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Anonymous Billionaire - is he trading Brazil stocks or call options?
- Thread starter Stymie
- Start date
Americans are obsessed with 'billionaires'.
What they don't realise is that being a billionaire is probably a pretty shitty lifestyle.
Everyone wants something from you, kidnap/scam risks, professionals (lawyers, accountants, fund managers etc) all trying to take the piss via fees, wives (on the booze/drugs), girlfriends (on the booze/drugs), people suing you all the time trying it on, having to employ bodyguards (what sort of life is that?), worrying about how to properly raise your children under the constant dark cloud of immense wealth and so on. I bet many of them look back and say 'life was far better, far more fun when I didn't have so much).
Then you have all the toys but I would think they get very boring after a while. If you have money to buy everything there is no fun in buying anything.
Buffet is probably one of the few that does it right.
What they don't realise is that being a billionaire is probably a pretty shitty lifestyle.
Everyone wants something from you, kidnap/scam risks, professionals (lawyers, accountants, fund managers etc) all trying to take the piss via fees, wives (on the booze/drugs), girlfriends (on the booze/drugs), people suing you all the time trying it on, having to employ bodyguards (what sort of life is that?), worrying about how to properly raise your children under the constant dark cloud of immense wealth and so on. I bet many of them look back and say 'life was far better, far more fun when I didn't have so much).
Then you have all the toys but I would think they get very boring after a while. If you have money to buy everything there is no fun in buying anything.
Buffet is probably one of the few that does it right.
If you look at shipping stocks in the US, they have been using bankruptcy for the last decade or more to restructure the business to raise capital while keeping the existing shareholders. They use it to convert all their debtholders to equity investors and stockholders take a haircut. So it is possible at a time of extreme stress that entire industries are operating under bankruptcy protection while restructuring their balance sheet. But like buying real estate at the bottom, your whole portfolio is underwater so where do you get the cash to buy these bankrupt companies? You can bet the broker and banks wont offer margin facilities so you have to be a cash investor.
Cash investors don't use leverage. They only outperform when markets crash and cash is king. The rest of the time they're on holiday.
Cash investors don't use leverage. They only outperform when markets crash and cash is king. The rest of the time they're on holiday.
They haven't kept their existing shareholders at all. As you indicated, the debt holders become the equity holders when a company goes through bankruptcy, pretty much that is the definition of bankruptcy. The existing shareholders take a 100% haircut. It's possible to invest in bankrupt companies by buying their debt, but not by buying their shares.If you look at shipping stocks in the US, they have been using bankruptcy for the last decade or more to restructure the business to raise capital while keeping the existing shareholders. They use it to convert all their debtholders to equity investors and stockholders take a haircut. So it is possible at a time of extreme stress that entire industries are operating under bankruptcy protection while restructuring their balance sheet. But like buying real estate at the bottom, your whole portfolio is underwater so where do you get the cash to buy these bankrupt companies? You can bet the broker and banks wont offer margin facilities so you have to be a cash investor.
Cash investors don't use leverage. They only outperform when markets crash and cash is king. The rest of the time they're on holiday.
In a chronically bankrupt industry like shipping, they provide piecemeal ownership to existing shareholders. I was able to buy stock in both genko shipping $GNK and eagle shipping $EGLE on their last day of trading for pennies and then waited for the bankruptcy reorganisation to relist the shares plus warrants and sell for a profit. In the case of Genko, they even used the same stock symbol which confused investors and the price was way too high on relisting before the normal market open. I was playing with free money because I shorted them all the way down so I was not afraid of the possibility that there would be no equity for me. To be clear, I was the only bid on the last day and kept dropping my bid when hit. Bought the all time low.
My memory of at least Gencko was that you didn't get stock in the new company, you got warrants which gave you the option to buy stock on the reorganized company, is that correct? That's not uncommon with bankruptcy, they're essentially raising money from existing shareholders by offering them the chance to give more money to the new company so it's really just a cheap way of fundraising for them. Those warrants had value if you sold them before expiration, but they weren't getting you shares in the company unless you made an additional equity investment. Perhaps I'm wrong on Gencko specifically, if you actually get real shares with no additional investment though it would be an exception to the rule.In a chronically bankrupt industry like shipping, they provide piecemeal ownership to existing shareholders. I was able to buy stock in both genko shipping $GNK and eagle shipping $EGLE on their last day of trading for pennies and then waited for the bankruptcy reorganisation to relist the shares plus warrants and sell for a profit. In the case of Genko, they even used the same stock symbol which confused investors and the price was way too high on relisting before the normal market open. I was playing with free money because I shorted them all the way down so I was not afraid of the possibility that there would be no equity for me. To be clear, I was the only bid on the last day and kept dropping my bid when hit. Bought the all time low.
In 1939 Sir John Templeton bought 104 stocks that were trading on NYSE under a $1, 37 of which were in bankruptcy. 5 years later when he liquidated his position 100 out of 104 were profitable bets...This was in the book "The Lessons of Great Minds of Investing". Buying "when there is blood on the streets" is a tried and true strategy.
You're a capital trader, @Stymie is an income trader. They are equally valid strategies, most traders use an income based approach, a few use a capital based approach, and a handful can do both such as Buffet. I'm one of those handful, but I gravitate to capital because it's less effort.
What they don't realise is that being a billionaire is probably a pretty shitty lifestyle.
That depends if you're a 'new money' billionaire or an 'old money' billionaire, you can apply the techniques from one even if you have the capital from the other. So that's crap, it's a really nice lifestyle, it just depends on which approach you take.
My memory of at least Gencko was that you didn't get stock in the new company, you got warrants which gave you the option to buy stock on the reorganized company, is that correct? That's not uncommon with bankruptcy, they're essentially raising money from existing shareholders by offering them the chance to give more money to the new company so it's really just a cheap way of fundraising for them. Those warrants had value if you sold them before expiration, but they weren't getting you shares in the company unless you made an additional equity investment. Perhaps I'm wrong on Gencko specifically, if you actually get real shares with no additional investment though it would be an exception to the rule.
Today there is a good example of an oil company coming out of chapter 11 bankruptcy. The symbol is $BAS. The news says that existing common stock holders received both new stock and warrants. Here again, people before the opening were confused that this was the old shares. They paid over $110 instead of $35. The NASDAQ has announced that they reviewed the trades and they will stand as executed. If you had the new shares, you could have sold them before the opening to these other confused people. It's crazy that NASDAQ approves of this but live by caveat emptor. In all likelihood, Goldman Sachs sold the shares and told NASDAQ not to unwind the trades. Didn't have any of this one. Damn!
The plan equitized over $800 million of unsecured debt, eliminated over $60 million in annual cash interest, and raised $125 million of new capital, the company said. Existing shareholders will receive new common stock and warrants in the reorganized company.