Never Been Richer – Investors Are Paying Historically High Multiples For Sales
By Tyler Durden
Submitted by Eric Bush via Gavekal Capital blog,
By any measure, DM Americas stocks aren’t cheap. The median price to cash flow ratio in the GKCI DM Americas Index is a hefty 12.39x.
While this is certainly high, current price to cash flow valuations are in line with valuation ranges in 2004-2007 and in 2014-2015. On the other hand, it seems that lack of global demand has driven up investors risk tolerance when it comes to sales. Current median price to sales multiples overall for DM Americas stocks are higher today than they have been at any point since 2001. The median price to sales ratio is 2.33x, which is higher than they highest point reached in 2007 (2.21x) and 2014 (2.27x).
Breaking down the equity market by sector we see sectors, consumer staples and utilities, that are trading at the most expensive price to sales ratio we have seen going back to 2000. Consumer staples are trading at 38% premium to the the levels it was trading at in 2007 while utilities are trading at a 46% premium. Industrials are actually trading below valuation highs made in 2013, but the median industrial company is trading at multiples that are higher than the highest multiples in anytime from 2000-2012 period.
The median price to sales multiple for consumer discretionary and health care stocks are above 2007 highs but remain below 2000. The median consumer discretionary stock is trading at a 11% premium to valuation highs in 2007 and the median health care stock is trading at a 14% premium.
Financials aren’t cheap either. Currently, the median financial stock is trading at 2.81x sales. This is below valuation level from 2003-2006, however, it is still over 60% higher than the multiples that financial stocks were commanding in 2000. Telecom stocks are basically trading at the highest price to sales multiples since 2007.
Finally, even the downtrodden energy and materials sectors aren’t immune to high price to sales ratio. The median energy price to sales ratio has rocketed from 1.45x earlier this year to 2.85x while the median materials price to sales ratio has gone from 1.34x and to 1.99.
In both cases, median price to sales ratios are higher than what these stocks were trading at in 2000.
The BDC Consolidation Begins: Ares Buys American Capital For $3.4 Billion
By Tyler Durden
Back during the last bubble, Business Development Corporation (BDC) pioneer American Capital was one of the hottest business models (and most desired companies to work for). However, when the bubble burst, so did the company’s stock price, as well as its reputation, and in the past 9 years the company failed to see its stock price recover anywhere near the levels seen during the last bubble. Which is perhaps why moments ago in a dramatic move shaking up the BDC space, ACAS announced it would sell itself to another BDC titan, Ares Capital in a deal worth $3.4 billion.
From the press release:
Ares Capital Corporation (ARCC) and American Capital, Ltd. (ACAS) announced today that they have entered into a definitive merger agreement under which Ares Capital will acquire American Capital, excluding American Capital Mortgage Management, LLC. This transaction enhances Ares Capital’s position as the leading business development company in the United States and a leading direct lender to middle market companies. The combined company would have on a pro forma basis more than $13 billion of investments at fair value as of March 31, 2016. The Boards of Directors of both companies have unanimously approved the transaction.
Under the terms of the Ares transaction, American Capital shareholders will receive approximately $3.43 billion in total cash and stock consideration or $14.95 per fully diluted share. In a separate transaction, American Capital also announced today that it is selling American Capital Mortgage Management, LLC to American Capital Agency Corp. (AGNC) for $562 million or $2.45 per fully diluted share. Collectively, the transactions announced today represent total value for American Capital shareholders of $4.0 billion or approximately $17.40 per fully diluted share, representing a premium of 11.4% to American Capital’s closing price on May 20, 2016 and a premium of 21.6% to American Capital’s unaffected closing price on November 13, 2015.
American Capital shareholders will receive $1.470 billion in cash from Ares Capital, or $6.41 per share, plus 0.483 Ares Capital shares for each American Capital share, resulting in approximately 110.8 million Ares Capital shares, or $1.682 billion in value or $7.34 per share based on Ares Capital’s closing stock price of $15.19 as of Friday, May 20, 2016, issued in exchange for approximately 229.3 million American Capital shares. Following the transaction, Ares Capital shareholders are expected to own approximately 73.9% and American Capital shareholders are expected to own approximately 26.1% of the combined company.
As part of the aggregate consideration, Ares Management, L.P. (ARES) will provide financial support to the transaction. Through its subsidiary, Ares Capital Management LLC, which serves as the investment adviser to Ares Capital, Ares Management will provide $275 million of cash, or $1.20 per fully diluted share, to American Capital shareholders at closing. In addition, Ares Management has agreed to waive up to $100 million in Part I income based fees (ARCC Income Based Fees) payable for the ten calendar quarters beginning the first full quarter following the closing of the transaction, in an amount of up …read more
Source: The BDC Consolidation Begins: Ares Buys American Capital For $3.4 Billion
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UK govt: Brexit would spark year-long recession
The U.K. Treasury has predicted a year-long recession if Britain votes to leave the European Union. …read more
Source: UK govt: Brexit would spark year-long recession
Rapper Threatens To Kill Donald Trump If His "Momma’s Food Stamps" Are Taken Away
By Tyler Durden
Threats by prominent members of the black community against Donald Trump, either directly or indirectly, are nothing new.
Just under two months ago we reported about the latest social fallout incident from Trump’s rising popularity, when prominent Black Lives Matter activist and rapper Tef Poe tweeted a message for “white people”: if Donald Trump wins the presidency, “niggas” will ‘incite riots everywhere.’
“Dear white people if Trump wins young niggas such as myself are fully hell bent on inciting riots everywhere we go. Just so you know,” Poe tweeted. A screenshot of his since deleted tweet was captured below by the Daily Media.
To be sure, the antagonism among African-Americans toward Trump is well-known by now, and even CLSA’s noted commentator Chris Wood touched upon this in the latest edition of hs “Greed and Fear” newsletter.
However, a new and perhaps even more bizarre protest, not to mention death threat, against Donald Trump was revealed this weekend when Louisiana rapper Maine Muzik said during a YouTube video recording that he would kill presumptive presidential candidate Donald Trump if his “Mamma’s food stamps are taken away.” To wit:
I could go to war with whoever the fuck I want to, but I really want to go to war with Donald Trump because Donald Trump trying to take food stamps from my mamma and that’s all the fuck she’s got. As long as the motherfucking government let us keep food stamps… we gonna be good, but the first time this nigga pass a law talking about he taking Louisiana purchase, shit going to get ugly. I swear to god on every motherfucking chain I got, bitchez gonna go down.
You gotta understand them (inaudible) love Fruit Loops. They love that shit so if you take that shit nigga it’s coming with the madness and a nigga ain’t gonna play about that. Y’all take Donald Trump and let him know it’s up over here. We gonna declare war.
In his tirade he even went on to declare his allegiance to the Islamic State.
And I ain’t worried about ISIS because they just called me, they want me to fuck with them now… Ya, we got them drums bitch and grenades but I’m scared to throw them.
According to Vidmax, on the same week Muzik record this threat, he was visited by police for posting a video to his Instagram account where he and his gang showed off a stockpile of weapons.
Threats aside, the implications from this “heartfelt” video for Trump could be substantial: if indeed the republican candidate wants to shift to a more “centrist” position, all he would have to do is promise he won’t “take momma’s foodstamps” and Trump could quickly find himself not only supported by belligerent Louisiana rappers, but also take a decisive chunk out of Hillary Clinton’s primary ethnic voting group.
In the meantime, we expect more such videos which explain that for millions in potential voters, all it really boils down to is whether …read more
Source: Rapper Threatens To Kill Donald Trump If His "Momma’s Food Stamps" Are Taken Away
Monsanto takeover would be 2016’s biggest deal
The world’s largest seed seller is the target of a $62 billion takeover bid from Bayer.
…read more
Source: Monsanto takeover would be 2016’s biggest deal
Mad About Rigged Elections? Mainstream Media Says "You" Are The Problem
By Tyler Durden
Authored by Claire Bernish, Op-Ed via TheAntiMedia.org,
Mainstream headlines constantly decry Bernie Sanders supporters for disrupting events in outrage, as if their protests and demonstrations somehow illustrate the devolution of the elections. But that focus by the corporate media utterly negates the consistent and continual reports of fraud and disenfranchisement fueling their ire.
And it’s getting ridiculous.
Newsweek, though far from alone, offered a prime example of the obfuscation of the election fraud and questionable campaign tactics by Hillary Clinton in its skewering of Sanders’ supporters.
“Get Control, Senator Sanders, or Get Out,” Newsweek‘s Kurt Eichenwald titled his op-ed — which thoroughly blasts the Vermont senator — as if he were somehow responsible for both the electoral chaos and the actions of an irate voting public.
“So, Senator Sanders,” Eichenwald writes [with emphasis added], “either get control of what is becoming your increasingly unhinged cult, or get out of the race. Whatever respect sane liberals had for you is rapidly dwindling, and the damage being inflicted on your reputation may be unfixable. If you can’t even manage the vicious thugs who act in your name, you can’t be trusted to run a convenience store, much less the country.”
Really?
Because what Eichenwald obviates most readily in his attack is the inability to understand why those protests might be occurring in the first place. Judging by the timing of his article, it’s likely Eichenwald wrote it after chaos broke out at the Nevada Democratic Convention on Saturday — chaos that transpired after the party took it upon itself to ignore thousands who rightly believed Sanders delegates had been excluded unfairly from the caucus proceedings.
Despite the call for a recount, party officials refused to follow necessary procedure and abruptly adjourned the convention, leaving thousands of voters in the lurch — and hotel security and local law enforcement to deal with the aftermath. When things seem suspicious, apparently Eichenwald feels voters should not only have no recourse, they should be happy about it.
“Sanders has increasingly signaled that he is in this race for Sanders,” he continues, “and day after day shows himself to be a whining crybaby with little interest in a broader movement.”
It would be nice if Eichenwald’s hit piece were as much a joke as it comes across, but clearly he’s missed the point — and the vast movement supporting not only Sanders, but electoral justice. Worse, he didn’t stop there:
“Signs are emerging that the Sanders campaign is transmogrifying into the type of movement through which tyrants are born.
“The ugly was on display” at the aforementioned Nevada convention, Eichenwald adds, “where Hillary Clinton won more delegates than Sanders.”
No kidding. That would be precisely the issue that “cult” expressed fury about — Clinton managed to put yet another state under her belt under highly questionable circumstances. In fact, suspect happenings at nearly every primary and caucus so far oddly favor the former secretary of state — and Nevada stood as further testament to why voters are practically up in arms over what …read more
Source: Mad About Rigged Elections? Mainstream Media Says "You" Are The Problem
The World’s Cheapest (& Most Expensive) Places To Sin
By Tyler Durden
While Draghi and his co-conspirators hammer the deflation ogre in Sendai, there is some good news for those who partake of ‘sin’. Broadly speaking the cost of beer-and-cigarettes (what Deutsche Bank defines as ‘sin’) has dropped notably over the past two years with prices in Moscow and Stockholm plunging the most (while Madrid and Mumbai have risen the most). However, those looking for the cheapest way to maintain their bad habits should head to Manila in the Philippines (and avoid Melbourne, Australia).
Bad habits cost most in Melbourne, Singapore, Auckland, New York City, and London (demand-driven?)
While Manila remains the cheapest for now, we note that prices are rising rapidly, similarly so in India.
Source: The World’s Cheapest (& Most Expensive) Places To Sin
Despite Depression, Greece Forced To Hike VAT, Add New Taxes
By Tyler Durden
Submitted by Michael Shedlock via MishTalk.com,
Greece remains in an economic depression interrupted by a few quarters of anemic growth.
Hiking taxes in a depression is one of the stupidest thing one can do, but Greece is set for another vote to do just that.
Prime minister Alexis Tsipras is once again prepared to kiss German Chancellor Angela Merkel’s behind, and his party will likely go along for the ride.
The wildcard IMF has yet to chime in on the economic stupidity of this hike.
Please consider Greece Set for Austerity Vote to Secure Bailout Cash.
Greece’s parliament is expected to vote late Sunday on a raft of fresh taxes and austerity reforms that the country must legislate to unlock further rescue loans, ahead of a crucial eurozone finance ministers meeting on Tuesday.
The bill includes the last portion of an austerity package worth €5.4 billion ($6.06 billion), or 3% of the country’s gross domestic product, which Greece has agreed on with its international creditors to implement by 2018 in exchange for fresh bailout funds under the terms of its third bailout deal.
The IMF has said it would only sign up to the Greek bailout if Germany agrees to debt relief. But German officials are seeking to delay any debt restructuring until the end of the current Greek bailout program in 2018, so that Germany’s parliament, the Bundestag, would pass such measures only after Germany’s 2017 elections.
To meet its targets, Athens was asked to set up a “contingency mechanism” of additional austerity measures worth some 2% of GDP.
The measures being voted on Sunday include new taxes on fuel, tobacco, alcohol, Internet, pay TV, hotel stays, cars, changes in property tax, as well as a rise in the basic value-added tax rate, applied to most goods and services, from 23% to 24%.
The Greek parliament is also expected to vote on the fiscal brake mechanism that would automatically cut state spending if Greece misses its budget targets.
How much the next bailout tranche would be is still to be determined, but European Union officials indicate it could be €10 billion.
Another Humiliating Greece Cave-In
On May 14, I reported Greece “Demands” Debt Relief, Owes Troika €11+ Billion by July.
My comment: “Greece has caved in every time, and in the most humiliating ways. Greece even caved in on pension cuts last week. Why should anyone believe Greek demands now?”
€10 billion would be a lot of money, if the money went to Greece. But virtually none of it will go to Greece.
Greece Short-Term Debt Timeline
Somehow I expect the next tranche to be a “greater than expected” €11 billion. Perhaps €10 billion will suffice if Greece has €1 billion of its own to pony up.
Greece Long-Term Debt Timeline
Payments to the Troika stretch all the way to 2059, while assuming Greece can maintain a primary account surplus of 3.5% the entire way.
The IMF says this is impossible, while proposing a surplus of 1.5%, also impossible.
Politics of Debt Relief
The IMF wants …read more
Source: Despite Depression, Greece Forced To Hike VAT, Add New Taxes
"Everything Is Plunging" – China Commodity Carnage Continues
By Tyler Durden
Hot on the heels of Trumpian-size tariffs imposed by The Obama administration on a desperately glutted and mal-invested steel industry, the entire panic-buying “well the market is always right”, “China is recovering” narrative based rally in Chinese commodities has crashed back down to earth with an incredible thud. As one veteran trader in the China commodity markets put it “everything is plunging… except cotton,” with Iron Ore, and Rebar down 7% today…
At least one industry executive “got it” – Baosteel's Zhang: “The price rebound is not beneficial to the overcapacity situation…. It will delay the shutdown of (inefficient) capacity.”
How right he was…
Dalian Iron Ore has collapsed 30% in a month, down 7% today…
Steel Rebar has crashed 32% in a month, down 5% today… (it seems the brief BTFD support has completely collapsed)…
Hot Rolled Coil -28% in a month, down 6% today…
One word to describe mainland commodities: TIMBERRR???
— Simon Ting (@simonting) May 23, 2016
Makes one wonder what the world's only marginal-buyer-of-crude could do 'retaliate' to a nation imposing tariffs like that which is also dependent on a bounce in oil prices to supports its 'wealth-creating' stock market?
Source: "Everything Is Plunging" – China Commodity Carnage Continues
Corporate governance crisis at Viacom
Sumner Redstone has officially broken with his protege and friend of 30 years, Viacom CEO Phillippe Dauman. …read more
Source: Corporate governance crisis at Viacom
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