Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gazprom, Puerto Rico and Ackman

Stock-Markets / Financial Markets 2014 May 06, 2014 - 10:05 AM GMT

By: Bloomberg

Stock-Markets

Jim Grant, Editor/Founder of Grant's Interest Rate Observer, spoke with Bloomberg Television anchor Stephanie Ruhle from the Sohn Investment Conference in New York today.

Grant talked about why he's long Gazprom when many are shying away, saying, "the beginning, middle and end of the bull case on Gazprom is that good things happen to cheap stocks. Gazprom is by acclimation the world's worst company managed by the worst kleptocrats ever assembled on one continent. So - and - and Jay Carney, the president's own press secretary, advised us all as a nation, regardless of individual suitability, to go short this stuff, Russia. So how can one not at least investigate the contrary side of that proclamation."


Grant on Ackman's Valeant partnership bid for Allergan: "Now something great conceivably could happen with respect to the proposed Valeant-Allergan merger, which I say may not happen. Maybe they're going to cure cancer.... Maybe they're going to cure ugliness. All the people they haven't fired yet in the lab - in the white lab coats, they're going to cure ugliness in the next five minutes. Okay, fine. That's great for the stockholders....We at Grant's have issues with Valeant's acquisition accounting and with its lack of GAAP-sanctioned earnings power and the like. But with respect to the credit markets, with respect to Valeant debt holders, what's in it for you?"

STEPHANIE RUHLES: Jim, you just made news. You made waves. Long Gazprom at a time when natural resources and Russia, many people are shying away from. Why are you in?

JIM GRANT: Well Stephanie, the beginning, middle and end of the bull case on Gazprom is that good things happen to cheap stocks. Gazprom is by acclimation the world's worst company managed by the worst klepe (ph) of kleptocrats ever assembled on one continent. So - and - and Jay Carney, the president's own press secretary, advised us all as a nation, regardless of individual suitability, to go short this stuff, Russia. So how can one not at least investigate the contrary side of that proclamation by -

(CROSSTALK)

GRANT: Yeah. So this is - first of all, it's a huge company. Revenues of $150 billion. The market cap is immense. They earn a lot of money even after, as my friend (inaudible) even after stealing they earn a lot of money. They pay a 5 percent dividend. As recently as 2006, the stock changed hands at 10 times the estimated earnings. So now it's at 2.5. And why is that? Well, because people know that there will be even more extreme and costly sanctions imposed on Russia. They know that something terrible is going to happen with the Ukraine election in a couple of weeks. And well it might. There is certitude about outcomes that is notable given that so few people saw the current set of outcomes approaching some months ago. So in addition to the epigram that good things happen to cheap stocks, I will offer this epigram. This too will pass.

RUHLE: Really? So what's the time horizon though? For those who are so panicked about Ukraine, Russia, rule of law -

GRANT: Okay, here's - here's - here is a - here's - here's a test of suitability for this investment. You can't care about the time.

RUHLE: You can't care about the time.

GRANT: You must - even if you don't actually - if you're - if not actually indifferent as to the amount of time that goes by, you must profess to because we can't know whether it's going to work out. But we do know, I think we know, that - that solvent companies - by the way, interest - you okay, Stephanie? Interest payments are covered by operating cash flow about 40 times over. This is - this is a terrifically solid balance sheet. So there's not a click ticking on the business by dint - by dint of debt. And we know I think that solvent businesses don't trade at 2.5 times yielding 5 percent forever. So in the fullness of time is what - is my - is my horizon.

RUHLE: All right. In your last note you wrote about Puerto Rico. What's your current view?

GRANT: We are now a little on the bearish side with respect to Puerto Rico. We had been - well we started out a year ago -

RUHLE: Ay dios mio, Jim Grant. Bearish on Puerto Rico.

GRANT: Well we started out a year ago saying how is it that this thing trades at about par when so clearly the credit fundamentals are cracking. Then the - the whole - the bond market got - somehow somebody's alarm clock went off and people woke up and said the credit is terrible, which indeed it was, and the bonds traded to 80 and we got bullish on a speculative basis. We have reexamined the - the new prospectus and we have taken a measure of the rumors and the substance of the talk of restructuring. And what we think is that there will be a restructuring of one or more of the Puerto Rico issues and that the municipal bond market is let us say not the most wide awake branch of the credit markets.

RUHLE: Oh really?

GRANT: Yes. And that when news of the restructuring finally hits the municipal bond buying public, this will be about six weeks after it actually happens, when that moment of fractionalization occurs, people will not be happy.

RUHLE: The snoozing muni investors. Al right. I need your take. Ackman, Valeant, Allergan. Bill Ackman is in there speaking right now. I'm not sure on what yet, but last week he was all over the news with this Valeant partnership bid for Allergan.

GRANT: Let me talk about - about the - the Valeant jet (ph). There is a 6.375 note which I think matures in the year 2020 and the bonds are priced to 5-point-something percent. This is a weak - a middling junk credit I think. The bonds are priced to 5 something to maturity and at much less, to a 4 something to the first call a few years before maturity. Now something great conceivably could happen with respect to the Valeant - proposed Valeant-Allergan merger, which I say may not happen. Maybe they're going to cure cancer. All the guys they haven't fired yet from the research department --

RUHLE: I don't think they're going to cure cancer. They're in the market of (inaudible) botox and breast implants. I don't (inaudible).

GRANT: Maybe they're going to cure ugliness. All the people they haven't fired yet in the lab - in the white lab coats, they're going to cure ugliness in the next five minutes. Okay, fine. That's great for the stockholders. It might work. For the --

RUHLE: Great for ugly Americans.

GRANT: What's in it for the note holders at a 4-point-something yield to worse for the junk bond holders? What possibly is the upside? These are - the bond holders are the tools or the - the - they are being used by the corporate financial engineers. Now we have also issues - we at Grant's have issues with Valeant's acquisition accounting and with its lack of - of - of GAAP-sanctioned earnings power and the like. But with respect to the credit markets, with respect to Valeant debt holders, what's in it for you?

GRANT: That is a question for all junk bond holders these days, especially the ones involved in corporate transactions (ph).

RUHLE: They don't seem to be paying attention. They're short-term investors.

GRANT: I know. They should be tuning in to you.

RUHLE: Or listening to you. Jim, thank you so much.

Courtesy of Bloomberg Television

bloomberg.com

Copyright © 2014 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in