SharperDingaan

Most should have a gross margin of 33%+, and pre-tax NI of around 10%+ of sales. Simply because they don't have to pay much to distribute the product, and don't suffer much inventory loss. Buy a physical good on-line. The physical goods seller has to ship it to the buyer (Fedex/UPS/etc). The IT seller delivers the software on-line - at minimal cost. Think of Apple. There's minimal inventory risk, as there's little inventory (only physical product), physical product is typically not made unless pre-sold, and there is planned product obsolescence (exit from old lines while they still can). Lean inventory primarily as a supply chain buffer, and not as a sales tool. Minimal everyday writedowns to changing tastes. SD

Most folks are just trolling for the guaranteed double, in the next 1-3 months. An unrealistic expectation. Because if you actually knew this .... why would a good capitalist, not just keep that valuable knowledge entirely to him/her self? Best we can hope for is an insight over each of the short, medium, or long term. Some industry specific, that reflects the industry. Some anecdotal, that reflects observation. Some global, that reflects cultural differences. Some from actual business owners, running private businesses. Because for all, it is better to find out that our beloved 'idea' is a POS, ... before we try to apply it. Ideally, the aim is to avoid the stupid losses. Your 'thesis' was utter sh1te. Or mostly correct - but badly timed. Hopefully, you make more than you lose after costs, and more than you would - had you simply held the Exchange Traded Fund Equivalent (not the index). And periodically, continually keep taking money off the table. There are many very skilled contributors on this board, and many reasons for contributing. Average EQ is high. Contributions also have a way of getting into industry policy, that we all benefit from ;) But if a poster is simply trolling for their next 'tip', there are better places. SD

Everybody putting the 2021 budget together, will be looking very closely at WFH. The overhead savings are compelling. The reduction in break-even volume in sync with post-Covid-19 requirements. The rent budget will be driven by functionality, centralization requirement, and cost. Applied differently, according to industry need. WFH/Office mix during the week. Decentralized 'back-office' in various rent-a-space locations, centralized 'middle-office coordination' in Grade B space, and sales in centralized satellite Grade-A space. Less total space, less Grade-A space, and more Grade-B - distributed over a wide area. Employees get the commuting time/cost savings as a no-cost, tax-free raise. Over time, some of the 'middle-office coordination' moving into converted warehouse space. Conventional wisdom was 'put everyone in a centralized box, and own the box'. Keep utilization >85% to benefit from the operating leverage, & fill the space with as many bodies as possible. Everybody using the same high-value space, regardless of functional need, or the opportunity cost of sub-leasing the space to others. The smarter folks captured the 'rent spread'; by moving the 'back-office' into Grade-B space, and sub-leasing the now vacant Grade-A space. But it wasn't 'main-stream'. Different thing today. Of course it means change, and there will be 'objections'; but for most, it will be 3-4 months to 'adjust', &/or a severance package to remove the toxic drip. The variety of alternative work 'options' available, reducing the payout. Assuming it's primarily the older work force that leaves; salary (top vs bottom of pay grade) and insurance (younger average workforce) savings, will finance much of the severance. Lower drug, eye-care, dental, pension, and life insurance premiums add up quickly. If you think the Covid-19 'recovery' will be quick; maybe it really is just status quo, with minor adjustments. But if you think that 'recovery' might take a while ..... Example: Air Canada plans to cut 50-60% (20,000) of its workforce by June-07. 16,500 of whom are currently on the federal wage subsidy that runs out June-07. Since extended through Aug-31 https://www.cbc.ca/news/business/air-canada-layoffs-1.5572596 SD

Re USO .... The disclaimer suggests they have received notice of pending legal action, and are doing everything they can to 'cap' their exposure period to as of date X. Particularly as the prospectus does not, & still doesn't, limit the units to just 'sophisticated investors' :) All grandma's lawyer need prove is that grandma, who just knits for her grandkids, wasn't sophisticated enough to recognize that o/g futures are a risky investment .... The prominence of the disclaimer also suggests that USO is desperate to raise new cash to offset redemptions, and hold positions. Lose the confidence of the market this roll-over, and they will be a lot smaller, a lot quicker ::) To a lot of people, the market would be better off with USO dead. Slaughter the pig; bring back version 2.0 (with a cherry-picked start date) in 3-4 months, once oil-demand evidences strong month-over-month improvement. New story, new gamblers, new 'experience'. Smart business. We live in interesting times. SD

You might want to do some background research first, then re-frame your question. It's a big topic, and there are Masters level degree's in this subject! Just one of the many sub-sets .... https://en.wikipedia.org/wiki/Enterprise_software What's the primary interest? IT development, enterprise application, or investor. What's the expectation? tools, case studies, or investment ideas. High or low tech? As in most things, the glamorous (20% IT high-tech) attracts 80% of the interest. Whereas it's the grunt applications (80% physical low-tech) that are both a a lot more profitable, and robust. The machines in the factories, warehouses, hospitals, buildings/aircraft/ships/mines, infrastructure, etc. SD

No worries. Agreed on the number of supplier early payment discounts. For the most part it's only going to be the less solvent suppliers, and because the cost of the discount is less than their cost of financing. A robust supply chain is not going to have many of these. Agreed on the w/c waterfall. Early payment discounts are typically an A/P manager responsibility Treasury just sets the internal rate and maximum capital allocation. Often as a training tool. Different industries, different practices. In the vehicle leasing industry it's not unusual to see supplier end-of-period 'channel stuffing'. Buyers offered very attractive volume and early payment discounts, to 'move the metal', for maybe a 2-3 week period at best. But often it means the treasurer having to temporarily finance 2-3 months of purchases up-front, by going into the CP market. If the raise is large, and the firm is near its borrow capacity, expect to pay a premium. SD

This is the answer. In effect it's taking off the A/R off of the balance sheet of the supplier and creates better optics for both supplier and customer. Banks/funding institutions are willing to take the risk b/c it's just another short term credit market (e.g., commercial paper) and counterparties are very credit worthy. So in effect the cost isn't really cost of funds for the supplier, it's the just a small discount to the supplier, especially in these days when rates are zero... The cost is the (discount x 365)/(term - discount period) - and it is expensive financing. The cost of (1/15, n90) is (1x365)/(90-15) - or 4.87%; the more traditional terms are (2/10, n90) is (2x365)/(90-10) - or 9.12%. The treasurer of an Apple, Amazon, etc. just borrows cheap on their credit line, pays the invoice early, and keeps the spread. SD Not exactly. The decision on paying early or not to get a discount is obviously based on the level of discount, so if the discount is hugely attractive then it may always be worth it. However, for public companies at least, the optics of higher debt balance and lower AP / WC balance is worth something (sometimes a lot more than "something"), so supply chain financing can often step in when the early pay discounts are not significant enough to outweigh that. This is zero-risk arbitrage, and what the treasurer is incentivized to do. Typically, the capital invested is not large enough to affect optics. In most cases, bad optics will raise the cost of FR debt by no more than 10-25 bp before tax. As long as the treasurer can earn more than that, risk free, it's really a non-issue. The higher EPS, from the risk free spread, more than offsets P/E multiple compression arising from risk related concerns. When the optics are big enough to matter, the treasurer has other, and more pressing concerns. More usually, can he/she continue to roll the debt long enough, until the company can either 'grow' into it - or pay it down? If growth is 'interrupted', and the debt cannot be rolled without difficulty, the company risks BK. As a great many companies are discovering , in this time of Covid-19. SD

This is the answer. In effect it's taking off the A/R off of the balance sheet of the supplier and creates better optics for both supplier and customer. Banks/funding institutions are willing to take the risk b/c it's just another short term credit market (e.g., commercial paper) and counterparties are very credit worthy. So in effect the cost isn't really cost of funds for the supplier, it's the just a small discount to the supplier, especially in these days when rates are zero... The cost is the (discount x 365)/(term - discount period) - and it is expensive financing. The cost of (1/15, n90) is (1x365)/(90-15) - or 4.87%; the more traditional terms are (2/10, n90) is (2x365)/(90-10) - or 9.12%. The treasurer of an Apple, Amazon, etc. just borrows cheap on their credit line, pays the invoice early, and keeps the spread. SD

Companies do it because they are the dominant player in their supply chain, it has nothing to do with their size. Want to sell product into the Apple, Amazon, Walmart supply chain? it's the cost of doing business with them. If a smaller supplier can do better elsewhere, they do so. SD

We might not agree with IFRS, but it's the nearest thing to standardization that we have, and practically - what your 'approach' will be measured against. If you want to do something different, you have to argue that your 'approach' materially better reflects the economic substance of the transaction. A merely marginal improvement will not be good enough - to warrant a move away from 'standard'. Ultimately, the substance of the lease is either financing or prepaid rent (ie: 30yr property lease). You choose. The finance is either debt on your books, or debt on someone else's books (ie: lessor, or securitizer/factorer). The operational levers are changes in the future residual value (higher future cash flows, higher terminal value), and changes in the future interest rate (bond math). Many, many, ways to play. Used to design these things in a previous life. SD

Look at the financial statements, typically Note 1 - the accounting treatment of both capital and operating leases is prescribed. If you want to do something different, you argue against this. SD

Just make the tax zero on a medium-term holding of 5-10 yrs. Keeps the greed and gaming of agency, but forces the executive to play the long game - consistent with the long lives of their planes/leases. Can't get paid unless the company survives both your strat plan, AND that of the guy after you. SD

The time estimate came from this link https://www.rome2rio.com/s/Wuhan/Shanghai Agreed, the Wuhan to Shanghai bullet train is 4-6.5 hrs, dependent upon the train. https://www.travelchinaguide.com/china-trains/high-speed/wuhan-shanghai.htm It's great to have the trains for shorter distances; but once the distances start getting up there - its better to fly. Everything is closer in Europe, and rail is more time competitive. A lot of people also see it as 'safer' in today's time of Covid-19. Hard to see a eurocentric airline recovering particularly strongly. SD

Was thinking more the distances between major centres. Much past 550 km (3.5 hours by train @ 160 km/hr), most business people will fly. Wuhan to Shanghai (700km) by train is about 6 hrs, and 4 hrs by air. To get there and back in one day, and do your business - you have to fly. It's only when you can stay a few days, and meet with other clients, that train becomes preferable. Bit different if you can travel via bullet train. Wuhan to Hong Kong (900km) is only 4.5 hours. You can be in HK by lunch, do your meetings in the afternoon, take a client to dinner, and be back by lunch next day. But if you fly - it's just 1.5 hrs one-way, and you can get some sleep in as well - hence still the preference to fly. https://www.travelmath.com/flying-time/from/Wuhan,+China/to/Hong+Kong SD

People will think what they want - why disavow them? If they think you're a dead-beat they'll voluntarily stay away from you - problem solved :D Nice thing with 'rape and pillage' is that it reinforces the above, and also describes your day. And it immediately filters the small-talk down to the more 'interesting' 10% SD

The industry really needs to be thought of, in terms of different holding horizons. Short (0-2 yr), medium (3-6yr), long terms (7yr+) Long term, it's hard to see why we do NOT have more passenger 'flag' carriers, and freight 'flag' carriers. Oligarchs, with one of the players being the state. Specialist niches (bush pilots, off-shore rig servicing, etc.) with combined military/private overlap. Stable, robust, net benefit to all, and the size/number of 'survivors' market determined. Short term. Industry collapse, lots of BK's, lots of job loss. China is still down 50-60% post Covid-19, 80% during Covid-19. A country where the distances between cities, and the state of the inter-city infra-structure, pretty much requires that you fly. Not the same thing in many other parts of the world, where you can travel by high-speed train instead. https://www.flightradar24.com/blog/air-traffic-at-chinas-busiest-airports-down-80-since-the-beginning-of-the-year/ To bring operating leverage back to 'normal', at least 50% of the industry has to go. To bring financial leverage back to 'normal', will require dilution of at least 25%+. The smart thing is to just sell, and let the market do its thing. Buy back on better terms, once the BK's/restructurings have worked their way through. Precisely as WEB has just done. SD

"Rape and pillage!" Nice little ice-breaker - but be mindful where you use it ;) Some parts of the world, this might just open the door to some of the more 'colourful' people. Always an interesting conversation! SD

They will just cut dividends, take massive write-offs, and extend debt maturities - but they will survive. The good news is that they are integral to the global economy, so after the cuts/write-offs/negative press ... they will be the ones to own. Mean reversion becomes your friend. SD

Just to follow up. It is just more inconvenient, and more costly to obtain a non-recourse loan in the US, but not particularly difficult. A very brief google search pulls up at least one bank, and a few mortgage brokers. Sure, they are unlikely to be the choice of johnny or suzy, but if you want non-recourse financing, you can get it. To the predatory borrower the extra cost is just insurance, and even tax deductible! https://www.sensefinancial.com/non-recourse-lenders/ The sad thing is that it is 'easier' to bail out a failing bank, than it is a failing home owner reliant upon airbnb cash flow to pay the mortgage. The airbnb landlord layer creates a toxic overlay, magnifying volatility; because as soon as a lender forecloses, it triggers a selling waterfall with no floor - as there are no buyers. The only back stop big enough to arrest the waterfall, is state purchasing as public housing; probably NOT what most had in mind. The opportunity is what this can do for somebody seeking election. In the DB pension industry, underfunded pensions (liabilities > assets) are common, and it doesn't collapse the DB value proposition. All a 'wise' authority need do; is target a specific area, work with the banks in that area to temporarily allow a LTV > 100% to non airbnb landlords, and offer to buy X units at 50% of the current market. Let the banks foreclose on the airbnb landlords. Instant public housing at a deep discount to market. Lots of ordinary voters saved from foreclosure. And all these votes concentrated in a target area, and grateful to the 'wise' authority. Airbnb landlords portrayed as leeches. SD

No worries. I have no problem with exposing the risk, but I'm not going to do the math for everyone. We KNOW that this can and DOES happen. Something very similar occurred in the US, and it initiated the GR2 of roughly 2007. This is just similar sh1te, in a different wrapper. Bankers argued that debtors wouldn't walk away, because it would damage their credit rating. And were wrong, repeatedly. It is well known that while Individuals are frequently very smart, they become progressively 'dumber' as they collect into larger 'homogenous' groups (ie: group think, mob mentality. etc). The defense is as much diversity, and independent thought, as possible. Coupled with ability to act. Obviously, not what many want to hear. .... but great for making a market ;) SD

But what exacttly is the problem. Airbnb apartments are just standard apartments. For a long time they made what? 2x - 3x their mortgage? Now they can rent long term and cover the mortgage. It seems very pandemic related. If there is so much property in excess of demand then rental prices should go down. Last time I looked I see big rent inflation everywhere. Just to throw some things out .... In the US, Airbnb ownership is a very smart thing to do. Put bluntly, it is an asymmetric bet against the US banking system, with very little downside US HELOCS/mortgages are for the most part non-recourse. Both the ALM mismatch risk, and cash flow mismatch risk, are borne by the bank - not the unit owner. And the more units the owner has - the more effective the risk transfer is. A SMART unit owner, may initially finance with 20% down. When times are good, apps do the marketing, cash flow is at 2-3x plus, and SMART owners repay themselves as fast as possible. The dumb, and the greedy, just plough the surplus cash flow into more units - with a little 'empire building' help from social media. In the short-term. More demand for the same supply, raises price, raises equity, raises more demand. In the medium-term. High unit values fuel new-build construction, and the good times roll. Great thing with 80% is that as cash flow shortfalls have to be financed and unit values collapse, 80% quickly becomes 90-95%. THE SMART SIMPLY WALK AWAY. They've already got their money back, and this is now the banks problem - not theirs. Non recourse lending is great! At the extreme, we get a condo market collapse, and the new builds become public housing. Owned by the smart money, and guaranteed by the public purse. Circle of life. Takeaway? Risk is your friend. But only play with house money, a keep taking as many $ off the table as soon as you can. Otherwise known as asset striping. SD

Economics is a harsh mistress. You might want to run a restaurant where your chef would like to eat and could afford it on chef's salary. You might want to run a restaurant out of love and do the best for your customers and staff. You may earn awards and a torrent of thanks and well wishes. But it's unlikely these patrons would have paid you 20-30% more so your restaurant would be rent-increase proof (if not Covid proof). Unfortunately, there's little space in the economy for businesses run out of love (unless they are also run out of deep pockets filled elsewhere). One could even argue that these destroy the business aspect for others who are trying to survive and run their places - whether out of love or out of business. Still sad. Short term, customers are the ones who win. Long term, the owners and the staff are people who lose. Covid only magnified this X-fold. It's not always this way. My partners and I are part of a community group that is helping 2 family-run community restaurants through Covid-19. Version 2.0 of the restaurants are both re-builds from the floor boards up, and will be re-starting life with recycled/upgraded equipment, zero debt, months of donated prepaid rent, and a direct line into a culinary schools flow of new graduates. Mom and dad retired, and their kids running the place, with business advice from 2 conseiller. SD

You asked for value proposition, I just refused. Could care less what others think. Have a good day. SD

But now it's a collectors item ... and it doesn't go off! SD

high quality, best of breed, widow and orphan stock are not adjectives I would use to describe companies where the only question is if they survive. guess that's what makes a market. Too bad you couldn't bother to look at some of the other exchanges, or over a time frame longer than 3 months. SD