The Nation's Financial Condition

[PizzaSnake]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

[Farfromgeneva]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

I do understand that but man, it’s not a good “long term greedy” strategy to me. Then again I often wonder if I took that path if id be typing this from my own private island and a harem of willing Hollywood actresses feeding me grapes.

I just don’t get it because I give cats a TON of rope and give numerous outs and they still hang themselves when I’m begging to just walk it back and I’ll be cool and let the first shot slide.

Maybe the follow up to Protestant Ethic and Spirit of Capitalism should just be “fake it until you make it”.

[PizzaSnake]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

I do understand that but man, it’s not a good “long term greedy” strategy to me. Then again I often wonder if I took that path if id be typing this from my own private island and a harem of willing Hollywood actresses feeding me grapes.

I just don’t get it because I give cats a TON of rope and give numerous outs and they still hang themselves when I’m begging to just walk it back and I’ll be cool and let the first shot slide.

Maybe the follow up to Protestant Ethic and Spirit of Capitalism should just be “fake it until you make it”.

[Farfromgeneva]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

I do understand that but man, it’s not a good “long term greedy” strategy to me. Then again I often wonder if I took that path if id be typing this from my own private island and a harem of willing Hollywood actresses feeding me grapes.

I just don’t get it because I give cats a TON of rope and give numerous outs and they still hang themselves when I’m begging to just walk it back and I’ll be cool and let the first shot slide.

Maybe the follow up to Protestant Ethic and Spirit of Capitalism should just be “fake it until you make it”.

I had so much love for that band early 90s in that early pre sellout period
For them, Blues Traveler, Phish, Rusted Root before they bounced my girl Jen, etc. then Crash becomes the college girl national anthem for 3-4yrs, they hit arenas and Dave pulls a Bon Dylan goes electric and it was never the same.

This album preceded that of course. Once they became an arena act I began to migrate to his stuff with Tim Reynolds.

That is an excellent song, used to like Ants Marching but when you see it live a dozen or so times it starts to get on your nerves. The underrated song on that album is Jimi Thing. And for as much as I blast Crash, Two Step is my favorite of theirs and really enjoy Say Goodbye and #41 to this day. Lots of good live versions of both of those.

Excellent full show at Roseland Ballroom-https://m.youtube.com/watch?v=L4f0_I7zU7E

Best Version of two step I ever heard was at the Finger Lakes Performing Arts Center in either 94 or 95. I might be able to bring my father back from the grave with that sax solo they break off in it.

[Farfromgeneva]

Headline in yesterday’s WAJ-US stock market’s have best month in 2023.

Today headline:

The Big Risk Causing Investors to Shun China

More than $24 billion of foreign money has left mainland China’s stock market since August

Dave Sebastian
Updated Dec. 1, 2023 12:04 am ET
Beijing’s relationship with Washington has been deteriorating, and the impact on China’s economy and financial markets has come into clear view this year.

This past summer, the U.S. restricted Americans from investing in Chinese companies in certain high-tech industries. The U.S. has also imposed export restrictions on advanced semiconductor chips that can be used to develop artificial intelligence and related manufacturing equipment, to limit their use by China’s military.

Chinese internet giant
Alibaba
in November shelved a plan to carve out its large cloud-computing division because Washington’s chip curbs could hamper the unit’s business activities. Alibaba lost about $20 billion in market value in a day, demonstrating how U.S.-China tensions can cause unexpected losses for investors.

International venture-capital and private-equity investors also have to tread extra carefully when assessing Chinese companies.

“For every deal we now look at geopolitical risk, regulatory risk even before we start properly evaluating the attractiveness of the business and the business model,” Alvin Lam, a Hong Kong-based operating partner at European private-equity firm CVC Capital Partners, said at the AVCJ Private Equity & Venture Forum in November.

“The bar for a China deal is very, very high. We can see that with our clients,” said Xuong Liu, co-leader of Alvarez & Marsal’s Asia global transaction advisory group, at the same conference. “Clearly there are certain sectors that are out of bounds.”

SHARE YOUR THOUGHTS

Do you view investing in China as a wise decision right now—or not? Join the conversation below.

The economic and financial decoupling between the U.S. and China has intensified since 2021. American investors have been forced to sell shares in companies that the U.S. says are aiding China’s military. That led to the delisting of Chinese state-owned telecom carriers and energy companies from U.S. stock exchanges. Americans have also been barred from investing in other blacklisted Chinese companies.

Russia’s invasion of Ukraine last year, which resulted in wide-ranging sanctions on Russia and bans on investing in the country’s stocks and bonds, crystallized for investors the risks of being heavily exposed to China.

Beijing has long regarded Taiwan, a democratic self-ruled island, as part of China. Communist Party leaders have threatened to take control of Taiwan by force, raising the specter of an invasion or military conflict. Growing U.S. support for Taiwan has drawn Beijing’s ire this year.

“We’re all watching closely what happens with Taiwan,” said David Vaughn, chief investment officer for non-U.S. and global strategies at San Diego-based ClariVest Asset Management. He added he is also concerned about China’s property bust and weakening consumer confidence.

Vaughn said that if geopolitical tensions don’t improve, he expects international investors to reduce their holdings of Chinese securities further. He said one worry for investors is whether the companies they hold shares in could be hurt by export bans or other new rules.

There has been a recent exodus of foreign money from mainland China’s stock markets. Since August, international investors have pulled the equivalent of more than $24 billion from China A shares—which are listed in Shanghai or Shenzhen—via a trading link with Hong Kong. That is the largest and most sustained net outflow of foreign funds through the link since it was established in 2014, according to Wind Information data.

The outflows coincided with a bout of weak Chinese economic data. The MSCI China Index has lost 10% this year, and is on track for its third consecutive year of declines.

Market strategists at some major Wall Street banks say most of the hedge funds and active-fund managers that have sold off their China stockholdings are unlikely to return until there are significant improvements in the country’s growth outlook and U.S.-China relations.

Morgan Stanley
strategists have warned investors of “sustained geopolitical complexity” in 2024 and an election year in both the U.S. and Taiwan.

Goldman Sachs
said in a Nov. 12 report that under what it called a very harsh scenario, investors could sell $170 billion more in Chinese shares—if U.S. pension funds completely liquidate their China holdings due to policy and geopolitical reasons and active mutual funds and hedge funds revert to their lowest China allocations.

Si Fu, a China equity portfolio strategist at Goldman Sachs, said the market has already priced in the geopolitical concerns, and that a harsh scenario isn’t likely to occur.

“We do get some questions from clients asking if things get even worse considering the current situation, how much can they still sell?” she said, adding that there have recently been signs of improvement in the U.S.-China relationship and for China’s macroeconomic outlook.

President Biden recently met with Chinese leader Xi Jinping in California, where they agreed to begin a dialogue on the risks of AI and resume communications between the two countries’ militaries.

The investment board for the Thrift Savings Plan, which holds the retirement savings of U.S. federal employees and members of the uniformed services, recently said its large international stock fund will shift to tracking a global MSCI benchmark that excludes China and Hong Kong.

Its reasoning for the change was deeply rooted in geopolitics. A consultant to the investment board pointed to “investment restrictions on sensitive Chinese technology sectors, the delisting of Chinese companies and sanctions on Russian securities due to the Russia-Ukraine conflict,” and said such unforeseen events could cause stocks to decline in value when investors are forced to sell them.

It also said the recent technology-investing restrictions and bans on exports of U.S. technology could herald more curbs on investments in stocks in China and Hong Kong.

Teeja Boye, a portfolio manager at Arlington, Va.-based Sands Capital, said his firm’s emerging-markets growth strategy had 30% of its assets exposed to China in mid-2021, and has since dropped to about 17% as of the end of October.

“Unfortunately, China is going through short-term stress in real estate and declining productivity—and at the same time it’s having a worse relationship with one of the most powerful nations in the world,” Boye said. “The best we can hope for is for things not to get worse,” he added.

Navigating the Markets

Coverage and analysis of stocks and bonds, selected by editors

Write to Dave Sebastian at [email protected]

[Farfromgeneva]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

I do understand that but man, it’s not a good “long term greedy” strategy to me. Then again I often wonder if I took that path if id be typing this from my own private island and a harem of willing Hollywood actresses feeding me grapes.

I just don’t get it because I give cats a TON of rope and give numerous outs and they still hang themselves when I’m begging to just walk it back and I’ll be cool and let the first shot slide.

Maybe the follow up to Protestant Ethic and Spirit of Capitalism should just be “fake it until you make it”.

Had my John popper guest shows mixed this is the best Say Goodbye version

https://youtu.be/Rltqh-Yu2rM?si=G9L76-K1XqZTeDOy

[youthathletics]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

I do understand that but man, it’s not a good “long term greedy” strategy to me. Then again I often wonder if I took that path if id be typing this from my own private island and a harem of willing Hollywood actresses feeding me grapes.

I just don’t get it because I give cats a TON of rope and give numerous outs and they still hang themselves when I’m begging to just walk it back and I’ll be cool and let the first shot slide.

Maybe the follow up to Protestant Ethic and Spirit of Capitalism should just be “fake it until you make it”.

The rub is that the mass majority have no clue what the number(s) are the dealer has to meet per car. Is it 30% of MSRP on the sticker and their goal is try and keep it above 18, but if they finance we can go lower knowing we'll make it up on pull through. As Pizza said....most of know very little; just depends how fast we can forget the pain of being phucked after we leave.

[Farfromgeneva]

https://www.cdkglobal.com/insights/car- ... -showrooms

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms

4 Min Read • November 13, 2023

Car Buyers Eager to Shun Idle Time, Not Dealer Showrooms.
Most dealerships are hyperfocused on building a better buying experience for their customers. Contrary to popular belief, a better experience doesn’t mean shunning the showroom for an entirely online sales process. It means eliminating idle time and dealer rigmarole that stretches showroom visits into endless hours of haggling, paperwork and high-pressure pitches for insurance products.

Mine was in and out in under 60 minutes with a new car purchase in summer of 21'. Big difference, wasn't much negotiating at that time...new cars were scarce coming out of cv19. Committed to purchase price over the phone, after I was sent a video of the car sitting on the lot to confirm no visisble damage. Filled out majority of paperwork online, with the exception of some personal data and final price. Made meeting time with salesman, sat with him for about 20 minutes, went into F&I office, told them I want no added warranties, bells and whistles, ceramic coating, undercoating, etc. Lady had been doing this for 20 years....she saw what I did for living and we had some common interests within her family...encouraged me to do something I had not planned (no expense related) and was done in about 30 minutes. What took the longest was waiting for them to finish detailing the car.

Ended up financing for a couple years, since they had a 0.8% rate.

Great experience....although first of its kind. Last time I did it I had the entire family with me and the kids got to watch the haggle in play...then after we settled on a price, I walked in to the F&I office and asked what the final price would be out the door, He said, we have to navigate financing first....I said I'm paying cash, he said.....well that makes it easier for you but doesn't really help us.

Just not a normal situation. And they make their money on selling the loans largely (and repairs) - I think it’s clear I have a modicum of understanding of finance generally* and when I clearly said 5yr or inside term and the guy jerked off in his office for like 30 min to closing time and tried jamming a 6yr term in my face when they were locking the doors. It’s total dishonest nonsense and given we’re talking about me here I had to walk away and let my wife be an jerk to them because the alternative was that F&I guy was getting some of this:

https://m.youtube.com/watch?v=Vaa4C9DE_hk

*setting aside I once literally had to reverse engineer an auto loan Asset Backed security deal for a hedge fund suing a originator over and car loans in the pool.

I’m sure the F&I people love you.

I bought two cars before that where I gave gave specs. Told a few dealers new and used and tried to read the room. The good ones show me where they buy it and what they can get. They find something and call me and I take it if it hits the specs and pay a very fair profit margin they were totally happy as they took 20% and turned the inventory within two weeks of ownership, probably barely had title. Both were sub 25k mi mid to upper Volvo’s.

It’s not hard. That’s a very good turn for that business and they were happy.

F&I is nonsense. I believe everyone has to be healthy in a transaction or something ends up sideways,I’ve never been a chizzler taking that last nickel off the table. You do the work and I pay for it and we build a relationship that’s profitable over time. But when I clearly know you’re trying trying to f**k me and when I question it with clear questions that obviously display and understanding as good (better) than the other guy and he wants to stay on the “bend you over” script and doesn’t realize the guy is fully aware your nonsense? That’s when I believe in f**king back. Now you made 11% and I made you sit on the car a few extra weeks on your line of credit just because. Good job jerk. You rolled the dice for your bonus and got your dealer margin cut in half.

It's a numbers game, if you'll pardon the expression. There aren't many people with your knowledge and proclivity so they always try the screw play, 'cause over time they "win." But yeah, people being, well, human...

I do understand that but man, it’s not a good “long term greedy” strategy to me. Then again I often wonder if I took that path if id be typing this from my own private island and a harem of willing Hollywood actresses feeding me grapes.

I just don’t get it because I give cats a TON of rope and give numerous outs and they still hang themselves when I’m begging to just walk it back and I’ll be cool and let the first shot slide.

Maybe the follow up to Protestant Ethic and Spirit of Capitalism should just be “fake it until you make it”.

The rub is that the mass majority have no clue what the number(s) are the dealer has to meet per car. Is it 30% of MSRP on the sticker and their goal is try and keep it above 18, but if they finance we can go lower knowing we'll make it up on pull through. As Pizza said....most of know very little; just depends how fast we can forget the pain of being phucked after we leave.

Not sure many know their being fubarred. Though the nice thing is the typically depreciating car assets for now are appreciating in value over time in a reversal of the norm.

But that’s on people. Don’t cry to gubmint or start a Revolution because you didn’t bother using Google or anything else to understand the financial impact of the largest or second largest purchase / expenditure in most peoples lives. Slippage in fast food or something is one thing. Taking down the Capitol because you got bent over too many times by actively not participating in ones own life is a whole other world of irresponsibility to man (or god for you). I say this not sarcastically but you get it and not like you spent 15yrs balls deep in high finance. So many who get picked off get what they deserve to a certain degree.

My objection is with the behavior in general and like liquor distribution and realtors the regulatory capture is sickening. And for you Big Ten and Pac 10 fans the dealership industry propped up football at a lot trash academic SEC schools for 30yrs enabling their powerhouse status in football.

[Farfromgeneva]

At least until a Rep admin is in place expect to see more funkiness get exposed and adjudicated the next few years here. That’s not politics I know many businesses succeeded changing heir focus and relationship with regulatory bodies once we moved from Barry to Fatty.

https://www.sec.gov/news/press-release/2023-242

SEC Charges Phoenix-Area Real Estate Fund Adviser Jonathan Larmore with $35 Million Fraud

Larmore also charged with stock manipulation for false WeWork tender offer

The Securities and Exchange Commission today announced fraud charges against Phoenix-based real estate investment company ArciTerra Companies LLC and its CEO, Jonathan M. Larmore, for engaging in a multi-year scheme to misappropriate millions of dollars of investor funds from investment vehicles that ArciTerra managed. The SEC also charged several entities controlled by Larmore for their roles in the scheme.

The SEC’s complaint, filed on November 28, 2023, alleges that, since at least January 2017, Larmore and the charged entities misappropriated more than $35 million from private real estate funds and other investment vehicles that ArciTerra managed. Larmore allegedly used a substantial portion of the misappropriated funds to pay for his family members’ personal expenses and to fund a lavish lifestyle of private jets, yachts, and expensive residences.

The SEC’s complaint also alleges that Larmore and Cole Capital Funds LLC, an entity Larmore formed and controlled, issued a press release in November 2023 falsely stating that Cole Capital intended to purchase 51 percent of all minority ownership shares in WeWork, Inc., an unrelated public company, at $9 a share, more than nine times WeWork’s then-current trading price. According to the SEC’s complaint, WeWork’s stock rose close to 150 percent in after-hours trading shortly after the press release was issued. The complaint alleges that Larmore purchased more than 72,000 call options in WeWork at a price far below the stock price in the days before the press release was published, hoping to execute the trades at profit after manipulating the stock price. However, due to a delay in the issuance of the press release, most of the options expired before Larmore could exercise them.

“As the complaint alleges, instead of protecting client assets, Larmore and his related entities took advantage of investor trust for his and his family’s personal gain," said Andrew Dean, Co-Chief of the Asset Management Unit. "Protecting investors from fraud by their financial advisers is a priority for the SEC, as is protecting the market from false press releases aimed at manipulating the stock of a publicly traded company for personal gain and leaving unknowing investors to lose out.”

The SEC’s complaint, filed in U.S. District Court for District of Arizona, charged Larmore, ArciTerra, and several related entities controlled by Larmore with violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctive relief, the appointment of a receiver, disgorgement and prejudgment interest, and a civil penalty, and other relief.

The SEC’s ongoing investigation is being conducted by Heather Marlow and Amanda Straub and supervised by Jeremy Pendrey, Mr. Dean, and Corey Schuster, all of the Asset Management Unit, with the assistance of Michael Foley of the San Francisco Regional Office. The litigation will be led by John Han, Ms. Marlow, and Ms. Straub. The investigative team appreciates the assistance of David Snyder and Assunta Vivolo of the Philadelphia Regional Office’s Crypto Assets and Cyber Unit and Neal Jacobson and Alistaire Bambach of the New York Regional Office.

[Farfromgeneva]

Greetings
Do you have any thoughts or comments on the life and contributions of Charlie Munger?

Head of a really strong (IMO at least) frost fund operator called Marathon Asset Mgt put this out. Bruce is a very sharp guy:

Trusting EBITDA?
One of my favorite one-liners by Charlie Munger at Berkshire Hathaway Annual Meeting in Omaha is: “Every time you hear EBITDA, just substitute it with nonsense earnings”.
Charlie, a legendary investor is smiling when he jokes that EBITDA is BS.
Charlie conveyed his wisdom with profound humor to teach simple, but overlooked truths. Financial Engineering allows for Addbacks and Adjustments to be excluded from EBITDA.
Addbacks and Adjustments may distort the accurate picture of a company’s operational performance, especially when “one-time” adjustments are re-occurring.
EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision.

[youthathletics]

Greetings
Do you have any thoughts or comments on the life and contributions of Charlie Munger?

Head of a really strong (IMO at least) frost fund operator called Marathon Asset Mgt put this out. Bruce is a very sharp guy:

Trusting EBITDA?
One of my favorite one-liners by Charlie Munger at Berkshire Hathaway Annual Meeting in Omaha is: “Every time you hear EBITDA, just substitute it with nonsense earnings”.
Charlie, a legendary investor is smiling when he jokes that EBITDA is BS.
Charlie conveyed his wisdom with profound humor to teach simple, but overlooked truths. Financial Engineering allows for Addbacks and Adjustments to be excluded from EBITDA.
Addbacks and Adjustments may distort the accurate picture of a company’s operational performance, especially when “one-time” adjustments are re-occurring.
EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision.

Would be interesting to learn what the EBITDA is on highly successful companies and see if it correlates with anything.

[Typical Lax Dad]

Greetings
Do you have any thoughts or comments on the life and contributions of Charlie Munger?

Head of a really strong (IMO at least) frost fund operator called Marathon Asset Mgt put this out. Bruce is a very sharp guy:

Trusting EBITDA?
One of my favorite one-liners by Charlie Munger at Berkshire Hathaway Annual Meeting in Omaha is: “Every time you hear EBITDA, just substitute it with nonsense earnings”.
Charlie, a legendary investor is smiling when he jokes that EBITDA is BS.
Charlie conveyed his wisdom with profound humor to teach simple, but overlooked truths. Financial Engineering allows for Addbacks and Adjustments to be excluded from EBITDA.
Addbacks and Adjustments may distort the accurate picture of a company’s operational performance, especially when “one-time” adjustments are re-occurring.
EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision.

I don’t underwrite what I call “what if” adjustments or “let’s pretend” adjustments. What if this didn’t happen Or let’s pretend that didn’t happen. I first adopted this take when working on a Marvel Entertainment deal when the company was in the tank in the mid 1990’s. These what if adjustments took an EBITDA loss to something that you could underwrite and cover fixed charges. This was back in my analyst days and when I was cutting my teeth on sponsor deals.

Working on a corporate right now with close to $1B in EBITDA with the addbacks being less than 4% with 2% coming from stock based non cash comp and $10MM in acquired EBITDA from M&A activity.

[Farfromgeneva]

Greetings
Do you have any thoughts or comments on the life and contributions of Charlie Munger?

Head of a really strong (IMO at least) frost fund operator called Marathon Asset Mgt put this out. Bruce is a very sharp guy:

Trusting EBITDA?
One of my favorite one-liners by Charlie Munger at Berkshire Hathaway Annual Meeting in Omaha is: “Every time you hear EBITDA, just substitute it with nonsense earnings”.
Charlie, a legendary investor is smiling when he jokes that EBITDA is BS.
Charlie conveyed his wisdom with profound humor to teach simple, but overlooked truths. Financial Engineering allows for Addbacks and Adjustments to be excluded from EBITDA.
Addbacks and Adjustments may distort the accurate picture of a company’s operational performance, especially when “one-time” adjustments are re-occurring.
EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision.

Would be interesting to learn what the EBITDA is on highly successful companies and see if it correlates with anything.

Different industries have different metrics. Your field is 8-12% generally maybe topping out mid teens. Software is 25-75% (35-50 probably more tightly), etc. have to look by “SIC” code or industry.

In theory (and reality) General Accepted Accounting Principles (GAAP) is a poor representation of cash flow because of of accrual of revenue/income and other non cash items that have to be included. IE if you sell a washer with a warranty you have to put a value on the warranty and recognize the revenue (amortize it) on the warranty value of the washer sale over the life of the warranty but you collected all the cash for the sale of the washer day one, same with long a average life equipment bought in a certain point in time but is used to generate sales over multiple years-you wouldn’t fully expense say an earth mover bobcat in the year you bought it and then show no equipment expenses related to business you used that equipment on two years later.

But you can look between businesses in industries quite easily even using some IRA/401k stock screener like a fidelity, vanguard or Schwab with filters that are easy to figure out and set up.

[Farfromgeneva]

Greetings
Do you have any thoughts or comments on the life and contributions of Charlie Munger?

Head of a really strong (IMO at least) frost fund operator called Marathon Asset Mgt put this out. Bruce is a very sharp guy:

Trusting EBITDA?
One of my favorite one-liners by Charlie Munger at Berkshire Hathaway Annual Meeting in Omaha is: “Every time you hear EBITDA, just substitute it with nonsense earnings”.
Charlie, a legendary investor is smiling when he jokes that EBITDA is BS.
Charlie conveyed his wisdom with profound humor to teach simple, but overlooked truths. Financial Engineering allows for Addbacks and Adjustments to be excluded from EBITDA.
Addbacks and Adjustments may distort the accurate picture of a company’s operational performance, especially when “one-time” adjustments are re-occurring.
EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision.

Would be interesting to learn what the EBITDA is on highly successful companies and see if it correlates with anything.

The only correlation I think you’d find within an industry or sector would be incentive structure on comp for executives. And maybe some variables relating to shareholder structure and corporate vote control/board composition.

If you see compensation (which is publicly available they file the contracts for C suite for public companies w SEC and is in the financial notes) for a CEO tied to revenue or net income over return on … (equity, Capital, etc) you have misaligned incentives as it related to margins. If the execs own little to no stock or control their hand selected puppet board or have super majority vote shares in split class
Share ownership of a business (Zuckerberg can never be forced out of Facebook because of this) you have an incentive structure problem.

https://pages.stern.nyu.edu/~adamodar/N ... argin.html

[Farfromgeneva]

Greetings
Do you have any thoughts or comments on the life and contributions of Charlie Munger?

Head of a really strong (IMO at least) frost fund operator called Marathon Asset Mgt put this out. Bruce is a very sharp guy:

Trusting EBITDA?
One of my favorite one-liners by Charlie Munger at Berkshire Hathaway Annual Meeting in Omaha is: “Every time you hear EBITDA, just substitute it with nonsense earnings”.
Charlie, a legendary investor is smiling when he jokes that EBITDA is BS.
Charlie conveyed his wisdom with profound humor to teach simple, but overlooked truths. Financial Engineering allows for Addbacks and Adjustments to be excluded from EBITDA.
Addbacks and Adjustments may distort the accurate picture of a company’s operational performance, especially when “one-time” adjustments are re-occurring.
EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision.

I don’t underwrite what I call “what if” adjustments or “let’s pretend” adjustments. What if this didn’t happen Or let’s pretend that didn’t happen. I first adopted this take when working on a Marvel Entertainment deal when the company was in the tank in the mid 1990’s. These what if adjustments took an EBITDA loss to something that you could underwrite and cover fixed charges. This was back in my analyst days and when I was cutting my teeth on sponsor deals.

Working on a corporate right now with close to $1B in EBITDA with the addbacks being less than 4% with 2% coming from stock based non cash comp and $10MM in acquired EBITDA from M&A activity.

Throw out revenue synergies and gains and parse cost synergies is cash flow credit 101 when you take the deck down from intralinks.

[Farfromgeneva]

Some folks I think have a good handle on regulatory relations think this is a heavy shot across the bow for lenders/financial companies playing with this product/space

State Regulatory Developments on “Income-Based Advances”

The CFPB has submitted input on a proposal by the California Department of Financial Protection and Innovation explaining states' critical role in oversight of providers of consumer financial products and services.
By Seth Frotman – DEC 01, 2023
SHARE & PRINT

In our nation’s system of federalism, both federal and state governments play important roles in safeguarding the public’s interest. Consumer protection laws are a critical example of how that system works.

The CFPB carefully monitors developments in state law and regulation relating to consumer financial protection. The California Department of Financial Protection and Innovation (DFPI) recently proposed to undertake registration and examinations of companies that provide what the proposal refers to as “income-based advances.” Earlier this week, the CFPB submitted input on DFPI’s proposal.

The CFPB’s letter notes that income-based advances – products where repayment is related, at least in theory, to a worker’s next payday – have long been part of the U.S. consumer lending market. The letter explains that states have long provided critical oversight of companies that provide consumer financial products or services, like those typically offering income-based advances. This oversight is crucially important for ensuring that companies are meeting their legal obligations. The CFPB indicates that, by treating income-based advance products as loans and including a variety of charges that accompany the advance as “charges,” DFPI’s proposal takes a similar approach to federal law—the Truth in Lending Act and the regulation that implements it.

Given the many developments in this market, the CFPB plans to issue further guidance to provide greater clarity concerning the application of federal law to income-based advance products.

Read the letter

https://files.consumerfinance.gov/f/doc ... 023-11.pdf

[Farfromgeneva]

This is another area that I suspect will transcend business media in 2024 and be a topic everyone is suddenly an expert on. Lending against net equity in private equity and alternative asset funds (hedge funds, anything with a Limited Partner/General Partner structure with institutional investors)

https://www.institutionalinvestor.com/a ... ng%20Craze

Allocators Aren’t Happy With the NAV Lending Craze

These newly popular loans can add “leverage on leverage,” says Cambridge’s Andrea Auerbach.

As private equity firms increasingly tap NAV loans, investors are raising concerns about transparency and the amount of leverage in their funds.

Net asset value loans — revolving credit facilities backed by an entire private equity fund, rather than a single company in the portfolio — have become popular as PE firms face fundraising and distribution challenges.

Neil Randall, head of private equity at Teacher Retirement System of Texas, is a critic of the loans. “NAV loan utilization is an underwriting consideration for PE commitments,” he said. “We don’t like seeing them, particularly at current rates.”

Some allocators, including Randall, say NAV loans add a second layer of leverage to a private equity fund, changing how investors need to assess risks. Asset owners also are concerned about the lack of transparency they say managers provide when they use loans.

For managers facing tough market conditions, NAV loans allow them to pursue add-on acquisitions without calling capital from investors, and to offer cash distributions during a time of tight liquidity.

But the use of the loans changes an allocator’s calculus when considering the risks of their portfolio.

According to Andrea Auerbach, head of global private investments at Cambridge Associates, her team pays a lot of attention to a manager using leverage at both the portfolio company level and at the fund level. “That’s leverage on leverage,” she said. That can restrict the growth of portfolio companies in the fund, Auerbach explained.

Over the course of the life of most private equity funds, particularly during good times, that’s not an issue. But for those that run into bigger problems, such as a company failing in a tough economy, added leverage can compound the damage.

Gaurav Patankar, chief investment officer of Merced County Employees’ Retirement Association, worries that NAV loans give managers latitude to help what are ultimately “unviable companies” on their books — rather than letting them fail if they didn’t have access to this capital. That becomes problematic when the struggling companies’ debt is tied to the rest of the portfolio.

“Most LPs would want GPs to wall off great companies, focus on them, triage the salvageable ones, and de-emphasize the unviable,” he said.

Another allocator put it more bluntly. “I don’t want to collateralize one company with another,” the limited partner, who spoke to Institutional Investor on the condition of anonymity, said. “It feels like an unnecessary risk.”

What’s more if a fund goes belly-up — which is admittedly rare — investors are paid out after NAV lenders, which are higher up in the capital structure. “It can create a risk for the entire portfolio that has been triggered by one bad asset,” said Steven Richman, partner at law firm Seyfarth Shaw.

More concerning for some investors is they report being taken aback by their investment managers choosing to take out these loans. “Their manager may be incurring an NAV facility when it was not abundantly clear in the LPA [limited partner agreement],” Richman said.

According to Richman, and his colleague Shamim Mohandessi, the use of NAV loans is technically allowed by most LPAs. “The LPAs don’t say that the manager can go get a NAV facility,” Mohandessi said. But “the LPAs say they can leverage those portfolio assets.” Many investors took this to mean that managers could take out loans against portfolio companies or use subscription lines. They many did not expect NAV loans.

Richman said there is also concern about NAV loans improving IRRs, which are used to determine managers’ incentive fees, even though interest payments are deducted directly from the funds themselves.

That works for investors who use IRR as a measure of performance, Richman added. But he said that from a gross performance perspective — when returns are measured by a multiple of returned capital to investors, NAV loans generally dampen performance.

Some limited partners, however, want their managers to tap NAV loans.

“There are LPs out there where maybe the tap for distributions has slowed to a trickle,” Auerbach said. “If their GP is looking at using a NAV loan, some LPs may say ‘that’s great news.’”

Whether or not they benefit from NAV loans, allocators are looking to clear up some of the gray areas, especially as they make new fund commitments.

Ropes and Gray attorney Patricia Lynch said she has seen an increase in the number of limited partner agreements that explicitly allow the use of NAV facilities.

“There are some newer funds that are being formed where the GP has to go out to the LPs and get consent,” she said. “There are other funds where the fund has flexibility to put a NAV facility into place if it thinks that it’s the right thing to do at the time.”

According to Mohandessi and Richman, guardrails can include a limit on the total amount of leverage a general partner can use and provisions that prevent general partners from earning fees on the outstanding portion of a NAV facility, which can better align the interests of both private equity firms and their investors.

“One other thing that we’re asking for, whether it’s a new fund or a re-up, we’re asking for advanced notice if there’s any NAV borrowing,” Mohandessi said. “We view it as the bare minimum.”

[Farfromgeneva]

Have a friend who has this 5-10 person consulting business. Former COO of
Regions bank’s capital markets business through the sale of it to another firm in around 2012-2013 along with the CEO of that unit (who’s kind of not as cool IMO). We were getting coffee and he’s telling me of interviewing someone who was in the 28-30 range with 3-5yrs of work experience in the Bay Area coming out of a top
50 B school (wasn’t top ten in the Mendoza/ND, Haas/Berkeley, Goizeta/Emory, McDonough/GTown level of perception noting this are all excellent schools but fall more like 20-40 in the god fearing USNWR-he wouldn’t be getting interest from those super highly ranked ones for his shop).

So my friend is interviewing this guy finishing B school for an associate position. The guy is telling my friend how he’s been doing business development “you know, raising capital…”. Now my friend admittedly with his partner oversaw a sh**show at Regions over structured products and other issues in the 2000s such that they had to sell the unit and the bank has never been the same and despite that my friend knows enough that he realized this interviewee wasn’t going to make the cut because “business development” is things that drive revenue as a rule whether that’s sales, cutting joint ventures and partnerships that drive front end business etc. NOT raising money. That’s the world we live in now folks so buckle of for a cycle where there’s a lot of control of resources in the hands of people who were in high school or younger during the financial crisis and have no idea what a proper functioning operation is through a cycle with rising rates and declining money supply (not to mention the compounding fiscal disaster). Who knows maybe they’ll figure it out because they aren’t anchored with legacy thinking but I suspect based on mindset and behavior I see from that cohort in my world that this won’t be the case. One of those times im rooting for myself to be wrong.

https://www.bain.com/insights/herd-on-t ... ttle-cash/

Herd on the Street: So Many Unicorns, So Little Cash

Billion-dollar start-ups are common these days. More fantastical: Insurgent companies profiting at scale.

Dunigan O'Keeffe

As a business term, the word “unicorn” has taken on a life of its own in recent years.

First coined a decade ago by venture capitalist Aileen Lee to describe 39 start-ups that had attained $1 billion in market value, it rapidly became a badge of entrepreneurial success—a signal that a founder had assembled a powerful team, was attacking a massive market opportunity, and had a clear path to becoming a market leader.

Today, however, unicorns are commonplace. Bain research shows that almost 2,500 of the companies founded over the last 20 years have achieved valuations topping $1 billion in the public and private markets.

What’s decidedly less common are unicorns that can stand on their own without regular infusions of venture capital. Indeed, our research turned up just a handful of companies launched over the past two decades that are generating cash from operations at scale (see Figure 1).

This raises the question: Is it time to stop talking about market value for its own sake and refocus on what start-up success really looks like?

Figure 1
Fewer than 1% of unicorns generate more than $1 billion in revenue and operating cash

Setting a new standard

While a $1 billion valuation is inarguably an impressive milestone, it’s been made easier by the large amount of venture capital that has surged into the market over the past decade, encouraged by stellar successes like Google and Amazon and supported by low interest rates. The gusher has allowed many companies with unproven business models to consistently raise cash at higher multiples from investors betting on the future.

Raising cash and generating cash, however, are two very different things, and the entrepreneurs who build sustainable business models understand this intuitively. While they’re keenly aware that they need to raise capital to build for the long term, they aren’t fixated on short-term valuation. Through our work on the Founder’s Mentality, we’ve seen that great founders are instead energized by a bold ambition to create something truly valuable for customers and a determination to build companies that will have an enduring impact in their industry. This is a multiyear journey that focuses from the outset on not just one, but three $1 billion goals:

$1 billion valuation: Bold vision. Investors have conviction in our long-term market opportunity and our potential to secure a leadership position over time.
$1 billion annual revenue: Market acceptance. Our product or service appeals to a broad set of customers, and the company has become adept at courting and keeping them.
$1 billion annual cash flow: Business model validation. Our business is capable of generating the cash we need to reinvest in long-term growth and market leadership. (For the purposes of holding a high standard for business model success, we look at cash flow net of the value of stock-based compensation.)
We call the companies that cross all three of these thresholds “established insurgents,” and our research indicates that they are exceedingly rare. Of the approximately 225,000 companies founded over the last 20 years, around 2,500 have been able to reach $1 billion in market valuation. (We expanded Lee’s universe to include public companies, given how the lines between public and private have blurred in recent years).

But of these, fewer than 250 have crossed the $1 billion revenue threshold, and just 15 generate more than $1 billion in cash and revenue: Airbnb, BioNTech, Daqo New Energy, Jazz Pharmaceuticals, JD.com, Li Auto, Meituan, Meta, Palo Alto Networks, Pinduoduo, Service Now, Sunshine Insurance, Tesla, Vipshop, and Xiaomi.

These 15 companies make up just 0.7% of total unicorns, yet collectively they represent a stunning $2.3 trillion in market value. Each has written an amazing story of innovation and scaling, and their enduring success continues to fuel enthusiasm to find and fund the next one.

This analysis has some limitations: Lack of public data means we had to extrapolate how many still-private companies made it into our emerging insurgents group based on revenue. We also had to exclude from the cash flow analysis large, successful private companies like Stripe, ByteDance, and Ant Group, for which detailed financials aren’t available. Finally, this analysis leaves out inspiring start-ups like YouTube that were acquired and scaled by a larger company.

Yet even if you expand our final list of 15 to account for the few private companies potentially left out, the total still reflects how exceptional it is to achieve success across all three of these dimensions. The insurgents in this select group have grown beyond an initial vision of how they might disrupt markets and have become enterprises that are actually doing so on a broad scale. By building powerful business models that are carving out enduring relationships with customers, they are having a profound impact on both their industries and the broader economy.

Insurgent speed

The founding teams behind these companies are doubly impressive for how quickly they’ve been able to make their impact. On average, they cleared these three hurdles within 10 years of launch. Of course, they’re not perfect—many are still early in their journey, and there’s no guarantee that their success will continue. But their momentum so far is undeniable. Looking across the group of 15, a few themes emerge:

Platforms – Five of the companies are consumer platforms in China (JD.com, Pinduoduo, Meituan, Vipshop, and Xiaomi), and three are US-based platform leaders in social media (Meta), hospitality (Airbnb), and cybersecurity (Palo Alto Networks).
Sustainability – Three of the companies have seized the opportunity presented by the energy transition through solar (Daqo New Energy), electric vehicles (Li Auto), or both (Tesla).
Biotechnology – Two companies are leaders in discrete areas of biopharmaceuticals: BioNTech and Jazz Pharmaceuticals.
Global poles of innovation – China (eight companies) and the US (five) dominate the list. BioNTech and Jazz Pharmaceuticals are the sole European-headquartered companies on the list.
Still striving

In the current capital environment where late-stage venture funding has slowed, it’s worth paying close attention to the “emerging insurgents” identified in our research. These are the public and private companies that have crossed $1 billion in valuation and revenue but have yet to generate $1 billion in cash flow (at least, as publicly disclosed).

Of the 206 public companies in this group, some, like Uber and Snowflake, have impressive momentum and valuations that imply they will push across the cash flow threshold soon. But many others have not moved fast enough to build sustainable businesses. It took Meta only seven years to get to $1 billion in cash flow. The more capital-intensive Tesla took 15 years. Yet fully 54% of the companies in this group are more than 15 years old and have yet to get over the hump (see Figure 2). Speed is a natural advantage for young companies. There is now tremendous urgency to use this edge to refine their business models for cash flow generation.

Figure 2
Nearly one-third of emerging insurgents have yet to achieve positive cash flow

Nearly one-third of emerging insurgents have yet to achieve positive cash flow
We plan to update our list on a regular basis to keep track of which companies are achieving established insurgent status and what we can learn from them. We’ve learned one lesson already: As we enter this next era of business building, founders seeking to raise venture capital—as well as those building businesses within corporates—need to move beyond the business world’s fascination with market value.

The founders that truly change the game have twin priorities at the outset: They are focused on rapidly scaling a powerful customer franchise and building a cash-generative business that can sustain itself. As our 15 insurgents have demonstrated, if all of that’s in place, valuation will follow.

[youthathletics]

https://www.bain.com/insights/herd-on-t ... ttle-cash/

Herd on the Street: So Many Unicorns, So Little Cash

Billion-dollar start-ups are common these days. More fantastical: Insurgent companies profiting at scale.

This appears like a fabricated version of the dot.com boom. Where at least during the late 90's and early 2k's, there was a race to be first in the market and if your were not, someone would buy you and you'd still be sitting fat and happy. Now, it seems like smaller startups are spawning from the big boys market share with some niche service/product, as if it was a calculated opportunistic move by either the startup COO or a joint venture from the major player. Fast forward, now these big PE firms are buying up all this smaller shops that spawned off or have been living in the small business market for decades but have a great market share in their territory and robust contract revenue and touch points.

It all seems a bit calculated...especially post covid, as the bigger CRE's figure out what is next.

Am I in left field, nibbling the edges, or rounding 2nd base?

[Farfromgeneva]

https://www.bain.com/insights/herd-on-t ... ttle-cash/

Herd on the Street: So Many Unicorns, So Little Cash

Billion-dollar start-ups are common these days. More fantastical: Insurgent companies profiting at scale.

This appears like a fabricated version of the dot.com boom. Where at least during the late 90's and early 2k's, there was a race to be first in the market and if your were not, someone would buy you and you'd still be sitting fat and happy. Now, it seems like smaller startups are spawning from the big boys market share with some niche service/product, as if it was a calculated opportunistic move by either the startup COO or a joint venture from the major player. Fast forward, now these big PE firms are buying up all this smaller shops that spawned off or have been living in the small business market for decades but have a great market share in their territory and robust contract revenue and touch points.

It all seems a bit calculated...especially post covid, as the bigger CRE's figure out what is next.

Am I in left field, nibbling the edges, or rounding 2nd base?

Yes for More than a decade most startups are built to be sold. The key differences are 0% Fed funds and multiple times the amount of money in the system and there was more true faith and optimism in the 90s if blind and over their skis. So while I’d look suggest looking at the differences as it might inform more there is plenty of commonality between the two periods .

Sometimes you can build something for less than $10mm that can be sold for $50-$250mm buy larger competitor who has too much cash or free cash flow and is creating a moat by buying the customer list and anything else proprietary. Most aren’t build to last. But the DOJ/FTC messed around and let monopolies and oligopolies occur while believing the lies from the Zuckerbergs, Dorseys, Anderson’s etc who laughed at ten the entire time. I’m a libertarian but you can’t have capitalism without free and fair competition which means many similar complementary or compelling products or services and we don’t have that in the tech sector at all today and instead of wondering everyone applauded it. Look at all the harm and damage these monopolies and oligopolies have done to our society currently and going forward given the even more robust fake i until you make it nature that didn’t exist as much in the late 90s when it was more of a unknown grenfield with more genuine blind optimism.

There are many similarities and some key (mostly macroeconomic and geopolitical) differences. But yes this has been a similar mindset for a while and really the reporting now is about things getting sideways 3-5yrs ago except Covid distorted the VC world greatly as so much of the stimulus money ended up in long dated speculative investments. In a few years I guarantee that second round of stimulus and what it did to asset valuations in second half of 21 will be very easy to see and look bad I will bet a Lugers dinner (or some dope crab cake joint for you mid Atlantic folks just don’t make eat another one of those crab bombs like I had to eat in front of a client and pretend in enjoyed once-just rape me with mayonnaise instead).

And the funny thing is the fixed minds, I know one military one here, think
Bankers are bankers, lawyers are lawyers and tech guys are tech people but reality in both circumstance is the worst talented and smart megalomaniacs and social monsters are the same people they just move around like locusts from the top or so colleges and universities to where the money, often give subsidized fiscally or via monetary policy, to where the rent seeking is best. (not all grads but that cohort is heavily represented due to recruiting and career office relationships at those schools)

Oh and Charlie Munger is absolutely right on crypto “digital assets” the new elegant term for “let me put my cash on the floor and throw a yo”.