Friday’s Drop in Unemployment: Less Than Meets The Eye?

The reaction to Friday’s labor market report was sharp and swift. Bond yields, especially on the long end of the yield curve rose and stocks sold off. The yield on the 10-year Treasury note ended the week at 3.23%, its highest level since April 2011. The financial markets fear that the Fed now has sufficient support from the economic data to continue raising the Fed Funds target rate by another quarter point in December and perhaps as many as three more quarter-point increases in 2019. Continue reading

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Questions About ESL’s Debt Reduction Proposal for Sears

On Sept. 23, in a 13D filing with the Securities and Exchange Commission, ESL Investments attached a proposal that it had made to Sears Holding (SHLD) that would reduce SHLD’s total outstanding debt by 78% through a combination of asset sales, proposed real estate transactions and conversion of debt into equity.  ESL has hired a financial advisor, legal counsel and public relations firm to assist in formulating and implementing the proposal.  SHLD has not yet endorsed the proposal, but since Edward S. Lampert, the founder, chairman and CEO of ESL Investments, is SHLD’s largest shareholder with a 75% ownership stake and also its Chairman and CEO, it is hard to imagine that the company will disagree. Continue reading

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Barrick and Randgold Agree to Merge

On Monday, September 24, 2018, Barrick Gold Corp. and Randgold Resources Ltd. announced that they had agreed on a share-for-share merger that would create the largest publicly-traded gold company in the world.  Under the terms of the merger, each Randgold shareholder will receive 6.1280 share of Barrick.  At Friday’s closing price of $10.47, that represented a value of $64.16, a premium of only 0.4% to Randgold’s 9/21 closing price of $63.91.  Since the announcement, however, both Barrick and Randgold shares have rallied, with Barrick rising 7% to $11.18 on 9/25. Continue reading

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A Review of AT&T’s Prospects Following the Time Warner Acquisition

AT&T completed its acquisition of Time Warner on June 14, 2018.  Under the merger agreement, Time Warner shareholders received $53.75 per share in cash and 1.437 shares of AT&T stock for each TWX share held.  In total, Time Warner shareholders received 1.126 billion shares, equivalent to a 15.5% stake in AT&T.  Together with the cash, Time Warner shareholders received $79.1 billion in total consideration.  In addition to the consideration paid to Time Warner shareholders, AT&T assumed $50.6 billion of liabilities, including $22.8 billion of debt, bringing the total cost of the acquisition to $129.7 billion.  AT&T ended the second quarter (June 30) with total assets (post-merger) of $534.7 billion. Continue reading

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Diamond Offshore Works to Stay Afloat

Diamond Offshore is the offshore drilling company that is 53%-owned by Loews Corporation.  The company currently owns a fleet of 17 “floaters” (self-propelled drillships and semisubmersible rigs), four of which are currently cold-stacked. Continue reading

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Barrick Gold: A More Speculative Bet on Gold

Barrick Gold is the second largest publicly-traded gold producer, with an equity market capitalization of $11.6 billion.  Like its rival, Newmont Mining, Barrick is focused on reducing costs and improving operating efficiency to maximize free cash flow generation in this rangebound gold price environment.  The company has also reduced debt by $7.3 billion or 55.7% since the end of 2014. Continue reading

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Newmont Mining: A Safer Bet on Gold Mining

Based in the Denver, Newmont Mining Corporation (NEM) is the largest publicly-traded gold miner by equity market capitalization.  Its geographic segments include North America (the U.S.), South America (Peru and Surinam), Australia and Africa (Ghana).  Newmont’s share price rebounded sharply in 2016, outperforming its peer group, as new, more profitable mines came into production replacing those that were sold in 2014 and 2015.  The company continues to execute on its plan to increase production (mostly so far to replace developed reserves) and reduce production costs through targeted mine and mill expansion projects. Continue reading

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A Quick Look at the Price of Gold

These are tough times for investors in gold and even tougher times for investors in gold mining companies.  Since the beginning of 2011 (through Aug. 31, 2018), the price of gold, as measured by the continuous CME futures contract) has declined 15.1%.  Meanwhile, the two gold miner ETFs – GDX and GDXJ (the junior miners) – have lost 68% and 79% of their value, respectively. Continue reading

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Genworth Rate Increases a Potential Positive for GE

In its August 20th issue, Investment News reported that Genworth Financial had received approval from regulators in 22 states to raise costs (i.e. rates) an average of 58% on $160 million of its in-force long-term care policies this year.  The company had previously obtained an average 28% increase on $714 million of premiums in 2017 and a 38% hike on $719 million in 2016.  Genworth’s in-force LTC book had $2.65 billion of annual premiums at the end of the 2018 second quarter. Continue reading

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Notes from the Inbox . . . August 24, 2018

Here are the noteworthy items that crossed my desk during the week ended August 24, 2018: Continue reading

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