A Supreme Court Mess

Just before going to bed Saturday night, I looked at my phone (which I normally avoid at night) and saw the headline that hit me like a truck: Justice Ruth Bader Ginsburg passed away at 87 years old. I immediately regretted looking at my phone. Really, what good can come out of looking at the news before bed. I instantly knew a political bomb was dropped in an already over-the-top gonzo super-charged election. The “October surprised” came early is a mild way of putting it.

Trump and Mitch McConnell didn’t waste time saying that they were going to fill the seat before the election, of course causing a massive controversy. The Democrats still haven’t digest what the Republicans did in 2012 with then-President Obama.

Some President never gets a pick. Just having one pick is a major decision. Trump is getting three picks in his first term assuming this one goes through. His first two picks were re-nominating conservatives judges to maintain the statue quo. But now he gets to flip a seat from liberal to conservative. Trump and McConnell gets to complete a judicial coup and install a 6-to-3 conservative majority. I don’t recall anything like that from happening and the Dems are freaking out.

The Democrats really have no power to stop them. So they make threats that if they take control of Congress that they will make sure that they get their day (severe retaliatory actions like expanding court, adding states (D.C. + Puerto Rico). For the Dems to take action they will need at least 52 seats plus the White House.

I don’t want to rehash everything that happened. If you read the news you know what happened in 2012 when McConnell and the Republicans stalled Obama to let the voters decide with ten months to go before the vote. It’s hard not to see the hypocrisy. But this is politics. Hypocrisy is an enduring norm with a long pedigree. Wouldn’t you have expected otherwise? You think the Democrats wouldn’t have not the done same in a similar situation? Try to imagine the reaction of Chuck Schumer, Nancy Pelosi if a conservative Supreme Court justice had died weeks before the re-election bid of a Democratic president while that party also controlled the Senate.

At first I was a “shocked” that the Republicans will go ahead with that. It’s hard to have faith in your politician, the government, the institutions when they pull that kind of tricks. But now that I digested the news, maybe the Republicans are shooting themselves in the foot with rushing the process.

At the moment of typing this post Trump is leaning towards Judge Amy Coney Barrett as a potential replacement. But it could change soon because they often send ” trial balloons” in the media to measure the reaction. Nominating Amy Barrett signals two things 1) Trump is going after the female vote 2) Trump is going after that “undecided/frustrated” middle-right centrist voter.

However that strategy might not pay off. Install Barrett and centrist GOP voters have one less reason to hold their nose to vote Trump. This could make the difference in the Presidential election. The Republican establishment probably already know that but staging the legal coup is very important to them. It’s worth the price to pay.

The simple answer here has always been that the GOP would confirm someone, because it’s worth an awful lot to them, and also that they’ll pay a price for doing so, because it’s worth paying a price for something that’s worth a lot to you. Maybe to the Republicans is worth sacrificing a few seats if you can reverse abortion and have a long-term hold on the judicial branch. If you’re McConnell you just want to get somebody confirmed as soon as you can, and then deal with the consequences (electorally and otherwise) later.

By paying a price, the polling suggests this is an unpopular move, perhaps verging on very unpopular depending on which poll you look at. So, it’s likely to make it harder (though far from impossible) for the GOP to hold the Senate. Is that the decision that will push the Senate to flip blue? And get slaughtered in the 2022 mid-term. But the playbook plays out, the Dems will be able to draw some decent House maps in redistricting, they can add D.C.+ Puerto Rico to help mitigate their Senate disadvantage, and the GOP seems to have trouble winning the presidency; it’s not a bad medium-run position.

SA Interview: Value Investing With Brian Langis

I got the privileged to be interviewed on Seeking Alpha. I believe the article is behind a pay wall at the moment unless you pay $200/month. Should be free after a week I think. It’s a long one, 19 pages. Enjoy!

Here’s a preview:

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(Exclusive) SA Interview: Value Investing With Brian Langis

Summary

• Brian Langis is a Chartered Business Valuator (CBV), investor, and manages Cape May Capital, a private investment company.
• The first question he wants to answer in the research process, the value in seeing what the credit markets have to say before investing in the equity and the importance of thinking like a business owner are topics discussed.
• Brian Langis shares long ideas on Intertape Polymer Group, Brookfield Asset Management, Brookfield Property Partners, Alimentation Couche-Tard and Jungfraubahn Holding.

Feature interview

Brian Langis is a Chartered Business Valuator (CBV), investor, and manages Cape May Capital, a private investment company. You can follow him on his blog at BrianLangis.com and on Twitter. We discussed how to evaluate a company’s culture, how to gain an edge from “on the ground” research and what “quality shareholders” are (and why companies need them).

Seeking Alpha: Walk us through your investment decision making process. What area of the market do you focus on and what strategies do you employ?

Brian Langis: First I want to answer the question “will it be around in the next twelve months?” In other words, does the company have a solid balance sheet? Does it have enough cash to pay its bills? To fulfill their obligations? To keep the lights on? To grow? To return money to investors? It’s a snapshot, akin to a quick blood test to prevent pitfalls. It also saves you time. It doesn’t matter how convincing the story is, cash is blood. Happiness is positive cash flow. A bad investing experience when I was a teenager left some scars in my brain. Basically the company was sexy, the product was better than anything on the market, and the CEO was smooth. But the company ran out of cash and creditors took over. If I repeat that mistake again I didn’t learn anything. People are attracted to investing for potential lucrative short-term returns. For me I can’t play that game. I don’t know what is going up today or next month. If you want to do this a long time, you need to survive, and you survive by avoiding losses. We see it today with the pandemic. It reinforces lessons we already knew. Liquidity and survival remains paramount.

Once I get a handle on a company, I look for four main things:

1. Is the company profitable? Do they generate strong free cash flow (FCF)? Good return on capital (ROC)?

2. Is it run by an honest talented management? Is management and shareholder interest aligned?

3. What are the re-investment opportunities? This is the capital allocation portion. What do they do with their cash? Are they a disciplined allocator?

4. Valuation. Can I buy it at a fair price?

You will notice that the first 3 points of the process are intermingling. It’s hard to have one without the others. A solid management team with a disciplined capital allocation process usually leads to excess FCF generation and great returns. Now the main question is can I buy it at a fair price? How much am I willing to pay for it? It’s a highly subjective exercise. It’s the “art” part in valuation. I know price and value and they are two different concepts. In order to know what action to take, you have to look at the asset’s price relative to its value. Assets are only attractive if they are priced right.

You can read the rest here.