Spekulatius

I haven’t added either, in fact I sold a few shares when there was a spike to $480 a few weeks ago. My concern is that HWC busy buying low quality assets. there are some dislocations in the credit markets, that they pot. could take advantage of, or perhaps just buy back their own preferreds (if that is possible).

This is getting insane. You'd think we are in the midst of some massive crisis. Or that every listed company in the US is cooking it's books... I know Tepper basically just declared the Fed Put dead, but all the writing on the wall, at least to me, seems to indicate that with a little more pain, a lot of folks are going to start looking to resurrect it. Ouch! I just miss the infamous phrase: “ Our liquidity is strong”. Feels more and more like September 2008 to me when they introduced TARP. They really should keep their mouth shut. Back then there was a problem, now there isn’t, unless they fabricate one.

Funny how people reset their valuations when prices fall. I don't see anything that has negatively affected the economic attractiveness of this business. I haven't read the Morningstar piece but imo Ads has a wonderful niche where they are positioned incredibly well with regards to competition and I haven't seen any evidence that has changed. ( The recent activities in Syf's end markets would concern me and is something that would potentially change my valuation) They are right on trend for their targeted 6% net charge off rate, they have signed some monster clients that has increased the likelihood of 15% receivables growth rate* (assuming a normal economic backdrop), they are proactively shedding non economic clients, they are shrinking their domain to the likely benefit of shareholders and they are investing capital in their cards business at ridiculous rates of equity returns. I'm not suggesting the model is bulletproof and people certainly differ in their opinions of valuation but I don't think it's an intelligent use of time to bash the stock on a forum populated by people that are knowledgeable of Ads without one iota of substantive information. But I would love an opposing argument that maybe can enlighten me to a possible risk that I am missing. PS... you used Morningstar as a source to support your point that the stock should be sold but their fair value estimate is 40% higher than the current quote with incremental intrinsic value already in the pipe. * Although receivables growth is an important variable I would be careful in giving it to much weight. First, at the current price of Ads you don't need anywhere near 15% growth to do well. Second, there's no question Ads could grow receivables at faster than mid teen rate (for instance, by not purposefully shedding non-economic clients) but their stated hurdle is 30% ROE's I am not bashing anything. I was merely stating that Morningstar has changed their price target with some rationale. If I were long this stock, I would read it and come to my own conclusions. I don’t own this stock, so I don’t really care. Edit: One of the issues that Morningstar mentioned that they believe the adjusted earnings that management emphasizes are not true economic earnings and that those are closer to the GAAP numbers, which are considerable lower. This is a concern that has been discussed in this thread as well.

FWIW, Morningstar has just reduced their fair value for ADS down to $210/share. They don’t expect ADS to hit the 15% growth rates for one thing. if I owned ADS, I would take my tax loss here and move the proceeds into DFS is I liked the sector. I think they are more solid and have equally good upside. just my opinion. I own a small position in COF, which had been a clunker too.

So again, is there a legal way to enforce this or are they hoping on the goodwill of JUUL`s management here? The dividend is decided by the companies board of directors. To the extend that MO can influence the decision, MO board representative can vote for a dividend to be paid.

It’s hard to know what BRK’s excess cash really is. The insurance subs need to hold some of their float in cash. just based on casually looking at some balance sheets, most Insurers hold about 15% of their float in cash and short term investments. Now, BRK is not an insurer, but a conglomerate. They also buy securities in size both at a holding level as well as with cash from their insurance subs.

I depends of how much of the tax cut will get competed away, which depends on industry, market position etc. I expect that most of it will get competed away in commodity businesses. Regulated businesses and those which already enjoyed very low tax rates won't profit very much either. So in aggregate IV certainly has not increased by 20%. The tax rate for many business was already way below the nominal tax rate befor the tax cut. When have you seen the last multiples national pay 36% tax rate? I GE’s tax rate was in the low 29% range before the tax cut even.nSame with tech companies. Domestic companies like insurers, and banks that don’t have that many opportunity to hide taxes benefited the most.

I don’t think a recession can reverse the trend towards craft beer. These brands are dead. Maybe it’s my circles, but no one brings Miller or Bud to a party any more. There best bet is develop or buy craft beer brands themselves, but they don’t come cheap, but I agree they may become cheaper in a recession. The problem is that the fragmentation probably reduces the profitability of the business permanently.

Wall Street is just pi$$ed because their bonus went to hell late in the year. :o

Anyone turned off the lights here yet? FFH has gotten absolutely wrecked. I am not quite sure why, their holdings aren’t of the best quality, but their insurance business is really not affected by an economic slowdown.

It looks like BRK has outperformed in the current selloff, even though the equities he owns haven’t. I also think that due to its larger industrial business, BRK is more economically sensitive than it used to be. I am quite surprised by the relative outperformance, quite frankly. FFH in the same time span has gotten absolutely wrecked.

Well, it’s a growth company, so dividends are a mute point. I do believe that over time any addition will get regulated and taxed. Replacing the nicotine in cigarettes with nicotine in vapes will not change that.

Also a bit early perhaps? The situation is interesting: there's a number of large (mega) cap good and great companies that are not very expensive. Some even cheap(ish). But also a lot of moaty companies still very highly valued. (That's just from the universe I track... no idea about the companies I don't track.) So on one hand, it would seem we should not get another 20+% drop but on another hand it would seem we could. FWIW, I think markets will rally after the year-end dumping of "losers" ends. So in January. But then there's politics, tariffs, etc., so my prediction is possibly not worth a share of BAC. Yes, too early. however, the selling had been relentless, almost like October 2008. I think a lot of stocks are cheap, unless the economy falls apart. I don’t think that’s likely. I do agree that the selling has more to do with momentum than with fundamental issues.

FWIW, I added to WMB, GOOG and FRPH and Fujimak (5965.T) a bit. Almost out of cash now. I haven’t got anything to sell either, since pretty much everything is in the hellhole.

I wonder how Berkshire Hathaway fared with its investments through the tech bubble and its bursting...Is that old crank Buffett still managing money or did he get a job at CNBC too? Also, note that Druckenmiller has been pushing cloud companies in his interview as an example and he believes they are a better value than banks, because they can grow in anlow growth environment and banks only can make more money at higher interest rates (which IMO isn’t true either). last I checke, the cloud companies arnt soing thwt grsat either, but it’s possible that he changed his mind. anyways, Druckenmillet is a macro trader. I enjoyed listening to his interview and I think he has valid point regarding the forward guidance. Greenspan perfected the art of saying nothing,which may be preferable. They should just state what they do and nothing else. No guidance and just look at the data every time and hopefully come to the right conclusions. Powell seems a bit like a Mickey Mouse Volker, except that Volker brought interest rates to 20% and Powell to 2.5% and yet here we are....

Probably more productive to look at a companies internals, rather than a quote screen showing a sea of red and charts looking like a toilet flush. I didn’t do much work on this, but went to some of their presentation and the last annual report. I noticed that their DCF/ share had actually fallen since 2013, while distribution has increased to almost 100% of DCF. I guess they will have to hold the distribution flat or increase DCF going forward. To triangulate valuation, I looked at their PPE ($27B+ $3B in other investments) generating $1.7B in EBITDA. This means that the assets are valued at a ~6.5% EBITDA yield. Valuation seems high to me, but what do I know. I am sticking with my pipeline companies KMI, WMB and ENB that are trading at 10-12x EV/EBITDA and have 10%+ and growing DCF yields. In fact I bought a bit more WMB today.

I am bullish on midstreams. It’s very similar to real estate and assets can be moaty. Locations and connections count and there is the FERC to regulate supply. They generate nice cash returns for decades and some pipes run for 50+ years, even though they are fully depreciated. in some cases they can be repurposed. Vulnerability is the same - overinvestment, cash return lag Capex expense during buildout phase and credit markets need to stay accessable for them to work. The E&P is like the airline industry 30 years ago and shale is the worst thing that ever happened to the industry.

The Fed chairman has been elected by Trump, so no conspiracy there. Their mandate is low inflation and full employment. If an elected president is going to push inflation, the central bankers should absolutely run counter, if they do their job and don’t get fired. Same in the EU, except their mandate is more biased towards low inflation. This is because upon formation, the EU central bank was created after to mirror the German Bundesbank. The Bundesbank only mandate was low inflation. Full employment wasn’t their mandate. We expect too much from central banks, as if they can steer the economy. I don’t think they can. They can in the short run to some extend but almost anything they do has long term consequence that runs counter the short term action. Nobody really knows if the QE has any LT consequences and what and when they may transpire. It would probably be better if central bankers would do less not more.

Yes, Spekulatius, Perhaps somebody thinks it looks a bit like a weirdo right now, and that some of the subs perhaps may lack quality, but I like them. Personally, I think CNH Industrial by many are underrated. Also, EXOR is "double cheap", because FCAU is cheap, and by EXOR in NAV included at market price. [A bit similar to the relationship between BOL.PA and ODET.PA.] [Please see Gísli's nice spreadsheet embedded in the blog post by Gísli, in this topic mentioned by Gísli earlier.] Well, Exor has mainly grown from Cash and spinoffs crated out of Fiat. The Agnelli know better than anyone else that automobile is a crummy business in the long run and Fiat was at the brink of bankruptcy at least 3 times in recent history. Now, with the Spinoff, they insulated themselves somewhat from Fiat and have now several pillars to stand on. I am guessing they Exor is as much a wealth preservation than a wealth generation vehicle and diversification is important to the owners. I agree that CNHI is underrated, it used to be a real crappy subscale business and It’s now at least Ok business and may end up getting merged eventually.

The regular people have given up privacy for convenience a long time ago.

I bet other than the stock market falling a bit, Powell doesn’t have much to go by in terms of leading indicators to suggest a slowdown right now. I guess, if you are in the hedge fund business like Druckenmiller, than the market is important, but for the Fed, I don’t think it matters much what the stock market does. I do think that Powell needs to look at this with an open mind - interest rate changes take about 6 month to filter through in the real economy and I would bet that they may pause the interest rate hikes if they see weakness in March 2019.

I am guessing that Druckenmiller is betting on increasing spreads. he may do this directly buy going long treasuriesnwnd shoring corporate bonds or indirectly by shorting financials. FWIW, increasing interest rates are rarely a problem by itself. What is far worse are increasing credit spreads. Credit spreads were at record low and I think this is because of QE. There is quite a bit of trash credit out there (private equity) or companies that leveraged up with buyouts that will probably have issue when spreads start to rise to normal level and junk bonds are again in the vicinity of 8% interest rates rather than 5-6%. HYG (junk bond ETF) is already looking sickly.

I remember 1987. the market went down 25% in one day and Reagan just said that the stock market is doing its thing. We didn’t get a recession either. Anyways, the slump has a lot more to do with what Trump does than with Powell or the Fed.

I get junk mail from companies that I never contacted. I got robocalls from companies that I never contacted. They spoof a number that is close to my own cell phone number (same zip, same 3 digit subset) despite having an out of state number from the left coast, yet they want to sell me a solar cell roof on my east coast house. Google maps news where I park my car. I am pretty sure they would tell the police, if it comes down to that. They probably tell advertisers too. By the way, I hate you guys ;D

Which company(ies) do you think that has to stop buying back shares? All consumer finance pure plays (SC, ALLY, SYF, DFS, COF, etc.) are so penalized at this point that valuation is already pricing in a mild recession ala 2001. I am ny sure whether they have to but DFS seems to have run down their Tier 1 capital ratio by almost 2% points. I doubt they want to go much lower. I guess they can just buy back from continuing earnings, but they probably will have to retain some, if they want to grow their loan book. DFS is BBB- rated and hence barely investment grade. I doubt they want to risk getting into junk credit rating. I think the market is a bit spooked about CC debt. I think in the last quarter, write offs started to increase, but it’s not clear to me that this is a trend. As far as I know they is some cyclicality in these numbers and they tend to spike early in the year (after Xmas).