Jimbo

MORE CRAZY BOND MARKET FACTOIDS The Greek Govt ten year trading at the same rate as the US Govt ten year ....2%. The Greek ten year trading from near 40% in 2012 to 2% now. We live in amazing bond days!!!!!!!!!!!!!!!!!!!!!!!!!! When only the Argentine 100 year bond makes any sense - 8.5% yield!!!!!

ANOTHER VERY SAD BALANCE SHEET Over the past 4 years AIG's net tangible assets have declined form $90 Billion ot $56 Billion. Shareholder wealth destruciton of a fairly high order. If it keeps that up it will be chapter 11 in 5-6 years.

MORE CONCENTRATED MARKET INSANITY The Aussie ten year bond selling near 1% yield. But inflation is at 2%. Thats a 1% real negative yield!!!!!!!! A 1% of capital gift to the borrower every year. Or a 10% gift of the bond capital over the life of the bond. And I cant see the RBA shifting its inflation target anytime soon.

BEYOUND MEAT A 10 Billion market cap on 40 Million of sales The company needs to be renamed BEYOUND REASON

THE BOILING FROG DEFAULT SYNDROME Because inflation is at 2% per annum the US government is defaulting on its real debts at a rate of 2% a year. Compounded this means that the USA wipes out the real value of its federal debt every 35 years. The same applies to all USA based debts. As all debtors are free riders on the boiling frog debt default train. Thasts why lending long at current low rates is a gift to the borrowers.

WHY MUDDY WATERS SHORT ON MANU LIFE WILL FAIL Much as I admire Carson Block I think shorting Manulife is the wrong call. Why????? Regulatory Risk The Government and courts of Canada will neve let Manulife go chapter 11. Too much damage Whilst the short looks good in isolation. A short must never be considered in isolation. The "FRAME" in which the short exists must also be carefully examined for the impact of external events on the short!!!!!!!!!!!!! The "frame" for the manulife short is bad.....very bad. If Carson would read his "Reminiscences of a Stock Operator" pages 189-192, and I hope he has, then he will obvouisly recall that Jessie Livermore lost out on his long coffee speculation during the world war one due to the US Government mandating that all coffee futures be closed out. This is a similar situation.

THE COYOTE CYCLE IN ACTION Anyone who wants to see the "Coyote Cycle" (hmmmm perhaps I should trademark the term) in action only need look at the long term stock chart of GE. A series of pumps due top massive stock buying with borrowed money followed by a series of dumps due to the ceasation of such buying.

A TALE OF TWO MINERS BHP has market cap of $309 Billion and has $12.5 B in FCF. P/CF ratio of 24. Glencore has market cap of $37 Billion and free cash flow of $7 Billion a P/CF ratio of 6. A dollar spent on a share of Glencore provides 4 times the free cash flow of a dollar spent on a share of BHP. So much for the efficient market hypothesis.

SHALE OIL CONTINUES TO LOSE MONEY Where is the Shale Drillers Short ETF when you need it???????

A TRULY TERRIBLE SET OF NUMBERS Here are some more numbers for you from the wonderful Kraft Heinz balance sheet. It has only $7 billion in tangible income producing property plant and equipment. This has to support $33 billion in debt and the interest payments thereon. This ALSO has to support the $40 billion in market cap and the dividends there on!!!!!!! i.e. a business value of over $70 Billion!!!!!!!! (talk about the value of advertising!!!!!! - the stock is 90% advertising) To think this company once had a market cap of $120 Billion?????? If you spend a dollar to buy the stock you are only buying 10 cents worth of real tangible income producing assets AND You come after the debt holders and their interest claims. It's so easy for disrupters to come in spend a dollar to get a dollar in tangible assets and split the rest with the customers through lower prices!!!

THE ECONOMIST IS SO FUNNY Whenever I want a good laugh I read the Economist!!!!! I just read an entertaining article how Daimler is a better investment than Nestle. I beg to differ!!!!! Daimler has basically no free cash flow and is increasing its debt to pay its over generous dividend and to cover CAPEX. (Coyote Cliff ETF candidate anyone?????} It will have to eliminate its dividend. What will happen to the stock then. Two words.....Kraft.....Heinz. Nestle generates $11 Billion in free cash flow a year very consistently. It has quite a wide moat that protects is free cash flow. Stock about 30% overvalued but still valuable. Why is all this so???? Because Daimler has to spend $10 billion a year on CAPEX while Nestle only spends $4 billion a year. Its just a much more structurally superior business.

GOODBYE TESLA GOODBYE Such an obvious short. In the end its the numbers that count. All the fan boys running for the exits. Reality finally bites. A good short like TESLA is like a piece of fruit. You have to let it ripen before it begins to rot.

THE OXY........MORON DEAL So Oxy gets Anadarko a company that generates no free cash flow And a lot of expensive debt. And Warren getting 800 million a year Winners: Warren B Anadarko shareholders who take the cash Chevron shareholders Losers: Oxy shareholders (lower oil prices or higher interest ratyes will tank the dividend). Oxy bondholders (lower oil prices or higher interest rates could see the bonds downgraded to junk). This exercise in financial enginering provides lots of opportunity for capital structure arbitrage.

TESLA BREACHES THE MARGIN...NOT LINE (Terrible pun on the marginot line) Tesla stock breached the $250 line Next stop ZERO??? Admire the guys vision BUT ....NOT the business plan, In the end its the cold hard calculus of numbers that count. When did Tesla jump the shark??? There are so many events to choose from. Sending the Tesla to Mars is definately up there for contention. But my personal favourate is the funding secured buyout at $420.

PARTY LIKE ITS 2009!!!!!! or MONEY FOR NOTHING AND YOUR WARRANTS FOR FREE So Warren B gets 8% on his ten billion in prefs AND 80 million in free warrants This is the sort of deal Warren was getting in 2009. But let us look a little bit more closely at Anadarko and Oxy. Thier share prices have almost halved on the past few years. Thats because it has slowly dawned on Mr Market that both companies really dont generate any free cash flow. Combining them wont change this. The only way to stop the rot with these 2 is: 1/ Higher oil prices - pay down debt - restore equity value. or 2/ major cost reduction. I wouldnt want to be a common shareholder in the merged entity. Chevon should let the deal go ahead and buy them out a couple of years latter at the inevitably low stock price. Because the merger will creat another publicy listed LBO. Dependent on low interest rates to survive. (shouldnt these companies be called "public private equity"?????). With all that debt any rise in interest rates will destroy the common dividend and lead to a lower stock price. Warren has appeared to have learnt his lesson from Kraft Heinz and avoided the common shares of a highly leveraged company. Just too much possible downside. The prefs meet the margin of safety rule. Let some one else own the downside.