Bernie Triggers Buyouts (What??)

Posted On Feb 19, 2020 By Emily Clancy

  • Legg Mason rocks Charm City
  • Zach Scheidt: “the picture for buyout opportunities” 
  • Three triggers (that won’t last forever)
  • “This is a story about a chart”… and gold
  • NYC commercial rent control: A great idea BUT…  
  • How Manhattan became a plutocrat’s playground
  • Moviefone’s last man standing.

Headline news out of Charm City (Agora Financial’s HQ): Asset management titan Franklin Templeton cut a deal to buy Baltimore-based firm Legg Mason for $4.5 billion.

For investors: “Franklin Templeton will pay $50 cash for each share of Legg Mason’s stock, a $9.28 per share premium over Friday’s closing price,” The Baltimore Sun reports.

Tuesday’s announcement comes almost a year after Legg Mason reorganized, letting go of 120 employees. At the same time, the company bowed out of long-standing sponsorships of the Baltimore O’s and Ravens.

It’s still murky today how the buyout will affect Legg Mason’s 300 employees — or the hard-pressed city of Baltimore. And we wonder how one of the city’s landmark buildings might change the harbor’s cityscape forever…

Baltimore

Among Baltimore’s landmarks: the Domino Sugars sign, the National Aquarium and the Legg Mason building

What’s not so murky?

“As we move our way through the beginning of 2020,” says our investment specialist Zach Scheidt, “the picture for buyout opportunities this year is starting to clear up.

“Both the market environment and business dynamics are lining up for some exceptional deals to be announced over the next several months.

“So far, I've identified three key catalysts that are set to kick off some very big — and very profitable — buyout announcements,” says Zach.

Here’s what he sees as three buyout triggers…

FRIENDLY REGULATORS: “The federal court basically just gave a green light to giant companies who have been considering mega-cap buyout opportunities,” Zach says.

A recent deal that epitomizes this friendly regulatory environment? When a federal court approved T-Mobile’s purchase of Sprint last week — a transaction that was almost two years in the making. (On news of the approval, Sprint (S) shares bounded up 78%. Nice!)

“Executives from every industry were watching this deal to see how the court would rule,” Zach says. “And since the court allowed this major deal to go through, it stands to reason that other big buyout transactions will also be approved.

“Now that we’re past the uncertainty about this deal, expect to see new deals announced between companies that are worth tens of billions.”

INTEREST RATE INCENTIVES: Exceedingly low interest rates are makingit easier (and cheaper) for big companies to borrow money for buyout transactions,” Zach says.

“The low rates have also helped push stock prices higher,” he continues. “Companies can use their own stock shares as currency for buyout transactions. So the higher stock prices move, the easier it is for large-cap public companies to enter new buyout deals.”

But Zach sees interest rates here and abroad slowly inching up in 2020, including the Fed standing pat on rates for the rest of the year. “And market interest rates are actually ticking higher,” says Zach. “This increase in interest rates could be the start of a bigger move.”

As C-suite types see the potential for higher interest rates, they'll have incentive to move on buyout deals sooner rather than later.

And we’d be remiss not to mention…

THE PRESIDENTIAL RACE: With Bernie Sanders’ narrow victory at the New Hampshire Democratic primary last week, big business is in a bit of a tizzy.

Because while President Trump’s been busy deregulating this, that and the other… Sanders’ approach would be quite the opposite.

“[Sanders] has made it clear that he is an enemy of big business,” says Zach, “and if he becomes president, it will be much harder for one company to buy out another.”

For the record, Zach’s not playing politics — who you vote for is up to you. “But as buyout investors,” he says, “we need to understand how the political environment could affect…  opportunities.

“And this year, companies that have their eye on a buyout opportunity will need to act before the November election,” Zach says. “In fact, they'll need to act sooner rather than later to ensure a deal is finished before any potential change in the White House.”

In short, an unpredictable political climate will force companies “to pull the trigger on any buyout deals they're considering,” Zach concludes.

[Ed. note: While billion-dollar buyouts were once unpredictable events for anyone outside Wall Street, Zach’s leveled the playing field.

His “Buyout Payday” Indicator’s spotted phenomenal deals in time for everyday investors to take advantage of extraordinary windfalls.

And Zach expects buyout deals to break out this year, triggered by less red tape, low interest rates and the 2020 presidential race. But these catalysts won’t be around forever…

So Zach wants to show how you can take advantage of the hottest sectors in the market — meaning more huge investment returns on the horizon.

In fact, you might cash in as soon as this Thursday, Feb. 20.

To get started… simply click here for all the particulars.]

“This is a story about a chart,” says Ed Conway, the economics editor at Sky News U.K. So for your eyes only… 

CLoak and Dagger Gold Manipulation

The eye-popping chart shows U.K. gold exports from 1998 to December 2019.

Conway notes: “For the vast majority of history [exports] were near zero… Then, suddenly, in the last two months of last year, gold exports were catapulted higher.”

So what gives? The 5’s never been one to shy away from a story about gold manipulation

Mr. Conway first wonders if gold exports — long included in total U.K. export numbers — were used to pump up export stats for the end of 2019, but fails to see why since exports minus gold came in at a vigorous 30.4% of the U.K.’s GDP last year.

Curious… Then came the story about Poland repatriating gold held in U.K. vaults; still doesn’t account for such a dramatic spike in gold exports, according to Conway.

His best guess? “A U.S. bank with London gold vaults shifted some of that gold from being ‘unallocated’ to… ‘allocated.’” While the gold stayed in London vaults, “a couple of clicks in a bank's spreadsheet caused the biggest fluctuation in Britain's trade figures in modern history.”

Why? We might never know the real story. Mr. Conway concludes: “No other sector is as cloak and dagger as gold.”

(Perhaps the repo market? Just sayin’.)

While we’re on the subject of gold, we thought this was rich…

“As the record bull market stretches on,” CNBC says, “and as the coronavirus outbreak incites fears of a potential slowdown in global growth, gold could be a way for investors to hedge risks to the downside, Citi said Wednesday.”

Another way to say: Got gold?

More from Citi analysts (we can’t resist): “Gold should perform as a convex macro asset market hedge, resilient during ongoing risk market rallies but a better hedge during sell-offs and vol spikes.”

They gotta be punking us… 

To the markets where gold’s doing its safe haven thing; the yellow metal’s added $6.00 to its price at $1,609.60 per ounce. The other commodity we follow, oil, is up 2% to $53.14 for a barrel of West Texas intermediate.

The Big Board’s rallied about 140 points to 29,370 while the S&P 500’s added 19 points to 3,389. The Nasdaq’s on a tear — up 88 points to 9,820.

For the major economic number of the day: Construction on new homes tumbled 3.6% in January… but permits jumped 9.2% to a level not seen since March 2007. (We don’t know about you, but that doesn’t give us the warm fuzzies — smackdab near the tail end of the housing bubble?) The permit numbers indicate a lot of contractors will be breaking ground this spring.

Enforcing rent control on NYC’s commercial properties “is almost certainly illegal,” says Reason, and wouldn’t necessarily resurrect small businesses as Mayor Bill de Blasio hopes. “Other than that, it’s a great idea.” Heh…

In his State of the City address over a week ago, the mayor addressed the idea of commercial rent control, saying: "I'm going to name a commission of people of different viewpoints and different expertise to come back to us once and for all this year with an answer, is there a legal way we can have commercial rent control in New York City?

"That is the answer we need,” de Blasio said. “If it's a yes, we should go to Albany and get it done in 2021."

While commercial rent control in NYC was imposed in 1946, it was struck down by 1963. But it’s an idea that’s resurfaced every decade since; however, more grassroots organizations in the city don’t believe it’s the answer for a small-business revival.

A trade association — the Real Estate Board of New York — said in November 2019: "Data shows that retail vacancy rates are driven by rising property taxes, longer wait times for government approvals, e-commerce and various other factors.”

Reason adds: “Borough-level Chamber of Commerce chapters similarly argued that the high costs of the minimum wage and mandated paid sick leave played a much bigger role in driving businesses out of the city than rent increases.”

To be fair, we’re not blaming the dearth of mom and pop shops squarely on Mayor de Blasio. Nah… he inherited this hairball from his predecessor, Mike Bloomberg. 

According to an article by urban-studies scholar Joel Kotkin: “As mayor of New York, Bloomberg’s approach… was to shape the city as a ‘luxury product’ shaped by the interests and investments of his fellow billionaires.”

In other words, Bloomberg fashioned NYC into the playground of the rich and famous by offering tax breaks for bougie apartment buildings and swank corporate offices.

“In contrast, the city’s middle-class neighborhoods shrank,” says Kotkin, “most precipitously in Manhattan, while those of the rich and poor grew.

“The very feel of the city changed as long-standing neighborhood retail fell from soaring rents, with once-cherished outlets either replaced by chains, ‘pop-ups’ or simply abandoned, a form of ‘high rent blight.’”

As far as Kotkin’s concerned, Manhattan’s idiosyncratic charm’s been replaced with Bloomberg’s “plutocratic-driven monoculture,” he says, “in many ways… made possible by the power implicit in [Bloomberg’s] wealth, a function of his fortune.”

At least Bloomberg’s consistent…

“Moviefone Is Bankrupt,” says a headline at /Film, “Now Being Run by Only One Employee.” The company that’s been at it since the ’80s — and saw its heyday in the ’90s — is on its last legs.

We’d like to think of Moviefone as a precursor to the app (at least that’s how I explained it to my 17-year-old) — a “call line… for listings of local movie showtimes” for those too lazy to check the newspaper (remember them?) or simply call the theater.

Moviefone even found its way into a Seinfeld episode when Michael Richards’ wild-eyed Kramer pretended to be a Moviefone operator…

Kramer Meme

We gotta hand it to Moviefone, though. It outlived the dot-com bubble; in 1999, AOL bought Moviefone in a $388 million stock deal. Today? Moviefone’s assets are listed at $4,379,504.

A shadow of its former glory, certainly, but Moviefone’s currently one of the largest holdings of parent company Helios & Matheson — also the parent company of ill-conceived MoviePass.

And here you thought the punchline was going to be a Seinfeld reference…

Best regards,

Emily Clancy
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