Castanza

A form of what Dr Burry is suggesting is likely what we see as we move to the next stage in the battle. Is the church of “scientific consensus” going to change their view? Will the epidemiological popes allow Galileo to give his opinion or will he be burned at the stake for heresy? My guess is the latter...

Yeah, it's the federal government that is in charge of the CDC, HHS, DHS, FDA, the national stockpile, army corps of engineers, etc.. They're the ones who are supposed to protect the country from what's happening right now as a first line of defense, and then coordinate resources and do clear national messaging/planning during the crisis, as well as coordinate with international allies and suppliers. Why are taxpayers paying for all that if not for times like these? The failure of the federal government is what is leading to individual governors having to pick up the slack as best as they can. Meanwhile, the president's failed-developer son-in-law is running point on a pandemic... It's amazing that people can see the blatant failures of government in the current yet continue to advocate for more. All while the innovations and solutions come directly from private industry and people thinking on their feet. ;D FWIW: https://www.factcheck.org/2020/03/false-claim-about-cdcs-global-anti-pandemic-work/ "Those hypothetical cuts were avoided, however, because Congress later provided more funding for the CDC’s global health programs, the CDC told us in a statement. " “CDC did not have to cut back its work from 49 to 10 countries,” said Maureen Bartee, CDC’s associate director for Global Health Security, in a statement to FactCheck.org. “In the FY18-FY20 annual appropriations, CDC received base appropriations for global health security from Congress. This was used to continue the essential public health capacity development in the four core areas that was started in 2014 with the one-time supplemental funds.” "Those amounts went up again in fiscal year 2020, when the CDC was awarded $183 million for global public health protection, overall, and $125 million specifically for its global health security efforts. For fiscal year 2021, President Donald Trump has requested that CDC funding for global disease detection and other programs be increased further — to $225 million total, with $175 million going directly to global health security. With its current funding, Bartee said, the CDC is actually working in “more than 60 countries” — not 10 — to address the threat of global infectious diseases and outbreaks."

Didn't RuleNumberOne call this? He may have. I’m not too surprised but I’m pretty sure this was the first time I heard a Fed insider officially say this. So than the government can exert control on many US companies which is a giant step towards socialism. I said this before, but I think Bernie wins without being nominated. Bingo. I'm more concerned about Joe's VP pick...

Didn't RuleNumberOne call this?

Perhaps after restructuring - have you looked at their balance sheet and cash flow statement? E-commerce is hard enough to begin with, let alone when you are trying to sell heavy, difficult to ship products at 20-25% gross margins. Also consider that a company that enjoys a negative working capital cycle when sales are expanding (and finances growth from that) will see that unwind, with declining sales causing a cash drain. Good point. That could come back to really bite all the SAAS darlings as well. Dig into their wonderful FCF generation and it's mostly D&A, stock compensation (which will likely decline either due to lower headcount, which kills the growth narratives, or employees demanding more comp in the form of cash), and upfront cash payments on multi-year contracts. In the furniture retail world, many brick-and-mortar stores have embraced the negative working capital model and now the negative aspects related to cash flow generation are starting to show. Isn't Wayfair the 'champion' of the negative working capital model? Won't slowing (or heaven forbid negative) growth mean losing even more money for a while? https://finbox.com/NYSE:W/explorer/nwc I see Wayfair as a company coming back to earth. What am I missing to explain the potential rebound? Edit: Apologies as I realize that the link submitted may require subscription. The graph in the link basically shows a pattern similar to what Dell accomplished at some point but in an exponential (negative) way. Dell was profitable though. All fair points, and I realize it's not a risk free name, but that's why it's even in the discussion, because if it was not down something like 85% we wouldn't be talking about it. On the other hand, I don't think it's unrealistic to think that if they can survive relatively unscathed and that this crisis impacts their competitors much more than them. Of course, I could be wrong on all of this. W up 42% today...

GOOG

I don't think anyone is thinking air travel gets back to normal in a year's time but I have high confidence that it grows over the long-term and AerCap has enough liquidity and unencumbered assets to get well past the next two years even assuming a highly distressed environment. I think countries that rely heavily on tourism will bend over backwards to get people flying again. As I've already said, I know many people already taking advantage of cheap flights and booking vacations for end of summer early fall simply because they had to cancel their current ones. People still want to travel. I think leisure travel will recover much faster than business travel. This is just speculation though. So many variables to take into account. But if any bit of stability returns on a macro economic scale then I can see air travel ramping up within a 1-2 year time frame.

Incorrect. The most valuable asset of AerCap is not the fleet but its leasing agreements which are not represented on the balance sheet. Only the value of the planes is. OK, I think there's about $35B worth of airplanes on the balance sheet. What would you say is the appropriate valuation of all of these leases, given the counterparties are universally insolvent? Because if it isn't >$35B, I'm still right. And if it is >$35B, I would have to imagine your portfolio is 100% AER calls at a strike of like $100? If you want to actually "go beyond the balance sheet", everything we're talking about is a zero. The planes are completely underwater, and the leases are worth absolute dogshit in any circumstance. The off-balance sheet "asset" this company has is its structural position in a complicated chain of contracts and counterparties where both ends are likely to receive a cascade of international bailouts that will be too rushed to include sufficient optimizations to remove AER shareholders from the list of beneficiaries. That's what we're buying with Aercap right now: like the malls, it's a bailout prediction market at this point. How many of the contracts are for companies that are heavily subsidized by the state? I can see contract issues for US carriers, but is it unrealistic to assume international entities will continue to pay the contract? Jeremy makes some interesting assumptions on that here https://rapercapital.com/2020/03/09/hard-hats-on-buy-aer-short-boc-aviation/ Thanks, seems like a solid analysis. Gives me some things to mull over.

Truth is always somewhere in between. That all the frauds were committed by financial institutions during GFC because they were out to screw people, and this time they are out to help is just too simplistic a view of the world. When there's $350 billion at stake, and hundreds of thousands of people / entities involved, there will be bad actors. At some point, there'll be opportunistic politicians rage in the name of "we the people" to raise his/her national profile on things that go wrong from the left and the right. At that point the only thing the banks can hide behind is the guidelines on the origination / monitoring rules that they want government to put out now. Even then, politicians can change goal post down the road if it suits their purpose. None of this is to predict this whole thing will necessarily be poorly executed this go around. Just saying plenty of issues exists in this whole endeavor. There are already people saying this is a give-away to the rich and connected, and they are right in some respects. Such is the nature of human societies at large. The big risk is not that banks are trying to screw their customer, with the new arrangement where they don’t partake in credit risk, their incentives is to approve everyone without due diligence, which lead to tax Payers taking losses. Mow that’s fine for. Now, but when it’s over, there could be hell to pay if banks are grossly negligent now. Bingo. That 14B in fees sounds nice now. But pending how businesses do down the line it could put them in the crosshairs politically.

Incorrect. The most valuable asset of AerCap is not the fleet but its leasing agreements which are not represented on the balance sheet. Only the value of the planes is. OK, I think there's about $35B worth of airplanes on the balance sheet. What would you say is the appropriate valuation of all of these leases, given the counterparties are universally insolvent? Because if it isn't >$35B, I'm still right. And if it is >$35B, I would have to imagine your portfolio is 100% AER calls at a strike of like $100? If you want to actually "go beyond the balance sheet", everything we're talking about is a zero. The planes are completely underwater, and the leases are worth absolute dogshit in any circumstance. The off-balance sheet "asset" this company has is its structural position in a complicated chain of contracts and counterparties where both ends are likely to receive a cascade of international bailouts that will be too rushed to include sufficient optimizations to remove AER shareholders from the list of beneficiaries. That's what we're buying with Aercap right now: like the malls, it's a bailout prediction market at this point. How many of the contracts are for companies that are heavily subsidized by the state? I can see contract issues for US carriers, but is it unrealistic to assume international entities will continue to pay the contract?

FWIW: Completely anecdotal, but I know a ton of people who are taking advantage of the cheap airfare and booking flights for August/September and even as early as Mid-late July. Obviously there are still near term issues. But if I had to pick an airline to make it through this ass beating. I would probably go with a well capitalized budget leisure focused airline. Business travel will no doubt take longer to come back up to speed.

Incorrect. The most valuable asset of AerCap is not the fleet but its leasing agreements which are not represented on the balance sheet. Only the value of the planes is. It's as if you are looking at a bank, but instead of the mortgage value outstanding you would see the value of the houses that secure the mortgage. The value of the house can vary wildly while the mortgage can still be whole. Another example is the difference between SLG which always has its properties leased for at least 10 years ahead, compared with what would happen if it had only short term leases. The leases provide tremendous value in times like today that the assets by themselves do not. As for the idea of liquidation based on negative equity, there are no debt covenants that provide for mark to market. So no. An event of default has to happen first - i.e. AerCap no paying debt and interest on schedule. Probably not happening for at least 2-3 years even with zero revenues based on their current payment schedule and liquidity sources. I Edward, thank you very much for your reply. So you are saying that, if the company is able to pay its debt obligations, even with negative equity, shareholders would be ok? Is there any other document besides the Annual Report where I can find the covenants? And why did you say that AER has liquidity for 2 years ? Are you including a massive decrease in expenses? On a different note, how would this nee Aercap be valued? By the PE? Petec, interesting. Why can't it buy new planes? Thank you guys Think about it this way. If you own Aercap stock it’s like owning a house with a mortgage. Your assets are planes and the contracts leasing them to airlines and you’ve borrowed say 70% against those assets. Now, say the value of the assets falls 35%. You now have negative equity. If you decide to buy another plane (house), you won’t have any money for the down payment (equity). Think the bank is going to give you a mortgage? On the other side of the coin, you put $100 in to start MacDonald’s. It grows like a weed and you pay yourself so much in dividends that there’s negative equity*. You go to the bank for a loan. The bank sees all the cash the business is generating and falls over itself to lend to you. *this is a gross oversimplification of the accounting but hopefully it makes the point. Who would be assessing the value of these planes? Worst case scenario if nobody is buying or leasing how can you properly asses value?

They won't have any risk but they will earn a fee for processing / administering these programs. That's not entirely true. It's true that they aren't supposed to take any credit risks. But plenty of other things could go wrong. JPM didn't think it was taking any credit risk either when taking over Bear Sterns, with Fed as a back stop on the assets they are buying, but then was hit with all the pre crisis mortgage underwriting issues that came back to haunt them. Robo signing, mortgage put backs, fines related to pre crisis conducts, etc. The assumption here is the borrowers are all well intentioned. But there's plenty of incentives to defraud the lenders/governments. And 2 years down the road, some of these stories come to light, banks will be stuck in the middle, government won't reimburse them for frauds, and money is out the door. How about at some point down the road, there's allegation of discrimination in disbursing the loans, money laundering, etc., etc. That's why banks are all looking for guidelines. They can't underwrite and monitor these loans to their traditional standard, yet they could be stuck with fines down the road. This is sort of what I was getting at when asking original question. How are banks vetting these small businesses and quantifying the risk? When I hear 10k applications in the first hour + government pressure to quickly underwrite these at all costs I can’t help but think that is a recipe for disaster down the road? Think about the types of businesses requesting these loans. If I had to put a number on how many of these companies will still go under even after receiving a loan I would say it has to be high. Everyone seems to be assuming that all these pizza shops and small clothing boutiques will pickup right where they left off. Well what happens when demand is slow to come back? Or we hit a second leg down in a year. Who do you think will be thrown under the bus? Banks or bleeding heart politicians? I’m by no means an expert in anything banking. Quite frankly the industry is often put in the too hard pile. Just some thoughts from your average joe.

I just don’t think so. It wouldn't be Buffet like. I think they just realized they these airline are impaired and may go to zero. If you think about it and look at the cash burn and make a timeline when this epidemic truly is over (Spring next year is earliest in my opinion due to vaccine availability) then it makes sense. The problem is they none of the airline companies lasts that long without bankruptcy. Probably right, thanks for sharing.

What are the odds this is a strategic move to end up buying these companies for pennies on the dollar in a month or two? Someone else pointed out that this filing now gives him a 45 day buffer window where no further filings are needed. Probably just my selfish hopeful optimism grasping at straws as I can see my Spirit position hitting zero.

https://www.factcheck.org/2020/03/false-claim-about-cdcs-global-anti-pandemic-work/

I think it was UAL who said they are burning 60m a day. That’s craziness

Fuck

The market did come down the last few days, were you trading out prior to that? Essentially asking whether you are slowly accumulating or simply trading around the market volatility? For me I bought some WFC, T the last few days. Was planning on buying some more WFC today but was caught up and didn't have time. Hopefully further opportunity presents itself! I was trading in and out of GOOG and a few others but started to accumulate in the above positions today. Still have quite a bit of cash and continued cash flow that I’ll deploy if we keep going lower. Timing is too hard. Less stressful to just dca on good companies and think 20 years down the line.

Freeze your credit

The durability of this in this market has been unreal. What was your expiration date on these?

GOOG VZ T CTL RTX PCYO BAC

Thanks for the responses

Can anyone speak to the risk (if any) banks are taking in with this influx of small business loans? BofA had 10k applications in the first hour.

So what’s the reason. Defense act only applies to domestic production. Every other country is hit too and does the same thing basically. Most mask are produced in China anyways. FOr what it’s worth, the MA governor on today briefing said that MA ordered N95‘s mask a while ago, which came through NY (airport) and were confiscated there. It’s a Wild West out there and everyone grabs what they can. Next shipment for N95’s for MA is coming though Logan Airport. That's what I'm not understanding. I saw some speculation that perhaps masks being made in other countries for the US are never actually making it over here. If the NYC MA story you noted is true then I can absolutely see that. At the end of the day, what can 3M do about it? It's a risk of operating in another country I guess. Instead of bashing a great company Trump should use it as a broad talking point about how we need to move some manufacturing back to the states . Anyways don't want to derail the thread into politics so I'll end there. Just found it peculiar. Hope this presents and even better buying position. MMM is already quite cheap.