Can Turtles Fly?

European Central Bankers Run Amok? I was in the deflation camp for a long time but even then, I never imagined yields would be negative. Amazing that even near-junk (BBB-rated) corporate bonds have negative yields! The data below is for Europe but similar situations are present in a few other regions (such as Japan). (source: Bank of America Merrill Lynch, via " These Are the Charts That Scare Wall Street ," Bloomberg.com, Oct 27 2016) (source: Bank of America Merrill Lynch, via " Bank of America: Here's One Way the ECB's Bond Buying Could Come to an End ," Bloomberg.com, Sep 8 2016)

I'm continuing to expand into more risk arbitrage positions. This time, Ingram Micro (NYSE: IM). Unfortunately, all are Chinese deals and there is somewhat increased risk of some event derailing all of them at once so hopefully I find something completely unrelated soon. Ingram Micro (IM) is a reseller/distributor of information technology products, with a few additional services. It is being bought out by Tianjin Tianhai, a Shangahi Exchange publicly-traded Chinese subsidiary (shipping/logistics) of the large HNA conglomerate (aviation/tourism/logistics). It makes sense from a strategic point of view since the logistics business can be utilized by the Ingram Micro IT distributor business. Ingram Micro is not that good of a business so it isn't one that I would be pleased to hold if the deal fails (in contrast, recall that Syngenta is one that is a good one). However, the valuation for Ingram Micro is not that high so the stock likely won't fall too far if deal fails.

Was going to do more analysis on this but for now, I'll just write a short post. I took a look at the top 20 Fortune 500 companies and compared them to what they were 20 years ago, in 1996. For those not familiar with Fortune 500, it is solely based on revenue . It ignores market cap, profits, and so forth. Because it uses sales (or revenue), the picture it presents is often quite different from, say, the S&P 500. 1996 2016 % change Rank Company Revenue Rank Company Revenue 1 General Motors  $      168,829 1 Walmart  $        482,130 415% 2 Ford Motor  $      137,137 2 Exxon Mobil  $        246,204 124% 3 Exxon Mobil  $      110,009 3 Apple  $        233,715 4 Wal-Mart Stores  $        93,627 4 Berkshire Hathaway  $        210,821 5 AT&T  $        79,609

Evolution of the Airline Logo The logos of some of the major airlines over the decades... (source: The Evolution of the Airline Logo by Just The Flight.

After pondering this for a couple of months, I decided to take a risk arbitrage position in the Syngenta (NYSE: SYT) takeover by ChemChina, a large Chinese company. I was vaguely familiar with Syngenta because I did some very preliminary, limited, research on it about 5 years ago when I was looking at non-commodity agricultural businesses such as Bunge. This is one of those deals where the expected return (based on my assumptions) is quite low (5%), which is below my usual target (I like to aim for 10%+, preferably 12%+). The raw return is 9% so if everything goes as planned on time, it is a good return; but I am attaching high negative downside so the expected return isn't as good. I wasn't too keen on a 5% return for risk arbitrage. In the end, I decided to take a position. The underlying business is great--there are only 3 or 4 other businesses like this at this scale in the world--so even if the deal fails, I would rather own this than many other companies out there. If

I'm back to blogging--I think. Anyway, I was reading this Bloomberg interview with private equity pioneer, Henry Kravis , and found it interesting. I don't follow private equity and don't really have much in common but it's remarkable how their thoughts and approaches apply to small investors as well (obviously everything doesn't apply so one can't apply everything). It's a pretty good interview so do check it out if you have some time to kill. (As long-time readers may be familiar, anything in square brackets is by me and bolds are typically mine.) (Photograph by Daniel Shea for Bloomberg Markets, June 13 2016) JK [Jason Kelly, Bloomberg journalist]: What’s changed in those 40 years [since KKR was founded]? HK [Henry Kravis]: There’s money everywhere today. There’s almost no institution in the world—whether it’s a sovereign fund, a foundation, an insurance company, banks, pensions funds—that doesn’t do something in the private equity sector. I

Likely return on this is very small but thought it was worth taking a position... I was reading this article on Bloomberg on Mongolia and it mentioned the mining license dispute with Khan Resources (CSE: KRI) that was finally settled by the Mongolian government. Now that the company has received the settlement, it will be liquidating itself and distributing its holdings to shareholders. I was evaluating it and following it for about a month before taking the plunge now. Based on some liquidation value calculations I did a while back--basically discounting assets and applying estimates of liabilities for liquidation--I arrived at a liquidation value of C$0.93 (calculation at bottom but final payment likely much lower). However, the company finally issued a press release on Sept 13 2016, estimating final liquidation value between $0.86 and $0.93. Shareholder vote will be held on Nov 10 2016 (record date Oct 4 2016). They will pay out $0.85 right away after the vote so the risk of ca