TwoCitiesCapital

Seems like there is a lot of mixed info out there. I've basically only heard forbearance for the 3-month term afterwhich an extension of mortgage modification could be requested. As for as when the forbearance is due, I've read a ton of articles that say either at the end of the 3-month period and a ton of articles that say they tack an additional 3-months onto your mortgage. I've also read a ton of articles where consumers are being told both of those things by their banks depending on who they're talking to. It really doesn't seem like ANYONE knows when the money will be due to be repaid at this point, but I imagine there will be some clarity once they've had some time. For an example, see this article from the WSJ https://www.wsj.com/articles/getting-a-mortgage-payment-break-isnt-the-boon-many-expected-11587634200

I think the bulk of the US straightened up after seeing what was happening in NYC. NYC is the perfect storm - high density, high public transit, and late in response. Not to say that other places would have been AS bad, but I'd think most metropolitan areas would've been similar had they not seen what was happening in NYC and shutdown earlier in th curve. Anecdotally - I was on a ski trip in early March with a healthcare professional from NYC. At that time, she was still saying this was comparable to the flu and that the media was over-hyping it. This was March 8th - plenty of time for us to have observed what was happening in Europe. Obviously, her opinion changed within a week of returning, but the fact that healthcare professionals in NYC still thought that as late as early-March goes to show just how unprepared and ignorant the country/city was to the dangers. For whatever reason, it's only real to most people once it hits home. And for the U.S., Washington and NYC were the first two places to really get hit and the rest of the country paid attention.

Hard for him to write a consent decree later in 2020 when 15-25pct+ of the loans are in forbearance. Hard to re-IPO in 2021 when cure rates and initial performance results coming off that base are still inconclusive. As Calabria said 1 month ago, if the forbearance rates start accelerating from his benign initial assessment he'll adjust his mentality (which at the time was just a couple months delay in the re-IPO). Balloon catchup payments (from wsj article this AM) will start to become a dirty word and once that happens and the bottlenecks subside, the numbers will likely keep rising, especially in the final weeks of the program (either end of 2020 or hopefully sooner when Prez pre-announces the end to the emergency period). A 12 month Forbearance is too generous of a plan to pass up for many struggling Americans. I thought the approved package was 3-4 month forbearance? Have seen 12-month forebearance proposed/passed? At that point we should just call it what it is - default. Like any other economic cycle. The 3-4 months made sense was because the economic closure that prevents some from working is gov't instituted and temporary. 3-4 months is expected to the be time frame where it's reasonably expected that those people will be cash flowing again. If that assumption is wrong, then the mortgage is now in default like it would be in any other economic scenario where you can't pay your bills for a year and should be better left to collateral liquidation and bankruptcy restructuring like any other economic downturn.

It's my understanding the number of shares underlying each option contract will change to adjust the new share ratio (i.e. 12.5 shares instead of 100). So both your strikes and underlying # of shares per contract get adjusted, but you will own the same number of contracts.

Honestly, this might be "positive"-ish news for the common. 3-more years of retained earnings instead of complete dilution in the near term? Changes the calculus for the preferreds more negatively since it will extend the time horizon, but I think as long as we get a permanent revision of the NWS that it will be positive for both in the medium term.

BLS does the index in the U.S. https://www.bls.gov/cpi/

Was considering this myself today. Interesting times.

If I had to take a stab at interpreting that, it likely means they will NOT be increasing equity allocation and will be doing relative value trades with the existing portfolio. There' still going to be meat on the bone for them in fixed income which is GREAT! But definitely not the outcome we would've envisioned from the "financial ark" that Fairfax was setting itself up to be when it was hedged.

Barring a rapid V shaped recovery, there's low odds for the Re-IPO in 2020 or 2021. Best to get capital into them ASAP, Plan B. Public (non-pspa) first, private equity, second if needed. The talk of jr pref conversions, AIG plan, modest discounts to par are likely fairy tales. The Fed is facing heavy backlash, they are probably reluctant to add on new areas. A freshly capitalized FnF (post-Collins settlement and Sr pref writedown) can - among many other benefits - help save select servicers, winning MBA's support for the plan. How do you propose FnF get capitalized without the re-IPO? Where is that much money going to come from? A senior pref writedown, with a concomitant return of $25-30B from Treasury to FnF, doesn't fully capitalize them; they would be around $75B short. This is also unlikely to happen fast enough to save the servicers, if that is even the purpose of the exercise. Anything more than a modest discount to par for the prefs means the commons go to near-zero. Placement in the capital structure matters. Honestly, does the current stress not help the litigation front? I mean now the narrative isn't just "they stole money from us". It's "they stole money from us and subsequently endangered the entire housing market as a result." That's gotta hit harder, no? I'd honestly like the quicker path of settlement/recap too, but if a court win is what it takes, I'll be here for it. This current crisis just seems like it makes the actions all the more heinous when your role was to "protect and conserve" the assets and your conscious failure to do so now endangers the housing market.

This is big, but not quite what you say. Futures further out (June and July, I think) were still in the 20s last I saw. This is a storage issue for this month's contract because we're close to date when you have to get delivery. https://www.forbes.com/sites/jimcollins/2020/04/20/the-us-oil-etf-uso-is-the-culprit-behind-oils-massive-plunge/?subId3=xid:fr1587412446979iif#141008c724e8 It matters, but Liberty is right. This is small potatoes--most oil futures for May were already closed. This just screws some people with open long contracts who cannot take physical delivery. That said, I don't see why this doesn't happen again when June expires...nothing about the massive oversupply has been fixed, and storage continues to fill.[\b] This. While the 90+% decline today, and negative oil prices, are being overly hyped b/c it's for front month delivery that no one wants, there is nothing stopping this from happening again in June when we get to May 20th and realize we still don't have any storage b/c demand is still 10% of what it was. 2-3 months of negative oil prices is likely all we need to shake out a lot of week hands (both investors and companies) who are in this field. That will probably be the time to start buying the majors that will survive this.

My guess? If it's like every other inflationary circumstance then you look at real assets like gold, real estate, commodities, etc. Some will go to equities, but that's not the only alternative. Also, bond markets may bigger than equity markets now, but where does that value go if interest rates are at something like 6%. Trillions of dollars in paper wealth disappear - they don't just "flow" to another asset class. If interest rates gap higher overnight, that money just disappears. It doesn't go anywhere. Consider what happened in 2011 where places like Spain, Italy, Greece etc saw their borrowing costs double in 2-weeks. Wasn't enough time for the bulk of capital to escape and so a lot of paper wealth just disappears.

The difference being we were already running massive debts/deficits prior to the pandemic and economic growth @ the peak wasn't enough for us to lower the debt/GDP (or even the deficit to GDP for that matter). I don't think the growth of the economy returning to normal after a few months will come anywhere close to that of a repressed economy for years with a ton of people returning to the consumer pool. That being said, if pandemic lasts 2 more years in various rolling outbreaks, your comparison may be more apt, but the debt-to-GDP will get MUCH worse beforehand. Higher taxes and eventual inflation are all but assured, but methinks it gets worse before it gets better.

Plenty off studies have been done to show interest rates have roughly zero correlation with stock multiples and what matters is inflation. Inflation of 0-2% supports the highest multiples. Anything above or below that sees equity multiples dropping fairly dramatically regardless of what interest rates and the economy are doing. When you have stocks trading at 21x earnings in an environment of low rates and low inflation, you've got the goldilocks scenario. It literally doesn't get better. Any divergence one direction, or the other, drops the multiple pretty dramatically - at least historically. If you believe this is a V-shaped recovery, then you should be concerned about inflation b/c that stimulus isn't going to sit as excess reserves on bank balance sheets like it did in 2008. It's going directly to consumers and businesses to circulate and it will be inflationary if it circulates. If you don't believe this is a V-shaped recovery, then you should be concerned because there is the very real threat of disinflationary pressures dropping inflation out of the sweet spot - or at the very least the market concerns of that happening. This is what happens when stocks get so damn expensive - you're left with mostly negative options on forward looking returns regardless of the direction the economy takes.

Watch what he does. Ignore what he says. And watch others like Tepper if you're curious about shorter-term, sentiment driven moved because that man seems to read the market like a book.

I'm shocked that people still listen to what Buffett says and ignore what he does. Buffett's advice on television is for grandmothers who don't know anything about stocks. If you compare everything Buffett says, with what Buffett actually does, you almost get disappointed with the hypocrisy. His entire public persona is the opposite of what he does personally. But what has Buffett been doing? Certainly not buying the S&P 500 because it was "so cheap". No, he wasn't buying hardly anything as a matter of fact and that's how he is sitting on $125 billion after years of waiting. Is he sitting on $125 billion because the S&P 500 was cheap relative to interest rates, like he says? Or was he sitting on $125 billion because deals weren't to be found because of how damn expensive we were and a 20-30% decline to average-ish multiples in the middle of a massive recession isn't enough of a correction to warrant buying just yet? I don't know why the catalyst matters. What matters is the ensuing damage, not what started it. If you shoot yourself in the foot, you still can't walk on it the next day - doesn't matter if it's self-imposed or not. We failed to address the virus early. Now we're embarking on an extremely damaging strategy to contain it to avoid the extremely damaging non-strategy of letting it run its course. The economic damage is real regardless of the catalyst that caused it. what is some other virus that we knew two months back mutated? We live in a world of risks. The risks havent really gone up in the long term. You need to re-read Bayes theorem. You update your model as information becomes known and probabilities are changed. Yes, there was the potential risk of a virus mutation with us all along - a probability that was much less than 100%. Now it's not a risk, it's a reality - probability = 100%. The damage to the economy is no longer a possible nor a hypothetical. It's real damage. Adjust the model accordingly.

Very interesting to hear the take of asset inflation with deflation in goods/services. Just trying to figure out how the prices of assets that produce those goods and services reliably rises if revenues/profits are falling. Will have to listen to the whole interview for more clarity I guess. Because the required rate of return goes down faster, having a greater impact than any lost income. Sure, theoretically. But had there ever been a deflationary environment where profits were consistently dropping and asset prices rose?

Very interesting to hear the take of asset inflation with deflation in goods/services. Just trying to figure out how the prices of assets that produce those goods and services reliably rises if revenues/profits are falling. Will have to listen to the whole interview for more clarity I guess.

This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so. I intend to do this once more bankruptcies hit the sector. No ideas what prices will do in the meantime, but would like more pessimism priced in and more clarity on who the consolidators will be BEFORE I buy.

It's an unfortunate view, but it's somewhat supported by data in America. While most of the world pulls teachers/professors from the upper quintiles of students, teachers in America tend to be more representative of the lower quintiles. That doesn't mean there aren't good teachers, or smart teachers, but that they are vastly outnumbered. Wow, that is an "interesting" claim, can you elaborate on why this is so? and how you know it to be so? I remember seeing stats on it years ago when I was in college. A quick Google search suggests that McKinsey did a nationwide study as recently as 2010 that determined ~ 1/3 of teachers were recruited from the bottom quartile of graduating students, but not sure if that's the same data I saw in college. It's my understanding there have been improvements in recent years in some localized areas, but it's not as if all the bad teachers hired in the late90s/early 2000s have been let go. It takes years for these types of systems to incrementally improve.

Maybe, but they're buying it AFTER the initial panic dislocation and it's only 4-year paper. Too far out to be immediately of concern and short-enough that additional moves in rates and credit spreads won't have major impacts. This alone could increase interest income by 10-15% per annum in coming years with no credit giving to any potential for higher rates - and there is probably more of this to come if I'm correct in that this isn't over just yet. Also, aren't these typically the types of bonds that are rolled in times like this? Companies voluntarily tender 2-4 year paper at a premium to push out maturities with a 7-10 year issuance to buy time and certainty of funding? Also, the equity accounting of Eurobank is likely to help seeing as it won't be marked-to-market. This will be one to watch though as future appreciation also won't flow through and current book values will be overstated as a result.

Glad someone is being honest, but hadn't this obvious in the shale field? Like it's been obvious that even at $60 most places weren't making enough for maintenance and new exploration to prove shale economic over the cycle. This is in spite of efficiencies and cost cuts from 2015/2016 bust.

I don’t know if that’s a bad thing without more context, but it could be construed as we generated a 30% cumulative ROI from printing money. We’ll get a pay back in 90 years for the initial investment, but this also excluded possible losses of principal from purchasing bad assets. 30% is generous. It assumes that that no future debt is necessary to generate the subsequent return on/of capital. But cut off all new issuance of debt and watch what happens to GDP growth which is needed to pay back the remaining 70% of that capital with a 0 return assumption.

Rolling those LEAP positions back into cash shares. Rolled for no net change in cash, but my notional exposure will drop by 30-40% on this reduction. Grateful for the ride up and the ability to sell the calls at larger premiums to spot than what I purchased, but skeptical that this rally continues and don't want the leveraged exposure on the way back down.

You're the one that brought up a single data point, not me. You're also the one that calls your system TA, which generally implies a high (if not 100%) level of mechanism. I don't understand why your system works or why it should work. If you have had sustainable success with your system, good for you. But a value investing forum is not the place to be gloating about a result of a system that is, from a value investor's perspective, indistinguishable from guesswork. Oh really? When did I say "this is a single data point"? I thought you are smarter than putting words into my mouth to make your arguments look strong. I came to this thread with the genuine intention to help, but look at the hostility you gave back in return. I am putting you on my ignore list, so no need to respond to this post anymore. muscleman your call from 2019 was epic. no one can deny that. going forward please contribute additional calls with any color on your TA work for FnF and don't look back. There's a good chance your return in that capacity would be appreciated by most or all here. No one? you sure? It wasn't 'epic', it was just him supposedly selling on short term bullishness. Doing so has been smart with FnF, I'll give him that if he actually did, but if you really believe his 'chart' instructed him, you should know it doesn't work that way. No chartist works on stocks/preferreds which trade 10k/day. His chart is absurd. He's basically claiming he called the pandemic. Correct, I would note too that he didn't tell us to buy last week which is a strike against also ;D I get it, some people like his input as an attempt of forecasting. That's fine but for a while I didn't get it. But after going to a strip club I realized I didn't mind watching the fat girls dance too, so now I get it. Even if it doesn't add value it didn't cost you anything if you were going to the strip club/message board anyway. Its usefulness wouldn't be worth going in the back for lack of better comparison. To be fair, it's not as if he called that the stock would go down. He called the top of an idiosyncratic investment, which topped several months before the top in the overall market. Luck or skill? I can't say, but he certainly did more than what you're implying. Did you sell all or a signficant portion of your position when he/she posted that? Nope. I've been buying on the recent draw down. Have said previously that I've been terrible at selling the rallies in this name, but pretty decent at adding on dips.

You're the one that brought up a single data point, not me. You're also the one that calls your system TA, which generally implies a high (if not 100%) level of mechanism. I don't understand why your system works or why it should work. If you have had sustainable success with your system, good for you. But a value investing forum is not the place to be gloating about a result of a system that is, from a value investor's perspective, indistinguishable from guesswork. Oh really? When did I say "this is a single data point"? I thought you are smarter than putting words into my mouth to make your arguments look strong. I came to this thread with the genuine intention to help, but look at the hostility you gave back in return. I am putting you on my ignore list, so no need to respond to this post anymore. muscleman your call from 2019 was epic. no one can deny that. going forward please contribute additional calls with any color on your TA work for FnF and don't look back. There's a good chance your return in that capacity would be appreciated by most or all here. No one? you sure? It wasn't 'epic', it was just him supposedly selling on short term bullishness. Doing so has been smart with FnF, I'll give him that if he actually did, but if you really believe his 'chart' instructed him, you should know it doesn't work that way. No chartist works on stocks/preferreds which trade 10k/day. His chart is absurd. He's basically claiming he called the pandemic. Correct, I would note too that he didn't tell us to buy last week which is a strike against also ;D I get it, some people like his input as an attempt of forecasting. That's fine but for a while I didn't get it. But after going to a strip club I realized I didn't mind watching the fat girls dance too, so now I get it. Even if it doesn't add value it didn't cost you anything if you were going to the strip club/message board anyway. Its usefulness wouldn't be worth going in the back for lack of better comparison. To be fair, it's not as if he called that the stock would go down. He called the top of an idiosyncratic investment, which topped several months before the top in the overall market. Luck or skill? I can't say, but he certainly did more than what you're implying.