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  • Taxi Medallions Are Safe Because Uber Will Implode [View article]
    There seems to be some misunderstanding about Average LTV and how the current fall in Medallion prices may play out for TAXI. As at September 30, 2014, TAXI reported weighted average LTV for medallions of 40% on about $304 million dollars of loans at fair value (not including Medallion Bank which has additional exposure.) However, the range is from 0-96%. As Larry has pointed out earlier, TAXI has recently stated to him that the Average is now 50%. There are a number of ways that the average goes up this substantially and this quickly, perhaps alot of people with low LTV paid off their loans or Taxi has extended alot of new loans at higher LTV than average. However, the most likely scenario is simple math (LTV= Loan / value). Loan stays roughly the same and value has decreased markedly since September 30, 2014. (There is an unrestricted medallion listed on page 2 of the website for $669,000 for quick sale ( )) This is a far cry from the over $1mn prices in September. If TAXI had some loans at a LTV of 96% before the big fall, are almost certainly underwater now. And as someone has said earlier, many may have balloon payments coming (see September 10Q for a partial listing of when loans are due.) How is someone who owes over $468,000 (which is 70% of $669,000 needed in order to get a new loan based on current value) going to refinance that medallion when a balloon payment is due?? It will get repossessed. This is how asset based lending works. One needs only look at a similar situation that occurred in the US housing market to see how this plays out. In addition, TAXI owns 159 City of Chicago medallions (albeit with a large imbedded gain) that will also lose value. I presume that these may be used as collateral for some of TAXI's own borrowings in order to bring borrowing costs down.

    I truly feel bad for the individual drivers who have invested in these medallions and hoped to retire on their sale but they should be talking to the City of New York or other cities that have used this as a revenue source instead of keeping the prices reasonable and allowing all drivers (whether leasing or tying up vast amounts of capital as owners and paying down loans) to keep more of the revenue that they have made over the years.

    TAXI appears to be growing in many other areas of secured and other lending for its future but I think that their current over-reliance on medallion revenues and profits for current performance is unsettling. It would be nice to see someone analyze TAXI valuation with a reasonably quick reduction of the medallion business assumed to see how this might turn out and at what price is TAXI a good value.
    Jan 29, 2015. 02:45 AM | Likes Like |Link to Comment
  • Taxi Medallions Are Safe Because Uber Will Implode [View article]
    Since the main thing a medallion owner can do that an Uber driver can't is pick up hailing passengers, how much is that worth? $1,000,000? $500,000, $50,000, $5,000? If Medallion Finance lends on a $300,000 down payment on a $1,000,000 medallion and the NYT article indicates prices down 20-25% from the peak by the end of November 2014, that doesn't leave alot of cushion for MF does it. What do you think a medallion is worth considering the REALITY of Uber, Lyft, and all the others that will come? More importantly, what % of MF business (profits) come from medallion lending? This business will dry up as prices are falling even if every current borrower continues to pay irrespective of how far the value of a medallion falls. Sales of medallions in many large metro markets have already dried up. Even MF has indicated that they will focus on other things. If you believe MF is a good buy without this medallion business then great but that doesn't seem to be what you have been saying. If you believe that the value of medallions will hold up, good luck to you Larry! You noted that the medallions are a business for these drivers. If they owe $700,000 and the value of the medallion falls well below that, do you think they would keep paying or do they bail and go work for Uber? I assume that they are rational.
    Jan 27, 2015. 11:10 AM | 1 Like Like |Link to Comment
  • Taxi Medallions Are Safe Because Uber Will Implode [View article]
    You might want to take your eyes off of the rear view mirror for a moment:

    New York Taxi Medallion Prices Fall Again

    DEC. 2, 2014
    Jan 27, 2015. 10:33 AM | Likes Like |Link to Comment
  • Taxi Medallions Are Safe Because Uber Will Implode [View article]
    Wow Larry, my numbers are illustrative of the fact that there is a cost to tying up $1,000,000 in a little piece of metal bolted to the hood of a taxi. This is a cost that was not included or discussed in an article that seems to focus on how Uber drivers will be uneconomic when they are properly insured (if in fact they are not yet properly insured which is stated but not backed up by a primary source.) Uber cars do not require this piece of metal. It seems to me that if you are leasing the medallion then there is a real cost. If you own the medallion, there is a real cost too irrespective of how it is or isn't financed. I'm just looking at a proper financial analysis vs. argument or advocacy. To pretend there is no cost because the capital value has gone up in the past is not really valid when we look forward at what is actually happening to medallion prices around the country (including NYC.) If I buy a medallion for cash, I have to take $1,000,000 that I could have invested for return elsewhere. If Medallion Financial is willing to let someone else take the first 30% of downside risk and lend at 4.5%, what would you think the return should be to compensate the person who is taking the first 30% of risk (well, actually, I don't know if these are recourse or non-recourse loans so possibly 100% of risk to the borrower.) To suggest that a required $1,000,000 capital outlay has no cost, irrespective of how it is financed, does not seem like a proper way to analyze the Uber vs. Yellow Taxi costs. If 40% of licenses are owned by individuals then 60% are not, there are alot of people leasing medallions. In addition, an individual license holder does not drive 24/7 so even those licenses are leased out to non-owners for some shifts (individual owners need to drive a certain minimal number of shifts.) So all those drivers who are paying rent on a $1,000,000 medallion every shift can simply buy a car, buy proper insurance and get a limo driver's license and voila....they own their own business with no fees to cover the cost of a $1,000,000 medallion.

    Why do you think a little piece of metal costs $1,000,000? Simple supply and demand. Lots of demand and limited supply. Supply can increase officially by the release of new medallions or it can be effectively increased by increasing the availability of what that medallion allows you to do: give rides to passengers for money (a la Uber et. al.)

    Also, whether or not Uber or Lyft make alot of money in the short term is largely irrelevant so long as people are willing to give them Billions (that is a big B) to keep going. The issue for for the price of taxi medallions is that as long Uber and others are around, there will be ample supply of options for rides available for passengers outside of the official taxis.

    BTW, 30% down payment on a $1,000,000 medallion is $300,000. A LTV of 50% would equate to a $500,000 down payment and I'm not sure where $350,000 comes from in your comment.
    Jan 27, 2015. 05:03 AM | 1 Like Like |Link to Comment
  • Taxi Medallions Are Safe Because Uber Will Implode [View article]
    jrdragon, why do you quote a primary source like the Florida Office of Insurance Regulation Deputy Chief of Staff when you could quote Anthony Kalamar, writing in OpEd News or the author's cousin Steve?
    Jan 27, 2015. 04:00 AM | 3 Likes Like |Link to Comment
  • Taxi Medallions Are Safe Because Uber Will Implode [View article]
    You appear to have forgotten to add in the cost of holding or leasing a medallion for the economics of Taxi vs. Uber. Most taxi drivers in NYC do not own their medallion and have to pay a per shift fee. Those who do own them have to pay a bank or medallion finance company to finance them or have a substantial sum of money tied up in owning a medallion. at a 5% return on $1,000,000, that is $50,000/year in opportunity cost. I would argue that 5% is too low of a return for this now risky asset. If you lease the medallion you are charged on a per shift basis (I have seen numbers mentioned as high as $132/shift but don't know if it includes the vehicle.) Even if you assume 2 shifts a day and 360 user days at $100/shift it would come to $72,000/year. Hmmmm.
    Jan 27, 2015. 03:14 AM | Likes Like |Link to Comment
  • UPS: Take Advantage Of Irrational Pricing [View article]
    WSJ article: "Amazon, in Threat to UPS, Tries Its Own Deliveries
    An Alternative to Shippers Like FedEx and UPS, New Service Could Deliver Goods the Same Day as Purchased"

    Author Comments?
    Apr 28, 2014. 06:57 AM | 1 Like Like |Link to Comment
  • Potash Corp: Top Contrarian Value With At Least 20% Upside Potential [View article]
    In a commodity market, low cost ultimately production wins. Comment and comparison of cost of production for the companies in the market (including the former cartel members) would be helpful in this analysis.
    Feb 7, 2014. 04:30 AM | Likes Like |Link to Comment
  • Nordic American Tanker Can't Generate Cash [View article]
    Key question is how long will it take to wash out competition with higher cash costs than current rates? This is what will bring more sustainable spot pricing back to the market. If operators can't foresee an ability to make cash costs + depreciation (to provide for new ship capex) + profit over the medium to long term then we should see a gradual decrease in operators. If they can't even cover their cash costs in the short term then we should see a decrease much sooner depending on the current liquidity situations of the these operators.
    Sep 5, 2013. 06:48 AM | Likes Like |Link to Comment
  • Why Friedman Industries Is My New Pick To Click [View article]
    Arohan, agree with your comment in general, however, keep in mind that net PP&E is only $11.3mn of $76.6 mn of total assets for FRD. So scrap value of plant would be less significant item in a liquidation due to high amounts of cash, A/R and inventory.
    Aug 15, 2013. 03:31 AM | Likes Like |Link to Comment
  • Questioning China XD Plastics' SEC Filings [View article]
    Can you update the link in your comment. Thanks.
    Mar 14, 2012. 10:08 PM | Likes Like |Link to Comment
  • Friedman Industries: An Undiscovered $10 Stock Yielding 5% [View article]
    A few other less apparent items:
    - founder died a few years ago and son resigned from board. This coincided with more substantial return of cash to shareholders including special dividend. No significant majority shareholder if takeover is contemplated.
    - during the depths of the financial crisis, company burned about $1+mn per year due to highly variable costs (a big positive) at the same time that they lost their biggest customer.
    - they commissioned a new coil plant just around the time of the financial crisis so no need to pump further capital into this area as there is still new and excess capacity.
    - at the depth of the crisis, company traded for about the amount of their working capital (which they unwound to cash. Back then there was a significant margin of safety as the w/c paid for your shares and you got the business for free while it was burning minimum cash to keep the lights on.)
    - My earlier research (admittedly a few years ago) came across a statement in one of their filings which basically said they were not interested in investor comments on how to run the business so this mentality is ingrained in the mindset and probably from the founder.
    - I purchased during the downturn (not because I am so smart but because of the substantial margin of safety) and still hold most of my position. I do not see this becoming a large growth company but rather a cash generative company willing to return money to shareholders with management willing to base their compensation on the true performance of the company.
    Mar 9, 2012. 02:05 AM | Likes Like |Link to Comment
  • Updating Price Targets And Ratings For 5 Companies [View article]
    THI cash is lower because of significant share buyback over the past quarter and year.
    Jan 9, 2012. 09:13 PM | Likes Like |Link to Comment
  • 6 Stocks With Unusually Aggressive Insider Activity [View article]
    For JEF, (also, coincidentally, a large LUK holding,) CEO Richard Handler and Executive Committee Chairman Brian Friedman did not purchase but were awarded options that would have a value in stock IF EXERCISED of $757,537 and $180,354. They do not appear to have made a purchase on August 15th. You may wish to also check your details for OI as well. ARCP, same issue as MLI.
    Sep 20, 2011. 06:18 AM | Likes Like |Link to Comment
  • 6 Stocks With Unusually Aggressive Insider Activity [View article]
    Only one total purchase of 10,422,859 shares of MLI done by Leucadia National Corp. (LUK) who have been persistent/consistent buyers of MLI. Cummings is Chairman of LUK and Steinberg is a Director and President of LUK and this is why they needed to file a statement of beneficial ownership for Leucadia's purchases as they are also Directors of MLI. These are not 3 separate purchases.
    Sep 20, 2011. 05:11 AM | Likes Like |Link to Comment