Behind The Idea Podcast: Disney

Two weeks ago I was on the Behind The Idea podcast with Daniel Shvartsman to share my views on Disney. The Atlantic’s Derek Thompson also contributed at the 50 minute mark.

Here’s the write-up:

And this is the podcast itself –

This comes about the article on Disney I wrote back in May that got quite a reaction. The article has some thoughts and insights on the future of Disney and ESPN. Disney is a leader in content and that it has to figure out distribution in the modern internet era. It was a short article that I wrote fairly quickly. The podcast gave me an opportunity to expand on my analysis of Disney. There’s also some discussion on value investing and other stocks.

I hope you enjoy the podcast!

Topics covered:

Brian Langis interview – 2:00 minute mark to 49:00 minute mark

  • 2:00 – Reviewing Brian’s thesis and a new hope for Disney
  • 7:45 – What are you watching for in the transition to streaming? When does the tipping point come?
  • 16:00 – How big a deal is Fox (FOX) (FOXA), how much to worry about $20B extra? The running cost of content and the offense/defense game.
  • 20:00 – Looking at Netflix (NFLX) across the aisle from Disney
  • 24:45 – Getting to the numbers for Disney. What is the story there?
  • 28:30 – How do we avoid getting attached to Disney shares when we enjoy Disney products?
  • 35:30 – Talking value investing in an expensive market, and a cheesy answer. Getting to Alimentation Couche Tard (OTCPK:ANCUF) and Dollarama (OTC:DLMAF) as examples.
  • 41:00 – What has changed in the past five years for your investing?
  • 45:30 – The Iger risk for Disney.

Derek Thompson Interview – 50:00 minute mark to 1:30 minute mark.

  • 50:00 – Setting the scene on Disney, one of the most interesting companies in the world
  • 54:30 – Why does Disney have a good chance of pulling off the transition to streaming?
  • 56:30 – Why relinquish ESPN to decline? What barriers are there?
  • 1:01:30 – What do the economics look like once Disney makes it to streaming land?
  • 1:08 – Are we at the tipping point where video is too easy to make, thus drowning out Disney’s advantage?
  • 1:16 – How important is Fox?
  • 1:19 – Vertical integration – is this business different? Why not work together with Netflix?
  • 1:27 – Let’s get into the fintwit discussion



Mittleman Brothers, Open Letter to the Board of Directors of Aimia Inc.

Below is a repost of the Mittleman Brothers letter to the BOD of Aimia (AIM). I have some shares of Aimia, better known for their Aeroplan loyalty program, that I bought at a very distress level. I’m a valuation guy and the value the market attributed to Aimia didn’t add up. I’m not saying this is a company that you need to buy and hold forever. It’s also not a company that I’m really fond of. This is a situation where there’s a large disconnect between price and value. That’s it.

Mittleman Brothers, the largest investor in Aimia, has publicly been outspoken on the situation at Aimia. I reposted the following letter because it provided clear detailed valuation of Aimia and it’s different parts. A consortium composed of Air Canada and a couple banks made an offer to buy Aeroplan. The offer is clearly way below the conservative estimated value of Aeroplan and was wisely rejected. This story is not over. Remains to be seen how it plays out. Original link.

NEW YORK, Aug. 6, 2018 /CNW/ —

Board of Directors
Aimia Inc.
525 Avenue Viger West, Suite 1000
Montreal, QC H2Z 0B2

Re: Recent offers for Aeroplan and PLM

Dear Sirs and Madam:

As the Chief Investment Officer for Mittleman Brothers, LLC, which is Aimia Inc.’s largest shareholder with a 17.6% stake, I feel compelled to share my opinion of the offer for Aeroplan announced on July 25th (revised and expired Aug. 2nd), and the offer for PLM announced on July 26th (wisely rejected by you on same day). The views expressed here are mine alone, but I’ve had unsolicited calls from many shareholders since July 25th, with estimated ownership of 20% of Aimia’s stock, who related opinions on these matters that largely concur with my own views.
Continue reading “Mittleman Brothers, Open Letter to the Board of Directors of Aimia Inc.”

Tesla: Bulls Vs. Bears

My article on Tesla was published on Seeking Alpha two weeks ago and since I was away on  vacation I didn’t have time to publish it on the blog. This article can be seen as a companion to the podcast I did, The Intelligent Investing Podcast with Eric Schleien.

We talked about the most hated or loved stock in America: Tesla. Elon Musk and Tesla are a very polarizing topic. The most hardcore short-sellers believe that Tesla is a fraud, Elon Musk is a conman, and the stock is worth less than zero. Fanboys believe in Elon Musk’s mission of transitioning the world to sustainable energy and will have become one of the most valuable and successful companies in the world. Both camps are deeply entrenched in their position and it’s very interesting to see them go at it. I also published a companion to the podcast on Seeking Alpha; Tesla: Bulls vs. Bears.

The podcast was recorded three weeks ago. When Tesla is the subject matter, a lot can happen in two weeks. Tesla, the drama filled company that gets TMZ style coverage, is one of the main reasons why I stay away from the stock. Even though the shorts have a very compelling investment thesis, the market seems to think otherwise. Tesla currently trades at $375 a share. When the article and podcast was published Tesla traded at $300. Seemingly out of the blue, Elon Musk proclaimed that he might pull his money-losing Tesla off the market for $420 a share! He also claimed that he has funding secured.  This story is not over.

Here’s the SA Article. The full article is available on Seeking Alpha.

Tesla: Bulls Vs. Bears

By Brian Langis


  • Elon Musk and Tesla are a very polarizing topic. Tesla may be the most hated or loved stock in America.
  • Tesla comes with a lot of noise and buzz. Facts, figures, and claims are exaggerated, spun, and manipulated to one’s interest or to simply distract from the real issue.
  • I have front row seats to a good heavyweight fight between Tesla bulls and bears.
  • It’s not the first time Tesla faces an existential crisis.

I had the pleasure to be back on The Intelligent Investing Podcast with Eric Schleien to have an in-depth conversation on Tesla (TSLA). If you are even reading this, you are fully aware that Tesla has turned into a full blown soap opera. The podcast and this following article try to make sense of the Tesla drama.

Since Tesla is a very polarizing topic, let’s start off with the disclosures regarding Tesla:

I’m not a shareholder and never was. I’m not a short-seller and never was. I don’t have an agenda. I don’t have a horse between the short-sellers and the bulls. I’m not a “hater” or a “fanboy”. I don’t have a secret source inside Tesla’s factories. I didn’t pay anybody for information. I don’t own a Tesla. I find the debate between the Tesla bulls and bears very interesting.

Bloomberg Headline ( Link)

I long hesitated writing an article on Tesla. I wrote short one back in January 2014. Tesla is one of the most popular (or unpopular) stocks on Seeking Alpha and the media. There are a couple of pieces published every day and it wasn’t clear at first how I could add value to the debate. It’s has all the ingredients for a juicy story. The combination of a very colorful CEO on a mission to save the world, a flashy company that is disrupting the auto and energy industry, and with billions of dollars at play makes this stock very emotionally divisive. Musk and Tesla comes with a lot of noise and buzz. Facts, figures, and claims are exaggerated, spun, and manipulated to one’s interest or to simply distract from the real issue. And I think this is where the opportunity is. With so much being said, it’s hard to see the forest for the trees. We need to take a step back and get a little perspective. I will write about the good and the bad. While the goal of this article is to provide clarity, I’m aware that this article won’t change people’s mind since folks with money on the line are deeply entrenched in their position. I haven’t seen a bull turned bear on Tesla or vice versa.

I have front row seats to a good heavyweight fight between Tesla bulls and bears. These two opponents have very opposite points of view. In one corner, we have the bulls, aka the fanboys. The fanboys are “believers”. They believe in Musk and that Tesla will achieved its mission of transitioning the world to sustainable energy and will have become one of the most valuable and successful companies in the world. The legacy car companies like GM and Toyota are dinosaurs that won’t be able to compete with Tesla because of its EV head start and superior technology. Musk has also talked about turning humans into an interplanetary species. He makes you dream. In the other corner, we have the bears, aka the “haters”. The extreme version of the bear thesis is that Musk is a straight up fraud and Tesla is going to bankrupt. The milder version of the bear thesis is that Tesla is overvalued and a correction is due.

I try hard to look at Tesla from a rational and objective point of view and this is a difficult task. I also suffer from my own biases. From the outset I’m a fan of Elon Musk but skeptical about investing with him. I’m a fan for what Elon has accomplished and tries to accomplish. I’m a skeptic because I’m not into fairy tale stories and I understand basic high school math. But whether you like Elon or not, his journey from his youth to present day is very interesting and inspiring. Ashlee Vance’s biography of Elon Musk is an excellent book that covers his journey. Of course Musk is a flawed individual. He has personal foibles and challenges as everyone else.

Let’s try to cut to through the clutter and noise.

Continue reading “Tesla: Bulls Vs. Bears”

Is Tesla a Fraud?

The Intelligent Investing Podcast – Copyright 2017 Eric Schleien

I had the pleasure to be back on The Intelligent Investing Podcast with Eric Schleien. This is a big one. We are talking about Tesla and the problems that company is facing. We examined its valuation, its history, the bull case, and the short case.


Is Tesla a Fraud?

Seth Klarman Investment Wisdom

Below are the updated links to Seth Klarman’s investment wisdom. You can find the full archive at the Investment Resources.

You can also buy one of the most famous book ever on investing, Margin of Safety by Seth Klarman, for $7.58 on the Kindle. Hard copies are going for $500 to $1000 each. Of course you don’t get the joy of holding a hard copy of this rare book in your hands, but you get access to its treasured wisdom.

Seth Klarman (Baupost Group)

A Primer On Brookfield Asset Management

My latest article on Seeking Alpha. This article can be seen as a companion for The Intelligent Podcasting with Eric Schleien. It took a while to get it published and it’s worth the wait. The topic is Brookfield Asset Management. The summary of the article is below. The full version is available here.

A Primer On Brookfield Asset Management


  • Brookfield (BAM), an under-the-radar company, is one of the largest alternative asset managers in the world.
  • Its CEO, Bruce Flatt, also low profile, is a value investor who has delivered tremendous value to investors over the past 16 years.
  • Brookfield finds opportunities that everyone else deems as uneconomic. If there’s a dearth of capital, expect Brookfield to be sniffing around. A crisis is a good time to find value.
  • Management is a key part in investing in Brookfield. They hold 20% of the company.
  • It is reasonable to assume that BAM will continue to increase the amount of assets with harvestable cash flow. Assets Under Management is also expected to significantly increase.

*Brookfield Asset Management’s Class A Limited Voting Shares are co-listed on the NYSE under the symbol (BAM) the Toronto Stock Exchange under the symbol (BAM.A)and Euronext under the symbol (BAMA.) I will be referring to the American symbol for the article. Dollar amounts are in USD$ unless mentioned otherwise. BAM currently trades for ~$40 with a market cap of $40 billion. It’s currently trading down from its all-time high of ~$44.

I had the privilege to be a guest on The Intelligent Investing Podcast with Eric Schleien. We mainly talked about Brookfield Asset Management but we barely scratched the surface. Since I wanted to elaborate on some points, I wrote this primer on Brookfield as a companion guide to the podcast. I have no affiliation with The Intelligent Investing podcast whatsoever, but I am a fan of his work.

Brookfield Asset Management (BAMBAM.A) is one of the most under-rated, under the radar, low profile company in the world. Brookfield doesn’t make headlines. For those of you that are in the investment business, you are most likely familiar with the global value investor Brookfield, its CEO Bruce Flatt, and the tremendous success the company had under his leadership. For the folks that are not in the investment industry, you wouldn’t know that Brookfield owns a large chunk of the arteries and pipelines essential to how global economy functions. BAM owns some of most prized real estate in the world, such as Manhattan’s prestigious World Financial Center. In Berlin, it owns Potsdamer Platz and, in London, Canary Wharf. And that’s just the real estate. In Ireland it supplies Facebook with electricity. A good part of Chicago is powered by Brookfield. It owns 36 ports in the UK, North America, Australia and Europe, and in India and South America it manages 3,600 kilometres of toll roads.

Brookfield Place “World Financial Center. Source:

Brookfield is a global alternative asset manager with $285 billion in assets. They employ a value investing style, where they shop around the world for bargains, with a penchant for distressed assets. BAM has the distinction of being an owner-operator of their assets. BAM’s modus operandi is to buy the asset on the cheap, fix it, improve the cash flow and value of the assets, sell it at maturity, and efficiently redeploy capital back into new development opportunities. A quick Google search of Brookfield Asset Management would freak out most investors. Among the results, you will links to Jared Kushner’s infamous 666 Fifth Ave. deal, mall operator General Growth Properties (GGP),Brazil, and Canada’s controversial Trans Mountain pipeline; basically deals that contribute to lack of sleep. But isn’t it odd that Brookfield finds opportunities that everyone else deems as uneconomic? All these moves have an anti-herd contrarian mentality. If there’s a dearth of capital, expect Brookfield to be sniffing around. A crisis is a good time to find value. It seems to have worked out well for the company. Brookfield’s formula for making contrarian investments by going where capital is most needed and in the shortest supply has worked well for Flatt in his 16 years as CEO.

Chart: Yahoo! Finance.

Under Flatt’s leadership, from February 1, 2002, to May 1 2018, BAM returned 1110%, or 11x your money, compared to 1.4x for the S&P 500. This doesn’t include dividends.

BAM, known for its low profile, is not afraid to display their great performance in their latest annual report (pdf). BAM mentions that they target returns of 12% to 15%. These numbers under estimate their real returns. The figures below include dividends:

Source: BAM 2017 Annual Report. Page 8.

BAM is a global alternative asset manager. What are alternatives assets? Well traditional assets are stocks and bonds (equity and debt). Alternative assets can be real estate, infrastructure (ports, pipelines, toll roads etc…), renewable energy and private equity among other things. Alternative assets are a little bit of a misnomer because all assets are composed of equity and debt.

Brookfield loves “real” assets. The emphasis is on “real” because we currently live in a world where investors highly value intangible assets. Some of the top companies by market capitalization barely have any tangible assets. For example, Facebook (FB) and Alphabet (GOOGL) are highly valued for their intangibles/intellectual properties, and sometimes that can be hard to value (e.g. network effects). Brookfield is the exact opposite; they love these tangible hard assets with a nice cash stable cash flow that can grow in value over time.

Brookfield likes to focus on long-life, high quality real assets. “Long-life” because BAM invests in assets like a hydroelectric dam that can last over a hundred years. “High-quality” because these assets are considered critical to the economy, scarce, and have a high barrier to entry. They also come with a 15 to 20 years contract with clauses for yearly price escalation and inflation. For example, one of BAM’s publicly listed partnerships, Brookfield Renewable Partners (BEP), sells the majority of its power under long-term, inflation-linked contracts that allow them to capture increases in power prices over time. This provides stable cash flows for a very long period.

Who also likes the investment profile of “alternative assets”? Pension funds, institutions, insurance companies, university endowment funds, sovereign wealth funds among others. Over the last twenty years, there has been an increase to their portfolio allocation to alternatives, and the shift seems to gather pace. Why is that? Pension funds have long-term obligations and in a world of low interest rates, they seek return outside the stock market with less volatility.

Institutions’ thirst for alternative assets provides Brookfield with the type of capital they need, which is a lot and patient. BAM is typically one of the largest investors in their funds. This provides an alignment of interest with their investors. Below is a list of BAM’s publicly listed partnerships (L.Ps) and their equity ownership interest. BAM also manages over 40 private funds.

Brookfield Property Partners (BPY) – 64% – Operations include the ownership, operation and development of core office, core retail, opportunistic and other properties. BPY consists of 147 properties totaling 100 million square feet of office space. BPY also has a portfolio of regional and urban malls (mostly GGP). Brookfield Renewable Partners (BEP) – 60% (*Wrote about here). – Operations include the ownership, operation and development of hydroelectric, wind, solar, storage and other power generating facilities. BEP consists of 217hydroelectric stations, 76 wind facilities, 537 solar facilities and storage.Brookfield Infrastructure Partners (BIP) – 30% – Operations include the ownership, operation and development of utilities, transport, energy, communications and sustainable resource assets. BIP’s main assets are ~2,000 km of natural gas pipelines, ~12,000 km of transmission lines, and ~3,500 km of greenfield electricity transmission developments, ~10,300 km of railroad tracks, 4,000 km of toll roads, 37 port terminals, and BIP also owns ~15,000 km of natural gas transmission pipelines, primarily in the U.S., and 600 billion cubic feet of natural gas storage in the U.S. and Canada. Brookfield Business Partners (BBU) – 68% – Operations include a broad range of industries, and are mostly focused on construction, other business services, energy, and industrial operations.

Long before Brookfield was an asset manager, BAM invested its own capital to develop, own, and operate assets. It’s in the early 2000s that BAM began other private investors to partner with them. As an owner-operator, BAM works to increase the value of the assets within their operating businesses and the cash flows they produce. They do this through their operating expertise, development capabilities and effective financing. This is significant because if it’s done properly, this is how Brookfield achieves superior returns. BAM has over delivered on their target of 12% to 15%. Once the asset has achieved targeted returns and cash flow has “matured”, BAM sells the asset to a buyer looking to achieve a yield of 5% to 7%. Most institutions are fine with that kind of return since the asset has been “fixed” and “de-risked”. Below in the article I provide a real example on how BAM operates.


Full article here.

Conan & Andy’s Stock Market Cliché-Off

If blocked in your country try this link:

The Intelligent Investing Podcast – Stocks & Poutine

The Intelligent Investing Podcast – Copyright 2017 Eric Schleien

I had the privilege of being a guest on The Intelligent Investing Podcast with Eric Schleien. Eric is an excellent host and I had a blast doing this. We mainly talked about Brookfield Asset Management (BAM) and we also touched on Shopify (SHOP), investor behavior that led to inferior returns, and poutine. Eric also found some crazy filings on Reddit. What was originally supposed to be a 30 minute podcast turned into over an hour. Time flies when you are having fun. I’ve listened to a few episodes and Eric’s podcast is a great way to learn more about investing and to get exposed to investing ideas.

If you like listening to podcasts like I do, Google has a new podcast app, called Google Podcast.  If you are on Android, I find it better than their default Play Music app which I’m not fond of.  If you are with iOS (iPhone), you can also use Google Podcast. The app has a minimalist design which I like.

You can listen to The Intelligent Investing Podcast by Eric Schleien here:

Even though we talked about Brookfield Asset Management (BAM), we barely scratched the surface. I am currently writing a post on Brookfield Asset Management that I hope to linked to the podcast soon. BAM is a huge organization with a rich history that’s over 100 years old that goes all the way back to Brazil. I wanted to elaborate on some points. Once completed it can be seen as a companion to the podcast.

What Is Bank Capital, Anyway?

Below is a good primer on bank capital from the NYT. The article dates from 2013 but is still relevant. American banks are about to find out if the Feds approve their plan to return capital to shareholders. It’s good to review what is bank capital and why it is important.

What Is Bank Capital, Anyway?
By William Alden

New-York Times

Regulators are butting heads with banks this week over capital, with new rules on the table that could force banks to hold more of it. But what exactly is capital, and why is it so important?

The question gets at the heart of finance today. In the crisis, a lack of capital brought some banks to the brink. Now, by requiring banks to bolster their capital, the government is trying to eliminate the need for taxpayer bailouts in the future.

Though capital is a centerpiece of Wall Street regulation, it resists a simple definition.

Capital is often described as a cushion that banks hold against losses. That’s true, but the implications are not always clear. One unfortunate misconception that can arise is that capital is a “rainy day fund.”

Related Links
Regulators Seek Stiffer Bank Rules on Capital (June 9, 2013)
To understand capital, think about how a financial firm does business. In a typical transaction, a firm pays for an investment with a combination of debt and equity. The more debt, or leverage, that finances the transaction, the more money the firm can make (or lose).

Say a firm pays for its investments with nine parts borrowing and one part equity. By using debt, the firm can magnify the return it makes on its equity. This is a principle banks use when determining how to finance their operations.

A bank’s capital is analogous to equity in the above example. More capital (so, less debt) means banks are more able to withstand losses. But it also means they can’t make as much money. This dynamic – more capital leading to lower returns – helps explain why banks tend to argue that holding more capital is “expensive.”

But even banks won’t deny that capital is essential. Without it, the tiniest loss would put a bank out of business.

Think about capital this way: It designates the percentage of assets that a bank can stand to lose without becoming insolvent.

If a bank’s assets decline in value, it has to account for that by adjusting the source of financing that it used. Liabilities like debt and deposits can’t be reduced, as they represent money that the bank has promised to pay to bondholders or depositors.

But what’s useful about capital is that it can be reduced, or written down. That’s the whole point. Shareholders, who contribute to capital, agree to absorb losses if the bank falls on hard times. So, rather than a “rainy day fund,” capital is a measure of a bank’s potential to absorb losses.

How does a bank increase its capital? There are few ways to do this, none of which banks particularly love. One is for banks to retain more of their profit, and not pay it out as dividends or spend it on share buybacks.

Another is to sell more shares in the market. That’s generally unappealing to banks because the shares would very likely be sold at a discount, and the slug of new shares could dilute the stakes of other shareholders.

A third method is reducing assets. This doesn’t actually increase the nominal level of capital. But it does increase ratio of capital to assets, which is one way that regulators measure the adequacy of a bank’s capital. If banks sell some of the things they own, that can have the effect of bolstering capital ratios.

When banks threaten to reduce lending or sell assets if they are forced to raise capital, this is the dynamic they are referring to.

The issue is complicated enough as it is, without the political posturing that is taking place. As regulators tinker with the rules, an understanding of capital will help reveal what’s at stake.

Where, Oh Where Are the .400 Hitters of Yesteryear? by Peter L. Bernstein

Peter L. Bernstein, the editor of Journal of Portfolio Management and the famous writer of two popular finance books — Capital Ideas: The Improbable Origins of Modern Wall Street and Against the Gods: The Remarkable Story of Risks. In this article, Bernstein has taken on  has taken Stephen Gould’s theses in Full House: The Spread of Excellence from Plato to Darwin about the 0.400 hits in baseball , and correlates it to the business and portfolio management. In his book, Gould talks about the the disappearance of the .400 hitter. What happened? Do batters have less skill than they used to have? Gould rejects that possibility as highly improbable, especially in a society that cultivates talent with as much zeal as U.S. society does. Bernstein said that “Portfolio managers performance data reveal patterns that are very similar to what actually happens in the baseball world”.

This article demonstrates that potential .400 hitters in the stock market are falling short of their goal because growing numbers of today’s investors are sufficiently educated, sophisticated, and informed to block their way, just as batters capable of achieving a .400 average have fallen short of that goal since the old days because defending teams have developed sufficient skill to block their way.

Where, Oh Where Are the .400 Hitters of Yesteryear? by Peter L. Bernstein