LakesideB

Spekulatius, interesting comment on CVNA. Superficially can see why CVNA : large amount of debt + no free cashflow + prior actions of senior Garcia. Curious to know if you had an opportunity to look under the hood and you found something that gave you a pause or you hold that sentiment due to the above mentioned factors? Txs.

Wow! On other hand, Bruce Flatt is going diametrically opposite with cash hoard!

My bad, I mistook what you meant. Agreed.

A 1% to 2% move is non-trivial. On a 30yr it translates to a -19% to -28% return due to its approx 19yr duration. The 30bps to 35bps move in US 10yr and 30yr in the past two days is a huuge move with much higher implications on actual returns. The other issue is for a P&C, the investment leverage is always >1 and in FFH's case, its around 3x, so the implications on ROE for FFH are even more dire due to this. Kudos for him to have had the sense to come out of them.

Look its pretty straightforward. If you think Trump wins two adverse things will happen that will affect US treasuries : decreased corp tax rate and increased infrastructure spending. Prem says as much. Decreasing corp tax rate to 15% and decreasing highest individual tax rates and lowering number of tax brackets means decreased tax revenue for the gov. I have seen estimate of lost tax revenue of upwards of $9 trillion by 2026. Increased infrastructure spending (military, infrastructure - building of Wall, etc) will be financed by huge bond auctions. When you suddenly triple the size of bond auctions to finance the increased deficit, what do you think happens to IR? Who has the appetite to come for a bid in today's environment (the last time that high a deficit as a % of GDP that needed to be finance was in 2008 ... and everyone participated due to safe heaven status of treasuries during those times)? Avg duration of 30yr treasury is 19 years, so 1% moves results in 19% loss. He wants to take the risk off in-case Trump get elected. Given the depth of US treasury market, he can easily do that and he can always come back in once he has certainty. Trump getting elected may result in other 'un-intended' events which he can capitalize on with his newly acquired $10b+ cash war chest. Makes perfect sense with what he did.

Could anyone post a pdf file of the transcript? Thank you! :) Gio FFH_Buys_Brit_Transcript.pdf

from transcript "We have partners who in the past have been – have suggested that they would like to be partners with us and – in these insurance operations, and we may consider that, if it's a partner that we're really comfortable with. And all of that just to say, in terms of our common stock, we think our common stock with a book value of $400 a share and a stock price – with a market stock price to book value of about 1.3 times, we think is inexpensive. We're selling – we had a very good year last year. Our earnings are well protected. Our underwriting is – and our insurance operations are very good. Our investment portfolios are very conservative, as you know. We went through it last week. Our equities are hedged. We got 25% cash, low corporate bond. We've got deflation swaps. So we just think that we have many ways of financing this, and one of the last alternatives will be a stock issue."

I agree and that's why the current FCF is depressed in my mind. Although I am curious to see that capex this quarter was probably the highest in the last 8 quarters with very little debt repayment. In fact they used cash to buy additional RE (I believe a nicer office building near their location). Somehow, I don't see the urgency to attack the debt that aggressively. Either they have a good visibility on how things will progress from here on or they are being extra confident about things. In the end however, I have confidence in what they are doing and believe this mgmt. Without this belief you would probably stay clear as a 25% FCF number is meaningless if you have a liquidity crisis.

Early part of this year they thought their investment in Post Media would start paying off. Its been a hole for them with close to 0 ebitda to show for. The investment in that asset continues and these dollars could have been spent growing their 'essential information' business. So a huge opportunity cost as well. This acquisition has been a disaster so far. For all the leverage the company took, it has very little to show for it. But I guess that's the reason why the opportunity exists ... so in a perverse way its good all this is happening. You have to believe in the mgmt at the end of the day.

They are well aware the circumstances they are facing. You can see it that this quarter they have started selling some non-core real estate to repay some of the debt. The problem is the rapidly dropping EBITDA has the potential to breach covenants before they have the opportunity to sell their RE. Also if u notice, Q3 and Q1 are the weakest quarters due to cyclicality of the business. So the next quarter will be very important in accessing how things are progressing.

I agree to your statement. Simply put, that is one of the biggest difference I find between this and the fate of yellow media. I should also state that the land is about $16m on their balance sheet or about 15% or so of mkt cap . The BV of that land is truly outdated. I recon the land value in itself is about half the the market cap.

I agree to your statement. Simply put, that is one of the biggest difference I find between this and the fate of yellow media.

This could be it. Although the company did get very close to breaching its covenant on its debt. They have quiet a few levers to avoid a run by the banks however: real-estate, further cost cutting (although its CEO runs a very tight ship). It seems that they are sort of facing a perfect storm : they levered the company up to buy Post Media asset and it hasn't worked off as they expected ... plus you have weakness in the national advertising creating all sorts of issues for them. Additionally, they have a potential $20-$25m tax hit due to dispute with CRA. If they didn't have a ton of debt, things would have been much easier to navigate. CEO and mgmt owns abt 33% .. .so they have a huge vested interest to make this work. My sense they will eventually pull it off. Berkshire AR 2012: Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job. A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end. Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents. Charlie and I believe that papers delivering comprehensive and reliable information to tightly-bound communities and having a sensible Internet strategy will remain viable for a long time. -CM I got to read that quote above when I was looking into this business. The local adverts in the community newspaper make majority of their revenues and they are quiet resilient. However, National advertising is still about 10% of their community newspaper business. Since the newspaper business is mostly fixed cost, what happens to national advertising has a disproportionate impact on the company's profitability. National advertising is paramount for their community business due to the operating leverage in this business. Some of the national advert cycle is cyclical and some of it is structural as advert dollars flow to the digital medium. Their other half of the business - 'essential information' is a terrific business with growth in it. If you combine all the debt and put a reasonable number to the pending CRA judgement the margin of error is that much narrower. Its a straightforward thesis, if you think they can avoid breaching their covenants, this could be a blockbuster opportunity as its trading at 25% fcf yield on a depressed free-cash flow number. They could do thinks like sales lease back of their RE or sell parts of their non-core RE to avoid disaster (which they did this quarter) or cut costs a lot more aggresively.

This could be it. Although the company did get very close to breaching its covenant on its debt. They have quiet a few levers to avoid a run by the banks however: real-estate, further cost cutting (although its CEO runs a very tight ship). It seems that they are sort of facing a perfect storm : they levered the company up to buy Post Media asset and it hasn't worked off as they expected ... plus you have weakness in the national advertising creating all sorts of issues for them. Additionally, they have a potential $20-$25m tax hit due to dispute with CRA. If they didn't have a ton of debt, things would have been much easier to navigate. CEO and mgmt owns abt 33% .. .so they have a huge vested interest to make this work. My sense they will eventually pull it off.

I guess the float is not really free if you pay a multiple > 1 to acquire it. Its free to the extent you can get it a discount to the face value. So agree with Jays numbers. Max bid of 999,999,999. My bad here!