I admit that this is a rather experimental post. I have done some work recently looking at valuations on US independent refiners and have reached some conclusions, one being that current share prices, despite their substantial declines in 2008, still price-in a historically strong industry environment going forward. Thus they are not priced for hard times as some might believe. The four companies I look at, Valero (VLO), Tesoro (TSO), Frontier (FTO), and Holly (HOC), are actually still more expensive in terms of capacity valuation than they were at their own share price highs of 1998-2003, at least by my analysis.
If one thing this financial crisis has exposed, it is that markets aren't as efficiently priced as half of modern financial theory presupposes. I am not referring to the housing crisis, where much has already been said.
John Paulson, of hedge fund firm Paulson & Company, in recent investor communications has lambasted his competitors for blocking investor redemption requests, something his firm has not done. His firm has actually fared well in 2008, thus hasn't been pressured by substantial redemptions.
“We think it’s a mistake for managers to use gates and other tools to limit investor access to their funds,” Mr. Paulson wrote, according to Bloomberg. “While we recognize the difficulties of the current environment, we think it is a manager’s responsibility to raise liquidity to meet the redemption needs of their investors.”
Of course, Mr. Paulson’s funds are showing profits this year, even as many of his rivals’ funds are flailing, and his investors are unlikely to be pounding the door for their money back. In November, Mr. Paulson’s firm, Paulson & Company, held an opulent dinner in New York to celebrate his funds’ returns and outline his strategy for the coming year.
In his recent investor letter, Mr. Paulson also said that he was “especially surprised” by managers who blocked or limited withdrawals in cases when the requests accounted for a quarter or less of assets under management, Bloomberg said, and where “the managers have the cash and one of the stated reasons for restricting withdrawals is so the manager can continue to invest in new opportunities.”
Henry Kaufman, the former Salomon Brothers chief economist whose bearish views decades ago earned him the nickname "Dr. Doom," lost several million dollars with Bernard Madoff, making him one of the most prominent Wall Street figures to emerge as a victim of the alleged Ponzi scheme.
FTC lawyer Matthew Reilly told Friedman he could impose a range of remedies, and that because a lack of competition in the premium natural and organic groceries is harming consumers, the agency wants to stop further integration and impose a hold separate for the Wild Oats assets that its new owner hasn't absorbed.
Hard to see how premium natural and organic groceries are some sort of opportunity for an invincible monopoly. I got another good one, two in the same day. In regards to Diet Coke Plus:
The FDA said the soft drink, Diet Coke Plus, doesn't contain enough nutrients to qualify for use of the word "plus." Foods may use that name only if they contain at least 10% more of the reference daily intake or daily reference value of a nutrient than a similar product. The FDA also invoked a longstanding rule under which it "does not consider it appropriate" to fortify snack foods such as carbonated beverages.
I'm actually a bit moderate and not too perturbed by the requirement for 10% additional vitamins in order to qualify for "Plus". But nevertheless, I had a good laugh whereby a company is told not to add vitamins and minerals to a product. I think diet coke with vitamins sounds like a pretty good drink. What's another good idea, but one I haven't seen yet? Coffee with vitamins and minerals. Hopefully that is allowed. Would make for a pretty good start to the day. Anyhow.
I'd been meaning to mention this sooner here, but I'm currently on my annual 2-week sojourn to Austin, TX. I have my fair slew of friends here from college days, but I always like meeting new people especially if you read this blog, etc.
Ping me firstname.lastname@example.org if you want to meet up.
Yes we know. We could have been more succinct with our title. Nevertheless, one of the top US business stories yesterday involved a Credit Suisse analyst predicting that GM could go to zero in its restructuring process. Which would mean that over $2bn of equity value could be wiped out as debt restructuring could lead to current equity holders being diluted to oblivion. Of course in return for equity stakes, creditors would agree to haircuts on their principal.
Anyway, I wanted to throw out something I've been thinking of. I feel like there's a real breakdown of the Coase Theorem when it comes to the vegetable beets. See, most people like to eat beets and they throw away the greens. I on the other hand, don't like beets, but prefer the greens. In fact they may the most delicious of all greens -- and it faces some pretty stiff competition among kale and collards.
It's problematic from an economic standpoint that greens that most people just toss the greens. I'd LOVE those greens. There should be a business collecting discarded greens and then selling them to people, but it's not obvious to me what the model is.
But this is such a big, sad waste that there has to be one. Just can't figure it out.
In what has been an action-packed M&A arb drama, Constellation Energy (CEG) has entered a defininitive agreement with France's EDF group to sell a 50% stake in its nuclear generation and operation business, bidding a hasty au revoir to Buffet's MidAmerican Holdings.
Constellation Energy Group said Wednesday that it will sell a 49.9% stake in its fleet of five nuclear reactors and other holdings to Electricité de France SA for $4.5 billion, derailing the pending $4.7 billion takeover by Warren Buffett's MidAmerican Energy Holdings.
For its part, MidAmerican will receive a hefty termination package. The deal calls for MidAmerican to get a $175 million termination fee. Additionally, preferred shares issued to its wholly owned MEHC Investment Inc. unit will convert, giving MEHC a $1 billion note at 14% interest and about 20 million shares of Constellation stock, representing about 10% of outstanding shares; and roughly $418 million in cash.
Ok well I guess that's life in the big city. Shareholders were nevertheless likely to be overall positive on the deal given previous opposition to the MidAmerican $26.5 bid as being too low. And not to imply any wrong-doing at all here, but it is still surprising, at least to this Stalwart, that such a massive change in course did not requite shareholder approval. If someone wishes to clarify the situation or explain their take, then please feel free to do so.
The companies expect to receive the necessary regulatory approvals for the acquisition of EDF Development Inc.'s interest in Constellation Energy's nuclear generation and operation business and close the transaction within six to nine months. The companies will work closely with Maryland regulators to make them fully informed of the transaction's details. Approval from Constellation Energy's shareholders is not required.