By Investment U
In focus today; a nation of deadbeats, Transocean (NYSE: RIG) and the SITFA…
In mid-January the president said, “We are not a nation of deadbeats, we pay our bills.”
According to a recent Wall Street Journal article the numbers tell a very different story.
This current generation of Americans has set records for defaults, not just for the US but in all of recorded history, to the tune of $585 billion. That’s $6000 per household.
And, according to the Journal, there’s a lot more to come.
Household debt today is three times what it was in 1998 and the so called reduction in debt that we have been hearing about on the news has been more bank write offs of bad loans than payment from the folks who owe it.
Households are defaulting on $35 to $40 billion dollars of debt a year, and have been for the past few years.
The Journal said, Americans have walked away from $3 in debt for every $2 paid.
Maybe we aren’t all deadbeats, but there must be a lot of them out there.
Can you imagine how bad the financial collapse would have been if everyone, banks included, had their feet held to the fire?
Either money really does grow on trees in Washington, or someone will eventually have to pay the bills. A bill so big it is almost unbelievable.
Transocean is making big strides since the Gulf oil disaster and has attracted some very big attention.
Carl Ichan, the billionaire and activist investor stated he intends to own 3.5% of the company. That would make him the third largest stock holder behind two mega institutions.
A MarketWatch article stated that Ichan might be in line for a big cash distribution if RIG shifts its structure to an MLP. Analysts give it no chance of happening this year but it appears to be in the cards.
RIG’s earnings beat analyst’s expectation in the recent quarter and since the announcement, Ichan has been screaming for a $4 per share dividend from the $6 billion in cash the company has on its books.
According to Barron’s, drillers like RIG show better share prices in an MLP structure than in a traditional corporate set up. And, better yet, most of the tax burden in an MLP would be tax deferred. MLP’s do not pay corporate taxes.
Barrons says compared to its biggest rival, Schlumberger, RIG is cheap trading at just nine times 2014 earnings while Schlumberger is sitting at about 13 times. And RIG only has to hit its mid-2014 estimates to show earnings growth of 27%.
Numbers like these and the fact that as the yield battle with Ichan develops will see another pop in the stock.
The shares are currently trading at $52 to $53 a share, but hit a high of $161 in 2008 and were at about $85 just before the Gulf disaster.
Take a look at RIG, and there’s an report below that is worth reading. Just click on the link.
[Editor’s Note: We’ve also uncovered a technology company that is likely to shift toward REIT status in the next two years. In the meantime its actually hiding its immense cash flow for tax purposes. But this should prove to be a huge catalyst for the stock. For the full story, click here.]
This week the sitfa goes to the Attorney General, Eric Holder and an Iowa Senator, Charles Grassley.
During a recent Senate hearing Senator Grassley asked the AG why no banker has ever been prosecuted by the DOJ for their role in the financial collapse.
The question was fielded by an Assistant AG and his answer might be one of the most outrageous you’ll ever hear.
This is incredible; the Assistant AG said the DOJ consults experts on the subject to determine if a prosecution would hurt the economy. He admitted that the decision to prosecute is not a function of law, it is dependent on the economic impact it has on the country and the world economy.
That’s insane enough, but Grassley’s response was even better.
Grassley essentially said he understood and agreed, but he’s concerned.
Concerned!
Trillions of dollars disappeared and he’s concerned.
I should have been a banker.
Good Investing,
Steve
Article By Investment U
Original Article: Is Carl Icahn Banking on Transocean (NYSE: RIG) Becoming an MLP?