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Investment vehicle underpins Germany’s exit from coal – Financial Times

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In the pitch-black confines of a steel-cage cable lift, Stefan Roßbach embarks on a seven-minute descent to the tunnels of the Zollverein coal mine, almost a kilometre beneath the German city of Essen.

His task is to supervise the seven water pumps that have stood there since the site’s closure in 1986 and which are replicated in the collieries that criss-cross the Ruhr Valley, the country’s fading industrial heartland. 

These 10-tonne contraptions, and the 500-strong team that service them, are all that stand between the region’s 5m inhabitants and the permanent risks resulting from 150 years of mining — contamination of surface-level drinking water and widespread flooding.

“This task is without precedent in economic history,” said Bernd Tönjes, a former miner who worked in the industry for almost 40 years. “We extracted 10bn tonnes of hard coal from the ground — and therefore the surface is sunk and we have groundwater problems.” 

Mr Tönjes now runs the RAG Foundation, a unique investment vehicle that as of January had amassed €18.5bn in assets and that will underwrite the maintenance of the shuttered mines in the Ruhr, Saar and Ibbenbüren districts in perpetuity, at a cost of roughly €300m a year.

Its deep pockets have not escaped the attention of German lawmakers, who would like to see the foundation’s fortune used to spur the economic revival of former coalfields.

Set up 13 years ago to prepare for Germany’s exit from hard — anthracite — coal mining in 2018, the organisation in North Rhine-Westphalia is also attracting the attention of policymakers around the world.

“We are already in contact with China, for example, to shut down some of their coal-mining sites,” said Mr Tönjes.

The RAG foundation, one of the richest of the 21,000 “Stiftungen” that have played a central role in Germany’s postwar economy model, was becoming a blueprint for how to manage the global energy transition, he said.

Some foundations, such as Bosch or Krupp, own all or part of Germany’s largest companies. But the Essen-based investor has a unique mandate: to ensure that the legacy costs of the coal industry never fall on the German taxpayer. Instead, they are financed via the dividends of the foundation’s controlling stake in local chemicals giant Evonik and smaller holdings in more than 20,000 companies across the globe. The RAG foundation also has a large private equity arm and invests in property in New York and Detroit.

“The eternal obligations could not be met by a normal business model,” said Marc Eulerich, business administration professor at the University of Duisburg-Essen. 

“Thousands of people [in the Ruhrgebiet] lost their jobs because of the coal exit,” he said. “Thus, we have to have a structural change — you need money to get from the dirty industries to the clean industries.”

At its peak in 1957, continental Europe’s then largest coal-producing region in terms of volume employed almost 600,000 miners. But in what is often referred to as “the long goodbye”, Germany’s coal industry, like others in Europe, became unprofitable in the 1970s. To avoid social upheaval, the industry was subsidised until 2018, when almost all its employees had moved on.

Mr Tönjes said it was important that “the whole thing was managed in a socially considerate manner”, in contrast to the UK, which in 1984-5 experienced a bitter miners’ strike over pit closures.

“[The then prime minister Margaret] Thatcher and [trade union head Arthur] Scargill in the UK did exactly the opposite,” he said. “If you visit that region [in England] today, there is still scorched earth.”

The former mining communities of the Ruhr are hardly thriving, however. Gelsenkirchen, the city at the heart of North Rhine-Westphalia’s mining region, has one of the worst child poverty rates in Germany, at almost 40 per cent. In many parts of the Ruhr, life expectancy is lower and municipal debt is significantly higher than the country’s average, a report by the left-leaning Friedrich-Ebert-Stiftung found last year.

The RAG foundation is beginning to shift its investment focus closer to home. Through a subsidiary, it has brought Boston-based Rethink Robotics to the Ruhr. It is also investing tens of millions of euros in start-ups and cultural projects across the Ruhr Valley, including Essen’s 120-year-old Colosseum Theater, which will be turned into a Berlin-style start-up incubator.

Last month, the foundation helped clinch a €17bn deal to buy ThyssenKrupp’s elevator business in what could turn out to be Europe’s biggest ever private equity deal and help the ailing conglomerate shore up its remaining businesses and fund its pension liabilities.

“It is not completely apolitical,” said Professor Eulerich, of the investment decisions by the RAG foundation — which counts foreign minister Heiko Maas and finance minister Olaf Scholz among its trustees.

The recent flexing of its financial might has brought the foundation into focus in Berlin, where lawmakers are preparing for seismic changes to Europe’s largest economy.

After closing its last hard coal mine two years ago, Germany is decommissioning its six remaining nuclear plants and aims to phase out its lignite industry, on which tens of thousands of jobs rely, by 2038. Its core car industry, which supports some 3m jobs, is under threat from the transition to electric vehicles.

The candidates in the race to lead Angela Merkel’s CDU party, including the frontrunner Armin Laschet, all hail from North Rhine-Westphalia and are well acquainted with the multibillion-euro war chest in Essen.

But Mr Tönjes is adamant that the foundation will not deploy its assets at the behest of elected officials. For Germany’s longest-term investor, the interventions of politicians are only a temporary distraction.

“Ewigkeit ist eine lange Zeit,” the 65-year-old said. “Eternity is a long time.”

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Is It Too Late To Consider Buying Atrium Mortgage Investment Corporation (TSE:AI)? – Simply Wall St

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Atrium Mortgage Investment Corporation (TSE:AI), operating in the financial services industry based in Canada, saw a significant share price rise of over 20% in the past couple of months on the TSX. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Atrium Mortgage Investment’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Atrium Mortgage Investment

Is Atrium Mortgage Investment still cheap?

Great news for investors – Atrium Mortgage Investment is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is CA$12.67, but it is currently trading at CA$9.56 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Atrium Mortgage Investment’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Atrium Mortgage Investment?

TSX:AI Past and Future Earnings April 9th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Atrium Mortgage Investment, it is expected to deliver a relatively unexciting earnings growth of 8.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since AI is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AI for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AI. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Atrium Mortgage Investment. You can find everything you need to know about Atrium Mortgage Investment in the latest infographic research report. If you are no longer interested in Atrium Mortgage Investment, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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AG Mortgage Investment Trust, Inc. Provides Updates as of April 8, 2020 – Business Wire

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NEW YORK–(BUSINESS WIRE)–AG Mortgage Investment Trust, Inc. (NYSE: MITT) (the “Company”) announced today that it is providing updates on several matters pertaining to the Company.

Update Regarding Discussions with Financing Counterparties

The Company continues to engage in discussions with its financing counterparties with regard to entering into a forbearance agreement pursuant to which each participating counterparty would agree to forbear from exercising its rights and remedies with respect to an event of default under the applicable financing arrangement for an agreed-upon period. The Company has made significant progress with certain of its largest counterparties in these negotiations and believes it has reached substantive agreement with these counterparties with respect to the terms and form of a forbearance agreement. The Company has received in escrow signature pages for the forbearance agreement and ancillary documents from two of its larger financing counterparties and expects to receive signature pages from additional counterparties. The Company understands that certain additional counterparties are reviewing the terms and form of the forbearance agreement to determine whether to participate. Nevertheless, the Company cannot predict whether certain or any of its financing counterparties will enter into a forbearance agreement, the timing of any such agreement, or the terms thereof.

Update on Financing Arrangements

Since March 23, 2020, the Company and several of its subsidiaries have received from several of its financing counterparties margin call notices, notifications of alleged events of default and deficiency notices. Subject to the terms of the applicable financing arrangements, if the Company fails to deliver additional collateral or otherwise meet margin calls when due, the financing counterparties may be able to demand immediate payment by the Company of the aggregate outstanding financing obligations owed to such counterparties, and if such financing obligations are not paid, may be permitted to sell the financed assets and apply the proceeds to the Company’s financing obligations and/or take ownership of the assets securing the Company’s financing obligations. The Company may also be liable for a shortfall if the proceeds from such sale or value of such assets is less than the relevant financing obligation. In the event of a default under one or more of those agreements, financial and other obligations under such agreements, and in some cases the Company’s obligations as a guarantor, may be accelerated and the counterparties may be able to take ownership of the assets pledged to secure the financing obligations by the Company or its subsidiaries. The Company and its subsidiaries also may be subject to penalties under those agreements and may suffer cross-default claims from its other lenders.

Through April 7, 2020, the Company has received an aggregate of approximately $145 million of margin calls due to mark to market declines and haircut changes, which it has not honored or otherwise met through the satisfaction of financing liabilities. Additionally, through April 2, 2020, either the Company has sold, or lenders have notified the Company that they have sold or taken ownership of, assets subject to $425 million of certain financing obligations. In connection therewith, the Company has also received deficiency and close-out notices from certain counterparties alleging deficiencies aggregating approximately $34.2 million under these financing agreements. Approximately $29.6 million of such deficiencies were alleged by certain affiliates of Royal Bank of Canada (“RBC”) by notice to the Company on April 2, 2020. As previously disclosed, the Company disputes RBC’s notices of events of default and deficiency amounts and filed a suit in federal district court in New York describing the wrongful conduct by RBC and seeking damages. The Company is unable to identify the ultimate acquirers of all such assets because certain of the transactions were completed by various financing counterparties through dealers. Additional counterparties may sell in the future assets pledged to secure financing obligations and the Company cannot predict if such sales will result in positive or negative net cash proceeds.

Update on Company Portfolio

As previously reported, on March 23, 2020, the Company, in an effort to prudently manage its portfolio through unprecedented market volatility and to preserve long-term stockholder value, completed the sale of the Company’s portfolio of residential mortgage-backed securities issued or guaranteed by a U.S. government-sponsored entity (the “Agency Portfolio”). After satisfaction of an aggregate of approximately $880 million of repurchase financing obligations with respect to the Agency Portfolio, the transaction netted the Company approximately $38 million of cash proceeds. The Company expects its cash and unencumbered assets to be pledged as collateral for the benefit of its participating financing counterparties upon the execution of the forbearance agreement described.

ABOUT AG MORTGAGE INVESTMENT TRUST, INC.

AG Mortgage Investment Trust, Inc. is a hybrid mortgage REIT that opportunistically invests in and manages a diversified risk-adjusted portfolio of Agency RMBS and Credit Investments, which include Residential Investments and Commercial Investments. AG Mortgage Investment Trust, Inc. is externally managed and advised by AG REIT Management, LLC, a subsidiary of Angelo, Gordon & Co., L.P., an SEC-registered investment adviser that specializes in alternative investment activities.

FORWARD LOOKING STATEMENTS

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 related to the Company’s outstanding indebtedness and the status of our ongoing discussions with our repurchase counterparties, among others. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results and outcomes could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, changes in interest rates, changes in default rates, changes in the yield curve, changes in prepayment rates, the availability and terms of financing, changes in the market value of our assets, general economic conditions, conditions in the market for Agency RMBS, Non-Agency RMBS, ABS and CMBS securities, Excess MSRs and loans, our ability to predict and control costs, conditions in the real estate market, legislative and regulatory changes that could adversely affect the business of the Company and the ongoing spread and economic effects of the novel coronavirus (COVID-19). Additional information concerning these and other risk factors are contained in the Company’s filings with the SEC, including its most recent Annual Report on Form 10-K and subsequent filings. Copies are available free of charge on the SEC’s website, http://www.sec.gov/. All information in this press release is as of April 8, 2020. The Company undertakes no duty to update any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.

Source: AG Mortgage Investment Trust, Inc.

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17 tips for more successful investing – MoneySense

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Photo by Wes Hicks on Unsplash

What is the most important thing to keep in mind as an investor? This is a question one of my students asked the late Walter Schloss, a legendary value investor, a few years ago when he talked to my value-investing students at the Ivey Business School. His reply was “do not lose money.”

Schloss argued that once you lose money it might be difficult to recover. For example, if you go down by 50%, you must then go up by 100% to break even.

Unlike other investors, value investors place a greater emphasis in avoiding losses than making money. In the words of Aristotle, “the aim of the wise is not to secure pleasure, but avoid pain.” 

The following checklist, adapted from Walter Schloss’ writings, helps investors avoid losing money, and will go a long way towards achieving financial success.

  1. Before investing, try to determine the value of a stock. A share of a stock represents part of a business; it is not just a piece of paper. Since buying a stock is tantamount to buying a piece of the company, one therefore needs to understand a lot about the company.
  2. Compare price to value. How far below value is the stock trading at? That is, is there a margin of safety?
  3. Examine the quality of the balance sheet. Be sure that the company is not over-leveraged in relation to the norm in the industry. If it is, you may risk permanent loss of capital.
  4. Have patience and a long-term perspective.
  5. Do not buy on tips and never make impulsive decisions. Do your own homework first and be independent; everyone has a conflict. It is your job to watch your back, no one else’s.  
  6. Do not sell on bad news as this information tends to be already reflected in the price and, especially, because markets tend to overreact on the downside (also on the upside).
  7. Do not be afraid to be a loner and a contrarian, but always look for weaknesses in your thinking. 
  8. Have confidence in your judgment, especially in the face of resistance and criticism, once you have made a decision.
  9. Have an investing philosophy and an analytical process of when to buy and when to sell a stock, and try to follow it with patience and discipline.
  10. Before selling, try to re-evaluate the company given current information. The level of the stock market, the direction of interest rates, changes in P/E ratios and pessimism or exuberance by market participants should be factored into your analysis.
  11. When buying a deep value stock, try to buy at the low of the past few years. This is because a stock may go to $100 and then decline to $50, which one may find attractive as an entry point. But what if, a few years ago, the stock changed hands for $10? This shows that there is some vulnerability in a decision to buy at $50.
  12. Better to buy assets at a discount than to buy earnings. It is easier to find deep value stocks and identify/expect a catalyst than to understand whether the company has a franchise and whether the franchise is sustainable. Besides, earnings can change dramatically in the short run, whereas assets change slowly. One has to know a lot more about the company if one buys based on earnings.
  13. Listen to advice from people you respect, and examine what they do. This doesn’t mean you have to accept their advice or do what they do. While you need collateral evidence to support your own thinking, listening to people you respect helps solidify your thinking.
  14. Do not to let your emotions affect your decisions. The worst enemy in investing is usually within yourself. Fear, greed, impatience and lack of discipline are weaknesses of human nature and emotions that work against success in investing.
  15. Stay invested to take advantage of compounding. If you make 12% a year and stay invested, you’ll double your money in six years. 
  16. Stocks are better compounders than bonds. Bonds have limited upside; inflation erodes the value of bonds and reduces your purchasing power.
  17. Beware of leverage. Risk is not volatility, but the probability of permanent loss of capital. Investing using leverage may result in a permanent loss of capital as you may be forced to sell at a time you did not wish to do so.

These rules worked marvels for Walter Schloss. Over a 49-year period of managing money, there were only two years during which he lost money, and he beat the market by 5%. The rules can work for you, too—but are you disciplined enough to follow this checklist? The answer to this question will determine how successful an investor you will end up being.

George Athanassakos is a professor of finance and holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, Western University in London, Ont. Also director of the university’s Ben Graham Centre for Value Investing, Dr. Athanassakos is offering a highly sought-after five-day seminar on Value Investing and the Search for Value, in Toronto, July 27–31, 2020. For more information, visit https://www.ivey.uwo.ca/bengrahaminvesting/events/seminars/.

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