Markets still falling like whoa

[Bozo_Casanova 26579]

[Aqua Buddha 14624]

9 hours ago, Wally Fairway said:

That formula only works well while the economy is strong, in a downturn WeWork still has the lease commitments and there will be far fewer customers looking for space. 
I know this because I went to work (contract basis) for a property management firm that had a similar model, that they were moderately successful right up until late 2008 early 2009. But instead of lease payments they were buying and refurbishing older buildings and leasing them out; same imbalance in risk and balance sheet - they had debt payments on properties and when people walked from leases and no one else was lined up the whole thing went into restructuring virtually overnight. 
(A year and a half into my working there, they had a restructuring deal fall apart and {poof} Wally and others were let go overnight)

WeWork is taking on long term debt and liabilities for short term commitments.  They clouded it with phrase like "change the world with distributed algorithms" but that's basically all it is.

[TwiceHorn 31560]

16 hours ago, Aqua Buddha said:

That's prolly tops.  That was a legit valuation whereas WeWork's value was just speculation.  Similar flameouts, though.  Just a few probing questions got the ball rolling.

Well, it was a legit valuation based on assets no one apparently understood, so arguably equally speculative, I guess with some fraud mixed in.

That's one grim thing about any attempt at corporate/Wall Street reform.  As acknowledged by Lewis in multiple of his works (Big Short, Flash Boys among others) and Markopolos in regard to Madoff, the financial guys are so far ahead of the regulators I don't see how we ever catch up.

[Bozo_Casanova 26579]

valuation is always speculative to some degree, but fundamentally I agree with your point.

[Reagan1k 3024]

15 hours ago, Nice Guy Eddie said:

I can only see WeWork greatly reducing their risk if they signed up large corporations to fill a certain percentage of their buildings. Presumably the large corps could provide a consistent revenue even through downturns.

thus becoming just another real estate management company and changing their name to TheyWork.

[3adays 454]

I was surprised to learn they own 4.7 acres at Red River and 1st Street. Nice little chunk of land

[52-80 19264]

10 hours ago, 3adays said:

I was surprised to learn they own  will soon default on a mortgage for 4.7 acres at Red River and 1st Street. Nice little chunk of land

fify

[Wally Fairway 5589]

10 hours ago, 3adays said:

I was surprised to learn they own 4.7 acres at Red River and 1st Street. Nice little chunk of land

 

34 minutes ago, 52-80 said:

fify

Then now is the time to make WeWorks a below market offer on the property, they will try to sell property to stay afloat. I've seen this before with property mgmt companies, and the best properties are what they can sell the quickest (and quick is what they need in a cash crisis). Maybe Surly should buy it; how much do we have in the wreath fund?

[52-80 19264]

1 hour ago, Wally Fairway said:

 

Then now is the time to make WeWorks a below market offer on the property, they will try to sell property to stay afloat. I've seen this before with property mgmt companies, and the best properties are what they can sell the quickest (and quick is what they need in a cash crisis). Maybe Surly should buy it; how much do we have in the wreath fund?

tree fiddy

[52-80 19264]

or if you prefer

 

 

[Trey3216 15373]

Mark Hurd, Oracle CEO, passed away at 62 today.  

[Fico 1791]

Then now is the time to make WeWorks a below market offer on the property, they will try to sell property to stay afloat. I've seen this before with property mgmt companies, and the best properties are what they can sell the quickest (and quick is what they need in a cash crisis). Maybe Surly should buy it; how much do we have in the wreath fund?

Lol

[Bozo_Casanova 26579]

1 hour ago, Trey3216 said:

Mark Hurd, Oracle CEO, passed away at 62 today.  

I got to spend a little time with Mark Hurd and he was brilliant. I've been around a lot of CEOs and Mark's penetrating insight and often brutal honesty were as unique as his use of flip charts and a marker while explaining strategic moves in financial terms. The "manager" part of executive manager often takes a back seat to charisma and polish. But Mark was a great manager and made his career on management - of strategy, workflow, structure, labor, and value. He brought that to his role as a leader every day and wore it on his sleeve. 

I did not know the man at all and didn't always agree with his decisions or the priorities he expressed. But he was a great corporate executive and we could use more of those at the top. 

Edited October 18, 2019 by Bozo_Casanova

[Trey3216 15373]

SoftBank to spend $4-5bn on new equity and existing shares in WeWork, valuing the company at $7.5-8bn.  They are taking a bloodbath on this, and are taking full control.  Ouch.

 

 

https://www.cnbc.com/2019/10/21/softbank-to-take-control-of-wework-sources.html

[hornhorn 100]

38 minutes ago, Trey3216 said:

SoftBank to spend $4-5bn on new equity and existing shares in WeWork, valuing the company at $7.5-8bn.  They are taking a bloodbath on this, and are taking full control.  Ouch.

 

 

https://www.cnbc.com/2019/10/21/softbank-to-take-control-of-wework-sources.html

And this gives them what? Another six months to stabilize the company....jeez. 

[Trey3216 15373]

3 minutes ago, hornhorn said:

And this gives them what? Another six months to stabilize the company....jeez. 

You'd hope more than that, but I'm pretty sure that sounds about right.   What a shit show.  

 

@Wally Fairway may be right here, I bet we see some fire sales on WeWork properties in the very near future.  

[hornhorn 100]

Just now, Trey3216 said:

You'd hope more than that, but I'm pretty sure that sounds about right.   What a shit show.  

 

@Wally Fairway may be right here, I bet we see some fire sales on WeWork properties in the very near future.  

Do they own any properties? Or was it all leased for the most part?

[Trey3216 15373]

Just now, hornhorn said:

Do they own any properties? Or was it all leased for the most part?

Both.  They own some properties and they have long-term leases on others.   Primarily lease from what I can see.  But they're not getting out of those agreements very easily.  They'll have to sell what they own to try and prevent outright implosion, but I'm not sure that's feasible at this juncture.  

[Trey3216 15373]

Michael Lewis' book about WeWork will be another awesome read.  Let's just hope it's a full book and not a chapter in a book of another economic disaster. 

[52-80 19264]

48 minutes ago, Trey3216 said:

Michael Lewis' book about WeWork will be another awesome read.  Let's just hope it's a full book and not a chapter in a book of another economic disaster. 

chapter 1: never trust a man with long hair

[LABEVO 928]

Lulz

 

[Trey3216 15373]

They’re not gonna make it to the end of the quarter.   Holy shit 

[Tailgate 3024]

We “used to” Work

[Aqua Buddha 14624]

History's biggest "down round?"

[Texas Jeff 1945]

8 hours ago, Tailgate said:

We “used to” Work

WeWorked

[Trey3216 15373]

This SoftBank deal is an absolute shit show.    
 

allows Neumann to sell $1bn in stock into the tender offer.  
 

gives Neumann a $500mm loan

 

gives Neumann a $185mm “consulting” contract even though he’s still the majority stakeholder

Lays off 2k employees within next 2 weeks 

[Aqua Buddha 14624]

29 minutes ago, Trey3216 said:

This SoftBank deal is an absolute shit show.    
 

allows Neumann to sell $1bn in stock into the tender offer.  
 

gives Neumann a $500mm loan

 

gives Neumann a $185mm “consulting” contract even though he’s still the majority stakeholder

Lays off 2k employees within next 2 weeks 

Why....?

[Reagan1k 3024]

Dude must have a lot of pictures taken while partying with SoftBank.

 

 

Edited October 22, 2019 by Reagan1k

[Trey3216 15373]

2 minutes ago, Reagan1k said:

Dude must have a lot of pictures taken while partying with SoftBank.

He must have record of Masa Son partying with Jeffrey Epstein  

[Reagan1k 3024]

Just now, Trey3216 said:

He must have record of Masa Son partying with Jeffrey Epstein  

And without the Japaneses porn-blur.

[HRSchenker 2274]

Twitter is going crazy over a CNBC article from 2018 claiming that 1 in 6 millennials has $100,000 in savings. Although you have to wonder if those are trust fund babies it brings me back to my strangely controversial question about why my generation is so broke during a great economy. 

Someone mentioned consumption and happiness being tied together but then I get sent this. 

https://www.cnbc.com/2019/10/10/study-millennials-who-buy-less-and-save-more-are-happier.html

How dependent is this economy on millennial and gen z spending anyway? 

[Aqua Buddha 14624]

11 minutes ago, HRSchenker said:

Twitter is going crazy over a CNBC article from 2018 claiming that 1 in 6 millennials has $100,000 in savings. Although you have to wonder if those are trust fund babies it brings me back to my strangely controversial question about why my generation is so broke during a great economy. 

Someone mentioned consumption and happiness being tied together but then I get sent this. 

https://www.cnbc.com/2019/10/10/study-millennials-who-buy-less-and-save-more-are-happier.html

How dependent is this economy on millennial and gen z spending anyway? 

A tremendous amount, considering they’re entering their prime spending years.

[Fudge Nuggets 19227]

56 minutes ago, HRSchenker said:

Twitter is going crazy over a CNBC article from 2018 claiming that 1 in 6 millennials has $100,000 in savings. Although you have to wonder if those are trust fund babies it brings me back to my strangely controversial question about why my generation is so broke during a great economy. 

Someone mentioned consumption and happiness being tied together but then I get sent this. 

https://www.cnbc.com/2019/10/10/study-millennials-who-buy-less-and-save-more-are-happier.html

How dependent is this economy on millennial and gen z spending anyway? 

I'm Gen X, but I can say I'm a lot happier with a big financial cushion than I am with new toys.

[Okie State 3848]

Why, exactly, is Twitter going crazy? Is it that hard to believe 17% of people in an age group that pushes into late 30's would have $100K saved? What am I missing here?

[Storm the Field 5302]

Because your average Millennial that is active on Twitter probably rents rather than owns, has upwards of $100K in debt, and only ever has a 4 digit bank balance on payday. Being able to sock away six figures seems an alien concept. 

[Storm the Field 5302]

Also, the article's headline misinterpreted the data. It was a survey by BOA of 1500 of their savings account holders, including 300 aged 23-37. It's not some random sample of Millennials. 

[Captainant 27828]

1 hour ago, HRSchenker said:

Although you have to wonder if those are trust fund babies it brings me back to my strangely controversial question about why my generation is so broke during a great economy. 

Our (guessing you're <35 like me) generation is so broke because we've gotten a smaller piece of pie, with larger cost of living than any generation prior, relative to our earnings. College is 10x (or more) more expensive, housing is treated as an investment vehicle rather than shelter for families so prices have obviously increased, a single trip to the hospital or even your doctor EVEN WITH insurance can cost thousands of dollars, or even bankrupt you (>$10k bill for a fucking broken arm is a fun one).

We've gotten a smaller piece of economic pie, wages have increased marginally when compared against GDP growth - all the growth is going to shareholders and top earners.

It's more expensive than ever to just exist. No shit people are losing their minds at the idea of having six figures socked away. Shit, it took me the better part of a year and a half just to save up a $10k emergency fund (slash house downpayment, of course) that just disappeared due to car troubles and some new fun medical bills. Between paying rent (instead of building equity in a home I own), paying for my student debt (and my wife's too in a month, hooray), covering living expenses, and just trying to live a happy life with my wife, we still have to budget carefully. And I make good money that's way on the high end for someone my age in Houston. 

The economy is "great" if you're allowed to have access to the growth. Otherwise, you're shit outta luck and gotta #bootstraps yourself with predatory student loans and platitudes from your out of touch parents that had everything given to them.

[Pig Bellmont 8739]

3 hours ago, Trey3216 said:

 

gives Neumann a $185mm “consulting” contract even though he’s still the majority stakeholder

Wow - quite the payday for running a company into the ground. I only wish I could be rewarded so lavishly for a horrific failure 

[Storm the Field 5302]

1 hour ago, HRSchenker said:

Although you have to wonder if those are trust fund babies it brings me back to my strangely controversial question about why my generation is so broke during a great economy. 

Did you read any of the multitude of responses to your question? There are at least 20 which are directly relevant on the previous 2 pages. 

[hayden_horn 11365]

19 hours ago, 52-80 said:

chapter 1: never trust a man with long hair

haha, my dad had a saying when i was young: "son, never trust a man who chooses a hairstyle over a haircut to get the job done right."

the man had a lot of sayings that were wise.

[Storm the Field 5302]

4 minutes ago, Pig Bellmont said:

Wow - quite the payday for running a company into the ground. I only wish I could be rewarded so lavishly for a horrific failure 

So many O&G companies went bankrupt the past few years and without fail, when they would come out of it, having wiped out billions, the same executives that rode them into the ground would walk away with anywhere from $20-100M in bonus awards. I used to joke about starting a consulting service where I would agree to run into a company into Chapter 11 within 6 months for a flat fee of $500K. No dragging it out for years at great expense. On Day 1, I'd start making disastrous financial moves.

[Aqua Buddha 14624]

Inheritance is the great unseen hand of wealth.

[drt 640]

Are you saying that millennials should expect their boomer parents to leave them inheritances?

[TwiceHorn 31560]

6 minutes ago, Storm the Field said:

So many O&G companies went bankrupt the past few years and without fail, when they would come out of it, having wiped out billions, the same executives that rode them into the ground would walk away with anywhere from $20-100M in bonus awards. I used to joke about starting a consulting service where I would agree to run into a company into Chapter 11 within 6 months for a flat fee of $500K. No dragging it out for years at great expense. On Day 1, I'd start making disastrous financial moves.

Chapter 11 for big corporations winds up being kind of a scam that way.

I know a guy that's a partner at Alix & Co., which runs/consults with companies in Chapter 11.  The guy's billing rates and billing practices would make most lawyers blush (and they're reviewed and approved by the bankruptcy court).  He's a sharp guy, no doubt, but a CPA from UTD (or some not super-prestigious school).  He was making half a million at age 35 or so.

[Aqua Buddha 14624]

7 minutes ago, drt said:

Are you saying that millennials should expect their boomer parents to leave them inheritances?

They shouldn't expect it but it will happen.  Millennials and boomers are similar in that both segments are very bifurcated.  They're either rich or poor and now much left in the middle.  (This is particularly true with the retiring boomers.)  Inheritance just isn't some pile of money when someone dies.  It includes the 30 something whose parents paid for their college at a good school and helped them buy their first house.  That exact same person's balance sheet would look wildly different if they grew up in a middle class household.

[The Royal We 3072]

I'm working with some Alix guys right now on a client that filed Chapter 11 not that long ago.  They have a hard time grasping pretty basic issues related to insurance and bonding, I never would have thought they would be billing V&E type rates.

[bernorange 8366]

So, anyone here see this?

Quote

JPMorgan Chase & Co. says the money-market stress that sent short-term borrowing rates surging last month is likely to get much worse despite the Federal Reserve’s attempts to inject billions of dollars into the financial system.
...
JPMorgan says it’s not convinced the Fed has resolved the issues in the funding markets, according to a note from analysts led by Joshua Younger in New York. ...
...
The overnight liquidity provided by the Fed goes directly to primary dealers, whereas those most in need of it are the non-primary dealers, the JPMorgan analysts wrote. The success of the program therefore depends on how much of the liquidity is passed along, but primary dealers are deterred from doing so by rules specifying how much capital they must hold to protect against losses.

Meanwhile, a preliminary analysis of balance sheets at the largest banks based on their third-quarter results suggests they may have to cut back on repo activity even more at year-end to avoid liquidity charges.
...
JPMorgan’s note follows similar warnings from Bank of America Merrill Lynch and Goldman Sachs Group Inc., who have also attributed September’s funding stresses to factors including post-financial crisis bank regulation. Even after the Fed’s latest moves to ease the log-jam in funding markets, “intermediation bottlenecks remain,” Goldman Sachs said.
...

https://www.bloomberg.com/news/articles/2019-10-21/jpmorgan-warns-u-s-money-market-stress-likely-to-get-much-worse

Just wow. The way I read that report, it seems JPM is:

1. confirming that they are the big whale with the liquidity problem driving the bulk of the problem in the repo market
2. arguing that the Fed is impotent to solve the problem and the rules on balance sheets need to change. The implication being that the banks can't handle compliance with current cash reserve requirements (scary if you think too hard about it).

[hornhorn 100]

17 minutes ago, bernorange said:

So, anyone here see this?

https://www.bloomberg.com/news/articles/2019-10-21/jpmorgan-warns-u-s-money-market-stress-likely-to-get-much-worse

Just wow. The way I read that report, it seems JPM is:

1. confirming that they are the big whale with the liquidity problem driving the bulk of the problem in the repo market
2. arguing that the Fed is impotent to solve the problem and the rules on balance sheets need to change. The implication being that the banks can't handle compliance with current cash reserve requirements (scary if you think too hard about it).

So basically all the investment banks are the ones who are in need of this liquidity. Maybe its time to stress test Goldman and Morgan Stanley.

[Captainant 27828]

20 minutes ago, bernorange said:

So, anyone here see this?

https://www.bloomberg.com/news/articles/2019-10-21/jpmorgan-warns-u-s-money-market-stress-likely-to-get-much-worse

Just wow. The way I read that report, it seems JPM is:

1. confirming that they are the big whale with the liquidity problem driving the bulk of the problem in the repo market
2. arguing that the Fed is impotent to solve the problem and the rules on balance sheets need to change. The implication being that the banks can't handle compliance with current cash reserve requirements (scary if you think too hard about it).

well the last time we faced a major liquidity crisis was 2008, and that sure turned out great. I know we "fixed" the mortgage derivative problem, but we really just kicked the can into a different problem, which is still massively growing debt without the ability to pay it down.

Sure is gonna be fun when all this goes tits up in a few months once we really get the middle east fucked up and brexit destroyed britain's economy and throws a wrench into the EU.

[52-80 19264]

22 minutes ago, hornhorn said:

So basically all the investment banks are the ones who are in need of this liquidity. Maybe its time to stress test Goldman and Morgan Stanley.