bmichaud

This is XOM's dream environment. The chemical and refining ops will generate FCF to deploy into cheaper O&G assets, and with a very underlevered balance sheet and the ability to issue stock, XOM has enormous capacity to grow its asset base if prices stay down here. Would love to see the stock get down into the $70s.

Al, Thanks. Haha thought Seadrill didn't sound right.

Al, Isn't Seadrill your long time O&G baby, or am I remembering that wrong? Stating the obvious, it is getting walloped but I like the owner/operator nature of the stock. Tiho of Short Side of Long mentioned it in a recent communication, and I thought of you. So curious what your thoughts are here if you don't mind sharing! Thanks.

Awesome work merkhet - great stuff.

My simple mind keeps going back to, WTF did they keep the junior prefs and common trading back in 2008? I could picture a Scalia asking something obvious like that - if you wanted to shut them down, why not cancel the securities and put them into Conservatorship/Pending receivership? And - I just saw posted somewhere regarding Treasury's emergency authority...in protecting the tax payer, Treasury must consider the: "The need to maintain the corporation’s status as a private shareholder-owned company." Riddle me that.

'Course we'll adapt. But we are still "adapting" to lower levels of leverage and the economy is slow as a result. 20% down with 6% rates would slaughter housing prices if implemented quickly (i.e. 5 to 10 years).

And that's in a low rate environment. The leverage profile of the American homeowner can barely afford current levels, let alone another 100 bps for a private sector cushion plus higher rates in general. One would assume logic will prevail here.

Got it. Sorry. That's exactly what I was driving at. It's nonsensical that Treasury believes it can wind down the entire existing mtg mkt in this manner.

Were you quoting my post? Lol I cant tell

Do you think Treasury can shrink F&F via starvation and the private sector will just take up the slack over time?

Not surprising to me it's taking so long given the Conservatorship. It's not like they own a private entity like GM or AIG where there seemed to be pretty good pressure to exit. But due to all of the lawsuits and the growing recognition that there is a win for everyone, it seems to make sense a reorg will take place within a few years. But who knows. Not saying Berk can't be wrong. But just seems like he had to have had a worst case scenario in place. Who knows.

So Merkhet, absent a favorable ruling, how are you handicapping the opportunity? Is there enough value there to incentivize the govt to restructure on private capital friendly terms? There just has to be more to this thing. Berk doesn't put 15% of a mutual fund into these securities all for some horrendously reasoned ruling to just wipe it out. Gotta be more.

Would there be alternative uses to simply paying down 2% debt? Is the status quo of just collecting NWS proceeds forever a viable solution for the mortgage market?

So in the case of AIG, the govt provided a massive loan and took an 80% fully diluted stake in the common. Existing common participated alongside govt, but just on a fully diluted basis. I don't remember what the preferred structure was, but to my knowledge, no securities were outright cancelled. No? With GM, I don't remember specifically. Didn't the govt loan get converted into common? Or was most of the common stake obtained via warrant? What is the upside to canceling the warrant and simply returning to the private sector? Is it not in the govt's best interest to maximize the value of the warrant? Ya they can sit here and collect the profits, but given the 80% ownership, govt could capitalize 80% of those profits at 15 or 20 times, bringing forward years worth of net worth sweep proceeds. No?

What are thoughts on Carney's comments that Sweeney holds Lamberth in high intellectual regard? Interesting. Also - what are the chances the govt simply cancels the existing common and pref equity capital structure, including the Senior Pref, then IPOs F&F to the market with all proceeds going directly toward recapitalizing F&F's balance sheet?

Extremely helpful, Merkhet, thanks.

Page 6: "But the Court finds that there is no disabling conflict here that would permit plaintiff to assume the Conservator’s function. Furthermore, the clear statement in HERA that “no court may take any action to restrain or affect the exercise of powers or functions” of the Conservator, 12 U.S.C. 4617(f), suggests that the Court may not be empowered to authorize plaintiff to pursue litigation that the Conservator has declined to pursue." The Conservator did not pursue the litigation because FHFA is the Conservator and would not sue that which it is working with...i.e. Treasury. No?

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Merkhet - what are you referring to by the "turmoil ahead"? Just general opportunity in cable land?

Market certainly doesn't like something going on behind the scenes....

EXACTLY!! The Hempton's of the world who focus on the tiniest outrageous detail are not sailing around the world in Yachts. Doesn't take a rocket scientist to figure out if someone weighs over 300 pounds...

Yes, for sure speculating that the next fool will pay more than the previous one for companies like TWTR and TSLA is an entirely different game than Buffett plays. Doesn't mean he is wrong.

Washington Post, Geico and ABC/Cap Cities were all "growth" investments at the time of purchase. Buying a "growth" company at 50% of fair value is no different than buying a company in liquidation at 50% of book, if that book value is fair value.

Precisely - the deceptive part of that statement being "fair price".

That's precisely why Buffett says that - but answers why you don't like it :) (For Palantir)