The day after tomorrow

[Spekulatius]

Her is another study from Accenture. Seems bearish for fashion, alcohol (!) and eve; electronics.

https://www.accenture.com/_acnmedia/PDF-123/Accenture-COVID19-Pulse-Survey-Research-PoV.pdf#zoom=40

 

Somewhat surprising, people intend to shop more locally.

[meiroy]

https://freakonomics.com/podcast/covid-19-college/

 

What Will College Look Like in the Fall (and Beyond)?

[DooDiligence]

https://freakonomics.com/podcast/covid-19-college/

 

What Will College Look Like in the Fall (and Beyond)?

 

I hope we’ll be able to have actual classes this Fall.

 

I plan on signing up for history and literature (not sure what periods for either) in the 2020 Fall semester & would be fine with Zoom classes, but I also want to take philosophy and psychology & don’t think these subjects would be as beneficial without face to face discussions.

[Spekulatius]

Interesting tidbit from Uhal CEO Schoen about the car/truck auction business  where they auction of their trucks.

 

Looks like this business is now totally virtual while before it was literally a marketplace full with people. It’s a tangent for Uhal, but nevertheless interesting. They also expect a miserable time for a lot of  self storage business due to oversupply. Uhal’s CC are always interesting because they are very frank:

 

Looks like COVID-19 totally changed the car auction industry perhaps permanently.

 

CraigInman

 

Okay. That's good color. And then on the truck side with the -- if you can't get new trucks in Ford and GM, and the auctions are -- or the auctions still closed?

 

EdwardShoen

 

Yes, they're starting to open virtually, the largest -- I think they're the largest. The Manheim furloughed over 10,000 people and their stated intent is to attempt to not reopen to transfer to a virtual business changed their whole economic structure. Well, during that time sales have just collapsed. Now whether that's because of the virtual formats are a whole bunch of other factors. I could only guess, I have no -- we see what we are able to move on a daily basis. And that just it went to just almost zero for a couple of weeks. Now it's slowly creeping back but it's nowhere near, I would say it's less than 12% or 15% of what we would have expected, Jason, would give --

 

JasonBerg

 

Yes. At the most.

 

EdwardShoen

 

It's drastic decline. Now we watch everyday and we every -- we see a little glow we kind of encourage each other and all that. But when the money finally comes into Jason it's disappointing. So I don't know what's going to happen with the auction business. I don't know if you have ever been to one but they -- it's big social event as well as sales event and so there is a whole bunch of people who have their business social activity build around this but they are all rubbing shoulders with each other, it's hustle bustle and if people are unwilling to be in that environment compared to an open air market or something. People may not be willing to back in that environment. If that happens it's going to change the whole auction industry. And Manheim is making the right bet. I have no idea what's going to happen.

https://seekingalpha.com/article/4350683-amerco-uhal-ceo-edward-shoen-on-q4-2020-results-earnings-call-transcript?page=10

 

[cwericb]

Doo...  "I also want to take philosophy and psychology & don’t think these subjects would be as beneficial without face to face discussions."

 

A good course in Abnormal Psychology is fascinating and I guarantee you will use it frequently throughout your life. It will help you read people and give you a good idea of why people do the things they do and what you can expect of some. Just my 2 cents worth.

[DooDiligence]

Doo...  "I also want to take philosophy and psychology & don’t think these subjects would be as beneficial without face to face discussions."

 

A good course in Abnormal Psychology is fascinating and I guarantee you will use it frequently throughout your life. It will help you read people and give you a good idea of why people do the things they do and what you can expect of some. Just my 2 cents worth.

 

Thanks for the suggestion.

 

I'm definitely interested in courses that help to improve perceptions about myself & others.

 

As an aside, I never expected English Comp 1 & 2 to be so transformative.

 

I'm definitely far from perfect, but my critical thinking skills have (maybe) improved based upon the single concept of "citations" from reputable sources. I have no reputable source to cite for this statement, hence the inclusion of "maybe".

[John Hjorth]

Somehow, it's to me a mental lift to read your posts ["Corona-nowadays"] bursting of mental energy, Jeff. Thank you.

[DooDiligence]

Somehow, it's to me a mental lift to read your posts ["Corona-nowadays"] bursting of mental energy, Jeff. Thank you.

 

Nice!  ;)

 

I delude myself into believing that my (mainly) positive attitude encourages others & am especially glad when it helps people who I consider friends (virtual or otherwise) to "see the sunny side of life".

 

I still consider myself a slacker. and need to do a lot of work on behavioral issues.

 

It's time to go a viking!!!

[Spekulatius]

Check this one out. $490M cash tax refund due to provisions from the CARES act for UHAL, a $7.6B (roughly) Market cap company. Retroactive refunds for 2017, 2018, 2019 and forward for 2020.

 

 

These looters you see on TV are dummies and are doing it wrong.

 

https://seekingalpha.com/article/4350683-amerco-uhal-ceo-edward-shoen-on-q4-2020-results-earnings-call-transcript

[rb]

If you have a good tax team why would you go out in the streets and soil yourself with the populace? This has always been true.

[wabuffo]

Retroactive refunds for 2017, 2018, 2019 and forward for 2020.

 

This will probably only upset you more - but a company can apply tax losses for both 2019 AND 2020 as tax loss carrybacks.  Plus the best part is that when you apply them to previous years, the Company gets a refund at the old 35% federal corporate tax rate. 

 

Congress did this in 2008 as well.  I remember the estate of subprime lender LEND (Accredited Home Lenders) got a $100m tax refund in 2010 as part of its bankruptcy estate.  I was holding LEND's stranded preferreds (AHHAP).

 

wabuffo

 

 

 

[Spekulatius]

Retroactive refunds for 2017, 2018, 2019 and forward for 2020.

 

This will probably only upset you more - but a company can apply tax losses for both 2019 AND 2020 as tax loss carrybacks.  Plus the best part is that when you apply them to previous years, the Company gets a refund at the old 35% federal corporate tax rate. 

 

Congress did this in 2008 as well.  I remember the estate of subprime lender LEND (Accredited Home Lenders) got a $100m tax refund in 2010 as part of its bankruptcy estate.  I was holding LEND's stranded preferreds (AHHAP).

 

wabuffo

 

LOL, know i remember the 2008 case. Makes everyone feel better to get looted twice the same way, LOL.

 

Between the US leaving the WHO, US inner cities looking like a trailer for the movie “Purge”,  and looking at the COVID-19 scorecard of China vs the US, I suspect Xi Jinping and the fellows running the CCP must be giving themselves high fives all around. Complaints about HK protests? Well....

 

Quite sad actually.

[Cigarbutt]

Retroactive refunds for 2017, 2018, 2019 and forward for 2020.

This will probably only upset you more - but a company can apply tax losses for both 2019 AND 2020 as tax loss carrybacks.  Plus the best part is that when you apply them to previous years, the Company gets a refund at the old 35% federal corporate tax rate. 

Congress did this in 2008 as well.  I remember the estate of subprime lender LEND (Accredited Home Lenders) got a $100m tax refund in 2010 as part of its bankruptcy estate.  I was holding LEND's stranded preferreds (AHHAP).

wabuffo

With the CARES operating losses provisions, losses can be carried back as far as 2013 and loss limitation rules for 2018 and 2019 are suspended. This is interesting since these retroactive amendments will require to adjust the dwindling corporate share of tax revenue for those years (for those who follow that).

 

wabuffo, if i'm not on your ignore list yet and if you have time, could you read the following? The AHHAP 'investment' is super interesting and i was following similar situations then (but not AHHAP). After a short retrospective review, it looks like they received more tax refunds related to net operating losses on top of the first 54M obtained. It seems like the fulcrum security category included the subsidiary series A preferred shares and the liquidation value ended up at 0.771 par value (78.9M distributed). Do i get this approximately right? If yes, did you invest before the actual tax act was passed or based on the expectation that such an act would be enacted or was it a positive surprise? (it seems that the preferred shares would have received nil absent this tax 'relief'?)

[wabuffo]

CB - re AHHAP

 

Ahhh - glory days!

 

Compared to other subprime lenders, LEND had an interesting structure and that was what drew me to it after sub-prime blew up in early 2007.  As an aside I also had an investment in ECRO after it sold its origination platform to Bear Stearns.  IIRC, in 2008 - two of my top five positions at times were sub-prime mortgage lenders (ECRO, AHHAP).

 

AHHAP ORIGIN STORY:

OK - back to LEND/AHHAP.  LEND was originally structured as a C-Corp.  But by the mid-2000s, it was finding itself at a competitive disadvantage vs the new subprime mortgage originators on the scene that were organized as mortgage REITs (NFI, New Century, etc).  So LEND created a Mortgage Loan REIT subsidiary that housed all of its securitization trusts.  Now the rules about ownership of REITs are very specific in order to preserve its tax status.  Part of those rules are a 5/50 rule which means that the top five holders of the equity cannot hold more than 50% of the total equity.  But LEND owned all of the equity of its new Mortgage Loan REIT.  To solve this ownership problem and qualify as a REIT, LEND created a class of publicly-traded preferred shares (AHH-A later AHHAP on the pinks). The preferreds gave the Mortgage Loan REIT broad ownership and helped meet the 5/50 rule to qualify as a REIT pass-thru structure.  But here's the key to the whole investment thesis.  In order to protect the preferred shareholders, LEND had to give a guarantee to the AHHAP preferred dividends.

 

So to summarize, LEND (holdco) is a C-Corp holding the mortgage origination platform.  The REIT that issued AHHAP preferreds is a subsidiary of LEND.  LEND owns 100% of the common equity of this REIT sub.  The REIT sub holds onto all of the securitization trusts' residuals, which are its only source of income to pay the preferred dividends. So when the mushroom clouds start to go off in subprime in 2007, and the mortgage REIT's preferred dividends can no longer be supported by the residuals, LEND is on the hook to pay the preferred dividends because of its unconditional guarantee. 

 

Few people understood that - that was the key that forced the preferred dividends to continue to be paid.  It got even more interesting - in 2007 Lone Star buys 100% of LEND, but it can't touch the preferred shares without unwinding the REIT.  So basically LEND goes dark after the buyout, and the preferreds are left to trade as stranded preferreds.  Their share price craters.  This was opportunity #1 because everyone thought that Lone Star would pull the plug on the preferred dividends and I bought AHHAP in mid-2007.  But folks who had read the details in the prospectus for the preferreds, knew that Lone Star couldn't stop the preferreds without pulling the plug on its investment in LEND itself.  The preferred dividends continued throughout 2007, 2008 until the 1st quarter of 2009.  Because I had made a great return on AHHAP and more opportunities were starting to appear in late 2008, I sold out of AHHAP.  This was fortunate because I missed the...

 

LEND CHAPTER 11:

LEND/Lone Star put the C-Corp into Chapter 11 in April, 2009.  The Mortgage Loan REIT was kept outside of the bankruptcy estate but had claims against the operating company (the origination platform and opco owed the REIT due to some large receivables related to how Lone Star extracted cash out of it) and the holdco (due to its preferred dividend guarantee).  AHHAP fell to around $1 but I stayed away.  I did follow the court docket and that's where I saw some of the discussion about large IRS refunds from past LEND tax years.  By that time the price recovered to around $6 which was where I bought back in, IIRC.  The estate filed a liquidation plan and disclosure document that outlined the recovery waterfall for AHHAP based on its claims against both the holdco and the opco.  IIRC, Lone Star basically abandoned its equity in the Mortgage Loan REIT and had to kick in some cash to the estate for basically trying to screw the preferreds as well as some of the Trust Preferreds.

 

But I was also watching the LEND securitization monthly reports.  And you know what, they were still providing positive cash flows to the Mortgage Loan REIT every month.  There were sixteen deals and I think the four 2004 vintage securitizations were quite solid.  In the end, between the Ch 11 recoveries and the securitization cash flows, total cash distributed to AHHAP holders was $19.28 per share (there was a final distribution in Sep 2016 after the securitizations were sold off and AHHAP was extinguished).  Not bad vs a $25 liquidation preference and very good vs where I got in at $6 in 2011.  But even better for some investors I know who got in at $1-2 right after it went Chapter 11.

 

I can dig through my files if you have any specific questions about the Chapter 11 case.

 

wabuffo

[meiroy]

Doo...  "I also want to take philosophy and psychology & don’t think these subjects would be as beneficial without face to face discussions."

 

A good course in Abnormal Psychology is fascinating and I guarantee you will use it frequently throughout your life. It will help you read people and give you a good idea of why people do the things they do and what you can expect of some. Just my 2 cents worth.

 

Searched on Youtube, and came up with these two playlists:

 

This one looks serious:

 

And this one seems a bit more fun:

 

What do you reckon?

 

 

[Spekulatius]

Doo...  "I also want to take philosophy and psychology & don’t think these subjects would be as beneficial without face to face discussions."

 

A good course in Abnormal Psychology is fascinating and I guarantee you will use it frequently throughout your life. It will help you read people and give you a good idea of why people do the things they do and what you can expect of some. Just my 2 cents worth.

 

Searched on Youtube, and came up with these two playlists:

 

This one looks serious:

 

And this one seems a bit more fun:

 

What do you reckon?

 

Kahnemann’s Books should be a must. Economics and psychology are joined at the hip as Munger correctly stated.

[Cigarbutt]

re AHHAP

 

Ahhh - glory days!

 

Compared to other subprime lenders, LEND had an interesting structure and that was what drew me to it after sub-prime blew up in early 2007.  As an aside I also had an investment in ECRO after it sold its origination platform to Bear Stearns.  IIRC, in 2008 - two of my top five positions at times were sub-prime mortgage lenders (ECRO, AHHAP).

 

I can dig through my files if you have any specific questions about the Chapter 11 case.

 

wabuffo

Thank you for the appetizer, i will take care of the rest through some research.

Housing subprime lenders ended up doing better than thought after a period that seemed like an eternity from a liquidity standpoint.

In that specific case, fraudulent conveyance-like scenarios had to be taken into account and there were potential legal technicalities. The tax refund aspect appears interesting.

As for any relevance going forward, in the event of unusual economic hardship on the typical subprime borrower, it's possible that some lower FICO score segments do surprising well allowing for unexpected performance for many auto loans securitizations.

Thanks.

[DooDiligence]

Doo...  "I also want to take philosophy and psychology & don’t think these subjects would be as beneficial without face to face discussions."

 

A good course in Abnormal Psychology is fascinating and I guarantee you will use it frequently throughout your life. It will help you read people and give you a good idea of why people do the things they do and what you can expect of some. Just my 2 cents worth.

 

Searched on Youtube, and came up with these two playlists:

 

This one looks serious:

 

And this one seems a bit more fun:

 

What do you reckon?

 

I vote for link #2.

 

My Intro to Biology instructor referenced a handful of videos with the same guy explaining meiosis, mitosis, etc.

 

I enjoyed them a lot.

 

YouTube is a gift!

[Spekulatius]

RGA - Life reinsurer raising cash. They were estimating 100k death in the US in their last CC which is obviously too low.

 

Their largest exposure is US (45%) and the UK (17%) which both have high mortalities and are not well contained.

https://finance.yahoo.com/news/reinsurance-group-america-announces-pricing-035400964.html

 

Doesn’t seem that bullish to me, on the other hand  RGA was considered well managed.

 

Based on a cursory look at the 424b filing , it seem like each 100k in US death cost them $400-500M in claims. They are raising a bit less than $500 in equity right now. Maybe it’s a short the way things are going...