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World Stock Markets Trading Discussion - Cranky collaboration


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3 hours ago, Jorma said:

 Well odd Lee would link to that. I'm with Lee. Those things he talks about  best explain the growth of economies but not the rise in the stock markets. A quick look says world GDP is up maybe 80% since 1990. The S&P 750%. Well the former may be inflation adjusted so let's say world GDP is up 200%. Still a huge mismatch.

He's a wealth manager. It figures  he doesn't think asset prices inflate. I suppose he thinks that if the Fed does whatever he thinks it should the S&P will be 21,000 in 2050. That would be excellent for him and his customers. I don't doubt for one second that 21,000 number is the target for the 1%

That's what get for not attempting to skim it.   

 

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46 minutes ago, DrStool said:

Rijeka is interesting. My first experience with Eastern Europe.  

The food seems...

bad. 

Even by the standards of American dinner house chains. 

It's my impression you don't go to Eastern Europe or England for food. I never understood England's excuse. Depending on how far East you go being able to drink large quantities of vodka is supposed to be the thing. 

Count me out. As in sleep.

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FINANCIAL MEDIA REFRAIN: WHAT HAPPENED TO KRAFT HEINZ

Answer: nothing happened to Kraft Heinz.

Once it vastly overpaid for its assets with cheap QE debt (this happened several years ago) the die was cast.

Kraft Heinz had $105 billion of intangibles and goodwill on the balance sheet.

It has $31 billion in debt and negative net tangible assets of $38 billion.

Its balance sheet is not a pretty sight.

At the same time its FCF is only $3 billion.

Not enough to pay interest and the dividend at the same time.

Obviously the "market" cant read a balance sheet or a cash flow statement.

The market is only now realizing that Kraft Heinz has to make massive write offs of intangibles and goodwill!!!!!!!!!

and eliminate the dividend to pay down debt.

I said on this board in January that the company would have to cut its dividend to pay down debt and now it has done so

The company is full of declining brands which were massively overpaid for when they were bought.

The stock price since then has simply been a case of market "Denial".

Only now is reality forcing its way into the markets conciousness in regard to Kraft Heinz.

 

 

 

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MORE THOUGHTS ON KRAFT HEINZ

Given the firms lack of free cash flow.

And adding $3 billion in debt every year to pay the dividend.

The company will have to completely eliminate its dividend.

It may even need a capital raising or asset sales to stabilize its position.

 

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8 hours ago, Jimbo said:

MORE THOUGHTS ON KRAFT HEINZ

Given the firms lack of free cash flow.

And adding $3 billion in debt every year to pay the dividend.

The company will have to completely eliminate its dividend.

It may even need a capital raising or asset sales to stabilize its position.

 

I don't know how it can go wrong. Warren Buffett was a prime partner in the merger. Then all the talk of synergies was enough to give investors stiffies and they managed to cut 1700 jobs at least already from what I've seen. 

Are you saying Warren Buffett can't read a balance sheet or imagine what one would look like after a merger?  Well I don't know how much he extracted from the merger if anything. 

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MORE THOUGHTS ON KRAFT HEINZ - PART 2

KH is basically a busted Leverage Buy Out - like toys r us.

Its just that its a publicly listed busted LBO.

But instead of paying down debt with the FCF (which traditional LBO's do to reduce risk and create equity value).

They paid it out as dividend to the shareholders.

So the company had no "Margin of safety" if the FCF went away.

The brands didnt have the pricing power they expected.

The "Moat" got filled in!!!!!!!!!!!!!!!!

So the FCF went away.

Hence the dividend cut and asset sales.

Another lesson that "Investors" shouldnt just look at the dividend.

They need to look at the dividend's coverage ratio - the company's "margin of safety".

But the FCF depends on how deep and resistant to being filled in the moat is.

And even deep moats can disappear - moats arn't static!!!!!!!!!!!!

They tend to diminish and disappear over time.

 

KH was always a financial high wire act.

Im sure Warren B can read a balance sheet.

But this investment was more in the nature of an experiment for Berkshire I think.

It just did'nt turn out well.

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