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Jeremy Johnson

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  • 10 High-Yielding REITs Offering Safety and Growth [View article]
    At HCP, pro forma for the HCR ManorCare acquisition debt and debt-like liabilities are 40% of enterprise value and 53% of current cost accounted net invested capital.

    I should take a look at HCN again, I can't recall what I didn't find attractive about it. I think it was their business mix.
    Feb 18 01:19 PM | Likes Like |Link to Comment
  • The Teflon Market: When Will It Correct? [View article]
    If you mean sell 2 trillion of assets off it's balance sheet, no. Impossible.
    Feb 18 11:48 AM | 4 Likes Like |Link to Comment
  • Is Gold 50% Overpriced or 25% Underpriced? [View article]
    The decline rate on a single well may be greater, but you can tie a well back to the gathering point more cheaply on average and the well itself is cheaper to drill due to all the process improvements enabled by the geology of shale compared to conventional plays. Encana believes it can still drive costs down significantly (>50 cents) from where they are now with infrastructure improvements in its fields.

    I agree with your long-term thesis on natural gas, at the same time we haven't even begun to see long-term, infrastructure related switching toward natural gas due to its current availability and these things take a lot of time.

    We probably agree over the long-term, but how long it takes to get there and what the path will be is up for debate.
    Feb 18 11:39 AM | 2 Likes Like |Link to Comment
  • 10 High-Yielding REITs Offering Safety and Growth [View article]
    When I looked at HCN I also looked at HCP and decided I liked the business more. Those interested in HC REITs should take a good look at that name as well. The dividend yield is not definitive for REITs because management has a lot of discretion in how much they pay out due to the dominance of depreciation in cash flow.
    Feb 18 11:24 AM | Likes Like |Link to Comment
  • Is Gold 50% Overpriced or 25% Underpriced? [View article]
    The structural price of natgas has changed. It's not so much the discovery of shale gas in terms of quantity, but rather that shale gas has manufacturing like economics because it can be extracted so efficiently and because a lot of shale gas has significant amounts of liquids byproducts which essentially subsidize the gas production.
    Feb 18 11:15 AM | 1 Like Like |Link to Comment
  • Is Gold 50% Overpriced or 25% Underpriced? [View article]
    seekingalpha.com/insta...

    I posted this awhile back and it complements your own research well. i compare to some different metrics than oil but note that the gold price is a good barometer of energy price inflation from a fundamental perspective.

    I chose 1973 as an earliest start date for gold. In 1970, the price of gold was still partially set.
    Feb 17 06:41 PM | 1 Like Like |Link to Comment
  • iPhone Technology: It's Like Buying 'B' Shares in Apple [View article]
    Commoditized.
    Feb 17 06:17 PM | Likes Like |Link to Comment
  • A Sense of Optimism for Steel Stocks [View article]
    Steel's only moving with iron ore, coke and energy prices right now. If you see operating rates at 85% or moving there quickly, steel itself might be interesting. Otherwise, play the underlyings.
    Feb 16 09:30 PM | 2 Likes Like |Link to Comment
  • Cisco vs. Netflix, Value vs. Growth - Which Should You Own? [View article]
    The comment raised the point that yes you apparently get a 9% yield, but for how long? Will that turn into 8% 3 years from now? It's a worthwhile question. You should also factor in that if CSCO repatriated current cash flows, the yield would not be 9%. I'm also curious if you are deducting the full value of CSCO's cash from EV, which would ignore the economic reality of US tax structure, unless you believe there will be an amnesty or a permanent change.
    Feb 16 03:26 PM | Likes Like |Link to Comment
  • Cisco vs. Netflix, Value vs. Growth - Which Should You Own? [View article]
    Housing prices have gone up every year for the past 20 years why would you expect a decline now after such large increase over the past decades?
    Feb 13 08:41 PM | Likes Like |Link to Comment
  • Diamond Offshore Offers Value Amid Gulf of Mexico Regulatory Chaos [View article]
    It seems unlikely that revenue and cash flow will have stabilized in 4Q10 compared to 3Q10 just based on the recent trend of each quarter getting a little worse, but perhaps 4Q10 will prove to be the bottom with dayrates having stabilized and the fleet getting put back to work.

    You have the Ocean Valor starting to generate revenue in 4Q10 at a $40 million quarterly rate helping that out in 2011.

    If the oil price stays at $90, I'm sure the company will do fine, but there is plenty of room for downside. In 2004, DO's return on invested capital bottomed at just over 5%. That is 1/3rd of the current run-rate (~15%) and compares to 25% in 2008.
    Jan 10 07:45 PM | Likes Like |Link to Comment
  • Netflix CEO Reed Hastings Responds to Whitney Tilson: Cover Your Short Position. Now. [View article]
    The streaming content is so limited. You can burn though it in 6 months and not much new is really added, except in the TV show department. People love TV shows streamed though so this could be enough for most people to pay $8 a month. I have joined netflix 4 times and most recently it was to get a few blu-rays and some streaming for the PS3. I think I'm done again for now but will be back in a year to catch up on some movies again.
    Dec 22 07:44 PM | 1 Like Like |Link to Comment
  • Is Citigroup a Buying Opportunity? [View article]
    Citi could likely support a dividend of $6-7 billion based on underlying earnings in the $15 billion range. This implies a dividend rate of 5-6% at the current market value, which is on the high side relative to global banks with dividends that have not impacted by the financial crisis. A yield in the 4-5% range seems possible, though it should be noted that Citi will remain a low growth bank and so should carry a higher dividend.

    However, the stock price will remain very sensitive to the course of future economic prospects, but if the world is in a durable recovery, then Citi shares have a relatively attractive yield prospect upon the resumption of dividends and may therefore appreciate to bring that level in-line with global competitors.
    Oct 26 03:57 AM | Likes Like |Link to Comment
  • The G20 Communique - A Victory for Asia [View article]
    China, like Japan before it, operates from a position of fundamental geopolitical weakness. The U.S. and it's allies create the global political economic landscape because they are the only one's with the surplus real economic output and human capital to do so. Asian countries fund our deficits dollar for dollar to support our stabilizing security efforts in the region. They do this because they believe it's in their net benefit and are generally happy with our Asian security efforts. Sixty years ago, Japan and China were in total war and that memory is relatively fresh in their minds. China did not save itself from Japan, it should be clear.

    At the same time, China has the most to gain at this point from a relative diminution but not complete removal of U.S. security efforts in the region. Specifically, China would like to throw it's weight around to secure better resource rights in the Sea of Japan but at the same time does not want to shoulder the burden of rebuilding N. Korea alone, when the time comes. The point is their regional geopolitical aims are conflicted by their ability to deal with regional responsibilities. But China does not need the U.S. to protect it's intrinsic security at this point. China's neighbors though continue to need a counterbalance against it's regional heft.

    So what difference does it make? You assert that the U.S. could be a surplus nation in 2015. It could be, but not while maintaining it's status as provider of global security. For Japan, for example, the math is simple: pay the U.S. to provide security or do it itself. Our charge is not high, for 60 years of security services, the cost has been some $850 billion or the amount of Japanese purchases of Treasuries over that period. They had no choice in 1950 after losing WWII, but today they could probably go their own way if they chose, with a transition period. As a side note, Japan gets 80% of it's oil from one country: Saudi Arabia, a county which has only two main customers, the other being the U.S. Who thinks this is happenstance? Japan benefits from it's relationship with the U.S. at no great cost. Japan is not the critical issue today, but it is the easiest to understand. I think the lesson's from Japan apply to the majority of other Asian nations as well.

    Regarding the yuan, it is a non-issue to the U.S., except for the political optics. The move from CNY 8.24 to CNY 6.65, has had virtually no impact on trade with China. The reason is that China's value added is small: a stronger yuan gets them commodities and foreign services cheaper which means they retain competitiveness despite the rise in the currency. Labor is the only value add in China and it's price easily adjusts with the exchange rate with a lag. This isn't to say a 20% one-off adjustment would have no impact: it would have a huge impact because nearly every established commercial contract would be economically void. Business and labor would have to find new equilibrium prices for everything overnight which is an impossibility, but once done the outcomes would be the same as they are today.

    The real issue is between China and it's competitors and here again what we are doing in pressuring China is playing the role of global mediator. Current account targets provide a framework for countries to compete in, which is negative for China so they will push back. The Hilton non-Accord (curious why you call it the Hyundai Accord, since that is the hotel the journalists stayed at and not where the G20 met) is not a failure for the U.S. in it's own policy interests, but in it's interests as global mediator.

    I'm not sure any of this says much about the fate of the dollar. As long as oil prices are "reasonable" I suspect the value of the dollar will not be a key variable for U.S. policymakers.
    Oct 26 03:33 AM | Likes Like |Link to Comment
  • At Least Eight Talking Fed Heads [View article]
    The key people will be Duke, Warsh and Pianalto. I don't think any of them have the clout to contradict Dudley, Rosengren, Bernanke and Yellen. Bullard gives the doves cover if he gets behind the effort. Raskin and Tarullo have to go along before they get along. Hoenig is serious but has few allies.
    Oct 23 05:05 PM | Likes Like |Link to Comment
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