KJP

This is an excellent idea. While maybe annoying, is there any reason at all it doesnt make sense to mandate an individual with limited investing experience take a brief online tutorial/course prior to being permitted to open a trading account? Doesnt even have to be pass/fail, just a basic intro of "hey this is what you're getting in to". I think the best argument against it is empirical rather than philosophical -- it wouldn't actually do anything to change people's behavior, but it would allow those who wish to do so to say that appropriate steps were taken and "You were warned. It's on you." In short, it seems to be a symbolic act, rather than a real effort to solve a problem. That being said, my objection could be tested by some type of randomized trial to see if the proposal has any effects. If it actually does change outcomes in a good way, then I see no reason not to do it.

OT? I am afraid that our expectations in both of these cases are too high. In fact, I am afraid that our expectations of human behavior in general are too high. Whether applied to young people in their 20s, or people in general, or "highly rational" investment professionals frequenting certain investment forums, or even people at the highest levels of business or politics. Yeah, that makes me a misanthrope. :-\ That is why caveat emptor should be the only law for adults. This was an adult who made his own decisions (and misunderstandings) and chose to not ask anyone for help. Unrestricted gambling and drugs should be available for adults as well, both online and off. It isn't a brokerage's responsibility to baby sit its clients. Or at least, it shouldn't be. KJP I think you are a lawyer right? Your argument doesn't make that much sense to me. Yes there are casinos and there is gambling. But Robinhood is not a casino, it is a brokerage. Gambling on stocks (while legal in the UK) is not legal in the US. Should Robinhood choose to convert to a casino, sure they can go and lay out the craps tables. But while they are a brokerage shouldn't they have to obey the laws and regulations governing brokerages? I don't know all of the facts of this particular case. My comment was directed to self-directed transactions, not transactions driven by recommendations subject to suitability obligations, e.g., FINRA Rule 2111 or the new Best Interest Regulation. What laws and regulations do you believe Robinhood is violating (there may be many, but I'm trying to clarify exactly what you're referring to)? Alternatively, we don't have to get bogged down in the weeds of broker-dealer regulation, because I agree with you that a broker-dealer should follow the law as it stands and can, in certain circumstances, be liable if it doesn't. My comment was more directed to what I understood to be the thrust of several commenters on this thread who were discussing what the law should be and and, in particular, what we should permit individual investors to do, rather than directed to your comments, which as you note were directed at compliance with the law as you currently believe it to be, rather than an opinion about what the law should be.

OT? I am afraid that our expectations in both of these cases are too high. In fact, I am afraid that our expectations of human behavior in general are too high. Whether applied to young people in their 20s, or people in general, or "highly rational" investment professionals frequenting certain investment forums, or even people at the highest levels of business or politics. Yeah, that makes me a misanthrope. :-\ You may be right. In any event, holding that view would at least be consistent with greater regulation in general of many activities.

In the United States legal gambling is not only lawful but rampant, whether its live at the craps table or Sundays on FanDuel. Many state governments are also into gambling up to their necks via lotteries and tax revenue from legalized gambling. For example, New York State alone had $10 billion in lottery sales last year. (Source: https://www.statista.com/statistics/388238/sales-of-lotteries-by-state-us/) Despite the known issues with people who are addicted to gambling, the United States not only permits this activity but actively promotes it. Why would we focus on shutting down something like Robinhood before shutting down casinos, lotteries, and FanDuel? More broadly, I am skeptical of the argument that people buying options or shorting on Robinhood don't understand the general point that they're engaged in risky activity. Likewise, we expect recent high school graduates who join the Army to obey the laws of war despite extreme conditions. We expect police in their early 20's to exercise restraint and good judgment at all times, even under duress, under penalty of jail if they don't meet that standard. Why do we not expect a 20 year old to be responsible for his or her own voluntary investment/gambling decisions? That last sentence sounds quite heartless in light of this suicide, which is indisputably a terrible tragedy. But, in my view, the people who are focused on the underlying effort at suicide prevention, rather than rushing to blame Robinhood, are on the right track.

Perhaps the folks behind OneSpaWorld: http://yetanothervalueblog.com/2020/06/cruise-ship-pirates-how-osws-management-plundered-their-shareholders.html

Why would you expect the revenue per employee at company that builds submarines and aircraft carriers (Huntington Ingalls) to resemble the revenue per employee at companies like Visa or Google? Put another way, the output of an a hour's worth of very highly-skilled software coding (i.e., code may be used and resold an infinite number of times -- labor output is highly scalable. On other other hand, the output of an hour's worth of a very highly-skilled welding creates a physical product that can only be sold once. The labor output is not scalable in the same way. So why would you expect the labor components of the two business models to be in any way comparable?

Today's brief can easily be written remotely. But how does a law firm develop tomorrow's partners, i.e., business generators?

I think you have two different groups in your "have nots". I believe the Macy's/JCP group originally thrived by occupying a pre-internet distribution bottleneck. They could charge full-price for a Ralph Lauren polo shirt because there was limited competition within reasonable driving distance. The internet has de-bottlenecked distribution for consumer goods. So, what purpose does a Macy's or JCP still serve? What problem is it solving for consumers? I also agree that the environment for many of their stores (e.g., dreary malls) isn't great. JCrew and Abercrombie, on the other hand, are mass-market brands that are vertically integrated into legacy retail. In theory, if their brands were strong, they should be able to succeed regardless of what the distribution channel is. I suspect that, to the extent they are struggling, it's because mass-market brands go in and out of fashion, their price points are high relative to mass-market alternatives (weak brands?), and possibly they've got too many locations in outdated distribution channels. The latter point would be the easiest to test -- do the stores in what we think of as "good" locations produce better economics than the stores in "bad" locations? As for the haves you list, they are almost all low-cost with a likely "treasure hunt" strategy on top to give consumers another reason to actually go their stores. Best Buy, on the other hand, seems to occupy a different niche. Perhaps it's the last-man standing in a niche were at least a decent portion of the consumers want to see many of the goods before they buy them. For example, if I want to go look at TVs, I'd go to Best Buy; I can't think of any other place close by that would be a better use of time in-person browsing time. But if I want to look at clothes, I have too many options to list.

All policy variations are being tested, even those with virus exclusions. See, for example, this high profile case involving Travelers: https://www.law360.com/articles/1265750/travelers-sues-geragos-law-firm-in-virus-coverage-dispute For an overview of the various theories insureds are pursuing, see here: https://www.law360.com/pennsylvania/articles/1273308

By "leech" I assume you mean a business that provides far less value to its customers than it charges. Unless there is some regulatory capture or market failure, how does a business like that last? In other words, why would customers keep using it. For example, if Seamless is truly a leech, why are restaurants doing business with it? My contribution: ESPN, AMC Networks, Viacom, MSGN, etc. They were exploiting a legacy distribution system and are now losing customers hand over fist and the barriers to distribution fall. I think industry structure acts as the enabler of Seamless' leech status. At one point, Seamless was a niche provider of a "seamless" way to order meals for I Banking analysts working really late hours in the office. Since time is money, the few restaurants that are on Seamless' platform that got the orders truly got access to a new source of revenue versus those that are not on the platform. As time goes on and Seamless went more main stream, they held onto the 20-30%. Now every John and Jane orders from Seamless. That's why if you go to restaurants, they will ask you to call direct or order direct from their websites. This is probably the best sign that a company is acting like a leech. To get back, there are lots of restaurants and they are afraid to lose sales to another restaurant. So they bid up prices to get the order flow. This is usually 20-30% of the actual order. Being from the food industry, this is likely fine if this was an "one time" CAC to acquire a new recurring customer. But restaurant diners are generally promiscuous and tend to try different restaurants. Hence, they don't stay loyal customers. So the restaurants have to constantly pay up to get that order flow. Most customers probably aren't aware of the take of Seamless and feels that the transaction is Seamless. The TAM could be so much larger if Seamless decided to take 3-5% of a transaction which is much more sustainable for a restaurant. Unlike e-commerce such as Amazon where Amazon is providing the warehousing, i.e. rent and logistics, restaurants still have to pay rent which is 10% or higher, the 20-30% take rate on a gross margin that is 40-60% really cuts into the profits before adding cooks and other overhead. It is simply unsustainable. But the leeches keep leeching because restaurants are low barrier to entry but high barrier to exit business much like small hedge funds. There are lots of passionate hedge funds managers (one man shops), but the barrier to exit is very high. I don't use Seamless (not in my area?), I use Grubhub. I can see that restaurants would think them as a leech. IMO the restaurants are mostly forced into this no-win situation that they do lose orders if they are not on a platform. Yeah, some outstanding restaurants can leave the platform and get the same orders through their phones or websites. But for most restaurants I will just order from their competitor that is on the platform. So I'd stay with platform rather than staying with the restaurant. (And I would pretty much never call a restaurant if they are not on a platform and they don't have website - calling just sucks.) Yeah, it sucks for the restaurant, but that's how it is. What is it about the platform that causes you to continue to use it?

It's interesting that both Seamless and Uber are mentioned here. I assume the view of them as "leeches" arises from viewing them from the perspective of suppliers (restaurants, drivers) rather than the perspective of users. But those companies provide a lot of value to users. Of course, they're also squeezing another part of the value chain by getting scale on the demand side.

Absolutely. So, if you were buying ESPN a la carte there's no issue. If it wasn't worth it to you, then presumably you wouldn't buy it. That whay it's the now-unraveling bundle that I was referring to.

By "leech" I assume you mean a business that provides far less value to its customers than it charges. Unless there is some regulatory capture or market failure, how does a business like that last? In other words, why would customers keep using it. For example, if Seamless is truly a leech, why are restaurants doing business with it? My contribution: ESPN, AMC Networks, Viacom, MSGN, etc. They were exploiting a legacy distribution system and are now losing customers hand over fist and the barriers to distribution fall.

Huntington Ingalls Paramount Group

During that period, Meritage was filing its disclosures with OTC Markets. They're available here: https://www.otcmarkets.com/stock/MHGU/disclosure

Huntington Ingalls Industries.

Comcast General Dynamics Alexander's

AMC Networks

You can get out of the mortgage debt on those terms if you can sell the encumbered property for $170 million. That is why Starbucks was able to get out of the leases on the terms you mention -- the landlord could release the assets. In other words, the asset embodied in the lease -- the right to use the real property for a certain period of time -- was not worthless. Indeed, some leases are worth more than the book value of the liability, because they are below market and can be sold for gains. For example, Sears has been selling certain leases for a profit.

I believe this is correct. You'd have the same answer to the question of whether to include purchase accounting intangibles in the denominator of your ROIC calculation. Taking your operating lease question, if you wanted to know who is the best at actually operating an airline (as opposed to how that operation is financed), you'd likely want to capitalize all leases so you're looking at an apples-to-apples comparison. On the other hand, if you're trying to figure out how fast a company can grow without issuing additional debt/equity, then you need to take into account how they finance their growth.

Charter Communications

Simpson looks like a strong company, and I agree with you about most home builders, which are too weighted towards levered land speculation. NVR, however, has historically been an exception. It's long-term returns are even better than Simpson's. The earnings of both companies are driven by new home sales (NVR even more so than Simpson). Simpson is trading at 25x 2019 earnings, while NVR is trading at ~15x 2019 earnings. What is the scenario in which Simpson outperforms NVR? I can't vouch for any business for the next 30 years, so I can't help you there. You seem to have extensive knowledge of Simpson, so it makes sense that you have great confidence in it. You also seem to believe it enjoys a very profitable niche in the industry, particularly versus homebuilders. You can look at a long-term stock chart of most homebuilders and see that, most of the time, you're absolutely right. But NVR has long been a special case, rather than just a transient "low p/e" opportunity: January 1, 1995/Today/CAGR Simpson: ~$2.70/$73.23/14% -- Very good! This certainly supports your belief that Simpson is a very good business NVR: ~$5.50/$3090/28% -- Incredible! I don't know what the future entails, and things could change. But the last 30 years at least suggest that it is possible that NVR at 15x is a better bet than Simpson at 25x. Full disclosure: I currently own neither because I foolishly cling to the belief that I can time the market on NVR.

Simpson looks like a strong company, and I agree with you about most home builders, which are too weighted towards levered land speculation. NVR, however, has historically been an exception. It's long-term returns are even better than Simpson's. The earnings of both companies are driven by new home sales (NVR even more so than Simpson). Simpson is trading at 25x 2019 earnings, while NVR is trading at ~15x 2019 earnings. What is the scenario in which Simpson outperforms NVR?

Why do you believe that most HELOCS/mortgages (given the context is AirBnb, I assume we're talking about residential mortgages) in the US are non-recourse? That is not my understanding. See, for example, the 50-state survey of foreclosure law available here, which says that 36 out of the 50 states permit deficiency judgments: https://www.nclc.org/images/pdf/foreclosure_mortgage/state_laws/pr-foreclosing-dream.pdf I believe those figures generally apply to owner-occupied dwellings. In general, there is less protection in the US for investment property loans. So, again, what is your basis for saying that most AirBnb's hosts in the US can buy a property with non-recourse debt?

As you suggest, the real interest rate on this is higher than 9.5%. CAKE essentially sold a PIK bond and something like a six-year call option on 9 million shares with a $22.23 strike. If you assume $19.50 stock price at exercise, 1% risk-free rate, and 27% volatility (from 2019 10-K, but too low now), Black-Scholes would value the option at $4.55/share * 9 million shares = $41 million. That leaves $159 million in principal for the PIK bond. It's paying 9.5%*200 million = $19 million annually in interest, which is ~12% interest on $159 million in principal. For various reasons, the B/S value of the option is probably too low, so the true interest rate here is likely higher. In addition, the right to participate in common dividends pre-conversion has some value, which would also increase the implied interest rate. Bottom line: It looks to me like CAKE is borrowing in the low teens.