we roll out our expansion and increase production, the opportunities will only be getting better," Blankenship concluded.
Business items at the annual meeting included four stockholder ballot issues. Preliminary results of shareholder voting were announced. The following three class III directors were elected to serve a three year term: Don L. Blankenship, General Robert H. Foglesong and Admiral Bobby R. Inman. The appointment of Ernst & Young LLP as Massey's independent public accounting firm was ratified. Two shareholder proposals regarding political contribution reports and climate change reports did not pass.
Company Description
Massey Energy Company, headquartered in Richmond, Virginia, with operations in West Virginia, Kentucky and Virginia, is the fourth largest coal company in the United States based on produced coal revenue.
FORWARD-LOOKING STATEMENTS: Certain statements in this press release are forward-looking as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on facts and conditions as they exist at the time such statements are made as well as predictions as to future facts and conditions the accurate prediction of which may be difficult and involve the assessment of events beyond the Company's control. Caution must be exercised in relying on forward-looking statements including disclosures that use words such as "believe," "anticipate" and "expects". Due to known and unknown risks, the Company's actual results may differ materially from its expectations or projections including disclosures that use words such as "believe," "anticipate," "expect," "estimate," "intend," "plan," "will," "project" and similar statements that are subject to risks. Factors potentially contributing to such differences include, among others: market demand for coal, electricity and steel which could adversely affect the Company's operating results and cash flows; future economic or capital market conditions; deregulation of the electric utility industry; competition in coal markets; inherent risks of coal mining beyond the Company's control, including weather and geologic conditions; the Company's ability to expand mining capacity; the Company's production capabilities; the Company's plan and objectives for future operations and expansion or consolidation; failure to receive anticipated new contracts; customer cancellations of, or breaches to, existing contracts; customer delays or defaults in making payments; the Company's ability to manage production costs; the Company's ability to timely obtain necessary supplies and equipment; the Company's ability to attract, train and retain a skilled workforce; fluctuations in the demand for, price and availability of, coal due to labor and transportation costs and disruptions, governmental policies and regulatory actions, legal and administrative proceedings, settlements, investigations and claims, foreign currency changes and other factors; and greater than expected environmental and safety regulation, costs and liabilities. The forward-looking statements are also based on various operating assumptions regarding, among other things, overhead costs and employment levels that may not be realized. While most risks affect only future costs or revenues anticipated by the Company, some risks might relate to accruals that have already been reflected in earnings. The Company's failure to receive payments of accrued amounts could result in a charge against future earnings.
Additional information concerning these and other factors can be found in press releases as well as Massey's public filings with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2007, which was filed on February 29, 2008 and subsequently filed interim reports. Massey's filings are available either publicly, on the Investor Relations page of Massey's website, http://www.masseyenergyco.com, or upon request from Massey's Investor Relations Department: (866) 814-6512 (toll free). Massey disclaims any intent or obligation to update its forward-looking statements. For further information, please contact the Company via its website at http://www.masseyenergyco.com.
SOURCE Massey Energy Company
http://www.masseyenergyco.com
Copyright (C) 2008 PR Newswire. All rights reserved
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