loganc
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Posts posted by loganc
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Only in republican circles the economy sucked in 2000 and 2016.
What?? 2000 was not even referenced in the post. The post started with Bush in office. If you don't think the weaker economy in the rust belt had any effect then you need to do more reading. It doesn't take a national issue like 2008. Regional can matter too.
Against my better judgement, I am going to try to shift this political discussion to something that is more relevant to investing.
Tim,
I have seen some of your investing commentary and I respect that you are thoughtful in that regard. I have also seen some of your political commentary and would say that I am generally in disagreement with respect to Trump. To be clear, I am certainly no "Liberal" as it pertains to economic policy. Given that I haven't read everything you have written on all things Trump, I am going to make some assumptions here about your support for his economic agenda generally and as it pertains to trade. If I am wrong about this, I apologize.
That being said, I am curious as to why you think the Trump economic policies that we can make reasonable predictions about at this point are going to actually help, rather than hurt, the rust belt areas. Specifically, I think it is pretty clear at this point that there will be some sort of anti-free trade legislation passed in some form. Given the EOs so far, the Trump trade rhetoric during the campaign, and the commentary from Navarro, I believe that is a near certainty that either (1) the corporate tax reform bill will include some sort of border adjustment tax or other measure that will be a de facto tariff on imports or (2) direct tariffs or border taxes (the same thing) will be implemented against China, Mexico, etc.
I am in agreement that things like lower tax rates (individual and corporate) and deregulatory measures will be of some help to the rust belt areas. However, it seems to me that there is a very high likelihood that border adjustment taxes or tariffs are going to ultimately be a net negative. I am EXTREMELY skeptical that such anti-free trade measures will ultimately result in any significant increases in jobs for low skilled labor and that the nearly certain rise in consumer prices will be a net negative for these individuals. Further, the second order effects from ad hoc economic policy (e.g. border tax on Mexico to pay for the wall) are very likely in my view to have very negative unintended consequences.
So, I am just curious if you have any specific empirical data that would support the notion that a border adjustment tax or some similar measure will yield a significant net positive benefit to low skilled labor in the rust belt.
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You just called not just Trump supporters, a significant Democrats Bull Turd. That is you called a vast majority of the country Bull Turd.
Bernie Sanders said “Let’s be clear: The TPP is much more than a ‘free trade’ agreement,” argues Sanders. “It is part of a global race to the bottom to boost the profits of large corporations and Wall Street by outsourcing jobs; undercutting worker rights; dismantling labor, environmental, health, food safety, and financial laws; and allowing corporations to challenge our laws in international tribunals rather than our own court system.”
"Those same exit polls showed that almost 60 percent of Michigan Democratic primary voters believed that flawed trade policies cost jobs—and they overwhelmingly favored Sanders." Emphasis in bold added
https://www.thenation.com/article/bernie-sanders-wins-in-michigan-thanks-to-trade-policy/
Yes I blame economists. Did they tell us that Obamacare will have huge premium hikes, high deductibles, your doctor may not be available in plan....etc? If they did, can you share the link?
Oklahoma Obamacare plans face 76 percent hike
http://www.washingtonexaminer.com/oklahoma-obamacare-plans-face-76-percent-hike/article/2603629
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"("Why do they stay silent?", ask Trump fans as they try to destroy the lives of the accusers)"
Hillary needs only herself to destroy the lives of the accusers.
I still can't believe that we have these two running. While both represent fairly accurately the policies wanted by both parties, you would have a hard time picking these two characters from 300+ millions of Americans.
Cardboard
How exactly do you come to the conclusion that Trump represents fairly accurately what the Republican party wants?
First, he is a protectionist, which is just about the most anti-free market position possible. Second, he has proposed fiscal policy (to the extent that one even exists) would result in massive deficits (i.e. cut taxes, increase military spending, 500B+ infrastructure spend, no cuts to entitlement spending, and ??B on the wall and other nonsense. Essentially, his budget plan is like Obama's stimulus plan on steroids.
So, you are telling me that these two pretty major talking points of his campaign are in line with Republican thinking? Do you not remember the massive fights that have happened over the last 6 years over the debt ceiling? Does the Republican party all of sudden not care about the national debt? Does the Republican party all of sudden not care about entitlement reform?
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Just curious, how would you guys compare Trump's latest comments on women with Hillary's comments of "Deplorables" and "Basement Dwellers"?
If you can't tell the difference between comments about sexually assaulting women and those comments from Clinton, then you have serious problems.
Edit: As a matter of fact, the response from the hardcore Trump supporters on these comments simply validates the accuracy of the "deplorables" comment.
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she's a war hawk and I hate that. Trump sucks but at least he's vehemently against interventions, and has the balls to say he's neutral on Israel. If he actually believes this...But, who the hell knows what he believes. All I know is that he's a dangerous demagogue.
With a few words snipped that is a excellent summary of this election. The dangerous, corrupt, bloodthirsty, war hawk politician vs. the dangerous populist xenophobic demagogue that, well, who knows what he will do.
I find it fascinating that "war hawk" would be a pejorative for Hillary Clinton from the standpoint of the Trump supporter given that a consistent rhetorical position of Trump is that the military has been underfunded (good luck proving that based on military budget allocation through the Obama administration from actual data). Further, a major talking point of Trump is something like knocking the hell out of ISIS (whatever that means - he apparently knows more about ISIS than the Generals) and encouraging increasingly brutal "enhanced interrogation." How is increasing military spending, increasing military actions against ISIS, and encouraging more intense "enhanced interrogation" (plus, encouraging war crimes by "kill[ing] their families") not the actions of a bona fide war hawk?
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Interesting talk. I agree with the general philosophy espoused - "capacity to suffer" and reinvesting capital for long term growth in spite of current earnings.
However, can anyone provide the long term investment track record of Russo?
Edit: (paraphrasing) The top 100 people in Illinois that work for Kraft speak 0.9 languages, per Russo.
Good luck with discounting 3G.
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Not a shareholder of CSU (unfortunately), but Leonard is incredible.
So, why aren't you a shareholder of CSU? Too expensive right now?
Thank you,
Gio
Gio,
I have not made an investment because I have not done significant work on this company. I think Leonard's track record is incredible and what I gain from listening to the Constellation calls justifies my statement. However, I will not make an investment on that basis alone. I try to take the "punch card" notion pretty seriously in my investment process.
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CSU.to - CEO gets no salary, no bonus, no options, AND he pays his own travel expenses
QSR Heinz, BUD - anything 3G buys is well run
+1.
Not a shareholder of CSU (unfortunately), but Leonard is incredible. QSR/BKW performance blows my mind.
I'll go ahead and make the obvious, while controversial, nomination:
VRX - Pearson.
Flame away.
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If I could get a PM as well, it would be much appreciated. Thanks in advance.
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This is what I was able to grab off a private database I have access to.
This is awesome. Thanks so much.
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The most federal income tax that Burger King has ever paid was approximately $30 million but their earnings are in the neighbourhood of $12 billion so the tax shelter benefits are negligible.
I can't say anything about the exact US federal cash taxes that BKW has paid, but BKW doesn't have "earnings" anywhere close to $12 billion. I suspect there was some kind of a typo here or misunderstanding.
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Buffett's a pretty smart guy. If you asked him about his comments on PE and 3G, I doubt he'd say "oh, you caught me". He might say that his problem is with a lot of PE practices, and that 3G doesn't have those. And it's not because he doesn't have the stomach to do big restructuring himself that it's something that should never be done and that you can't strengthen a business that has grown soft and fat over time. People assume that because Buffett doesn't like to do certain things, that he would be against them in all situations in the abstract...
I kind of derailed this thread by talking specifically about BKW/QSR, but I wanted to address the above comment by Liberty because I think it is important.
So, Buffett has been asked the direct question comparing 3G to "private equity" (from Becky Quick) and his response was along the lines of what Liberty says - (paraphrasing) "the difference between 3G and private equity is that 3G holds for keeps and private equity has a short term horizon and is looking to flip the asset."
What Buffett said (and what many have said in this thread about the short term thinking of private equity) is absolutely true. However, I don't think the culprit is really the private equity general partners. In other words, I think the true criticism should be geared towards the short term thinking of the limited partner investors in the private equity funds that force exits from investments on a specific time frame. The perceived "flipping of companies" could very likely be explained by the selling of assets to return capital to the limited partners on the specific time frame that is demanded from the limited partners.
Ultimately, I think it is a gross oversimplification to place all of the blame of "short termism" on the private equity investors, when the private equity industry in general does not have access to permanent capital and must therefore return capital on a strict time frame. I think this particular dynamic is worth thinking about.
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Here's a 2 hour audio clip of the Q & A. It includes everything except the very first question (which Charlie said happened to be the most intelligent question ever asked at the meeting, haha)
Very awesome. Thank you so much.
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Don't know if it had to do with how bad it was at BK at that time. Seeing the good things happening at BK perhaps brought newfound love at Omaha for 3G. Leading to Heinz, Kraft and the new BK?
I do however expect BRK to own a larger chunk of the biz in the coming years, especially as 3G works their operational magic with TH-BK. Buffett has regretted not participating in MCD for a long time, this appears to be his way into the fast food world to make up for his error of omission.
3G has gotta be very big on BRK's partnership radar. Besides, 3G is a PE firm after all, albeit with a longer time horizon. But not permanent. That's where BRK comes in. These deals must be mouth watering for Buffett.
No idea why he passed on it in 2010. I guess it would have been a pretty small investment for BRK at that time, so maybe that has something to do with it. I recall him mentioning passing on the initial deal during an interview on CNBC which happened around the time of the THI deal. No idea whether BRK ends up with significantly more of QSR or not. It certainly doesn't seem outside the realm of possibility. I would say that Buffett has been blown away by the progress at HNZ and I am sure he is really excited about the KRFT deal.
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Time will tell, but the 3G/BRK deal here has started the nursing of BK's franchise value back by allowing them to once again compete with MCD and Wendy's. Something that PE ownership of BK did not deliver on for over 12 years.
To be fair, I think 3G has done a pretty good job of nursing back the value the BK franchise and growing the business without the help from BRK. Buffett actually passed on investing in the deal in 2010. That was obviously a mistake as the returns from that transaction have been quite substantial.
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I am not sure what your point is on BK. I understand the general idea that PE firms can load a company with a bunch of debt, cut costs to the bone, and impair a business. My point is that 3G bought BK with a lot of debt and they have subsequently made vast improvements in the business operation.
Then you said something about BRK coming in and removing a "debt anchor" from Burger King and nursing the franchise. It seems to me that BRK provided financing via a preferred (i.e. additional leverage) to the THI deal.
The preferred improved the capital structure of BK by decreasing the debt ratio to a respectable 5 through the preferred versus 7 with the straight debt before the deal. The $3B of debt bearing interest rates of 9.75% to 11% sounds like an anchor to me, no? Was all of the debt 3G's doing? Not.
I would have to go back and look specifically, but 3G purchased BK at a 4B EV with 2.8B of debt financing in 2010. It would appear at that point in time BK had about 800MM of debt. So, obviously, 3G did load BK with debt at that point. I can't say whether the 800MM was refinanced in 2010, but it seems likely that it would have been due to change of control provisions.
The 2.8B of debt that 3G used to purchase BKW had quite an onerous weighted average interest rate and they could not refinance earlier due to some costly make whole provisions. That were at the point where they could have refinance the debt at a reasonable cost just prior to doing the THI deal. It was actually expected and somewhat telegraphed to BKW shareholders from management that they were planning to do a dividend recap. However, it appears that they found the THI transaction to be much more attractive. I am pretty familiar with BKW as I have been a shareholder for the past 1.5 years.
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I am not sure what your point is on BK. I understand the general idea that PE firms can load a company with a bunch of debt, cut costs to the bone, and impair a business. My point is that 3G bought BK with a lot of debt and they have subsequently made vast improvements in the business operation.
Then you said something about BRK coming in and removing a "debt anchor" from Burger King and nursing the franchise. It seems to me that BRK provided financing via a preferred (i.e. additional leverage) to the THI deal.
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2. As PE firms atrophy, Berkshire will likely see more opportunities to buy biz's, where PE is done wringing out what they can from a biz allowing for BRK to come in, remove the debt anchor and nurse the franchise value back to life. This just happened at Burger King. More certain to come. Because PE and extreme debt load go together. Only thing to verify is if the PE ownership took the life-blood out of the original franchise value. Thank goodness they have a holding time horizon of 3 to 5 years only, not longer!
I am am quite sure 3G bought Burger King in a pretty leveraged transaction and then the business de-levered over time as the business performance improved via cost cutting, re-franchising, and the master franchise joint venture growth model. The BKW-THI is also pretty leveraged via the BRK preferred.
Also, in terms of the VRX thread thing. I am pretty sure Liberty never made the comparison and that I was the one that made the comment. In my mind, there is very little difference between the VRX model and the 3G model. For what it is worth, I would imagine that the two largest shareholders of VRX would probably make similar comments.
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I like that blog a lot, but do disagree with some of his analysis. He leaves out cash saved by some of the refinancing (admittedly to his credit). Taking the EBITDA on down approach misses quite a bit if you ask me. For instance, he uses 5% for refinancing (too high IMO) and uses D&A as a proxy for maintenance capex (overestimates IMO). Also - yesterday's price was what I was referring to when discussing 16x.
Anyways - I feel like I am getting nit picky at this point. I'm happy to have built a position at $83, time will tell if I'm correct!
What do you see 2017 FCF being for the combined entity, assuming synergies and refinancing? It appears that you have done enough to estimate this number and I am curious to compare with my rough estimate. Thanks.
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His contributions to the field may be less appreciate by the "little guys" who can't necessarily mimic his strategy, but it's a brilliant view on investments, captive capital, and leverage that should definitely be recognized.
Wouldn't the "little guy" be able to mimic his strategy perfectly by buying BRK stock?
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I wonder if in 10-20 years many investors who started out close to 2008-2009 will regret that they expected it to repeat every few years... That certainly seems to be the case for many people.
+1.
I don't think this mode of thinking is limited to investors that started in the 08/09 vintage. To me, it seems like the consensus opinion is that 08/09 is going to be a regular occurrence. It is axiomatic that the next recession is closer today than it was a few years ago, but I am just not sure that it makes much sense as an investor to be positioned like the next financial crisis is happening tomorrow. I think the most prudent action is to own shares in companies that can take advantage of whatever the future brings. Given the namesake of the site, the obvious example is BRK - BRK stock will go down during a calamitous event, but there is ample liquidity to be deployed in such an environment that should ultimately result in a more valuable franchise. Is the mark to market loss on BRK stock really that horrific?
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I read "Once in Golconda" and it was very good - Gayner mentioned it an interview. Brooks is a fantastic writer and I will be reading Business Adventures in the near future. I can understand being skeptical around the Buffett/Gates hype, but I am pretty sold on Brooks.
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I am not sure about the net neutrality argument. NFLX actually started paying Cable companies and perhaps others for better distribution this year.
You can actually completely bypass the broadband of the cable companies with DSL, so the cable providers power is checked on the broadband side. In addition Google Fiber, Verizon Fios and perhaps others may be larger competitors to broadband in the future. An interesting sidenote: Google Fiber actually looks profitable because they have gained such huge scale in the markets they entered.
Do you stream content over a DSL connection? My experience with it has been absolutely terrible. My parents live in a rural area and have DSL - it is almost like not even having internet.
Verizon Fios wasn't economic, so assuming they are going to expand over a huge footprint including rural areas is dubious. Also, where are you getting your numbers with respect to the profitability of Google Fiber. I don't believe Google has ever provided hard data on the economics of this project.
2907 days until President 46th
in General Discussion
Posted
I misread your post. I apologize.