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 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…
by ValueWalk - April 24th, 2017 7:30 am
By Jacob Wolinsky. Originally published at ValueWalk.
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We’ve got balance sheet ratios covered.
If you have seen some of the ratios that we cover in our stock analysis software, you will see something like this:
Balance sheet and income related ratios are one of the first sets of financial ratios you learn to use when analyzing a company.
- Current and Quick Ratio
- Debt to Equity
- Return on Equity
- and so on
Very popular and common.
Before you dive into the meat of the content, if you haven’t signed up with your email for our free investment resources, do so.
I’ll immediately send you extra stock ratios notes, checklists, spreadsheets and additional downloads you can succeed with.
What the Balance Sheet and Income Statement Ratios Miss
When it comes to doing a liquidity or solvency analysis, using the cash flow statement is a better indicator than using the balance sheet or income statement.
Gross margins are important, but it doesn’t tell you whether a company will survive or not.
The PE doesn’t help.
Unfortunately, the cash flow statement analysis and good ol’ cash flow ratios analysis is usually pushed down to the bottom of the to do list.
The income statement has a lot of non cash numbers like depreciation and amortization which does not affect cash flow. On paper, and at the top of the financial statement, it may look like a company is making or losing money when you account for depreciation and amortization, the actual cash in and outflow could show a different picture.
by ValueWalk - April 23rd, 2017 10:30 pm
By International Business Times. Originally published at ValueWalk.
Schwarzman Makes ‘A Rigged Game Worse,’ Democrats Say
Wisconsin Democratic Sen. Tammy Baldwin became the first federal lawmaker to call for Blackstone CEO Stephen Schwarzman to recuse himself from Trump administration policy that affects Schwarzman’s private equity firm. Baldwin’s criticism was echoed by the senior Democrat on the Senate Banking Committee, which oversees many of the economic issues Schwarzman has been working on with…
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G. Edward Griffin: Exposing The Creature From Jekyll Island Hard truths from the man who wrote the book on the Fed
by ValueWalk - April 23rd, 2017 5:02 pm
By PeakProsperity. Originally published at ValueWalk.
G. Edward Griffin, the author of the seminal book on the formation of the Federal Reserve, The Creature of Jekyll Island, joins the podcast this week to add his perspective to our ongoing critical examination of the Fed and the impact its actions are having on society.
Meeting Ed and getting to spend time with him was a real honor for Chris and me. His breadth of knowledge of the central banking system as well as his engaging manner of storytelling are masterful. Plus, he’s simply a wonderfully kind person.
Ed’s decades of research and critique of the Federal Reserve, sadly, have left him with conclusions that corroborate our own. Despite its carefully-crafted image as an essential public servant, Griffin concludes it is anything but. It is a private cartel that has connived its way to tremendous advantage and power, secretly (and not-so-secretly) plundering the American people of their treasure and freedoms.
On The Fed’s True Goals
[In researching the Federal Reserve] I was looking for a very complex mechanism. And I couldn’t believe at that time that there would be deliberate deception in this system. So, I was working on the false assumption that everybody in the system was doing their best to make it work on behalf of mankind and on behalf of society. Initially, I never entertained the idea that its goal was not to benefit mankind at all.And so, where one would say, look: the Federal Reserve system is failing to meet its goals — because it said its goals were to stabilize the economy and to preserve purchasing power, etc. — I finally came to the realization: No, those are not its goals.If we understand what its goals really are, then it’s not failing at all. It’s succeeding amazingly well.And most people, as I initially did, have found that an impossible assumption to entertain. They simply can’t get over it.
On Whether The Fed Is A ‘Conspiracy’
Most dictionary definitions of the word “conspiracy” seem to agree that a conspiracy occurs when:
- two or more people come together
- they use methods of deceit and deception to achieve a goal
- which is unethical or illegal.
Those are the three requirements. So talk about the Fed:
Are there two or more people? Oh, yeah.
by ValueWalk - April 23rd, 2017 4:44 pm
By Adam Parris. Originally published at ValueWalk.
Assessing the Earnings Power Value (EPV)
Earning Power Value can be thought of as Intrinsic Value. In the 2013 Berkshire Hathaway annual report, Buffett explained what intrinsic value means.
“Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover – and this would apply even to Charlie [Munger] and me – will almost inevitably come up with at least slightly different intrinsic value figures.”
I mentioned in part I how important it is, not to take earnings at face value, the reported earnings can be manipulated and many companies report earnings via EBITDA. That is earnings before interest [payments], tax [payments], depreciation [on past capital expenditure spent on plant and equipment] and amortization [on the purchase of past intangible assets]. Essentially implying these items are not costs to the business, it’s their way of reporting earnings better than what actually occurred. Ego is the core reason why they participate in manipulating earnings.
The first step requires assessing the value of current earnings, properly adjusted. This requires us to make certain assumptions about the relationship with future earnings and currents earnings.
The equation for earnings power value is: EPV = Adjusted Earnings X 1/R
- R = Your Discount Rate (think of it as your require rate of return).
Here we aren’t going to add forecasted earnings to our equation, instead, we are going to arrive at an accurate estimate of the current earnings of the company by refining the earnings data.
There is a sane approach to analysing the future cash flows that does not involve some arcane highly complex mathematical formula. It involves assessing the strength of the company’s competitive advantages, to determine if they can continue to generate growing cash flows well into the future – 20 years’ time. That’s why investing is…
by ValueWalk - April 23rd, 2017 12:44 pm
By ThinkAdvisor. Originally published at ValueWalk.
SEC Says New York Advisors Falsified AUM to Entice Investors: Enforcement
The Securities and Exchange Commission charged a New York-based investment advisor, Hyaline Capital Management, LLC, and one of its founders, Justin D. Meadlin, with disseminating false information to prospective investors and clients in order to induce them to invest money with them. The SEC’s complaint, filed in federal court in New York, alleges that beginning in…
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by ValueWalk - April 23rd, 2017 10:52 am
By The Foundation for Economic Education. Originally published at ValueWalk.
When I write about poorly designed entitlement programs, I will warn about America’s Greek future. Simply stated, we will suffer the same chaos and disarray now plaguing Greece if we don’t engage in serious reform.
Ideally sooner rather than later.
But when I write about state governments, perhaps it would be more appropriate to warn about a Brazilian future. That’s because many American states have made unaffordable and unfunded promises to give lavish benefits to retired bureaucrats, a topic that I’ve addressed on numerous occasions.
And why does that mean a Brazilian future? Because as Greece is already suffering the inevitable consequences of a bloated welfare state, Brazil is already suffering the inevitable consequences of a pension system that treats bureaucrats as a protected and cossetted class. Here are some excerpts from a sobering report in the Wall Street Journal.
Twenty years before Michel Temer became president of Brazil, he did something millions of his compatriots do, at great cost to the country’s coffers: He retired at age 55 and started collecting a generous pension. Delaying that moment until age 65 is at the center of Mr. Temer’s proposed economic overhaul. …making that happen is seen as a make-or-break test of whether the government can get its arms around mounting economic problems like rising debt, low investment and a stubborn recession now entering its third year. New pension rules are considered central to fixing an insolvent system.
It’s easy to understand why the system is bankrupt when you read the details.
…some retirees receive pensions before age 50 and surviving spouses can receive full pensions of the deceased while still drawing their own. The generosity of Brazil’s pension system is legendary—and, economists say, troubling as the country’s fertility rate plummets and life expectancy climbs. João Mansur, a long-time state legislator in Paraná state, served as interim governor there for 39 days in 1973, a stint that qualified him to retire with a $8,000 monthly pension. …Other former public workers who retire not only reap nearly the same income they got while on the job, but also see their checks get bumped up whenever those still working