bizaro86

I think MLB needs gambling money more than they need Shohei Ohtani. MLB is probably the sport that has the most to lose from the bundle/RSN model breaking. I think ultimately MLB needs gambling and wants Ohtani. I think even if it was him it gets swept under the rug. May be he takes a year off as a soft suspension - this year is good as he can't pitch anyway.

I'm not an American and have no political affiliation in that country. I avoid their politics whenever anyone talks about them. But as a shareholder, my strong preference is that Berkshire not consider politics when writing insurance contracts, only premium and risk. I think that's reasonable and relevant to the conversation here. If you've been appointed moderator of the board without me being aware of it then I apologize.

Republicans buy insurance to. Charging high fees for bespoke insurance that no one else can write is what I want Berkshire to do. If they didn't feel his collateral was good then fine, but I hope they aren't giving up lucrative opportunities for political/optics reasons.

I think this is likely to end up happening at some point, especially if buyers commission is removed. On a $1MM house $500 + 15% over 900k provides more incentive to get a good price than 1.5% of total, even though the expected commission is the same.

Yeah. Buyers will be way more price sensitive than sellers, imo, on offering their agents commissions. Sellers feel they need to offer the full amount to attract buyers, while buyers paying their own way will want a deal. Sellers also have a big influx of funds at closing so never really see the commission, while buyers will have to either add to their mortgage or pay cash.

Airlines are often not great for float, because their credit card processors often either keep the money, or require large amounts of restricted cash. AirBNB has tons of float along those lines. For your example, if they have $20 MM of cash from some sort of licensing deal (no ongoing costs) I'd value it at $20 MM. That's exactly like having $20 MM in cash from some other source, except the GAAP shows over many years which doesn't matter, imo. What they do with it is a capital allocation question, but it isn't different than what would they do with $20MM of cash balances.

This. I didn't start investing until late 2008. My results have been better than if I bought and held BRK at that time. That would have probably been lower risk though (and a lot less work).

Since he complained about railroad wages in the letter, I think he wanted to make it clear that while he respects the front line workers he has issues with the politicians. Otherwise "billionaire rail baron complains about front line worker wages in letter to millionaire investors" is a bad look.

I think SIRI will get added to a variety of smaller indices once the Liberty shares are spun off into the float.

I only owned it as a trade. I bought the dip on the short report last week and am taking my profits now. I will never own it as a long term hold, because I don't trust management. I get that's not the consensus opinion on this board (and the last couple of years have been good). But after they had Fairfax India effectively borrow money from Omers at a high rate along with giving them a free upside option on their best asset (the airport) in exchange for getting a mark to charge fees with I'll never trust them. All that said, the short report was obviously opportunistic so it was some easy short term money to pick up. Was able to get a nice round-trip on nearly a 10% position.

Sold out of FFH today.

FFH

I think in a situation like that predicting thr future is less important than controlling the spread of your own outcomes. You can size it like an option and sleep well knowing it's probably a good risk-reward but is a bit binary. If you want to size it larger you need a good hedge. So something that will benefit from gas prices staying the same or dropping, and ideally you want that to have a bunch of leverage. Something like a fertilizer company, or maybe puts on a nat gas producer or nuclear power generator (both of which benefit from high gas prices).

I think reducing the size of the investment portfolio would be a good choice for a post-WEB world. I'm not sure about the "paying capital gains" taxes part of it, that doesn't seem like a great plan to me. If their insurance subs are overcapitalized, couldn't they move a chunk of Apple to the holdco, and then do a swap with shareholders for their BRK shares on a tax free basis? That seems like it would function as a buyback, reduce concentration in Apple (which is no longer cheap, imo), and reduce the size of the securities portfolio which helps the successor be successful.

I hadn't considered them selling ECN, and agree that would be a home run. I'm somewhat skeptical of that, in the same way I don't like accounting for intangibles on finance companies In all seriousness, I agree completely a financial can deserve a premium to TBV (eg Geico) but I'm uncertain that their origination platform delivers high enough ROEs for it to have much intangible value. Probably the best case would be they find an alt-manager looking to expand or someone looking to build private credit capability who pays up. Anyway, ECN seems like a mix of too hard and not rich enough for me right now. I'll probably nibble on the DRT debs, as it seems like management wants to get them repaid, which is a surprisingly important factor in credit investing imo. And the spread is very high. I took a brief look at ACD and sort of like their debs as well, and might add there. Obviously only 11% ytm but I did a deep dive on them years ago and think they do a good job. Recent large write-down not withstanding I think factoring is a reasonably low risk operation. The equity might be the better bet there as it's cheap and a go-private probably pays close to TBV

I'd say a contemporary example of a cigar butt would be a biotech firm that had its drug candidate fail and is now trading for less than the cash on the balance sheet. There have been many of these lately. Anything with a decent ongoing business (which includes most merger arb) doesn't qualify as a cigar butt, imo.

So it took me much longer than a week to get to looking at these, and I missed a pretty solid move in the ECN debentures, so congratulations! ECN did lower the balance on their senior credit facility using the proceeds of the equity raise you mentioned, and now they have enough space on that line that they could refinance the debentures into it, which is a pretty good backup plan. I'm a bit skeptical on how much of that capacity is going to be there in the long term and the credit facility expires before any of the outstanding debs come due so they'll need to renew first. Capacity might be lower because they've been selling down their finance assets, that is deleveraging but also is getting used to cover losses. They do have positive equity~=market cap here, but much of that is goodwill/intangibles, and I'm a bit skeptical that those are worth much in a finance/leasing business. I also dislike that they've been reducing exposure to floorplan loans (Which I think are pretty solid) and ramping up exposure to areas I think are riskier. Basically I think at the mid-teens YTM these are at right now they're probably priced about right. But getting in here when the last Q came out and they showed the deleveraging from the equity raise was a great trade and you're up 20 points since then! DRT is definitely higher risk/reward. YTM is obviously extremely high, and I like that their credit facility is essentially undrawn so they don't really have debt senior to these debs. But their business is probably impaired by work-from-home. They've been shutting down plants (and without the charge for that last quarter they'd have made money) which hopefully gets them on more solid footing. The major owners being willing to fund the rights offering is a great sign, imo, because as you noted they're putting in money that is effectively junior to the debs. Having a major owner committed to the equity is a good thing, because a share-for-debt restructuring would be a completely fine option here, but a CCA filing would probably not result in a good outcome, imo. The other one I've always thought probably has a greater ability to pay off their debs than the market expects is Wildbrain, from the underlying value of their intellectual property assets. But those are trading pretty close to par right now.

Even inventory I think you need to take on a case by case basis. If it's a tank full of crude oil market price is fine. If it's a warehouse full of clothes that didn't sell when they were new/in-season then zero minus cost of disposal might be liquidation value.

I did a trip recently where I had a rental car for one piece and used Uber for the next piece. Waiting for Uber got old pretty fast. Especially the once where it ended up taking over an hour and a half - granted that was leaving an NFL game, but even still... In terms of the 2 public choices I think Avis is better run, but Hertz has some immediate upside as next year they probably won't buy tens of thousands of EVs that immediately depreciate because of lower MSRPs, so growth will be easier for them. I also really like (and own) the Hertz warrants. If you think Hertz is a good long term buy the warrants seem like the obvious play to me.

I've been buying the AMC debt through Interactive Brokers. The 7.5% of 2029 is first lien paper. If they filed today I don't think it would be covered, but at the pace they're adding equity to the balance sheet I think there's a good chance they get there. And if they make their maturity wall in 2026 it probably trades at a much smaller spread thereafter. I'll try and take a look at ECN and DRT this week.

I agree it's very probabilistic/event driven. Most of the issuers aren't exactly top-tier corporates - if they were they'd issue regular bonds instead. So I think a diversified portfolio/par-buyer type strategy would underperformed in the space. I think bankruptcy/restructuring type events tend to have the fattest returns here. I had a very large position in the Just Energy debs when they restructured, that I was able to fully hedge with puts for like a 20% spread in a month. Was a very big position but seemed like a layup and did close. The hardest part was getting RBC-DI to correctly exercise the puts after the reverse split. If you're interested in debt benefiting from equity issuance, you might consider AMC debt. Various issues, but even the first lien has a high ytm and they are issuing $50-$100MM/week of equity through ATM (or more recently equity-for-debt swaps)

I'm super interested in this topic, and some of my best (and worst!) returns in the past have been in this space. I've got quite a lot of floating rate prefs right now at double digit current yields, but no exchange traded debt other than CSU.DB right now.

I'd be interested in the identity of these if you're willing to share.

If you think the Canadian economy/dollar/stock market is going to tank Couche Tarde is a great choice to watch, imo. If it dropped with the market/canadian dollar, there's no reason to think it's (mostly international) business would be affected.

Right. Rig count is down and production growth is down. Rig count 2023 is 57% of Rig count 2018. Production growth 2023 is 57% of production growth 2018. Seems like productivity is similar to me. You're correct that there is natural depletion of the existing production base, but that's very difficult to determine. I'd suggest that it's probably a very comparable number between the two years - production is higher now but the % decline is probably slightly lower as the production base is more mature than it was in 2018 so has lower decline.