Pershing: Despite Recent Vol shares of Fannie & Freddie “will be worth a multiple of their current price”
by ValueWalk - April 24th, 2017 10:26 am
By VWArticles. Originally published at ValueWalk.
Pershing Square latest presentation slides
Chipotle Mexican Grill (CMG)
?Superb restaurant brand that pioneered the “fast casual” category with the success of its outstanding product offering, unique culture, and powerful economic model
?Founded by Chairman and CEO Steve Ells in 1993
?High quality, simple, predictable, unlevered, free-cash-flow-generative business
?Recovering from food safety issues beginning in the fourth quarter of 2015 which caused a peak decline in average unit sales of 36%(1)
?We are currently Chipotle’s second largest shareholder with a ~10% ownership stake in the company
We believe that the Chipotle brand is still in its growth phase with significant opportunity to increase its unit count and its average unit volume. The drivers of this growth include:
“Fast Casual” category growth
?Mobile and online opportunity
?Unit growth opportunity
?Potential for significantly more units in the U.S. than the current store base of approximately 2,200
?Compelling returns on capital for new units even at today’s lower sales levels
Despite significant share price volatility since the 2016 US elections, we believe the shares of a reformed Fannie and Freddie will be worth a multiple of their current price
Perry Case Development: In February, the D.C. Circuit Court of Appeals upheld a lower court ruling against shareholder plaintiffs, concluding that the FHFA has broad discretion as conservator and refusing to invalidate the Net Worth Sweep
?We believe that the approximate one-third decline on the day of the ruling was a market overreaction:
?Various appeals options are available to the Perry plaintiffs
?Several other legal cases, including the Court of Federal Claims case under Judge Sweeney, continue to proceed favorably
FNMA and FMCC: Perry Case Developments
Irrespective of court case developments, we believe reform and restructuring of Fannie and Freddie are likely to occur:
?We do not believe there is a viable alternative that can preserve the prepayable 30-yr fixed rate mortgage at a reasonable cost
?US Treasury warrants for ~80% of the common stock of Fannie and Freddie would be worthless if the entities are eliminated
Organizational Updates in March 2017
by ValueWalk - April 24th, 2017 10:15 am
By The Foundation for Economic Education. Originally published at ValueWalk.
One possible gift to come from the mass bloodshed of 20th century totalitarianism: perhaps the history will serve as a lesson for the future. If that is to happen, however, we need to know the history, and not avoid it, much less deny it.
To make sure we understand – that we care about what is in fact a historical abstraction for the current generation – increasingly falls to the filmmakers. This is the medium by which people today discover a past they did not experience.
It is just too easy to look away. Few people travel to the nation’s capital with the ambition to tour the Holocaust Museum, for example. I totally get it. But out of all the exhibits in this city, this is the one that offers the most powerful lesson about human rights and dignity, and the existential threat of centralized power, as well as a warning against the politics of violence and where it leads.
The Holocaust Museum stands there as a rebuke to a sin you did not commit, a horror you see no need to face, evidence of a blight on humanity from which you would rather avert your eyes.
Yes, everyone needs the message. At the same time, hardly anyone really wants to come face to face with the full expression of horror and evil that the Holocaust represents, and what it meant for Europe and the so many millions of victims. It is more comforting to spend time at the monuments to greatness, virtuous leaders, and war victories, however much these traffic in mythology.
Why learn about death camps that killed millions when you can use your time to admire monuments to bravery in war? The Holocaust Museum stands there as a rebuke to a sin you did not commit, a horror you see no need to face, evidence of a blight on humanity from which you would rather avert your eyes.
Denial Is a State of Mind
This is why “Holocaust Denial” is not just the designation for a gaggle of self-publishing cranks and Nazi apologists. It is a general tendency that everyone possesses to look away from a history that is…
by Zero Hedge - April 24th, 2017 10:01 am
French credit risk has collapsed by almost 40% this morning - the most ever – as it appears investors are satisifed that 1) Macron will win the presidency, and 2) Centrist banker/Hollande-lackey Macron will solve all of France’s problems.
Notably, European VIX has plunged (back to historical norms absolutely and relative to US VIX)
FX market risk has crashed back to historical norms too…
But while the so-called “le spread” also plunged from EU crisis highs…
It does remain somewhat elevated from recent norms… Perhaps all is not ‘solved’ by a Macron win?
by Optrader - April 24th, 2017 9:50 am
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by Zero Hedge - April 24th, 2017 9:46 am
This is the second of a three-part look at why oil prices have failed to rally despite OPEC’s best efforts at managing supply cuts. Read part 1 here.
So, why is everyone so bullish?
Many oil analysts take as a fait accompli that OPEC-led production cuts thus far are key to balancing the crude market. If this is the case, though, why hasn’t it happened yet?
But the bulls say give it time. In the long run, the market will balance.
Everyone knows what Keynes said about the long run (that we are all dead).
That the market is prime for a rally has become gospel truth. But isn’t something so paradigmatic just a little bit risky?
“Oil prices will get better, and you can take that to the bank,” David Purcell, head of macro research at Tudor, Pickering and Holt, said at a recent Dallas conference.
“The market is under-supplied, inventories are back to normal levels by the end of the year, and if you guys don’t drill the Permian too fast, we’re okay,” Purcell said.
But drilling too fast is just what drillers have been doing. According to Platts Analytics RigData, active Permian horizontal rigs now stand at 280, 40% of all US horizontal drilling. The number of US horizontal rigs will likely break above 700 soon, revisiting a number last seen in April 2015, when Permian rigs made up just 25% of the total.
Calling for $60/b by the year’s end, FGE Chairman Fereidun Fesharaki said at a Fujairah bunkering conference last month that recent price pessimism was overdone and that financial players in the short term were misreading the market.
Many of the banks have been driving this home as well.
While Credit Suisse analysts earlier this month conceded that both Atlantic Basin and Asia-Pacific crude markets are suffering from oversupply — widening price discounts for Asian grades like Russia’s ESPO Blend and Qatar’s Al-Shaheen can attest to that — they also say that it is too early to ditch the idea that just because prices have struggled, the market isn’t rebalancing.
In fact just two weeks ago, they suggested doubling down.
A key factor to that call, which by now
by Zero Hedge - April 24th, 2017 9:28 am
Days after Donald Trump signed an executive order to probe steel imports, mostly from China, Beijing responded warning such a move could trigger a trade dispute between the United States and its major trading partners, who are likely to take retaliatory steps, the official China Daily said in an editorial on Monday.
“By proposing an unjustified investigation into steel imports in the guise of safeguarding national security, the U.S. seems to be resorting to unilateralism to solve bilateral and multilateral problems,” the China Daily said. The probe could result in efforts by the United States to curb imports that will affect the interests of a number of its major trade partners, including China, the editorial warned.
“If the U.S. does take protectionist measures, then other countries are likely to take justifiable retaliatory actions against U.S. companies that have an advantage … in fields such as finance and high-tech, leading to a tit-for-tat trade war that benefits no one,” it said.
The article called on the United States, the world’s top economy, to use the settlement mechanism under the World Trade Organization to resolve the dispute over steel. Reducing imports will not alter the weak competitiveness of U.S. steelmakers, help restore U.S. manufacturing or bring back jobs, as President Trump hopes, it said.
As Reuters puts it, “the article was the strongest official response yet to U.S. President Donald Trump on Thursday launching an investigation of China and other steel producers for dumping cheap steel products into the United States.” It was a marked shift from official comments on Friday. China’s Foreign Ministry spokesman Lu Kang said in a briefing the country needed to ascertain the direction of any U.S. investigation before it could make a judgment.
In addition to China, in Japan, the world’s second-biggest steel producer after China, the head of its steelmakers’ group expressed concern over Trump’s protectionist policy.
“We are greatly concerned over Trump’s protectionism, although we hear he has softened his tone on some issues with a grasp of reality,” Japan Iron and Steel Federation chairman Kosei Shindo told a news conference on Monday.
* * *
Separately, in a parallel move yet one which appears to justify Trump’s threat to curb Chinese steel imports, 29 Chinese steel firms had their licenses revoked as Beijing kept
by kimblechartingsolutions - April 24th, 2017 9:15 am
Courtesy of Chris Kimble.
Below looks at the VIX (Fear Level) over the past few years. A rally had taken place in the VIX, driving it up to falling resistance and its 50% retracement level at (1), in the chart below.
CLICK ON CHART TO ENLARGE
We shared the chart above last week on Twitter last week (See Here) One of the reasons Premium and Sector members bought XIV, was due to this pattern and a seasonal pattern in stocks (strong the last two weeks of April). The VIX index is down nearly 40% in the past week, following hitting resistance at (1). Members this morning are pulling up stops to protect gains.
To become a member of Kimble Charting Solutions, click here.
by Zero Hedge - April 24th, 2017 9:06 am
President Trump and Congress have until this Saturday to strike a budget deal or face a government shut down. Not surprisingly, Trump decided to kick off what will undoubtedly be a week of tense negotiations with some opening shots across the bow via Twitter:
ObamaCare is in serious trouble. The Dems need big money to keep it going – otherwise it dies far sooner than anyone would have thought.
— Donald J. Trump (@realDonaldTrump) April 23, 2017
The Democrats don’t want money from budget going to border wall despite the fact that it will stop drugs and very bad MS 13 gang members.
— Donald J. Trump (@realDonaldTrump) April 23, 2017
Eventually, but at a later date so we can get started early, Mexico will be paying, in some form, for the badly needed border wall.
— Donald J. Trump (@realDonaldTrump) April 23, 2017
The Wall is a very important tool in stopping drugs from pouring into our country and poisoning our youth (and many others)! If
— Donald J. Trump (@realDonaldTrump) April 24, 2017
Throughout his campaign Trump touted several policies which would require massive increases in government spending including his infrastructure plan, new military funding and the border wall. That said, at least in this round of Congressional bickering, it looks like the border wall will be key issue which could leave 1,000s of federal government employees with a little extra paid vacation time in 2017.
As negotiations continue, the White House says it has offered to include $7 billion in Obamacare subsidies that allow low-income people to pay for health insurance in exchange for Democratic backing for $1.5 billion in funding to start construction of the U.S.-Mexico border wall. Congressional negotiators have also offered to cut back Trump’s proposed $30 billion increase in defense spending.
“The question is, how much of our stuff do we have to get? How much of their stuff are they willing to take?” budget director Mick Mulvaney said on Bloomberg Television. “We’d offer them one dollar” of Obamacare payments, he added, “for one dollar of wall payments right now.”
Democrats called Mulvaney’s Obamacare offer a
by ValueWalk - April 24th, 2017 9:01 am
By FinancialSense. Originally published at ValueWalk.
Recently, we’ve seen markets pull back a bit, and many are citing geopolitical tensions, and particularly the recent saber-rattling between the United States and North Korea, as likely culprits.
This time on FS Insider, Jacob Shapiro, Director of Analysis at Geopolitical Futures (GPF), joined us for an in-depth update on current geopolitical events and to provide their analysis on North Korea’s nuclear capabilities, US-China political dynamics, Europe, and more.
Rumors of Wars
Though the rhetoric from both sides has been alarming in recent weeks — culminating in North Korea’s apparently failed attempt to test a nuclear device — it’s important to keep in mind that North Korea is still controlled by a regime that will do all that it can to retain control over its populace, Shapiro noted.
“It is the world’s last remaining totalitarian state,” he said. “When you’re thinking about North Korea, the first thing you always have to keep in mind is that regime survival is going to be the most important thing.”
The issue troubling President Trump now is the threat level posed by Kim Jong Un potentially gaining possession of a deliverable nuclear weapon. As Shapiro says, this is a “red line” that the US won’t allow North Korea to cross:
While there are many reasons to think this a ruse, Shapiro noted, we can’t base foreign policy on wishful thinking.
Tensions were extremely high this past weekend during the 105th birthday celebration of Kim Il Sung, the now deceased “supreme leader” of the North Korean regime, as North Korea threatened a nuclear bombing on the US while conducting a missile test.
Ultimately, though, the missile test failed and tensions were eased somewhat. Uncertainty still persists, however.
Winners and Losers
The United States wants to avoid direct action in North Korea, Shapiro said, and is leaning on China to help resolve the issue.
The quandary President Trump faces is that he promised tough action regarding trade policy with China. Now, the geopolitical pressure of the North Korean issue presents a big problem for his tough rhetoric.
“The winner in all of this is China,
by ValueWalk - April 24th, 2017 8:50 am
By Dan Steinbock. Originally published at ValueWalk.
After the first round of the French elections , “center-right” Macron and “radical right” Le Pen are positioned for a face-off. However, the real story of the election is that Le Pen’s agenda has shifted the political landscape toward new French Gaullism.
At the eve of the French election, A gunman opened fire on the Champs-Élysées, killing a police officer and wounding others, while the Islamic State claimed responsibility. Meanwhile, US observers explain the rise of Le Pen on the basis of the French industrial decline, while German observers see France sandwiched between extremists on the Left and the Right.
What both ignore is French frustration with the failed policies of both the pro-EU conservatives and socialists – and with US efforts to shape their electoral outcomes.
Before the vote, the leader of the Front National Marine Le Pen and the centrist Emmanuel Macron garnered about 23-25% in the polls. The two were followed by the center-right François Fillon (19%), whose ratings have been penalized by a funding scandal, and the radical left Jean-Luc Mélenchon (19%), whose ratings soared leaving behind socialist Benoît Hamon (9%), who failed to unite the left.
Since no candidate garnered absolute majority in the first round, the second round is critical. With 75% of polling stations results in, Macron was leading (24%) with Le Pen (22%) close behind. Conservative Fillon was penalized by his public scandal; socialist Hamon by President Hollande’s socialists’ failures; and the left’s Mélenchon by the absence of institutional support.
Public facades versus financial interests in French election
Emmanuel Macron’s (40) stint in President Hollande’s socialist government as a business-friendly economy minister alienated most socialists while failing to win over most conservatives. As I have argued through the spring, French right, the business and conservatives can tolerate him as a unifying figure; media will portray him as a “centrist”; and Washington wants him in Elysee Palace. But in reality, he does not represent “center-right.”
Macron advocates a Clintonesque, Blairian “Third Way.” Yet, his platform movement En Marche! is a one-man’s façade, which is guided by Institut Montaigne’s corporate giants, including commercial real estate titan Unibail-Rodamco, banking behemoth BNP Paribas, and aerospace mammoth Safran. En Marche! is funded mainly by…