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  • The Drug Carry Trade: Valeant's Massively Leveraged Long-Short Strategy Is About To Unwind [View article]
    Indeed... The US healthcare system is by far the most expensive, and one of the least effective in the modern world.

    It does not take much digging to discover this...
    Oct 2, 2015. 01:55 PM | Likes Like |Link to Comment
  • Herbalife: Pyramid Or Sphinx [View article]
    That implies margin pressure, but not necessarily legal action or regulatory penalties, depending on what regulators decide is wrong with the business.

    That's interesting, I can see the process you used for evaluation. It's a little ridiculous HLF has to be brought in front of regulators to release the numbers required to see how the business operates.

    Its a public company, most of these sales figures should be widely available. The value should be in the product, how they chose to pay their distributors should hardly be proprietary... Unless they are running a pyramid in such a way as to prevent regulators from ceasing their operations... That would be very valuable.
    Sep 29, 2015. 01:55 PM | 4 Likes Like |Link to Comment
  • The Drug Carry Trade: Valeant's Massively Leveraged Long-Short Strategy Is About To Unwind [View article]
    Please explain, when I see a story like this I see it as indicative of a capitalist healthcare system, and an endorsement of socialized medicine.

    I'm interested to hear how you came to the opposite conclusion.
    Sep 28, 2015. 02:03 PM | 3 Likes Like |Link to Comment
  • Valeant takes another hit after House Dems request subpoena for docs on drug pricing; shares off 12% [View news story]
    It's fundamental to the business model. Paying a 50%+ premium for an acquired drug company requires costs to go down, or revenue to go up.

    Valeant guts R&D and raise prices to what the market will bear. That's good capitalism, but it hurts when people call you out on it.

    It's almost like regular people are unhappy when life saving drugs are controlled by a corporation whose job it is to make investors money... That's so odd.
    Sep 28, 2015. 02:01 PM | 7 Likes Like |Link to Comment
  • The Drug Carry Trade: Valeant's Massively Leveraged Long-Short Strategy Is About To Unwind [View article]
    Wow, if this happens and Valeant's CEO is testifying before congress with Martin Shkreli it could well be devastating. It might actually prompt real legislative changes... Though I can't help but feel that's unlikely.
    Sep 28, 2015. 01:57 PM | 2 Likes Like |Link to Comment
  • The Drug Carry Trade: Valeant's Massively Leveraged Long-Short Strategy Is About To Unwind [View article]
    The trade is dangerous, I agree, though for different reasons. The author wanted to shine light on the fact that public opinion could be swayed to deal with the pharmaceutical industries price gouging. I'd argue this is unlikely for a few reasons:

    1) Canada's healthcare system is an order of magnitude better than the US system, with more government involvement, yet has also failed to implement satisfactory pharmaceutical legislation (note that many developed European countries are an order of magnitude better than the Canadian system and, to my knowledge, have managed to pass this legislation).

    2) Many under-estimate the ability of vested interests to prevent US consumers from acting in their own self-interest. Many have decades of experience forming public opinion, preventing legislation that should have been passed many years ago from actually occurring.

    3) The likelihood of a "Obamacare" solution to this issues is much higher than most rational observers would expect. What I mean by this is the legislation was initially started with good intentions and real solutions. It was gutted by congress on the request of lobbyists before passing, preventing effective change. (Note: It is also likely to be scrapped if Republican's win the election, despite the effectiveness of the weakened policy change. We are likely to see a repeat here, if it makes it that far).

    There is currently "winds of change" that could negatively impact most of the bio-technology/pharmac... industry, but like most winds, there is a massive machine in the US that is unlike any in the developed world. For consumers to actually get the system to protect their best interests, particularly in the US, is a nearly impossible feat.

    On the other hand, the likelihood that the industry will choose a company to sacrifice to the public to get them to forget this little issue even happened, is possible. This represents a bigger risk as Valeant, a Canadian giant that fits the bill perfectly, stands out as a solid target. It depends how much influence Valeant has built (purchased?) in Washington to see if they can ensure this witch-hunt stays focused on Martin Shkreli.
    Sep 28, 2015. 01:43 PM | 3 Likes Like |Link to Comment
  • The Drug Carry Trade: Valeant's Massively Leveraged Long-Short Strategy Is About To Unwind [View article]
    It's the US healthcare system. It's the most obviously broken in the world. All other countries have single-payer, or government owned, healthcare systems that allow the country to negotiate the best price for all healthcare expenses, including pharmaceutical drugs.

    Leaving hospitals and pharmacies to purchase drugs on a case by case basis, especially for little known drugs that are required to save lives, means that drug companies can charge whatever they want, as the demand stays the same and the system itself foots the bill.

    The US has long been subsidizing the international communities healthcare bills, and when the first attempt to properly fix the situation was attempted, it was derisively deemed "Obamacare" and gutted before passing.

    I imagine pharmaceutical legislation would pass with a similarly tame "solution" once lobbyists are done with it. It would be impossible to believe that would happen, if not for how difficult it was to foresee the Affordable Healthcare Act passing without a public option, which it managed to do despite all rational policy observer's protests.
    Sep 28, 2015. 01:26 PM | 3 Likes Like |Link to Comment
  • CEO Compensation: The More You Pay, The Less You Get? [View article]
    You do attempt to dismiss the criticism that the listed companies mentioned are all resource companies by stating that the TSX is heavy with energy and materials (~26%). That makes the article much more contentious, as energy and material companies are generally well paid due to the risk involved (much like their employees high wages). The other issue is that energy, material and finance have all suffered recently, paring their returns despite the three industries making up 63% of the index, and their CEO's being among the highest paid in Canada, building in a bias, presumably.

    A more meaningful comparison is by breaking the performance down by industry, something feasible when you are looking at such a short time frame, though that might require increasing the sample past the TSX 60.

    Baring that, a break down of the composition of the 35 highest paid companies, to show that their industry breakdown is close to the TSX, which might be the case, it's hard to tell without seeing the data.

    I do agree with the general idea. Actually creating value without taking on large risks is difficult in any company, as they are all run by talented people in competitive industries. There are 60 CEO's in the TSX 60, but thousands to choose from in Canada. They are always the cream of the crop, even if they are paid one tenth what the next one makes... In my opinion.
    Sep 24, 2015. 05:28 PM | Likes Like |Link to Comment
  • The Inextricable Link Between Politics And Biopharma Investing [View article]
    The two Democratic front-runners are both now on the side of increasing regulation on the bio-pharma industry. Sanders, who will be much more aggressive in attaining an adequate healthcare system, is doing well as the Democratic primaries begin, making nomination of either difficult on an industry who relies on American's system remaining broken.

    The Republicans have had their heavily unpopular positions highlighted by Donald Trump's participation, shining light on some of the most aggressively backwards political opinions in modern history, and exposing moderates who choose to watch the debacle unfold to those opinions Republicans are required to say to satisfy the "base" that influence nominations in the primaries.

    The Republicans are scaring the moderates away, and the Democrats are taking the issue of affordable healthcare into consideration. As the author indicates the healthcare sector in America is tied to its political environment, and the likelihood that a "continue as-is" Republican winning, with everyone knowing the "party-line" they tell their base during the primaries, makes that nearly impossible.

    Clinton is the most business-friendly (super-PAC funded) of the Democratic potential nominee's, so hearing her discussing reforming the system could be devastating to the industry.
    Sep 23, 2015. 01:34 PM | 3 Likes Like |Link to Comment
  • Brookfield News Has Similar Benefits For Northwest Healthcare Properties [View article]
    Been a solid run so far this year, pleased with the results. Financials have been reasonable, and the trend should start bringing in other types of investors.

    If the markets do poorly I'm expecting this company to have substantially less down-side... And if the markets do well, the return to fair value should be a profitable move upwards.
    Sep 22, 2015. 06:38 PM | Likes Like |Link to Comment
  • Do Not Short Highly Levered REITs With Strong Fundamentals [View article]
    REIT's have been punished below what most would consider extreme value, and instead of presenting this as an opportunity writers are calling for exiting and shorting their positions.

    Especially in a case of companies that control physical property, a terrible manager only allows you to accumulate assets at fire-sale pricing. Managers can be replaced, or improved, over time, the assets they control are not as easily replicated, let alone for 80 cents on the dollar.

    It was refreshing to see another author look to these REIT's as opportunities. Low prices may beget lower prices in the short term, but landowners that earn slowly escalating rents make these investments more compelling on the way down. Reinvest the dividends, and try not to let market sentiment and article bashing make you exit.
    Sep 3, 2015. 03:55 PM | Likes Like |Link to Comment
  • My 'Freakonomics' Bank Pick Of The Month [View article]
    In my experience companies like this can stretch those figures by leveraging themselves, as a return on less equity makes the effective yield higher, with larger risks.

    Some Canadian companies, for example, have high interest savings vehicles that provide "sticky" and cheap access to financing as they consistently earn more than a commensurate savings account at a major financial institution, but these funds are also the most at risk should something happen, as accessing them is relatively easy. To try to compensate they also borrow using Term deposits which are higher rate, but are relatively cheap compared to corporate borrowing, and are stickier because they cannot be withdrawn.

    On the loan side, corporate loans and mortgages, and personal loans, offer more compelling rates but aren't as safe. The lenders who focus on personal mortgages must then utilize cheap leverage through consumer HISA, Terms and short term credit lines taken on the parent company, to juice returns.

    I like to think of it like this:

    Equity: $1,000,000
    HISA: $1,000,000 (costs 1.25%)
    Terms: $1,000,000 (costs 2.5%)
    Parent Company Short-Term Loan: $1,000,000 (costs 1.5%)

    If they are Mortgage Focused, they can lend out $3,000,000 at 2.85%, making money on the spread. They can then pay out 90% of their earnings to shareholders, spread equally to all Equity holders. They are leveraged 3 to 1. They could payout a 2.97% yield.

    If the company is equity-light, they can pay out a massive amount more. If their equity position (in the above example) was $500,000, they could effectively pay out a 5.94% yield, while taking on more risk (leveraged 6 to 1).

    The same concept works for corporate and personal borrowing, but instead of leverage risk there is lending risk (the loans themselves are riskier). In our example if you keep it all the same but have an effective rate of 5% on what you are lending out, you can be leveraged 3 to 1, but have an effective rate of 8.775%, with higher underlying loan risk.

    That's all I was trying to gauge, if these particular lenders are the highly leveraged variety, or the higher lending-risk variety. Both have their merits, and risks to consider.
    Sep 3, 2015. 03:42 PM | Likes Like |Link to Comment
  • Miller Industries: Investing Smartly For The Future [View article]
    Very interesting company. These older, well-run companies in "non-sexy" industries, trading at a discount are always good finds. I enjoy that type of company, though in this ones case I am not as certain.

    My long term fear is the headwind presented by self-driving cars, which will reduce the vehicle collision rates by a substantial amount. Due to how the industry works, every car converted is responsible for a disproportionate amount of accidents avoided as those interested would be the most at-risk (older drivers) and those that drive a lot (I would buy one in a heart-beat, so I could work on projects while I get places).

    This may be a few years away from having an impact, but its tough when so many companies need to post impressive growth in order to get premium valuations. This company might be able to dominate their industry, but it might find itself as the largest in a shrinking industry.
    Sep 2, 2015. 01:29 PM | Likes Like |Link to Comment
  • RCS Capital: Painful Quarter Changes Game For Investors [View article]
    You're right, they were running the risk of violating debt covenants, though with the fire-sale of their wholesale division and a renegotiation of those covenants, the risk should be diminished slightly.

    There is still a lot of debt, something that raises the risk and return profile for the company.
    Sep 2, 2015. 12:28 PM | Likes Like |Link to Comment
  • My 'Freakonomics' Bank Pick Of The Month [View article]
    Interesting way to analyze smaller banks, a key metric to be sure. They are posting some impressive numbers, do they rely on consumer lending (non-mortgage) and commercial loans more than average? It seems odd to produce that kind of extra interest margin without stretching on the risk-side.

    If the savings is mostly from deposit, how are they getting away with rates that low? Do the majority keep the funds in low-interest flexible accounts (savings and short-term GIC's)? This is nice as it bumps interest margin, but that's also the hardest money to hang on to when things change (better or worse), making the deposit side less reliable.

    Curious to hear your thoughts, thanks for the article.
    Sep 1, 2015. 03:02 PM | Likes Like |Link to Comment