Wall Street

"business. Always take advantage of a situation where Wall Street gets confused between risk and uncertainty. The results will usually be quite acceptable."

"The cast of characters was of critical importance in this investment. I ascribed the odds of Walter Scott Jr. lying as being well under 1 percent. When Jim Crowe makes statements in press releases or at the company’s annual meeting, it is pretty much the same as Walter Scott Jr. making those statements. The odds I ascribed to Jim Crowe blatantly lying in a very public forum was under 1 percent as well. Wall Street did not even attempt to handicap this important fact. For them, the entire sector was in meltdown, and the people and what they were saying didn’t matter. Well, they do matter. 2. If Jim Crowe was not lying, then it follows from that statement that they would try their hardest to stay out of bankruptcy. This was not a company that would throw in the towel and file until every stone had been turned. This meant that they’d conserve their dry powder of $2.1 billion until the company got to being cash flow positive. The $2.1 billion of liquidity meant that Level 3 debt holders would receive interest payments for at least three years. 3. Good management gives you upside options for free. Walter Scott Jr. had a pristine reputation. Level 3 was in a situation very much like GEICO found itself in the early 1970s. Warren Buffett’s injection of money into GEICO then did two things: (a) it took away the liquidity crisis they were facing, and (b) with the liquidity cloud gone, the stock rallied and traded on underlying fundamentals. Once Mr. Buffett invested in GEICO, he could not lose money on the investment. If Level 3 had more cash on hand, its debt would trade at par and its ability to get marquee customers would be significantly enhanced. With friends like Warren Buffett and the goodwill that Walter Scott Jr. had, Level 3 had many levers it could pull to erase any liquidity issues. Over the next few years, on the backs of the reputation of the cast of characters, it did pull several of these levers. 4. While I had no way of knowing how this would play out, in 2003, Level 3 did use its goodwill. It did a private convertible debt offering, and its friends (Berkshire Hathaway, Longleaf Partners, and Legg Mason Value Trust) invested hundreds of millions in the business. Now, once Warren Buffett, Bill Miller, Staley Cates, and Mason Hawkins publicly backed the business with their dollars, the odds of Level 3 going bankrupt pretty much went to zero. The halo these investors provided meant that if Level 3 needed more capital, it could easily get more from a plethora of investors. Once this offering was done, the bonds rallied and I exited. As I write this in 2006, Level 3 has not had to file for bankruptcy. On the contrary, most of Level 3’s bonds are trading above par. The overhang is completely gone."

"Wall Street sometimes gets confused between risk and uncertainty, and you can profit handsomely from that confusion. The Street just hates uncertainty, and it demonstrates that hate by collapsing the quoted stock price of the underlying business. Here are a few scenarios that are likely to lead to a depressed stock price: High risk, low uncertainty High risk, high uncertainty Low risk, high uncertainty"

"These days, you can't swing a dead cat without hitting some corporate executive whining that Wall Street won't let him run the company for long-term growth. But I say complaining is a waste of time. In the end, you have to choose your master-the investor vestor or the speculator."

"“I create nothing, I own.” -Gordon Gekko in the film “Wall Street,” 1987"

"the timing of PayPal’s IPO wasn’t solely a triumph of Girardian logic. Thiel admitted that rivalry, conflict, and emotion also played a powerful role. “The competitive thing in me was just, you know, if the bankers thought we weren’t ready, then it was more important than ever. It was sort of like a Wall Street versus Silicon Valley thing,” he said of his will to prevail, “and there was a part of my thinking where, emotionally, I felt like the Wall Street banks were especially negative because we were encroaching on their turf.”"

"Wall Street Maneuver,"

"Drexel became a pioneer in what Wall Street would by the mideighties loftily call merchant banking (a term borrowed from the British), which simply meant that a firm was using its own capital to finance deals (as a debt and/ or equity participant)."

"the company became so successful—such a juggernaut, with such high financial expectations to justify our share price—that we began to manage not to 20 million members, but to 15 financial analysts on Wall Street. We weren’t trying to keep our members happy. We shifted to keeping financial analysts happy, and in that construct, it’s easy to sell away entire categories of future success just to make the quarter."

"Another thing I don’t have to mess with is dealing with stockholders and all the federal and state paperwork of being a public company. We’re still family-owned, which keeps life a whole lot simpler. When my wife and kids and I decide to make a business move, we don’t have to ask Wall Street about it."

"Drexel became a pioneer in what Wall Street would by the mideighties loftily call merchant banking (a term borrowed from the British), which simply meant that a firm was using its own capital to finance deals (as a debt and/or equity participant)."

"the timing of PayPal’s IPO wasn’t solely a triumph of Girardian logic. Thiel admitted that rivalry, conflict, and emotion also played a powerful role. “The competitive thing in me was just, you know, if the bankers thought we weren’t ready, then it was more important than ever. It was sort of like a Wall Street versus Silicon Valley thing,” he said of his will to prevail, “and there was a part of my thinking where, emotionally, I felt like the Wall Street banks were especially negative because we were encroaching on their turf.”"

"I came to this view as a Canadian who has spent almost equal amounts of time living in the United States and China. To me, these two countries are thrilling, maddening, and, most of all, deeply bizarre. Canada is tidy. I sometimes find myself relaxing as soon as I cross into its borders. Drive around America and China, on the other hand, and you’ll see people and places that are utterly deranged. That’s not a reproach. These two countries are messy in part because they are both engines for global change. Europeans have a sense of optimism only about the past, stuck in their mausoleum economy because they are too sniffy to embrace American or Chinese practices. And the rest of the world is either too mature or too young to match the impact of these two superpowers. It is Americans and Chinese—Silicon Valley, Shenzhen, Wall Street, and Beijing—that will determine what people everywhere will think and what they will buy."

"China’s policymakers have declined to be bound by some of the fundamental tenets of Wall Street investors—reduce investment, shrink assets, produce profitability—all of which emphasize efficiency. ⁠Perhaps it will trigger financial distress in the future. So far, however, building big has improved the lives of regular people, not just a narrow set of elites. This lack of emphasis on efficiency has been key to another Chinese success: Part of the reason that China dominates advanced manufacturing technologies is precisely because it tolerates lower profits while cultivating a large workforce.⁠"

"Investors who had no idea of the private worth of their holdings were susceptible to being scared out of them. Their only measure of value was the stock price, so the more the price dropped, the more they were inclined to sell. Davis was panic-proof. Wall Street's daily, weekly, monthly, and yearly ups and downs didn't alter his strategy. He held on to shares through demoralizing declines, knowing that the market…"

"But Cook’s email to the board was a model of transparency relative to what he and Maestri would tell analysts on the earnings call just a few hours later. They informed Wall Street that Apple was expecting $89 billion to $93 billion of revenue in the holiday quarter, underwhelming investors. But they didn’t say a word about the muted sales of the XR, or the difficulties of forecasting, or that Cupertino now expected China revenues to shrink. Instead, they soothed investors with cheery sentiment. The obfuscation was brazen. Asked specifically about the XR, Cook replied that it’d been on sale for just five days so “we have very, very little data there.” Asked about “deceleration” in emerging markets including China, Cook said it was a “great question” and mentioned “we’re seeing pressure in… markets like Turkey, India, Brazil, Russia.” Then he switched to China, subtly moving from present tense—the nature of the question—and looked back a quarter: “In relation to China specifically, I would not put China in that category. Our business in China was very strong last quarter. We grew 16 percent, which we’re very happy with. iPhone in particular was very strong, very strong double-digit growth there.”"

"The author and historian Gunnar Wetterberg fundamentally praises credit. He emphasizes that it is one of humanity’s great social inventions, which increases the pace of economic development. “To make debt into humanity’s problem is wrong, but it must be kept in check.” It is never the debt itself that is the problem, but rather something in the environment that weakens or completely nullifies the debtor’s ability to pay. “Kreuger was up to his ears in debt, but he would have managed if Wall Street hadn’t crashed in 1929,” says Wetterberg."

"The author and historian Gunnar Wetterberg fundamentally praises credit. He emphasizes that it is one of humanity’s great social inventions, which increases the pace of economic development. “To make debt into humanity’s problem is wrong, but it must be kept in check.” It is never the debt itself that is the problem, but rather something in the environment that weakens or completely nullifies the debtor’s ability to pay. “Kreuger was up to his ears in debt, but he would have managed if Wall Street hadn’t crashed in 1929,” says Wetterberg."

"Corporate stock repurchases and leveraged buyouts were eating up just under 10% percent of the total shares outstanding of American equities on an annual basis. This was equal to about 16 percent of the floating supply of stock through- out the land, which meant that if the trend continued, Tiger and its funds, along with other large investment ve- hicles, would own just about all the stock that was avail- able on the market by 1993. There was too much cash on the sidelines. Mutual funds were sitting on hordes of cash. Investors had moved $ 12 billion out of equity-based products and into fixed-income prod- ucts. And pension funds were seeing an increase in their cash positions. The money would have to be put to work eventually. TJie independent investors seemed to be all but out ofthe market. The crash had scared them away. They were waiting for it to seem safe to enter the markets again. They would eventually come back, and when they did-well, this was a plus factor. Wall Street was bored. The heydays of the 1980s were over, and pessimism and lethargy had set in. The phones had stopped ringing. There were fewer ideas being generated by brokers. The crash was still in peoples' minds. This caused people to"

"I’m not sure where my life would have led had I declined President Nixon’s offer and stayed on the comfortable road I was following on Wall Street. But by listening to my instincts, taking a risk, and beginning a new journey on an unknown path, I learned more about life, discovered more about myself, stretched my horizons farther, and savored experiences far richer than I would otherwise have ever known. Some people might call it fate. Some might call it luck. But I would call it God’s plan."

"Milken was made the poster boy for Wall Street excesses after the Crash of 1987. In a plea bargain deal in 1990, he pleaded guilty to six felony counts, including securities fraud, mail fraud, and tax evasion, and served twenty-two months of a ten-year sentence after cooperating with authorities and getting time off for good behavior. He was fined $200 million and ordered to pay $400 million in restitution to investors."

"Now, in a lot of those deals, we focused hard on one measure: cash flow, or specifically, EBITDA (earnings before interest, taxes, depreciation, and amortization). It gives a clearer picture of operating performance and a firm’s ability to borrow or invest. Some people say I all but invented the term. I can’t swear to it, though it is true that I helped make it a whole new form of currency on Wall Street."

"It was a bold idea, and I was sure it could help the company. In fact, this big idea would play a role in driving the strategies, mergers, and financial alchemy that would come to define the rest of my career. It’s the strategy I used to help grow the cable industry by focusing Wall Street and bank lenders on cash flow instead of taxable earnings."

"We raised money from everywhere—banks, insurance companies, publishers, Wall Street, anyone with capital—to fuel TCI’s growth, because I knew the advantage would go to the biggest company. Scale economics drove every decision."

"An order that large would be unprecedented and would require enormous amounts of arm-twisting with each one of the big cable operators, and in a hurry. It would be easier to train monkeys to play chess. “I have an idea,” I said. “We can give you a bigger order than that. We just need to sweeten the pot.” “I’m listening,” Ed said. “Why don’t we do a deal where General Instrument gives warrants for GI stock for every box that a cable operator buys?” I explained that if GI got a big order, for say, millions of boxes, it was safe to assume the stock price of General Instrument would go up significantly, and that way, Wall Street would essentially pay for the upgrade. We figured this would motivate people to participate. And boy did it."

"Does Del Vecchio give up control? To those who have followed him in this triumphant ride from humble beginnings to Wall Street, it seems impossible, simply unbelievable. And, in fact, it is an optical illusion."

""His name is Leonardo Del Vecchio and he makes eyeglasses. The company he presides is listed on Wall Street and must be doing wonderfully if it allowed him to become the most generous Italian taxpayer, the one who with 13 billion and 358 million declared to the tax agency has surpassed the most famous and envied entrepreneurs: from Giovanni Agnelli to Silvio Berlusconi, to Carlo De Benedetti," begins the article from the newspaper of via Solferino. "Rich and honest: an Italian miracle," titles, instead, Repubblica. Suddenly comes fame. Leonardo would have gladly done without it."

"Our plan was to grab Hartford in a “bear hug.” This is a common Wall Street carrot-and-stick approach: large blocks of stock are purchased from shareholders; and then this “carrot” is promptly followed with a decidedly more menacing offer to the board to purchase a controlling interest of the company’s shares at a price substantially over the market. It’s a carefully orchestrated technique: the attention-grabbing offer is made in a formal letter to the board, and next there’s an immediate public disclosure of the terms. Theoretically, the announcement that the target company is “in play” will result in a huge turnover of its stock. The biggest buyers will be professional traders, or arbitrageurs, and they will greedily pressure the board either to approve the deal or to search out a richer one. Under constant attack, and with the happy prospect that their own piles of stock as well as those of their shareholders will suddenly be worth incrementally more, the board will simply throw up its hands in pragmatic surrender, resigned to suffering through an unwanted but lucrative takeover. Or at least that was how our “bear hug” strategy played out in our hopeful minds."

"The sharks were swimming around RCA. The company’s performance, driven by a reinvigorated NBC, had been improving rapidly. But despite an increase in revenue and earnings, its stock price remained flat. This was precisely the sort of financial paradox that suggested an undervalued company. Of course, the corporate raiders couldn’t help noticing. And the word went out on Wall Street: RCA was an appealing takeover target."

"It wasn’t the first time he had more than made up for the lack of a plan by having acute radar for a rare investment opportunity, a ready load of cash, and the unshakable self-confidence to move swiftly. Those were the qualities that, in the span of 20 years, transformed Tisch the hotelier into Tisch the conglomerateur—all the while prov- ing himself one of Wall Street’s smartest smart-money investors and one of corporate America’s most sought-after board members."

"The beauty of the deal was that it required not one penny of Loew’s cash to acquire a company three times its size. For each share of Lorib lard, shareholders got a Loew’s $62 principal amount, 25-year subordi- nated debenture paying 6% percent, plus one-quarter of a warrant to buy a Loews’ common share for $110. Analysts’ estimates of the value to Lorillard shareholders ranged between $66 and $75 a share, or a total of $429 million to $487.5 million. Wall Street analysts estimated that Loews’ profit for the fiscal year ended August 31, 1968, rose about 27 percent to $20 million on a 32 percent sales gain to $180 million. Lorillard’s calendar 1967 results showed a relatively slim $31 million of profit on sales of $565 million."

"cunning and harder-working too. A Wolf of Vienna, unlike the one Leonardo DiCaprio portrayed as a banker on Wall Street, but just as hungry. One who beguiled people with his charm and his talent. And in doing so, he took advantage of their greed and their fear of missing out on a business opport"