SharperDingaan

The conversation just highlights that different functions, at different levels, are impacted differently. It really comes down to an across-the-board 're-set' of expectations, throughout the company. Some will be able to handle the change, some will not. White collar 'core hours' (CST, PST, GMT, EST, etc) are pretty meaningless, when there are no borders. The 'standard' becomes 'next working day' - and that is NOT between 9-5 'next working day'. You pay for quality task completion by day X, time Y - how it's done is to the employee. Hence the communication at weird times of day; but same outcome, productivity, etc. Just different execution. Lean manufacturing has long impacted blue collar employment. WFH is just the early stages of lean manufacturing being applied to white collar employment. Good or bad, depending upon how individuals position themselves. Our block-chain partnership recently let our office space 'go' - as it just wasn't worth it. It is far more effective/efficient, for us to rent space as we need - and meet up at extended lunches within the GTA. Builds the collective EQ, does the social thing, keeps conversation focused; but requires discipline. When we need to pitch a client, rent a room close by and have them walk over. Underlines the cultural difference, and acceptable because this is 2020 - not last century, and we're tech. SD

Office buildings are still required - it's just much less NYC Grade-A space, much more Detroit Grade-B space, and much less TOTAL space. We still socialize, work the office-cooler, etc - but in the Detroits, not NYC. NYC/London/Paris etc still have the elites - just not as many of them (posers failed the cut). BUT - we no longer need the cast of thousands anymore. Everyone is their own personal business, and the firm paying you is just ONE OF MANY - and a temporary pay cheque SD

He is referring to the different time horizons. In the short-term QE is stimulative, but over the medium to long term - QE tends to be destructive. Markets have a short-term orientation, and view QE stimulus as permanent (consistent with the view); capital flow creates an asset bubble, market players leverage against the higher valuation. The QE is subsequently unwound, the asset bubble bursts, and the debt is cleared via bankruptcy. The issue is that too much bankruptcy, too quickly, tends to trigger a collapse. Basically - too much QE, for too long, is toxic. A key lesson from the Great Depression - is that nations need sustained, unlimited spending to get out of it. World war type spending that BOTH stimulates the economies of the entire world, AND destroys the entire capital stock of the losing nations. The subsequent rebuilding, and shortage of labour, typically stimulating the global economy for a decade plus. We have the spending (global cumulative QE spend), but not the turnover in capital stock (new infrastructure replacing old). Unpredictable obsolescence write-offs triggering bubble collapses (RE, vehicle manufacturing, o/g, national grid, health-care, etc). Too much unskilled labour, worsened by demographics, geography, and automation. Cheap labour is readily outsourced (migrant labour planting/picking crops, extraction industry camps, etc). High volume, standardized product, is better achieved via automation (machines, call centres, etc.). In war time these people are the cannon fodder, that do the dying. In peace time where do those millions of obsolete go? what do they collectively do in civil society? how are they supposed to buy anything with no income? In the US, this is Trumps 'base'; in the UK, they were enough to produce 'Brexit'. Unpredictable changes in civil society, triggering bubble collapses. Unfit capital markets. Any new analyst entering capital markets since 2006, has had very limited experience with anything but QE. 3 successive generations (average 5-year career life) of analysts, all mutually reinforcing each other (levels within the organization), and all very fragile to anything but continuing QE. And this is before the automation of smart-contracts, and AI. Unpredictable reactions to material structural change, and greater volatility, triggering bubble collapses. Of course to some - Nero fiddling while Rome burns, is an opportunity! In Taleb speak, this has all the makings of a great asymmetric bet on fragility failures (bubble bursts) - as long as the counter-party can make good on their obligations. Problem is, keeping the money - while the world around you is burning. SD.

Keep in mind that manufacturers need to move product, and much of their downstream customer base is cash constrained at present. Manufacturers will be dumping old inventory (via credits to the garage/service provider), to bring customers back in. In most uses, synthetics have the longer life, a wider temperature range of use, and cost less/mile driven. It is more expensive than regular oil for a reason; but in today's economy, a manufacturer will begrudgingly eat the difference to move old product. Use the opportunity to upgrade. Does it really matter? If it seldom gets below -10C where you live, and the driving is primarily commuting - probably not. If -35C is not unusual, or the vehicle often has to haul heavy loads - it matters. SD

The expectation is that over the long term, the business will continue in its current form. For most businesses, this is just not a practical expectation, as businesses evolve over time (different product lines, market shares, etc.). Its more relevant in the extractive industries (mining, o/g, etc), as there is a minimum level of annual exploration/development/drilling that must be done to maintain production at current levels. Complicated by rapid obsolescence/revaluation as the MV of the resource moves up/down. SD

In the accounting world, depreciation is NOT just a expense recognizing use of the asset. Per the 'going concern' assumption - it is ALSO the amount for the period, that should have been put aside to REPLACE the asset as it wore out. Ideally, the depreciation method chosen, reflecting the expected use of the asset over time. ROIC is only meaningful when the IC is approximately MV (assets are revalued at MTM every period). Buy an apartment building, and you control land AND a structure. The structure depreciates, &/or becomes obsolete. and is demolished, Replaced with a shiny new structure reflecting highest/best use of the land, at the time of construction. The ROIC should be that of the new structure + the ROIC of the land rental, weighted by the capital invested in each. The ROIC on the old building has to be the same, or higher - were it lower, you would simply demolish and replace. Which will occur when the diminishing net rents can no longer adequately cover the rising upkeep. We don't much care whether this occurs as a result of market forces (building obsolescence, declining market rents, etc), or just simply wearing out (aging windows, carpet, HVAC, plumbing, etc). SD

Talk to your significant other .... 'shopping' is primarily entertainment. The utilitarian stuff (groceries, gas, etc) is just that - utilitarian. Bought on price (Walmart/ Costco), minimum in/out hassle (parking, self check-out, etc), convenience (groceries-to-go. on-line, etc). What's more entertaining? strolling an enclosed mall, or strolling the street-front? If you thought mall, you're out-of-touch. YESTERDAY'S teenagers went to the mall for entertainment. TODAY, they are mother's/grandma's, and meet for coffee at that sit-down street-front coffee shop - the price of the coffee is about the same; the entertainment experience? completely different. The chain-stores mentioned are primarily creatures of the mall, and 'mall culture' Business models that are out of date, inability to evolve with the times, and collapsing under their own weight - long overdue. Put the space to higher and better use. Technology is great, but value still prevails. Common practice at many grocery stores; is to shop/pay on-line at the grocery store price, and pay $5 for drive-by store pick-up. $10-15 for timed at-home delivery, inclusive of orders from the store hot buffet. Both Friday-night dinner, & the week-end grocery shopping - reliably wrapped up for $10-15. Value. Think about how you, and your parents/kids, actually shop? versus what is available in your area. Bifurcation is primarily generational, the shopping 'delivery format' just reflects each generations preferences. Fewer people, buying fewer goods, at lower margin - and the mall dies. SD

Best of luck to you, and happy hunting! SD

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