February 17, 2016 2:34 AM
Until early this summer, certain promoters seemed to believe that they could do a magic trick that no one would catch. A larger entity would “drop down” an asset at twice what it cost to purchase or build, add a bit more leverage and call it a “yield vehicle” that would then be sold to retail investors. Adding hubris to this whole charade of financial engineering, the “sponsor” would keep an IDR so that in addition to a huge gain-on-sale, it would also get a healthy chunk of the cash flow fr... more
February 14, 2016 6:33 PM
A few years back, I was at dinner with a British ship-owner who had just sold part of his fleet for almost $250 million (which was about $200 million more than he had paid for the ships only a few years earlier). He couldn’t stop laughing. Sure, they threw off about $50 million in cash (20% yield for the buyers) based on this year’s earnings, but he knew the cycle was turning and this would be the peak for many years—maybe even decades.
Me: “Who would be stupid enough to buy at the top?”
November 11, 2015 1:34 AM
My Buddy Tal, publisher of Beijing Perspective (http://www.beijingperspective.com) sent me the following last week. It's both prescient and obvious advice. I felt the need to share as I agree completely. If you want more of his notes, I recommend signing up at his site.
November 7, 2015
Two cents on interest rates
Cent #1) “Anyone familiar with asset markets know that it is expectations that move prices” - George Soros
Cent #2) Every action has a consequence, and e... more
November 8, 2015 9:55 PM
It has now been three weeks since CitronResearch.com accused Valeant (VRX: NYSE) of being Pharmron (Pharma + Enron). Ever since then, I’ve read a bunch of articles and tried to find an actionable angle. When there are rumors, innuendo and allegations of fraud, there’s a potential for opportunity. However, the deeper I dug; something increasingly struck me as rather odd about Valeant. At its peak, why was it so overvalued?
Valeant has spent approximately $34 billion on acquisitions after sub... more
September 27, 2015 2:54 AM
Starting at the end of 2014, I wrote a number of pieces (There Will Be Blood!!, There Will Be Blood!! (Part II), There Will Be Blood!! (Part III), There Will Be Blood!! (Part III.V)) detailing how QE was facilitating the production of certain real assets like oil where the production decision was no longer being tied to profitability. For instance, shale producers could borrow cheaply, produce at a loss and debt investors would simply look the other way because of the attractive yields that ... more