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Assaf Nathan

 
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  • Is Warren Buffett Losing His Mind? [View article]
    Sorry, but you are DEAD wrong.

    The countries you mentioned have their debt in *other currency* than their own. So they can print money but they cannot repay their debt with it.

    Argentina uses Pesos, but its debt is in US dollars. It can print as many Pesos as it wishes, its debt will still be CONSTANT in US dollars and the Argentinian government can do exactly NOTHING to lower the debt.

    The US is the only country that has all of its debt in US dollar, the "home" currency, thus is able to control its external (and internal) debt.

    See for instance - Argentina entire external debt is in... US Dollars !
    www.mecon.gov.ar/proge...

    Till those countries can print US dollars, they will repay their debt in other currencies than their own and as such they do not deserve perfect AAA rating.

    In general I would like to comment in the defense of WEB - There are not many people walking on this earth that can criticize him or understand the way he thinks. Mostly when people criticize him, it comes from utter ignorance (like in our case) or plain stupidity, see for instance Jim Cramer criticism about buffett selling PG and JNJ "not being american after calling us to buy america" back in 2008. It turns out he sold those shares to buy other american companies.

    When criticizing Buffett, I would leave a lot of room for error and modesty, which obviously the author lacks.
    Aug 8 09:10 PM | 5 Likes Like |Link to Comment
  • Can Nordic American's Fat Dividends Continue? [View article]
    BIGGUYPEET,

    I know the company very deeply. I don't care what other experts say, other experts also said that housing bubble in the states won't explode. I prefer having my own independent opinion, otherwise I'm just another ant. A fund manager cannot afford it.

    Well, I raised some logical claims, you can't argue with that. I think you didn't, instead of talking to the point, you chose to undermine my knowledge of the company (based on what?). If you choose not to agree that's fine, I'm sure your decision is based on a thorough analysis. I'm hoping, for your sake, that I'm wrong and that management will pull some rabit out of the hat (print money maybe?).

    You said "years of dividends": isn't this exactly what I was discussing in this article? - Whether this can continue? (and it can't). Citigroup distributed "years of dividends" as well. Also AIG. So what? What does it proof? Enron did it as well. We both know (I hope) how Enron ended. I don't see any logic in mentioning past performance as proof of future one. One could have enjoy it in the past, indeed. I even opened the article with the astonishing returns NAT had. But what about the future? If you don't buy it, fine with me, I'll just sit and enjoy the show. It will take a few years, but if there is one thing I have, is patience.

    Moreover, I communicated my ideas to the CEO and to the investor relation officer in person, but they chose not to respond. If management are so good, what are they afraid of?
    Oct 11 12:14 PM | 5 Likes Like |Link to Comment
  • The Nordic American Tanker Model and How It Can Be Fixed (Part 1 of 2) [View article]
    A few more things:

    Are you serious about your claim that companies traded under book value are underpriced? Do you really think that the number that is written in the company's assets represent the actual price they can get on their assets? If you do, you need to hit the (basic) books again.

    Do you think that the banks that end up with houses after foreclosures got for the houses what they wrote in their balance sheet? What caused this financial crisis in the first place, isn't it this exact assumption?

    usualy when a company liquidate it's under a fire sale. And lets imagine the company NEVER liquidate, like 99.9% of the comapnies, why should the price go back to book value? What will be the catalyst? (In a company, like NAT, that an hostile takeover cannot take place).

    The catalyst here, my friend, is nothing but the dividends. You need to analyze DIVIDENDS. Not "book value". There is a connection between the two, of course, but you make it sound like book value is all there is to it. Gosh. If Macdonalds say in their books that they have 2B$ of french fries making machines, do you really think they can get 2B$ for it?

    According to you, we can burn all investment books because we have seen the light- just look at book value. If it is lower than 1 - voila, there we go. Otherwise - go away. I wonder what buffet would say about this statement. Go buy some airline companies, they are all mostly below book value. Buy and hold for 20 years. Let's see how you will end up. You can also buy textile copanies in US back in the 60's. They were all below book value. Wow. so undervalued. But even back then even one person would not pay 1 cent for every 1000$ in their books.

    Now for the cherry on top of the ice-cream - here is one question that will *KILL* your argument.

    Back in the end of 1997, some 13 years ago, NAT traded at 1.147 of book value. 15% above book value. According to you, it was overpriced even then. So one should not have buy the company. Nice. Since then the company delivered 20% YEARLY. For 13 years. 13. this is almost 11 times your money. ELEVEN TIMES. Gee. I would LOVE to buy such "overvalued" companies. If you see some "overvalued" companies like these, please sell them to me. I'd love to have their 20% per annum, and you can have your claim that they are overvalued.

    Your small comments did not explain how come you claim that NAT is overpriced because of book value, and still, for 13 years the company delivered 20% yearly.
    They did not explain or foresee if this is still possible.
    My article examines exactly this - will NAT deliver the same way in the next 13 years like it did in the last 13 years. This is, of course, in spite of some people that will claim it was overpriced for the whole time. They see only book value.

    So keep investing according to book value. Please also tell me how it went, 10 years from now.
    Oct 20 09:41 AM | 4 Likes Like |Link to Comment
  • Why Frontline's a 10-Bagger [View article]
    Very good article.
    I admire your writing style and the clear light you shed on issues in matter.

    I will definitely be a follower !
    Jul 26 05:03 AM | 3 Likes Like |Link to Comment
  • Why Iron Ore Is Going To Be Great In 2013 [View article]
    I think you had yet to see the Chinese meltdown. It has just started.
    This article is just like some articles on the shipping industry a year and a half ago.

    The fact that prices dropped does not mean we saw the bottom.

    I cant believe a very common commodity, like iron ore, which costs about 20-30$ to produce and is abundant on our planet, will be sold at 130$. Just 10 years ago, throughout history, iron ore cost abut 20-40$. What happened now? "A new economy"?

    When China will drop the ore purchases, and when extra supply, scheduled next year (2013, and esp. 2015) will hit the market, we'll see how this commodity reacts to over-supply that meets declining demand.

    China already has over 70 million empty apartments, enough almost to transfer all of the US population into China. Over 60% of the population lives in "City-Villages" ("Villagers" that lives in a "village" that is comparable to Seattle in its infrastructure) . How far can this go? depends. But not long. I'd guess 2013-2014. Iron ore? I'd be surprised to see it above 100$ (or even 80$) by the end of 2014. Talking about "long term"... some horizon we got here :-)

    I'd be more surprised to see iron ore producers beat the market. Moreover, more pain is to come - why buy VALE at 20$ when you'll be able to buy it at 10$ in 1-2 years?
    Dec 24 05:45 AM | 2 Likes Like |Link to Comment
  • Is Warren Buffett Losing His Mind? [View article]
    I think you have a good point there. I especially agree about inflation.

    But the misstatements in Beijing are much more acute than changing how inflation is calculated. It is lying about the urban population, lying about the number of people in cities (they recently "discovered" another 12 million people in Beijing. They know about them long ago because of the Ho-Kou system), lying about provinces GDP (that always add up to more than the total Chinese GDP). So the US is far from perfect but the Chinese... Gosh...

    I still don't think it is the rating agency job to rate how the country behaves. If the US will run 25% deficit it will surely have to print lots of money and probably cause inflation. But is it S&P's job to predict inflation? What if the US will also raise capital requirements from banks thus decreasing the amount of money to kill inflation? S&P cannot predict the future.

    I am trying to say that it looks too much like politics than straightforward credit rating.
    They did not do their job with Lehman Brothers who went bust with "A" rating still hanging above them, and again they are not doing their job today.
    www2.standardandpoors....
    Read the last sentence and think how it can relate to these times. Isn't it the same? "
    "...in a way that fundamental credit analysis could not have anticipated." And if you do fundamental analysis on the US, what do you see?

    I think credit rating is more relevant to countries that actually CAN go bust. I would like to open the newspaper one day and based on the rating I can tell how likely am I to get my money back if it were invested in Nicaragua. I will check about Nicaraguan inflation myself.
    Aug 9 09:17 AM | 2 Likes Like |Link to Comment
  • Is Warren Buffett Losing His Mind? [View article]
    Sorry about the "dead wrong". :-)
    Your example in which Buffett lends to a corporation is not analogous to our situation, plain and simple.
    If Buffett is the lender, I.E. China and "ROW", and the company is the borrower, i.e. The US, what does stock represent? currency? Because in your example Buffett lended out money and expect to be paid back in money (not stock), so what does stock has to do with our story? (unless the US gvmnt has stocks that I don't know of).
    But let's continue: In your specific example, If I were Buffett, I would say to the company: "issue as much stock as you wish, dillute your shareholders by 1000000%, if i will get the money I am pleased". Who cares where the money is coming from? When I lend to someone money - I don't care how he will get it back as long as he will.
    Now, Imagine that your corporation had the ability to print money - now wouldn't you feel safer to loan to this corp?

    As I understand it, rating agencies rate the DEBT of a certain facility, or the CHANCE that you will get your money back, and NOT the value of the debt. This is a whole different story. I never saw a rating agency take inflation into account when rating a DEBT vehicle.

    Now answer me this: What are the chances that you will not get your dollars back when loaning to the US government? Zilch. Nada. This is why the US should always be AAA. It is like an axiom.

    That the fiscal status is crap? yes I agree. Inflation? Agree. But these are other issues. Maybe S&P should start a new division that should rate the "investment grade" of a country, in this the US will probably score low (in another thought, I am not so sure about this one as well). But if you are talking about CREDIT rating, CREDIT as of DEBT, risk of not paying back and going default, isn't it clear that US should retain AAA?

    Now let's say you do not agree with me, or WEB. Fine. It appears the ROW (rest of the world) does - since yields on TB had dropped to record low since the downgrade, as ironic as it sounds.

    And another thing - Imagine a scenario in which S&P gets bolder and downgrades the US debt over and over again to CCC.
    In this case, I think that S&P will become irrelevant, and not the US. If you think about it and induce to this case, you will see more clearly what is correct now.

    Regarding Chinese rating agencies that downgraded US debt - I wonder how those rating agencies rate their own sovereign debt, the debt of a country on the brink of the largest RE bubble ever seen that dwarfs the Subprime crisis a few times over and on the brink of social collapse. A country that lies in its statistics and that corruption and lack of rule of law, copying IP and lack of human rights are part of just another ordinary day. I guess if they even thought about rating it other than AAA they will be shot on spot. I say to S&P - go buy Chinese debt. See you in 10 years.
    Aug 9 02:38 AM | 2 Likes Like |Link to Comment
  • The Nordic American Tanker Model and How It Can Be Fixed (Part 1 of 2) [View article]
    Well I can't believe you are a half brained CPA either :-) No need to go to personal lines.

    Anyway, I demonstrated in simple language why it is not a good investment nowadays.

    I think that in my way of seeing things, you can see the entire model and not only part of it.

    You can claim that I don't understand their model as many times as you like, it's very much OK with me :-) I can claim you don't understand simple math. It won't say that it's true. Till you suggest a detailed alternative explanation that will point out my errors, I won't take your comments seriously.
    Oct 20 08:46 AM | 2 Likes Like |Link to Comment
  • Black Holes in Nordic American Tanker's Model [View article]
    Thanks for your comment.

    Currently, I think that there is no room for a long time horizon position in NAT. I feel that I missed the train, this could be a great investment 10 years ago. Right now, the risk is too close in the horizon.

    However, there can be a solution, not without a cost, that will solve this. This, of course, requires prudent actions from management in a very timely manner.

    As you said, I will detail my suggested solution in the coming post.

    After it will be posted, I will contact management (again) and forward them with those articles.
    Oct 12 04:48 AM | 2 Likes Like |Link to Comment
  • Intel: We Can See Why Berkshire Sold Its Intel Position [View article]
    It was not buffett at all.

    As buffett said - he does not buy in 200M$. He buys in billions.

    It was todd combs.
    Sep 19 07:29 AM | 1 Like Like |Link to Comment
  • Entercom Communications: A Value Opportunity [View article]
    I obviously got it wrong on the debt refinance side.
    Nevertheless, I sold out of it a long time ago at around 7$ per share.

    I think the non callable bonds at 11% broke my back, I was very angry to see these.

    Luckily I made money on this investment, today I would not buy them.
    Aug 22 02:00 AM | 1 Like Like |Link to Comment
  • Spanish Broadcasting System, Inc. Should Call Berkshire Hathaway [View article]
    I mostly agree with what you said. I was greatly disappointed to discover that my estimate of ETM's refinance was correct, but was added with a very high yielding bond.

    (1) When I said that the company has no assets, I meant from the lender point of view. As a bank, you wouldn't want to operate radio stations, and it is difficult for you to assess their value. When banks consider RE as dangerous, how dangerous are radio assets?

    (2) You are right, it looks like a stupid call. But the bank saw a prey, showed its teeth, and bit into the flesh. SBS was cornered and had nowhere to go. I talked with Steve, ETM's CFO, they can't bet the life of the company on a credit crunch and they have no cards against the banks. SBS refinanced 4 months before, ETM did it 8 months before (more conservative... Still these 8 months cost the company lots of millions).
    Radio companies are too small to pressure banks and they are too weak to resist. They are right in the size and the situation the bank likes. Just like a mouse and a snake.
    ETM's weighted cost of debt, BTW, is about 7.5%.

    I do not know why did they have to refinance everything for 12.5%. As WEB said - there is never just one cockroach in the kitchen. This is another roach. You call it incompetence, I call it maybe incompetence maybe lack of choice, either way the result is a cockroach.

    (3) You are right about the 10%, I thought about 5 billion and got 5% stuck in my head. WEB usually looks at businesses with good business metrics and good management, that even a "fool can manage". We both see what happens when a fool manages a radio company. Even more, at BRK, although structured as a conglomerate, each company still bears its own cost of capital towards the parent company - BRK states clearly that it does not want units to finance each other into an unfair advantage. If you blow it, you pay.

    I don't know if you are familiar with banking cartels, um, syndicates, and how things are being done behind the curtains, but the financing cartel usually DEMANDS a high yielding bond attached to the financing vehicle as a "candy". The real argument is what portion of the recycled debt will bear a reasonable interest and what portion will be the usury candy. The demand, of course, is that the bonds will be NC.

    When you NEED the bank, be sure it will make sure you will keep needing him, like a drug addict and a dealer - in our case a debt addict and a dealer.

    Otherwise, either all the radio companies managers are incompetent in negotiating, or they are addicts, as all of the radio companies I know bear very high interest rates + high yielding senior bonds.

    Thanks for your comment, and I share your disappointment for the company.
    Feb 15 03:35 PM | 1 Like Like |Link to Comment
  • Is Warren Buffett Losing His Mind? [View article]
    You call it semantical bullshit, I call it role or scope of operation. I think they had breached it.
    Maybe in your opinion S&P should asses the quality of Washingtons steps or how politicians behave, but they can as well issue plans for capital restructuring for countries and also recommend fiscal measures to reduce deficits, write budgets, heck, maybe they should create a division called "treasurers" that will outsource T-ministers to governments.

    If they rate CREDIT, they should rate CREDIT. They should stay within their defined role. If a country cannot default, they must issue AAA. Otherwise it is POLITICS, call it bullshit many times as you like.

    I agree that what is happening in Washington is a complete mess, but this requires other forms of rating, maybe some sort of efficiency rating, but why use credit rating? It is like using a book to stick a nail into wood. You can do that, maybe it will work in some awkward way, but it is still stupid.
    Aug 9 08:59 AM | 1 Like Like |Link to Comment
  • Black Holes in Nordic American Tanker's Model [View article]
    Jim,

    A few remarks:

    They started using this model *during* 2004, you are measuring from 2002, this is why you see the discrepancy of 100M. Start your calculation at the beginning of 2005, before it they were just plain boring shipping company. Then you'll be able to see the match between CFO and divs.

    As you mentioned, recently, they wanted to payout at least 10c although they did not generate enough cash, so they used op cash + hand cash to complete a 10c div, by this you are correct.

    I am sorry but I did not figure what was your intention in the third paragraph. Either this is very simple - as the definition of a balance sheet (raised funds = equity, isn't this the definition of equity, give or take?), or I completely missed your point. I don't see what is the claim behind those words. Also, what is share capital equals book value of equity?

    I would have to disagree on the last paragraph. Assuming those rates are unpredictable, one will need to rely on the sustainability of this model, not on discounted cash-flows. How can you discount an unknown cash flow?
    Assuming the model is sustainable - with time, rate values will converge to their mean. If not sustainable thus temporary - risk that everything will fall apart before of this so needed convergence.
    Oct 25 05:14 PM | 1 Like Like |Link to Comment
  • The Nordic American Tanker Model and How It Can Be Fixed (Part 1 of 2) [View article]
    So what?

    Are you telling me that there is no value to the business but the ship's value?

    Who said businesses need to trade at book value?
    Who said businesses under book value are under priced?
    Who said businesses above book value are overpriced?

    According to you, to evaluate a shipping company you only need to look at book value.

    Again, I think that YOU are the one missing the key point.
    Oct 19 07:17 AM | 1 Like Like |Link to Comment
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