Don, what do you think about a buy of NDLS now, thinking about doubling up. Can't see what would be a catalyst before next earnings report. If they can maintain that 1.3% SSS growth, seems the price should rebound. If it comes in less than that no, then $15 seems like a good possibility. I think you have lots who bought at the ipo price bailing, keep thinking that the $18 number is significant, buy who knows.
Pzena pushing banks in Barrons and CNBC. If you want a hedge on interest rates, a rise, BAC or C. Think he may be right, problem is what they screw up next and when. C normalized earnings should double. Not much downside. Have been thinking about BAC, good franchise, and Merrill.
Adam Parker, MS, on CNBC, the idiot that called for 1250 S and P a couple of years ago, now forecasting 3000. Hubris and debt are factors in the market, aren't there yet. 6% earnings growth a few years, $170 S and P earnings. 3 to 3.25% 10 yr. IF the consensus gets to 3% conventional expectation, the market has to inflate. My bet is 2800 in two years. That and a $1.50 won't buy you a tall Starbucks.
Don, thanks. It was 34 here in the CO mtns at 8k ft. Went to the tundra over the weekend, and the temp was 31 with snow at midday. Talked to a ranger, and she said she has never seen it as green as it is this time of year. Wonder if this continues through the winter.
Siegel on CNBC, the worry over currency debasement, his comment, that currency debasement reality should lead to inflation, and the world is still worried about deflation. Thinks the 10 yr T note settles at 3 to 3.5%. That seems a reasonable call. I still think this asset inflation continues for longer than most think, years, and finally rolls over, the reason, ???
Our reality is warped. CNBC is reporting on a $25mm psychic scam, I'm sure it's there night time promotion. One of the reporters this am spent several minutes talking about the new jeans he bought at Bloomingdales. They have turned into the People Magazine of finance, and the IQs of the reporters continue to decrease. The Shark Tank guy is now dispensing market advice.
The 30 yr T bond is at 3.08%, would guess that a 2 handle gets everyone's attention, if they aren't too busy deciding whether to buy the new I Phone 87 or whatever the number is. There are enough red flags out there. I might just sell something.
Don, I've traded GDP, don't own any at the moment. My order is the Bible, Beer, a good IPA, and Bullets. I have my guns, but don't know where the ammo is. We are living in strange times, this Snapchat, whatever that is, $10 billion value and no revenue, and the gurus think that is alright. I don't own any of that stuff, I only buy things I understand, so that narrows my choices by a bunch. I can barely use my I Phone, I continue to Face Time my son when I don't want to. Won't ever buy a bank again in this life time. Don't buy technology, don't understand it. I think housing is a lousy bet. Love farmland but it hasn't come down enough, I think. I would love to cash out of everything but not sure what I would do with proceeds if this phase takes years to play out. Don't think I have seen a phase like this, everyone thinks the market is too high but can't tell you where to invest. The media, CNBC, hates it, the geo pol events don't move the market much anymore. Who cares about the jobs number anymore in relation to the market. The hedge funds own $3 trillion of the market, they are the market, and have taken the volatility out of the market. We won't use Canadian oil but burn 700 mmcf/d of nat gas to the atmosphere, I'm not a tree hugger but that makes no sense. Today I would say the interest rates don't bring down the market, my guess would be the Amazons, Facebooks, Netflix..... those high flyers, but I don't know what will do it. There doesn't seem to be a play book that is believable. But this could go on for a long time as rates may even go lower.
Don, I think you summed the fears well, what will be the discount rate. Heard someone yesterday say that the Italian 10 yr yield is about the same as ours. What will drive rates up, don't think inflation is in the cards. Wages are not growing. Lots of global competitiveness. The central banks it seems are the key and they seem to be fighting the fear of deflation more than inflation, so the prospect of raising the fed funds rate a bunch seems remote. Heard a guy this am on CNBC, said wages growing at 3% and corporate profits much faster, mentioned 25%, must have been stock values. We need better jobs, energy is doing its part. I still think the 10 yr ends up in the 3 to 4% range, maybe only 3%. And as for the Banana Republic, we have been irresponsible with our debt, but look around the world, we still look great compared to Europe, SA, Japan..... I would guess China holds the key to continuing prosperity and who knows if they can do it. China will drive our energy investments as well. If we keep the debt about where it is and the economy grows 3% per year for the next decade, the balance sheet will look fairly good. And I think people are underestimating the impact of the energy boom here in the US, it could add growth and jobs for years.
Thinking about buying more NDLS, what do you think. Seems the next quarter report is going to be critical, if they can show 2% same store sales growth, the stock should rebound. I keep trying to find a non energy bet and there's not much that I feel comfortable with.
Thought I would throw out the issue of what everyone sees as far as interest rates. Seems to me that compa
nies are doing well, especially in the energy industry, and that the discount rate for earnings, dividends is the key issue. The piece above, i thought was interesting. Even if the Fed starts to raise the funds rate, might not affect long term bond yields much. The period around 04 to 06 the funds rate went from 1 to 5% while the 10 yr T note stayed in the 4 to 5% range and inflation was in the 2.5% range. Seems the key is inflation, if the Fed doesn't have to fight inflation, the Fed funds rate won't be an issue. Reducing the balance sheet could be an issue but by comparison, the German 10 bond yields 1%. Again, seems inflation is the key and the drivers in the past have been wage growth, don't have that problem now, the problem now seems to be not enough growth. Seems commodity inflation could be an issue but with the explosion of energy supplies here in the US, that could be contained. So the conclusion that a 3% 10 yr T note may be the expectation for the next few years could be a good one. If that is the case, I think the market could handle higher multiples. Again, high $130s on S and P earnings next year at 20x gets you to 2800, a 40% advance. Will inflation get out of control, my bet is I can't see it. ????
Jerry, Williams will pay $3.25 div in 17, at 3% yield as a pure GP, stock will be $108, $58 today, that should produce 25% annual returns over the next three years. Hard to not like that prospect. PAGP should do about the same. Williams could merge with the LP and accelerate that return. Same thing for PAGP. Assumes rates don't explode and oil stays around the current price. Lots can happen in three years.
Jerry, thanks. Just saw that PAA will build pipe from Cushing to Memphis for Valero, $900mm cost. I still think PAGP might be the easiest way to play the continuing boom.
Don, just caught part of a CNBC report on "fracking" flares in the Bakken, typical, not very informative. Mentioned lawsuits but coudn't figure out whether it's the mineral owners irritated with the loss of royalties from the flared gas or if it were the farmers irritated with looking at the flares, or the environmentalists, if there are any in ND. Assuming 500mmcf/d being flared, that's a loss of around $730mm of revenue annually at $4 gas, 20% of that to mineral owners, not a small number. Guess the economics aren't strong enough to allocate capital to infrastructure, and a long ways from markets.
I've been looking at WNR but will take a look, they should do well, is transitory. Just listened to CNBC piece on cattle prices, a Cattlemen's Assoc guy from TX, thought it was you for a moment, who said the herds are the lowest in 50 years, plus cheap grain prices. But they are building their herds, a couple of years to impact. Have been eating 20 cent per ear corn all summer. Not sure we need to use it as a fuel with the glut of oil we have. Am concerned that e and p will flounder for a while if diffs expand. Still think infrastructure will do well for a couple of years more. They also had a piece on gas flaring in the Bakken as if it was something new. We are over flowing with hydrocarbons, the increase in the rig count in the Permian was amazing.
Saw a note, said the current Permian net back is $73 /b. The horizontal rig count is up to 320 rigs vs 188 last year. And down but still 227 vertical rigs drilling. I still think PAGP might be one of the best bets on the oil explosion in the US, drillers are outrunning the pipes, plants in most areas. DJ Basin, Permian, Appalachia.
Don, listened to the cc. They say Mid Atlantic DC area was the problem. Other areas are ahead of their model. They model 2.3% increase in same store sales, 12 to 13% store openings, eps growth of 25%. Catering expected to add 1 to 1.5% increase in rev. Class of 14 stores are ahead of their model. They think last two quarters are an anomaly. DC area, they suggested that govt spending might be diminishing, could be a cause for the underperformance, not sure about that. Catering should help and online has doubled to 4% of sales. They are building now in Bay area, Orlando and Boston, happy with those areas. Still see 2500 stores. Feels like this could be a good entry to the stock, if they show a same store sales increase this quarter, is up 1.2% through 8/12 and that's half of the quarter. Would think if they can improve on that through the end of the quarter, the stock should rebound. If it deteriorates, will move down.
Don, ate at the NDLS in Boulder, mid afternoon, good traffic. Still think the product is unique and great. Decided today that I will buy more. Need to listen to conf call.
Jerry, KMI was up today, Cramer had a segment on it last night, thinks it is going higher, and it probably will, think it will be $50 by next year. Actually think Williams is a better value, it will do $2.50 div next year at 3% for a GP, mid $80 stock price, 40%+ upside, KMI 20%+. And Williams could do a deal to merge the GP with WPZ, same as KMI did, guess it could go to MLP or to C corp, either way, it would boost the value above $80. Targa has itself up for sale now, will see who steps forward. PAGP should go too. CEQP needs to partner with and e and p co, similar to what Crosstex did, they are trying to now. OKE should go too.