Ambac (ABK) CEO David Wells addresses the Moody’s (MCO) downgrade.
So, now we know Ambac has talked to the Treasury about the TARP program. Does this “solvency” vs “liquidity” argument sound eerily like the AIG (AIG) fiasco?
Disclosure (“none” means no position):None
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Boston Properties (BXP) Chairman, the nations largest office landlord ought to be listened to.
Don’t want to watch and want the cliff notes….don’t be too optimistic.
Disclosure (“none” means no position):none
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I had tears coming down my face….
Obama Win Causes Obsessive Supporters To Realize How Empty Their Lives Are
Notes from yesterday’s AutoNation (AN) earnings call
CEO Mike Jackson said:
“In the third quarter total US industry new vehicle retail sales declined 31% based on CNW research data. In comparison, in the third quarter AutoNation’s new vehicle unit sales declined 24%. This performance relative to the US retail total is attributable to a combination of increased market share as well as the benefit of our geographic and brand mix relative to the total market.”
“We have shifted our capital allocation strategy from share repurchase to debt reduction. So far this year we have repaid $589 million of combined non-vehicle debt and floor plan debt. This was made possible by strong operating cash flow including a significant contribution from working capital improvements. Going forward we have targeted an additional $500 million of total debt reduction.”
“Finally, prior to the third quarter of 2008 we operated as a single operating segment. During the third quarter of 2008 in response to changes in the automotive retail market including the disproportionate decline in revenue and earnings from our domestic franchises relative to our import and premium luxury franchises, we made changes to our management approach and divided our business into three operating and reportable segments: Domestic, import and premium luxury.
Beginning in the third quarter resources are allocated and performances assessed based on financial information from each of these segments. We believe that our segment-related disclosures will improve the transparency of our financial reporting.”
“Despite the impairment charges, we remain in compliance with all the covenants under our debt agreements. Our consolidated leverage ratio at September 30 which measures non-vehicle debt to EBITDA was 2.65 versus the covenant limit of 3.0. Our capitalization ratio which measures floor plan plus non-vehicle debt divided by total book capitalization was 61.5% at September 30 versus the 65% cap. We believe that our aggressive costs and cash-flow management will enable us to continue to reduce debt and remain in compliance with our covenants.”
Other notables:
– Compared to the quarter a year ago, revenue per new vehicle retail of $30,000 was off $530 or 2% primarily driven by a decline in truck pricing that was highly incentivized in a shift in car/truck mix. Same-store gross profit per new vehicle retail of $1,975 was off $184 or 9% impacted by compressed truck margins which were pressured by the liquidat5ion of low demand inventory.
– At September 30 we had a 62-day supply of new vehicle inventory favorable to the industry at 72 days. At 62 days our day supply increased 14 days compared to the quarter a year ago resulting from a slowing of sales in September. Since June 30 we’ve managed our inventory down by 6,600 units ahead of our target for the second half of the year.
– Turning to used vehicles, we retailed just over 45,000 used units in the quarter up 13% compared to a year ago. Same-store revenue per used vehicle retail was down 7% as consumer demand for value or lower-priced vehicles continued to trend upward. Truck pricing remained under pressure but began showing signs of improvement as gas prices started to drop.
– Gross profit per used vehicle retailed was down 8% or $136 with used cars and trucks having approximately the same margin and each accounting for about half of the margin decline.
– As we look at the rest of 2008 we believe the market will remain extremely challenging. We also believe that in 2008 new vehicle sales for the industry will decline to the low 13 million unit level.
– New vehicle sales for 2009, the most conservative industry forecasts are in the range of 12 million new vehicle units. Even at a 12 million unit sales rate, AutoNation will remain profitable and we are confident that we will remain in compliance with our debt covenants.
The key phrase it the bold highlight above…”increased market share”. We know An is not going under and neither is Berkshire’s (BRK.A) Buffett pick in the sector, CarMax (KMX). The key is how strong do they come out of it. I have yet to find any evidence that these dealer groups are not going to be a substantially better position when we come out of this than when they went it.
Since that seems to be true, it is just a matter of buying shares and waiting. It’ll happen..
Disclosure (“none” means no position):Long AN, None
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Free Bold, Severance, FireFox, Deflation
– Is anyone surprised it sucks?
– Panic?
Disclosure (“none” means no position):
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Luecadia (LUK) owns 28% so together with Fairholme (FAIRX), this could get interesting.
From the 13-D
“The Reporting Persons are in discussions with the Issuer’s management concerning (i) the exchange of certain debt securities of the Issuer held by the Reporting Persons for additional Shares, (ii) the acquisition by the Reporting Persons of asset-backed securities of the Issuer or its affiliate offered in a future securitization transaction, and (iii) an agreement under which the Reporting Persons will refrain from taking certain actions with respect to the Issuer for a specified period and will acquire one seat on the Issuer’s board of directors, and the Issuer will waive the application of the Texas Business Combination Law. The Reporting Persons reserve the right, at a later date, to consult with management and other shareholders of the Issuer from time to time to evaluate the business prospects of the Issuer as well as its present and future intentions.
Except as set forth above, the Reporting Persons have no plans or proposals
that would relate to or would result in: (a) any extraordinary corporate transaction involving the Issuer; (b) any material change in the present capitalization or dividend policy of the Issuer; (c) any material change in the operating policies or corporate structure of the Issuer; (d) any change in the Issuer’s charter or by-laws; (e) the Shares of the Issuer ceasing to be authorized to be quoted in the over-the-counter security markets; or (f) causing the Issuer to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934. The Reporting Persons, however, reserve the right, at a later date, to effect one or more of such changes or transactions in the number of Shares they may be deemed to beneficially own.”
“As of the date hereof, Fairholme may be deemed to be the beneficial owner of 22,853,914 Shares (19.6%) of the Issuer, the Fund may be deemed to be the beneficial owner of 16,692,000 Shares (14.0%) of the Issuer and Bruce R. Berkowitz may be deemed to be the beneficial owner of 22,850,413 Shares (19.6%) of the Issuer, based upon the 116,312,936 Shares outstanding as of August 26, 2008, according to the Issuer.”
Disclosure (“none” means no position):None
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Wow
In its annual report in February Leucadia (LUK) booked an $85 million loss on the investment in Target (TGT).
In the most recent 10-Q for the first nine months of 2008 Leucadia is booking another $27.7 million dollar loss on the investment.
Pershing head, Bill Ackman recently unveiled his plan for the retailer. One has to assume as his options, dated 1/2010 get closer to coming due he will begin to put real pressure on the retailer.
Disclosure (“none” means no position):none
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Fairholme’s (FAIRX) Bruce Berkowitz talks about what he is buying now.
Disclosure (“none” means no position):None
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The “Black Swan” author talks about his thesis and its result on his success this year.
Here is the book:
Here is my review of it.
Disclosure (“none” means no position):
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Here is how you know the market is totally irrational. Look at the credit spreads on Berkshire Hathaway (BRK.A) credit defaults.
I am quite familiar with Berkshire – about as familiar as you can get by reading stat statements and the like. I can not blow it up. That means I know of no reason whatsoever that it could wind up insolvent in five years.
That does not mean it can not happen. If 9.11 had been nuclear they might have had problems – but as my “Risk Aversion Berkshire Style” post makes clear fat tail risk is not part of the formula.
So why is the five year credit default swap spread on Berkshire over 200bps? I have no idea and it makes no sense to me. Maybe it is just irrational bearishness about everything (ie BUY HARD) or maybe there is something I do not know.
So if anyone wants to post/reply a case for Berkshire CDS please…
Now, personally I have more faith in Warren Buffett and Berkshire than I do the US government at this point. That being said, a 200 point spread defies any and all rational thought.
I also can’t imagine a scenario in which Berkshire becomes insolvent. Perhaps a catastrophe the like of which we cannot imagine? If that is the case, the ability of Berkshire to pay it bills and make good on it’s debt will most likely be pretty low on everyone’s “things to worry about list”.
Insane….it also means “great opportunities”
Disclosure (“none” means no position):None
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AutoNation (AN) reported an operating profit this morning…..
The automotive retailer, today reported a 2008 third quarter net loss from continuing operations of $1.40 billion or $7.95 per share. In the quarter, the Company recorded non-cash charges for goodwill and franchise impairments of $1.46 billion after-tax. After adjusting for the impairment charges and certain other items disclosed in the attached financial tables, net income from continuing operations for the 2008 third quarter was $44 million or $0.25 per share, compared to $73 million or $0.37 per share in the prior year.
Third quarter 2008 revenue totaled $3.5 billion, compared to $4.5 billion in the year-ago period, driven primarily by lower new vehicle sales. In the third quarter, total U.S. industry new vehicle retail sales declined 31%, based on CNW Research data. In comparison, in the third quarter AutoNation’s new vehicle unit sales declined 24%.
Here is CEO Mike Jackson on the numbers:
Other recent dealers reports:
Sonic Automotive (SAH), the number three auto retailer which operates only in the United States, posted a loss of $25.3 million, or 57 cents per share during the quarter, compared with a profit of $26.1 million, or 58 cents, a year ago.
The company lost 24 cents per share from continuing operations. Revenue fell nearly 16 percent to $1.78 billion.
Group 1 (GPN) Chief Executive Earl Hesterberg said on a conference call with analysts that the global financial crisis, which affected consumer confidence, and lenders raising credit standards had hurt showroom traffic in the latest quarter. He said some lenders were turning down loan applications, and higher down payments and interest rates were making other customers reject the financing being offered.
Group 1, the #4 auto retailer operates in the United States and UK. The UK market accounts for 1.7 percent of its new vehicle unit sales.
Group 1 posted a net loss of $20.6 million, or 91 cents per share, compared with earnings of $20.8 million, or 90 cents per share, a year earlier. Income from continuing operations was 42 cents per share, one cent higher than analysts’ average expectations.
Now, you have heard (read?) here many times that AutoNation will pick up market share simply by surviving this environment. But, just how many dealerships are going away? Here it is in graphical terms…
The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs. The country has roughly 20,700 dealerships.
Now, this is a real good earnings report as AN is still the only one in the black operationally. It is a bad as it can get and they are pulling through it just fine. It is painful yes….but things will be just fine.
Jackson also refuted rumors swirling last week that the company was in danger of being in violation of debt covenants. he said they have paid down $600 million in debt to date and will do another $500 million next year.
Disclosure (“none” means no position):Long AN, none
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Curve, MySpace, Guns, Craig’s list
– Some useless info
– Gun sales up…people fear Second Amendment challenge
– Just in case things weren’t weird enough
Disclosure (“none” means no position):
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So, was this a referendum for Obama, or, scapegoating the party in charge. Check this out..
Eight of the top 10 foreclosure states all swung for Obama giving him an additional 71 electoral votes.
Would them swinging for McCain made a difference? No. It does mean that it was the central issue. 90% of exit polls said the economy was the central issue. It also means that the McCain camp really dropped the ball not linking Obama to Freddie (FRE) and Fannie (FNM) the same relentless way Obama linked McCain to Bush.
It also means that two years from now should the housing situation not be any better, Democrats may face a backlash in Congress in those election as this shows the vote in these areas was not so much “for Obama” but “against Bush”.
The only thing less popular today than Bush is Congress. The new Congress has no honeymoon period as citizens over their head want someone to blame. It will be the guys in charge, not themselves.
From ForeclosurePulse
State-By-State
1. Arizona (10 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Arizona voted for McCain.
2. California (55 electoral cotes) Voted for Gore in 2000 and Kerry in 2004. In 2008 California voted for Obama.
3. Colorado (9 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Colorado voted for Obama.
4. Florida (27 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Florida voted for Obama.
5. Georgia (15 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Georgia voted for McCain.
6. Indiana (11 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Indiana voted for Obama.
7. Michigan (17 electoral cotes) Voted for Gore in 2000 and Kerry in 2004. In 2008 Michigan voted for Obama.
8. Nevada (5 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Nevada voted for Obama.
9. New Jersey (15 electoral cotes) Voted for Gore in 2000 and Kerry in 2004. In 2008 New Jersey voted for Obama.
10. Ohio (20 electoral cotes) Voted for Bush in 2000 and 2004. In 2008 Ohio voted for Obama.
It will be interesting….
Listen closely to this……..simplify the verbiage and you have the basis for the speeches being given today..
The best line, “the unscrupulous money changers now indicted in the court of public opinion” and “there must be an end to speculation with other people’s money”. At the end he asks for “broad executive power”.
Disclosure (“none” means no position):
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If your day is easily ruined, don’t watch this….but…..he did predict the current situation to a tee.