What is a Daily Margin Statement and How to Read it?
What is a Daily Margin Statement and How to Read it?
Haircut Definition and Example - Investopedia
How To Calculate Haircut In Stocks Trading
Haircut - Know the Types, Significance, Variables
Margin Trading Fund | Relitrade | Stock Broking Company in
Bitfinex Increases Maximum Leverage and Reduces Haircut for Tezos (XTZ) Margin Trading
We have updated margin trading on Tezos! From today, Tezos pairs (XTZ/USD), (XTZ/BTC) can be traded with a lower initial equity of 30% and a higher maximum leverage of 3.3x. XTZ can also be held as collateral with a lower haircut of 30%. https://www.bitfinex.com/posts/456
Occasionally people ask how these loans work. With that in mind: from the Canadian prairie on a beautiful day in July, to you: First, if you're from the U.S.: I'm doing this from a Canadian perspective which means I'm ignoring the Regulation T, special memorandum account, overnight maintenance requirement, and initial margin, because all of those are concepts that have no equivalent or application in Canada. But the basics are the same. You can ignore all of those concepts because they have no bearing on how margin actually works. Those concepts are simply restrictions in how you can use margin and as a practical matter they're not onorous restrictions. I'm also ignoring U.S. risk-based "portfolio margin" because that's a specialized, alternative margin system some brokers offer in the U.S., that we don't have in Canada. We have traditional, rules-based margin that hasn't changed in Canada in 100+ years. Note: If you are a Canadian resident buying U.S. stock in Canada you still fall under the Canadian rules for margin. Margin in Canada hasn't really changed since the 1900's, except you have to put up at least 30% nowadays instead of 10% as it was back before the crash of 1929. Basically that's the only thing that's changed. In Canada you can borrow up to 70% of a position at once for most stocks. This means that if you want to buy $10,000 worth of RBC or Apple, you only have to put up $3,000 and your broker lends you the rest. Margin was first developed in the Netherlands which basically invented the modern financial system we have today in the West, back in the 1600s. The Dutch East India corporation (ticker VOC) was at one point 20% of the world's total commerce. That would be like a company in 2020 grossing about 16 trillion US a year. By comparison Apple brings in about one half of one percent of that. The Amsterdam stock market developed just to trade VOC and other shares and related securities. Seein the success of their Continental rivals, the British copied the Dutch and for a long time, until after the Battle of Waterloo, the western world had two rival financial capitals, London, and Amsterdam. For various historical reasons, Amsterdam got pushed out of the picture and for about 100 years the City of London (which is what the financial district in London is called) was the financial capital of the west. They of course now share that crown with New York City. But it's really the Dutch who started it all, around the time of Vermeer. *** The concept is that the bank (or broker) will lend against some of your stock, but not all of it. They want a "haircut." The haircut is the amount they won't lend against. In Canada the haircut is usually 30% but can be 50% and there are some stocks the banks won't lend against at all, like most of the stuff on the TSX-V or on the U.S. pink sheets. Every bank is different, so BMO InvestorLine might want 50% on one company and Interactive Brokers Canada might want 30% or vice versa for another. But most things are 30%, some are 50% and some are 100% (meaning no loan). The maximum available leverage is 1/haircut. If the haircut is 30% as is typical in Canada, the bank will let you buy up to 1/0.3 = 3 1/3 as much as your cash, meaning, you can borrow up to 2 1/3 dollars for every dollar you put up. That's the limit. But: So say you have $3,000 and you want to buy on margin. As the bank haircut (margin rate) is 30%, you can buy $3,000/0.3 = $10,000 worth of stock. Obviously you then have a loan of $7,000. You now have $10,000 worth of stock, but remember, the bank won't let you borrow against 30%*$10,000 = $3,000. So your collateral is only $7,000. So you now have a $7,000 loan collateralized by $7,000 worth of stock. In the above example, you put up 30% margin, the same as the haircut. It's easy to see that if your total position slides so much as a dollar, you will have less collateral than $7,000 and therefore get what's called a "margin call" where they will tell you that you have to put up more money in a few hours or sell stock (which automatically pays down the loan to the extent of the sale) so that you have enough collateral to cover your loan, otherwise they will automatically sell a stock of their choosing at an amount of their choosing. They are also allowed to sell whichever stock they choose automatically without calling you first, in the event of a margin call. That is explicitly set out in your margin agreement. There have been at least two challenges to that in the Ontario courts in the last 20 years or so, where the former client argued that the bank sold their shares out without first advising them, or, in one of the court cases, after promising to hold off so that the client could put up money, and then reneging on that and selling the client's stock anyway. The court in both cases sided with the bank. The margin is for real, not negotiable, it is there to protect the bank and the other client's capital, and the words "the bank can sell at any time and without prior notice" mean what they say they mean. If you get sold out at a loss, don't expect the courts to give you redress. So obviously you need some "buffer" because of volatility, but how much do you borrow? Now you have to understand some more math. target margin = 1-(1-x)*(1-haircut) x is the price drawdown target margin is how much margin you have to put up. Say Apple is marginable at 30% (the haircut) by your bank. You decide you want to borrow on margin. But you decide, "I will allow Apple to slide 40% from what I buy it at before I get a margin call." So how much margin should you put up? target margin = 1-(1-0.4)*(1-0.3) = 1-0.6*0.7 = 1-0.42 = 0.58. So you have to put up 58% margin. That means if you have $3,000 to invest, you would buy $3,000/0.58 = $5,172 worth of Apple. If Apple is trading at $350 that means it can slide to $210 before you get a margin call. At which point you will have lost 0.4/0.58 = 68.9% of your money. (Remember, leverage is simply 1/margin.) You can convince yourself by working through it as a check. In the example, as you had $3,000 and you margined that at 58%, you bought $3,000/0.58 = $,5172 worth of stock. Obviously your equity at the time of purchase was be $3,000 because you owned $5,172 worth of stock and owed the bank $2,172. Because of the haircut, 0.3*$5,172 = $1,551 could not be used as collateral. Then the stock slid 40%, from $350 to $210, so your total stock position was then (1-0.4)*$5,172 = $3,103. Of course, you still owed the bank $2,172. But remember, not all of the $3,103 was available be used as collateral, only 70% (meaning, 1-haircut) of that. So at $210 your collateral was (1-0.3)*$3,103 = $2,172, exactly the same as the loan amount. $210 was, therefore, the lowest price at which you still have sufficient collateral. Anything less and you would have received a margin call or the bank would simply have automatically sold stock, depending on how they saw the risk. Key takeaway here is that the haircut is 30%, meaning that 30% of your stock cannot be used as collateral, which mathematically also means that your account equity/total amount of stock = (total amount of stock-loan)/(total amount of stock) has to stay at or above 30%. You're putting up 58%, meaning you're borrowing 1/0.58 - 1 = 72 cents from the bank for every dollar of your own money that you put up. The formula above is simply a rearrangement using basic algebra, of the basic margin equation which is: price at margin call = initial price of stock*(1-target margin)/(1-haircut) Whatever you do, make sure you are maxing out your TFSA or possibly RRSP or possibly both before you use margin, or only contribute a small amount of capital to a margin account and make sure your TFSA or RRSP is your main stock investment vehicle. Do not put up your TFSA as collateral on a margin account. You could end up getting a margin call, then the broker transfers the TFSA over to the margin account, but then the stock market slides again and now your TFSA is wiped out along with your margin account. Questrade offers this and I think it's an absolutely terrible idea. Frankly I think the CRA should disallow it. Notice how none of the banks offer this. Also have a plan for a margin call. You will get a margin call at some point. One good plan is simply to sell enough stock to pay off the margin loan and then re-enter margin when conditions warrant. It makes absolutely no sense to have cash lying around to meet a margin call. Why not just invest the cash and not use margin. The old adage is, "Never meet a margin call" and I think that's good advice. If the bank gives you to choice of either putting in more money in or selling, then sell. To me there are only 3 reasons you would use a margin account:
You have a large account in a diversified stock portfolio and you want to borrow against say 5% of that to go and buy a car, renovate your house, pursue an investment other than securities;
You are consistently good at beating the stock market by a significant amount, and you have maxed out or at least significantly contributed to a TFSA or RRSP or have other wealth-generating property, you have a well-thought out plan that you commit to, that governs your trading decisions, how much you will borrow, and what you will do in the event of a margin call;
You are executing certain trades that require a margin account; for example, options spreads, short selling stocks or commodity futures trades.
To me the following are bad reasons to trade on margin:
It looks like a way to make even more money in stocks, even though you don't know how to make money in stocks;
You are a diversified "Canadian Couch Potato" -style investor getting more or less average returns and you realize that you can buy stock get a 5% dividend yield and pay 4% pre-tax on margin money, so you decide to be a margined "couch potato."
Margined investing = active investing = checking your positions at least daily and following a trading plan. Finally, the average investor working with average capital should always, always, make the TFSA their #1 priority. The TFSA is truly a gem. When I was in my 20's back in the 90's, the only tax shelters for the average Canadian were the sale of their primary residence and the RRSP, the latter which is a deferral and a deduction but not an outright break the way the TFSA is. The TFSA offers leverage effectively equal to the capital gains inclusion rate * your average taxation rate, and yet without a margin call and at zero percent and it doesn't even magnify your losses. No margin account can match that. Some investors don't believe in margin at all. Like Warren Buffett, who said in a 2018 CNBC interview, "It's crazy to borrow against securities." (Note he said borrowing against stocks, not borrowing to buy stocks.) But he is right in saying that the bad thing about margin is that it gives you limited additional potential upside but at the cost of great potential downside. Understand the risks. Read your margin agreement. Consider even meeting with a securities lawyer who can explain the agreement to you. Consider this statement from an article posted on a popular stock investing website (Fair dealing exception), posted March 15th, 2020: " https://www.fool.com/investing/2020/03/15/5-ugly-lessons-from-a-nasty-margin-call.aspx From its close on Feb. 19 to its close on March 12, theS&P 500fell more than 26%, a huge decline in less than a month. Like many investors who had been using options in a margin account, I faced a margin call during that precipitous decline and was forced to liquidate positions to satisfy that call. Note that despite facing that margin call, I never actually borrowed money from my broker. I just had margin available and usable from a purchasing power perspective in the event some of my options got exercised against me. It didn't matter to my broker, though, who only saw the margin math, rather than the cash and investment-grade bonds that were also in that account and hadn't seen their values evaporate. Unfortunately, my experience during that margin call revealed some very ugly realities about how Wall Street really works, particularly when it comes to retail investors. " He goes on set out "lessons learned." None of those lessons learned is "read your margin agreement before you trade." So he didn't really learn his lesson. Anyway, it's up to each person to do what is right for them, bearing in mind the risks. But know the risks. Trading with margin doesn't mean you'll be wiped out, but if you trade anything you need to know what you're doing and that is even more important if you've agreed to borrow money. The post here was to explain how to do the calculations for this popular and important financial tool as there is a lot of misinformation out there on the subject, make some suggestions on how you can use it as a part of your overall portfolio, and give my opinions on how one might do that. Whichever road or roads you take, good investing. For more details on the TFSA and its contribution rules, see https://www.reddit.com/CanadianInvestocomments/hcy9r9/how_the_tfsa_works/
Margin trading for $LINK and $DOT pairs is now available on Bitfinex!
Margin trading for $LINK and $DOT pairs is now available on Bitfinex! From today Chainlink pairs (LINK/USD), (LINK/USDt) and Polkadot pairs (DOT/USD), (DOT/USDt) can be traded with a maximum leverage of 3.3x, an initial equity of 30% and a maintenance margin of 15%. LINK and DOT can also be held as collateral for margin trading with an initial haircut of 90%. Discover more about Chainlink and Polkadot listing at ⬇️ https://www.bitfinex.com/posts/508 https://reddit.com/link/ig8j9k/video/12lud0w964j51/player
Disclaimer I own shares in Zytronic. As always, this is all just my interpretation and could be completely wrong, I'm sharing to hear (preferably constructive) critical feedback from others. Always do your own research. Business Overview Zytronic plc are a UK based commercial touch screen manufacturer (think casino machines, ATMs, train ticket machines etc.) with a factory & headquarters just outside Newcastle. They specialise in 'projected capacitive' touch screens. Their products are considered to be on the high-end of the value curve- they're more expensive but offer a better combination of durability & touch-sensitivity than cheaper alternatives. Their 2019 turnover was £20.1M (£22.3M 2018), with profit for the year of £2.7M (£3.6M). Their gaming (casinos) segment accounted for 32% of this, whilst the financial sector (ATMs) represented 31%. From 2005 to 2017, revenues grew fairly steadily from £10.6M to £22.9M, at the same time profits went up 4.5X to £5.4M. Since 2015, the financial segment has been decreasing from around £10M to £6.2M in 2019. The majority of this decrease has come from their non-touch displays, which now represent around 6% of the segment's revenues. The touch financial segment has also experienced some decline, but a lot less extreme and 2019 was up slightly on the previous year. They don't have high hopes for the financial segment as the requirement for ATMs decreases with the uptake in card payments. The declining financial segment revenues were more than offset from 2015-2017 by the gaming sector experiencing rapid growth. However, in 2019 this gaming revenue declined 25% due to a major project nearing its end, which looks likely to further decrease as that project winds up. The nature of the business means that they make the majority of their revenue from long-term projects with a small number of customers. In 2019, around half of their revenue came from the top 3 customers. This evidently lends itself to big swings in revenue and earnings when these projects come to an end without another major project in place to fill the gap. H1 2020 (ending March 31st) offered little to console shareholders that the business would return to growth. Revenue was £7.4M, down 22% on H1 2019, and profit before tax was down to £0.5M from £1.4M. This decline was further driven by their largest gaming project finishing, but also by declines in their two other largest segments of financial and vending, so it was bad news on multiple fronts. The silver lining is that the business had started to turn around its trading in the first 3 months of the 2020 calendar year with order intake for Jan-Mar was 15% up on the previous year and prior to the coronavirus outbreak and the associated global lockdown, they were expecting the second half of the year to drastically improve. Type of investment Clearly the above description of the business isn't one of a clear path to increased profits and they could be loss-making very quickly if the business can't convert its opportunities into sales quick enough (which is what it attributes the 2019 underperformance to). The reason I chose to invest was when looking at the balance sheet and seeing that with the company selling for a market cap of £17M, they had a book value of £23.8M, £12.4M of which is cash. Even if you attribute 0 value to patents & licencing, assume no value appreciation on their properties and take a significant haircut on inventories, receivables, properties & machinery, I still believe the liquidation value offers a slight margin of safety on today's market cap (my calculations said around an 8% margin of safety, but do your own research). I'm not investing because I think there's a slight profit on the liquidation value. I simply see that as solid downside protection of the business doesn't return to growth (or at least remain stagnant at 2019s levels). The touch screen industry is very likely to continue growing over the coming years and Zytronic plc appear to have a history of innovation and product improvement. Whilst I would struggle to put a number on the upside here, if they return to a level of profit whereby they can pay the dividend they have over the last two years, the current share price offers a 21% yield. If the business does anything besides liquidate, I see this as a very undervalued stock.
How Argentina learnt to stop worrying and combat coronavirus
As anyone who hasn’t spent the last month under a rock knows, the COVID-19 coronavirus is a big deal to the global economy, and governments have taken a number of potentially disruptive measures to contain it. The aim of this post is to look somewhat closely at the likely impact to the economy of this famously unstable country, and to briefly weigh the policy actions of the Alberto Fernández administration against their costs.
A little context
Argentina and economic collapse, name a more iconic duo. In the past decade, the inflation rate went from the twenties to the fifties, and 2019 had the highest recorded figure in almost thirty years: 53.8%. The country has not grown for two consecutive years in an entire decade, and official figures for most relevant variables, including unemployment and production, are unreliable (to put it kindly) since the official statistics agency was intervened by politicians and pretty much faked its data for ten years. In 2015, the reign of a faction of Peronism (the dominant political ideology/party in Argentina, an economically left, nationalistic, autarchic, anti-globalization movement) known as Kirchnerism, with more ties to the hard left and more socially progressive than the rest of the party, came to a close after 12 years of dominance: their prefered Presidential candidate, Daniel Scioli (an unpopular, unexciting, uncharismatic Governor who lost an arm in a boat racing accident) narrowly lost a runoff to the center-right Mauricio Macri, the mayor of the country’s capital. Macri ran on a platform of change (his coalition of centrist parties was literally named Cambiemos, or Let’s Change) and promised to lower taxes, reduce regulations, open the economy, and lead Argentina into a new era of market-based prosperity. This did not pan out: after a rocky first year, where the lifting of currency controls and sky high raises in public utilities led to a 40% inflation rate, nearly 15 point above the previous year’s, 2017 looked bright: GDP grew, wages increased, inflation returned to its prior levels and seemed to be going down, and the government scored a double-digit win in the midterms. 2018 was even more promising, until May: following a series of policy and communications missteps by the government, investors became more bullish on the nation’s ability to repay its significant dollar-denominated debt; when the Fed raised rates in May, capitals bled out of the country and the peso began depreciating for months, more than doubling from 19 pesos per dollars to over 40 by the end of the year; the economy took a beating, with GDP collapsing and completely erasing the previous year’s gains. 2019 was tougher: Macri became, obviously, increasingly unpopular - but still stood a chance because his likeliest rival, the divisive and corrupt former President and sitting Senator Cristina Fernández de Kirchner, appeared to be an even less palatable candidate - and voters going to moderate Peronist economist Roberto Lavagna looked more like Macri than Kirchner supporters. In an unexpected, risky gambit, Kirchner picked her former Chief of Staff, the little known and more moderate Alberto Fernández (no relation, it’s a common surname) to run for President, with her being his running mate. This bet paid off: Fernández united the entire Peronist party (no easy task, since Kirchner wasn’t particularly popular with Peronist Governors) and surpassed all expectations: while polling had him in dead heat against Macri, the high number of undecided voters made the race extremely volatile. After two hours of delays, the results of the national primaries (basically a trial election) came in: Fernández had beat Macri by nearly 20 points, 49 to 32, and was, by all intents and purposes, the next President. The markets did not take this well, since the winning candidate was notoriously vague and tight lipped in his positions: in a single day, stocks and bonds plummeted by 55%, and the peso depreciated another 33% - to 63 pesos. Macri performed better in the October elections, getting 40% to Fernández’s 48% due to higher turnout, but still lost. 2019 was another bad year: GDP shrank by 2.2%, unemployment soared to 9.7% (it later came down to 8.9%), and poverty rose from 25.4% (a historic low) in 2017 to 35.4% in the first semester; the only positive figures are the fiscal deficit, which went from 4% in 2015 to 0.5% in 2019, and the trade balance, which reversed sign and was an astounding 19 billion surplus; the current account deficit was reduced from a staggering 31 billion in 2017 to 3.4 billion in 2019, the lowest since 2012 and mostly caused by the positive trade and service balances. The Fernandez administration, meanwhile, surprised in its moderation: efforts have been made to somewhat maintain fiscal balance, while also increasing welfare payments without committing “populist excesses”, to somewhat speak. The fiscal balance has been weak, though, with Economy Minister Martín Guzmán only vowing a surplus in 2023 and returning to the much dreaded “gradualism” of the Macri era. Fernández seemed mostly interested in one issue: restructuring the country’s substantial debt (nearly 90% of GDP), which included a record breaking program by the IMF and the products of a previous restructuring, in 2005, after the country defaulted in 2002 (it would partially default again in 2014) - Guzmán himself is an academic focusing on the issue, and a disciple of the “heterodox” Nobel Laureate Joseph Stiglitz at Columbia.
The healthcare system
Argentina’s healthcare system is complex, heterogenous, and very poorly supervised - public health is not mentioned in the Constitution, putting it under the purview of provinces, except for some compromises between jurisdictions to make it run smooth. Considering the demand side of healthcare, the age structure of Argentina is not particularly concerning: only 15% of the population is over 60, and, on average, 88.5% of those over 60% have some kind of health insurance. Speaking of, 60% have any kind of insurance, according to census data - higher with age. Although 35.4% of the country lives in poverty, this number plummets to around 10% in older groups - providing a better safety net for the most vulnerable groups (children, by comparison, have a 52.5% rate). The country is only worryingly densely populated around the nation’s capital, the City of Buenos Aires, whose metro area comprises 13 million people and an expanded definition is inhabited by almost 20. On the provider side, the country’s hospitals are mostly run by the provinces, except a handful in the orbit of the national government. According to the government, the country spent 9.8% of GDP on healthcare - 6.6% by the public sector, and 2.8% by private companies. The country seems to have a low number of physicians, hospital beds, and nurses - yet the larger provinces with a higher number of cases seem better prepared. Still, the glaring inequalities in the country make it clear that being ill in the wealthy City of Buenos Aires or the oil producing, sparsely populated Santa Cruz would be highly preferable to Chaco or Misiones. Another notable issue is the disparity between systems: private insurers (“prepagas”) offer extremely high quality care, as does PAMI, Argentina’s equivalent to Medicare (it is, in fact, a state-run public insurer for the elderly). The problem comes with the public system, which is much higher quality in richer provinces, especially in the less populated Patagonia. The country, despite not being at such apparent risk, has taken measures extremely early: a full quarantine was announced roughly 20 days after the first confirmed case. The main situation is the country has only really tested those who either traveled abroad recently or were in close contact to those who did - meaning that official statistics of 500 infected, 8 dead aren’t particularly meaningful, and the number of tests administered isn’t publicly available.
Employment, poverty, and consumption
The country being under a quarantine poses a significant risk: 35% of the labor force works in the informal sector, and another 15% is self-employed. This means that, under a lockdown, nearly half of the population wouldn’t receive any income. The Catholic University of Argentina's Observatory for Social Debt (sworn enemies of mine, if you’ve read my previous post on poverty) estimates that 32% of people don’t receive any kind of formal salary, and that just two thirds of those families don’t even collect welfare checks - so 10% of homes will be deprived of all forms of income during a lockdown. The government has tried to mitigate this: bonuses for welfare recipients and the poorest retirees were announced, a $10.000 bonus for the unemployed,and some self-employed people was enacted, and the steps have been taken to ensure that people don’t lose access to basic necessities: a temporary ban on eviction and loss of utilities, a freeze on housing credits and rent, and price controls. The Social Development Minister, Daniel Arroyo, recently declared that 11 million people are receiving nutritional assistance, 3 million more than before - and 3.5 million of whom are children. The consulting firm IDESA paints an even bleaker picture: they claim 45% of all Argentinians live off of informality, meaning the quarantine, on this basis alone, could deal a crippling blow to nearly a majority of families. Others have gone further: a recent report claims that 5.5 million people are at “very high” risk of losing their jobs based on their employment status (self employed of informal) and at slightly lower risk depending on the sector they work in, even if they are registered. The government responded to this by banning firings and suspensions by decree, which will obviously negatively affect job creation (which is at historic lows anyway, according to Ministry of Labor data). Consumption has also been negatively impacted, since the incomes of those newly unemployed will obviously decrease; some retailers have experienced decreases of 50% in sales, and many have estimated that people simply won’t be able to afford their living expenses or their credit card bills (which were recently postponed until after the quarantine is over).
Economic activity and output
Economists estimate that each day of the quarantine reduces GDP by 1 to 1.4 billion, although there is a massive caveat - their projections are all based on national holidays and workers’ strikes, which are quite different because they are both scheduled in some advance, aren’t particularly long (the longest national holiday lasts about 3 days), and national holidays in particular have much higher “entertainment” (cinemas, theaters, restaurants, vacations, etc.) spending than usual. The aim of government policies so far seems to be to mitigate the loss of income on poor families, while not spending too much - the public sector has an extremely limited margin of action, given that current commitments make up 0.6% of GDP with revenue in free fall due to lower activity (VAT, income tax, and export taxes have been particularly deteriorated lately). The demand shock to some sectors will be highly negative: tourism, entertainment, non-basic goods, etc. As you can see here,the largest sectors of the economy (Industry, construction, and retail) will be hardest hit. Starting with construction, things are not looking good: work has ground to a halt, while it has already had its worst performance in decades. The sector also has a very high demand for labor, some of the highest rates of labor informality, and is the third largest sector of employment (360k workers in December) which makes it a ticking time bomb of lost income that has to be addressed as soon as possible - and the government has announced new credits for construction, and a 100 billion public works plan. The sector has already registered its lowest employment levels ever this year, and in an omen for things to come, the massive multinational company Techint has already laid off 1500 workers based on estimates that their profits in April will be 0. Regarding industry, after it has the worst indicators for production in since 2002, only the food and pharmaceutical industries seem to be trending upwards - and they only account for a third of industrial workers, which make up themselves a fifth of all workers.Industrial Union figures claim that just 20% of manufacturers are currently active - and that the entire sector is having difficulties paying salaries or acquiring components. Car manufacturers have shut down production until April, and expect to sell fewer than 200 thousand units this year; and the electronics sector has followed suit. While industry does not have the same level of informality construction does, some issues may arise. The main complication will be supply chains, since many key components for industrial production are imported - and most major manufacturers (notably China) are dealing with the aftermath of their own coronavirus responses. And lower projections for growth in Brazil could especially hurt the automotive industry, where 50% of units sold are destined for the Latin American country, and whose growth has a large impact on Argentina’s manufacturing sector (note: even if the article is old, it still very clearly illustrates the close relations between the countries). Retail is the biggest problem: after a 30% surge in sales in the days leading up to the lockdown (mostly in large chain supermarkets and wholesalers), sales collapsed as people became more frightened to leave their homes: restaurants have reported a 55% drop in sales, bakeries an 80% decrease, and 70% of small shops have already shut down until people are back in the street, since their sales decreased by 50% as well. Retailers in most sectors express concern, and most restaurants, bars, and “proximity businesses” (drugstores, corner shops, and small convenience stores known as “Chinese supermarkets” because their owners are generally Asian immigrants) have seen their income go from a steady stream to a small trickle, mostly due to online shopping and home deliveries - amd 20% of these smaller stores have closed their doors for the duration of the quarantine. Small business owners have already expressed their concern with the situation, with most expecting steep losses in revenue and some even reducing their staff. The sector is the second largest employer in the economy, with nearly 20% of the workforce as well, and a retail recession, so to speak, could collapse into a vicious circle where a crash in demand is reflected in sales, which forces firms to downsize, leading to even more drops in revenue, which starts the cycle all over again. Regarding other sectors: hotels, tourism, transportation, etc: have seen their income fall by billions, and combined employ as many workers as the construction construction. Agriculture and other primary activities are probably mostly affected by second order factors, such as lower international demand and lower prices - which puts them in a secondary position for aid; their main issue at the moment is the paralysis in activity affecting docks and trucking due to the lockdown. “Personal services”, the tech sectors, and other highly skilled workers can probably move home and still receive full compensation; some firms, such as “Latin America’s Amazon” Mercadolibre or companies that specialize in consulting or telecommunications, could even thrive in this context. . All in all, the economy looks like it will take a big hit from the lockdown: experts have estimated that each day in March had a 30% reduction in activity (which could be estimated by the observed drops in the demand for electricity, fuel, and transportation), and some go even further and assume a 45% daily drop in April, due to higher baselines because of seasonal factors. Goldman Sachs predicts GDP would drop by 5.4% in 2020, the largest decrease in 18 years (it was 10.9% in 2002) and more than the previous for years combined.
Trade and the external sector
To begin with, Argentina is basically cut off from financial markets at this point: country risk (the premium the country must pay to borrow) skyrocketed to 4500 points at a maximum, before settling in the high 3000’s, and the country seems to be on the verge of its 9th debt default- restructuring offers are basically dead now, with Guzmán and Fernández previously intending to negotiate during March and April. There is no clear consensus on the specific consequences of a debt default, although this publication by the IMF seems to imply it both causes tremendous damage to a nation’s reputation and cuts off growth by weakening the banking sector (which has taken a pummeling in the last year), even if defaulting itself does not cause degrowth. Since most companies are expected to have difficulties paying salaries due to low liquidity, and most people are also expected to not pay some of their obligations, a financial crash could send shockwaves into an already weak economy. In the longer run, a weak financial sector (like the one Argentina most definitely has) can constrain the access to credit necessary for investment - which is a prerequisite for sustained growth, and which already is at its lowest share of GDP in decades. The government remains adamant that its official position is not to default, but the chances of an offer that both sides are content with are slim - the IMF itself has recently weighed in and supported large haircuts for the sovereign debts of emerging economies. Secondly, trade: most of Argentina’s leading trading partners (Brazil, the EU, the US, China, South Korea) have been negatively affected by coronavirus - China’s GDP is probably going to plummet in the second quarter, and exports to Asian markets have already decreased by 30%. China alone is responsible for almost a third of all industrial exports, which will surely affect global supply chains negatively, as well as reducing imports. Argentina has mostly been a commodity exporter (they made up 40 of the 65 billion dollars in exports during 2019) and commodity prices have plunged during March - soybean, wheat and corn prices will affect the trade balance most harshly, and oil (which is key to national investment in the Southern provinces) has nearly halved in price, making the U$S 15 billion investments that were planned probably unprofitable. The agricultural sector in particular may be heading to a crisis of its own soon, since restrictions on labor and movement, issues with transportation, and blockages to roads and docks have negatively impacted production and sales - and April is the beginning of the most productive part of the year. Regarding Brazil, Argentina’s largest trading partner, relations have been tense due to the personal and political inminity between presidents Fernández and Bolsonaro (who at one point threatened to leave the Mercosur trade bloc) - and growth and industrial production projections for the neighbouring giant have steeply declined lately, which doesn’t bode well for Argentina at all: those indicators, due to the large entanglements between the two nations, are some of the strongest predictors of Argentinian growth (and vice versa: the Brazilian stagnation and manufacturing recession of these last few years have negatively impacted on its partner, which has also entered a recession of its own to the detriment of Brazil itself). Another major issue for the government is the peso becoming “overvalued”: due to the high volatility in international capital markets (almost 60 billion fled out of developing countries/arc-anglerfish-arc2-prod-infobae.s3.amazonaws.com/public/IG6CNPW4IFD6VM3QCC5RY5VWXQ.jpg)), most emerging currencies have been battered, rapidly depreciating with regard to the US dollar. The Argentinian peso became one of the strongest currencies of such category (honestly surprising news) because the high rates of inflation mean that any devaluation will be offset by higher national prices; as a result, any gains in competitivity done after the massive devaluations of 2019 have already been lost, since the real exchange rate is, in fact, lower than it was in August. As a result, the country will lose many of its trade advantages over its competitors, which will negatively impact the trade balance (fewer exports + more imports, despite more rigorous controls) and possibly create difficulties in acquiring the hard currency in such high demand in the economy.
Deficits, debt, and the money printers
Argentina’s government has been quick to take action on the healthcare front, declaring a quarantine not even a month before the first cases were confirmed, and extending it for nearly a full month. Their political resolve in handling the pandemic was widely praised, with leaders across the political spectrum working together and Alberto Fernández himself soaring to 90% approval, with 95% of the population approving of his actions. On the economic front, things have moved way more slowly. The government has mostly taken actions on the demand side, as was previously detailed, by increasing transfers to individuals on the basis of need and with a means-tested mechanism to ensure that nobody “with too much” gets aid. This logic may be questionable, but it is widely accepted that aiding those most in need is correct; so far, these programs have cost about 0.6% of GDP, doubling the public sector’s deficit (from 0.5% in 2019) amid slumping revenue, due to the ongoing recession (lowering income from VAT and, to a lower extent, payrolls and income) and the collapse in foreign trade (hurting export and import taxes). This will surely create difficulties all over the country, since the government will lose its margin of action concerning any future developments; provincial and municipal governments, extremely dependent on sales taxes, administrative charges, and central government remittances, will take an even larger hit (especially some, such as Buenos Aires, Chubut, and La Rioja, which are having serious difficulties with their external debt). On the supply side, on the other hand, the government has been extremely slow in offering any real support to struggling businesses. 80% of small businesses don't think they could stay in business if the lockdown continues for an entire month, and 70% of companies are planning on cutting costs. Only some sectors (such as tourism and entertainment) received tax cuts, albeit in homeopathic proportions, and some plans to help the construction sector, such as the Procrear credits and a $100 billion infrastructure plan, will take their time. Companies have shown concerns regarding how to pay their employees’ salaries, since the collapse in sales has surely impaired their liquidity - and the Central Bank took measures to inject up to $280 billion into the economy, which has led to much lower rates in short-term borrowing. The government has also recently announced two new programs: government assistance of up to a minimum wage of salaries for companies with under 100 employees, a doubling of unemployment subsidies, and a 95% postponement in payroll taxes for smaller companies (up to 60 employees). This seems to make sense, until you consider that the largest companies have been hit just as hard by the recession in the past year, and that companies with over 100 employees have bled jobs for the last 12 months; this is without even getting into the sector-by-sector measures that almost all those affected (from construction, to cinemas, and small retailers) have already demanded. The fact that this expansion to spending seems to mostly come from into aggregate demand has not put experts at ease: this will not increase revenue at a time of crisis, but it could also be insufficient to protect firms from bankruptcy. One of the biggest problems concerning an enlarged deficit is that almost all avenues of financing it are unavailable: reducing the deficit itself is impossible, as has been specified, and Argentina (as previously explained) is teetering on the verge of default, so it’s not like the financial sector is dying to lend. So the only remaining alternative is seigniorage: in March, the Central Bank assisted the Treasury to the tune of $125 billion, and has printed nearly $400 billion in this regard since December. Even if, yes, money printer go brr (for example, former Central Bank President and inflation hawk Guido Sandleris has defended the expansion as necessary, with some caveats, during a conference) many economists have recently rung alarm bells: the government's massive expansion of the monetary base (some say 62% in all of 2020, and it has recently reached the record high of 2 trillion pesos) could become a factor for inflation to still go up, from the 54.8% 20-year record in 2019 to the 60’s or even 70’s (since the exchange rate is under steep controls and the monetary base contracted massively in the previous two years, nobody serious is forecasting hyperinflation yet). The inflationary tax being a way to raise revenue in this dire context could be acceptable in the short term - the Central Bank gave $125 billion for the government, while overall emission was at nearly half a trillion and was mostly justified with measures to keep firms liquid and not allow the chain of payments to break - or force companies to not pay their taxes to stay solvent. And in another positive development for inflation doves, the demand of money has risen recently - since people and companies are having trouble paying their bills, their employees, or even buying groceries. This makes it unlikely the new pesos will go to the currency market (a leading preoccupation of policy makers), since that could put pressure for a devaluation and boost inflationary expectations - which generate inflation of their own. Concerning debt, the government has taken all available steps to create confidence - despite being at ideological odds with the organism, it was recently announced that they would accept a U$S 3.5 billion dollar SDR that was previously refused, added to smaller loans of a couple hundred billion by the IDB and the World Bank to finance the new spending caused by the crisis. The IMF itself has expressed support for emerging markets giving large “haircuts” to their sovereign debts, which Minister Guzmán seems to have taken at heart: he looks set to offer big cuts to interests and principal, a grace period, and maybe even unorthodox instruments like a GDP based bonus. Bonds recovered slightly, and country risk went slightly down; the problematic aspect could be that part of the recovery in bonds could be by “vulture funds” trying to gobble up obligations for cheap to later sue the country and get the full amount from a more friendly government (as Paul Singer famously did in 2019). While Guzmán’s good intentions were appreciated, bondholders did not accept the offer - and countered with a proposal for a 6 month break in payments and negotiations out of mistrust of the government and the options it presented.
Summing up, 2020 is shaping up to be a tough year for Argentina - or even tougher than expected. All indicators seemed to point at the economy being somewhat on the path to a recovery, with a milder recession, less inflation, and a public sector with a small deficit and a friendly (as possible, at least) debt restructuring. Coronavirus came as bad news (where didn’t it, though) at the worst possible moment. Despite the obvious political differences of most readers with the Fernández administration, it is clear that his handling of the healthcare side of the issue received wide acclaim, even if Latin America’s standards for it are depressinglylow. On the economic front, Fernández acted within the bounds of the mainstream and still focused his efforts on the poorest segments of society. In the immediate context, it could seem like a positive - nevertheless, it’s clear that all actors in the economy will be heavily affected by the crisis, and not providing aid to all of them would be inadequate. The government has also undertaken some deeply populist measures that will have no meaningful effect: a list of maximum prices, enforced by AFIP (the tax collection agency) inspectors which has mostly resulted in crackdowns for the small businesses that can’t actually afford to sell at those values. The authorities could provide the necessary stimulus to the economy, putting those least affected on the back burner until the worst of the crisis has passed; unfortunately, taking coronavirus as an opportunity to enact even stronger controls on market mechanisms out of ideological purity would do a huge disservice to the country at a crucial time.
Disclaimer I own shares in Zytronic. As always, this is all just my interpretation and could be completely wrong, I'm sharing to hear (preferably constructive) critical feedback from others. Always do your own research. Business Overview Zytronic plc are a UK based commercial touch screen manufacturer (think casino machines, ATMs, train ticket machines etc.) with a factory & headquarters just outside Newcastle. They specialise in 'projected capacitive' touch screens. Their products are considered to be on the high-end of the value curve- they're more expensive but offer a better combination of durability & touch-sensitivity than cheaper alternatives. Their 2019 turnover was £20.1M (£22.3M 2018), with profit for the year of £2.7M (£3.6M). Their gaming (casinos) segment accounted for 32% of this, whilst the financial sector (ATMs) represented 31%. From 2005 to 2017, revenues grew fairly steadily from £10.6M to £22.9M, at the same time profits went up 4.5X to £5.4M. Since 2015, the financial segment has been decreasing from around £10M to £6.2M in 2019. The majority of this decrease has come from their non-touch displays, which now represent around 6% of the segment's revenues. The touch financial segment has also experienced some decline, but a lot less extreme and 2019 was up slightly on the previous year. They don't have high hopes for the financial segment as the requirement for ATMs decreases with the uptake in card payments. The declining financial segment revenues were more than offset from 2015-2017 by the gaming sector experiencing rapid growth. However, in 2019 this gaming revenue declined 25% due to a major project nearing its end, which looks likely to further decrease as that project winds up. The nature of the business means that they make the majority of their revenue from long-term projects with a small number of customers. In 2019, around half of their revenue came from the top 3 customers. This evidently lends itself to big swings in revenue and earnings when these projects come to an end without another major project in place to fill the gap. H1 2020 (ending March 31st) offered little to console shareholders that the business would return to growth. Revenue was £7.4M, down 22% on H1 2019, and profit before tax was down to £0.5M from £1.4M. This decline was further driven by their largest gaming project finishing, but also by declines in their two other largest segments of financial and vending, so it was bad news on multiple fronts. The silver lining is that the business had started to turn around its trading in the first 3 months of the 2020 calendar year with order intake for Jan-Mar was 15% up on the previous year and prior to the coronavirus outbreak and the associated global lockdown, they were expecting the second half of the year to drastically improve. Type of investment Clearly the above description of the business isn't one of a clear path to increased profits and they could be loss-making very quickly if the business can't convert its opportunities into sales quick enough (which is what it attributes the 2019 underperformance to). The reason I chose to invest was when looking at the balance sheet and seeing that with the company selling for a market cap of £17M, they had a book value of £23.8M, £12.4M of which is cash. Even if you attribute 0 value to patents & licencing, assume no value appreciation on their properties and take a significant haircut on inventories, receivables, properties & machinery, I still believe the liquidation value offers a slight margin of safety on today's market cap (my calculations said around an 8% margin of safety, but do your own research). I'm not investing because I think there's a slight profit on the liquidation value. I simply see that as solid downside protection if the business doesn't return to growth (or at least remain stagnant at 2019s levels). The touch screen industry is very likely to continue growing over the coming years and Zytronic plc appear to have a history of innovation and product improvement. Whilst I would struggle to put a number on the upside here, if they return to a level of profit whereby they can pay the dividend they have over the last two years, the current share price offers a 21% yield. If the business does anything besides liquidate, I see this as a very undervalued stock.
Wealth Formula Episode 224: Multifamily Macroeconomics in the Twilight Zone
Catch the full episode: https://www.wealthformula.com/podcast/224-multifamily-macroeconomics-in-the-twilight-zone/ Buck: Welcome back to the show everyone. Today my guest on Wealth Formula Podcast, he's been on the show before. He's economist Ryan Davis. He actually joined us at one of our last Wealth Formula meetups. Of course, the last one we had was canceled but Ryan was at the one before that. He serves as a chief operating officer at Witten Advisors and provides fact-based research analysis and discussion to help clients like us formulate their apartment strategies and these insights and for investment decisions for multi-family development and buy/sell opportunities which as you can imagine we're all looking for some of this advice these days. Ryan has a PhD in economics from the University of Texas. Ryan, welcome back to Wealth Formula Podcast. Ryan: Thank you. Glad to be back. Buck: Yeah it's been like a pandemic ago when we last talked right? Listen, you know I want to kind of jump into the whole you know what the heck is going on, I mean the overall, if you would, you know kind of give me your overall assessment of the economy. I mean obviously we know these huge drops in GDP etc which were expected last quarter. How is this all affecting real estate asset prices especially you know apartments which is you know is our interest and something that you specialize in? Ryan: Sure so yeah the great unknown is the pace of the recovery. So we had that big drop through April in terms of employment and then we got a bounce back in May and June and the hope was that it was going to be a V-shaped recovery. But then we saw virus cases ramp back up in the second half of June into the early part of July and the local economy started rolling back some of their openings and so with that, we've kind of stalled out recently. So we'll get the July numbers this Friday for overall payroll gains and that could I think the consensus is anywhere between one, one and a half million jobs it could be negative so who knows but it looks like the hope for a v-shaped recovery in the economy has kind of stalled out after the first two months of optimism. And so we think that going forward we won't see any the worst is behind us really and so we won't see you know the big losses that we experienced in March and early into April so kind of what we're calling for right now is for the national economy to continue to add jobs for the remainder of the year and then beginning next year a recovery should emerge and that would sustain demand for housing and ultimately apartments going forward. In the near term as far as multi-family goes we expect some pain through the end of this year and then into the early part of next year. In terms of pricing power, if we had to boil it down to one number it's rent growth so year over year effective rent growth we think that declines to eight percent rent cuts this year and into the early part of 2021. That varies considerably on a local market basis I think our worst-performing market is Metro New York City probably no surprise there but then also many of the other gateway markets such as Boston, LA, the Bay Area, etc. We expect rent declines to be lower than that eight percent across the board, however many of the inner west, Texas, southeastern market should outperform still see rent declines but not closer to five/six percent range at the depth and so we expect near-term pain but then as we get out into 2021 and afterward and the economy begins to add a lot of jobs we would expect rent growth to return to multi-family. And then what that means for pricing in terms of apartment assets for right now in the second quarter hardly any deals trade at hand so it's really tough to get a sense of where pricing is and with the deals that have traded though the cap rates have remained relatively stable which is a good sign. We've heard from some of our merchant builder clients where they had assets they had constructed and were going out to the market to sell in the early part of April they were saying 10 discounts in terms of the compared to pre corona levels but that has since come back in the last 45-60 days and maybe it's only one to two percent in terms of the haircut that they're seeing out there right now. And there's a just a ton of capital that wants to get back into multifamily at the same time there's hardly any distress out there right now so there's a lack of available to you know supply to buy and so everyone is just kind of in this standstill there's a big ass gap because buyers aren't willing to pay yesterday's prices for assets but sellers aren't willing to give any you know deep discounts right now and so it's kind of a standstill and we’ll see how all this plays out. Buck: Yeah you know it's really interesting we're obviously you know through, you work with Western Wealth Capital, one of my partners and you know it's funny because we were kind of thinking well maybe there'll be some real buying opportunities but you know we've seen a little bit maybe just you know from buyers who are sellers who just are just wanting to get out while they're ahead maybe they made some money you know maybe they and at this point you know they're just thinking let's just cash out and maybe they're willing to take a little bit less but for the most part you know if you look across our own portfolio and it might be because it's largely again Texas and Arizona, etc that and maybe it's because it's mostly working-class B and you know high C class apartment but our portfolio you know the numbers are just as good as they've ever been in terms of you know occupancy in terms of even our we're still raising rents. And so when you look at that you're like well I mean how do you expect there to be any you know smoking deals out there if the sellers really aren't feeling any distress. So is there a difference you know when you look at something like a B and C class apartment scenario versus A right now or have you been able to break that down a little bit because I think the people I know who are in the A-class and new build are you know they're certainly feeling things a little bit more than we are. Ryan: Yeah so what we've heard from some of our clients in terms of early on so may June in terms of rent collections class A's were actually from a nationwide perspective actually exceeded the class B and C product. Now we don't think that will continue going forward and the main reason is that new deliveries that are coming online they will compete with the existing top of the market product and so we think that it will be short-lived in terms of the top of the market outperformance and another part is due to just the nature of this downturn where low-wage sectors were hit extremely hard in April, got some bounce back in May and June but the leisure and hospitality sectors lower-paying positions those have been the most impacted so far. But going forward we don't think that this downturn would be any different than prior recessions in terms of the class A leading the way down in terms of jobs and occupancy and also rent growth or rent cuts in the near term. So class A’s will lead the market down but then as we get out into the later part of next year and into early 2022 then class A's would outperform the broader market. So yeah we think through the end of this year until early next that B's and C's will hold up relatively better but that's mainly a function of just the competition that it takes to get these new projects they will get leased up it's just a matter of the market-clearing price and so those have to compete those could be mostly with the top end of the spectrum and so we see big rent declines and concessions in the class A space going forward. Buck: You know there's this thesis that's going around in the multi-family space and you know I've been sort of you know looking at it this way too for a while though I'm starting to you know feel like it's maybe not gonna happen is this idea that there's going to be a potentially before we really rebound and start heading up again that there’ll potentially be a you know big tsunami of defaults and things like that. Right now at least what I'm you know seeing and hearing about in terms of the lending markets and in terms of these properties, there really isn't much indication of that right now is there I mean what do you think? Ryan: No at least not in the short term I mean again there's it goes back to my earlier comment there's been no distress really and so that is due mainly to the huge stimulus packages that have been passed those from a fiscal standpoint and a monetary standpoint which is it's crazy to think that GDP declined at an annualized rate by 32 however incomes soared and so that's all due to the stimulus that we saw and so that's helped prop up renters incomes and allow them to pay rent. Now going forward I think some of these the number of defaults I don't think there will be a tsunami, at least that's how we view it right now, ask me again in a week and it could change, but I think that the defaults will be very market specific and so those geographies that have been hit harder we'll see a larger number but many of the Texas markets, Phoenix, Denver, southeast high growth markets where you've got this short-term tailwind in terms of folks at the margin more and the trends that have been in place for years of folks moving from gateway markets into these inner markets will be kind of you know given a stairway shot really in the near term and so that would help to prop up multi-family fundamentals and so yeah if you're expecting a tsunami of defaults in any of those markets that I've mentioned again it kind of gets a little bit granular in terms of you know potentially Orlando might have some problems just with the amount of supply and then the you know low-wage in tourism industries being impacted more dramatically and that would lead to some weakness in Orlando but out outside of that maybe Houston you could argue you know somewhat but outside of those two and those those areas of the inner west Texas, southeast Florida should be but hold up you know relatively well and I would think that the main stress points will be out you know on the coast in California potentially portland we do think seattle holds up relatively well and then northeast in terms of you know New York and Boston as well so I think it's very locally market driven. Buck: Yeah it's interesting you know we did we were a little worried about Houston too but our you know Houston portfolio is actually doing awesome it's not having any problems at all which is which was you know again, knock on wood that’s what it's been so far. Let me ask you another question you mentioned the pent-up demand of you know money on the sidelines waiting to get back in and you know and in many situations, they have to get back in right they're mandated to deploy capital and that sort of thing do you the one thought that I've had through this is you know multi-family and well multi-family in general has held up so well during this period of time does that potentially create a situation where you know the big money that's coming in starts looking at this even harder as potentially a little bit of a hedge or a little bit of safe haven. What what do you guys think is going to be the effect of that you know the relatively stable performance and then ultimately you know having all of this money on the sidelines,? Do you see paradoxical even further compression of cap rates over the next couple years? What's your thought on that? Ryan: Yeah and so kind of pre-corona our forecast was for cap rates to continue to decline and you know taking a step back it was mainly driven by global factors with the aging populations across the globe that have built wealth up and all that investment needed to be placed somewhere. And so those trends were driving returns lower for longer and so those are the demographic that have not been affected by the pandemic. And so just from a global standpoint, we're expecting returns across all assets whether stocks bonds you know all classes of real estate whether it's multi or industrial retail office, etc those returns would continue to head lower. Now we've had the pandemic and we've seen multi-family and industrial hold up exceedingly well and who knows what to make of retail office and lodging just lots of pain and in those sectors and so if you need to be allocated to real estate then multifamily and industrial or where you want to be at least in the short term and especially if you're looking for consistency of returns and you know risk-adjusted on a risk-adjusted basis you know multi-industrial or have outperformed other asset classes and so really to get into the lodging office retail space probably more opportunistic mindset in terms of those assets may need to be repositioned etc and so I think a lot of that money that's out there is not looking to get there's a lot that's looking for that type of asset turnaround story but there's also a lot of money out there that needs the stability. And so that should continue to compress cap rates or put a really put a cap on that cap rates and so it would be no surprise if cap rates on an aggregate basis hold steady and maybe even decline despite a deterioration in short-term fundamentals and part of that is due to the long-term belief in apartments going forward and so yes there's a short-term dislocation where we expect some move-outs that you know this year actually there are a lot of move-outs that we expect and so there's going to be a lot of doubling up folks moving back in with their families but then there's going to be pent up demand as we as that recovery takes hold next year and that will be released and so we see leasing to be through the roof next year and then out into 2022. Then at the same time as that demand story improves in the short term we see starts decelerating dramatically so we've we're going from a 400,000 unit run rate to about 200,000 units by the early part of next year. And so new production is going to get cut in half now that we don't get any benefit of that immediately so we have to wait till later part of 2022 and 2023 before we see that slowdown and production really lift fundamentals and so I think everyone is seeing that yes there's some short-term disruption in the multi-family market right now, but the long-term drivers are there and if you have the capital to wait out this very painful period in the short term then there will be major benefits after that we should see after next year. Buck: Now one of the things you said I think earlier is that the worst is behind us do you believe that's the case in terms of rent growth and you know rent cuts and that sort of thing right now? Ryan: I think the worst is behind us in terms of the economy. I think that going forward we should continue to produce job gains on a monthly basis, though this next report could see some layoffs we'll see the consensus is one million one and a half. In terms of multi-family we do not think the worst is behind us we think that fundamentals will continue to deteriorate into the early part of next year we think that you know kind of right now in terms of year over year rent growth in the early part of this year let's call it three, three and a half percent we've since gone down to zero percent in the second quarter. So on a quarterly basis we've seen some dramatic rent cuts, again this is on a national basis and then as we move forward we see occupancy dropping by about three percentage points into the early part of next year, rent declines of about eight percent through the remainder of this year into the first quarter of next year and so no we do think that there will be some deterioration and fundamentals going forward. On the flip side of that might present some opportunities and so any assets that were purchased specially in your space in terms of if they were bought at the top of the market at the end of last year in the early part of this year and now that value-add story isn't there where you might not be able to get the rent bumps that you were expecting so some of those assets will have to be recapitalized and so that might present some opportunity as the year progresses but again like you said we haven't seen that materialized so far. Buck: Yeah that's the tricky part right I mean it's sort of like I think when you're on the buy side here you're saying well I mean these prices that we're seeing right now you know with prolonged you know low-interest rates which we can pretty much guarantee at this point for a period of time and then the pent-up demand. It's sort of like okay well I mean this actually might be one of the better times to buy if you consider what could potentially happen in the next you know 18 to 24 months in terms of you know explosive growth. When you look at those indicators that you're you know that you're talking about that may lead to some of the more explosive growth metrics what markets come to mind the most for you? Buck: Now one of the things you said I think earlier is that the worst is behind us do you believe that's the case in terms of rent growth and you know rent cuts and that sort of thing right now? Ryan: Yeah so our general geographic areas that we like we like the southeast, parts of Florida, Texas and the inner west. We really like Atlanta, we like South Florida though there's a little more pain in the short term some of our clients are saying it kind of in terms of you know rent collections you know northeast but also yeah LA but then South Florida is outperforming those two areas but still lagging some of these other markets. So we like the Texas markets long term the interwebs you have Phoenix, Denver, Salt Lake as well. We like Seattle that's an outlier on the west coast but then the other markets whereas in the Bay Area we expect those you know rent growth numbers to average four, four and a half percent which stack up really well across the nation but for those markets that's a recession pretty much and so compared to what's normal and the cap rates you have to pay the rent growth numbers there kind of you know lackluster. So the midwest the markets they won't be hit as hard but still they don't get that explosive growth going forward and so we really like the inner West Texas, southeast of Florida markets and you know part of that has been driven being driven by the migration flows. So domestic migration numbers have really helped out all of these markets we've seen outflows from the northeast boston new york the bay area Southern California we've seen migration outflows from those markets into the you know inner west you know Las Vegas the inland Phoenix, Denver you know people moving from the coast into those markets and then you know also parts of texas as well but then in terms of the northeast the flows that are coming in to the Nashvilles the Charlottes, Raleighs, Atlanta, Florida markets we and then also Texas as well and so those trends have been accelerated at least in the short term, but it's important to remember that those have been going on for a decade at least even more and then other markets and so it's not anything new but at the margin that will support many of these other markets. Buck: Yeah on the west coast I mean there's that flight to Arizona as well right from California. One of the things that you know is worth talking about is what effect this has had you know the pandemic and the recession on the lending market, with Fannie and Freddie and you know how that might be playing into any of the growth or lack of growth. Ryan: Yeah I think on the financing side you know debt for stabilized assets it's there and it's cheap you may have to you know have higher reserves than you've had typically but for the most part it's there and so that's part of the appeal of buying assets right now with these record low interest rates. So I think for stabilized assets yeah it's there for new construction it is dried up considerably and this is a change in the last 30 to 60 days and so the fed does a survey each quarter of banks and their tightening of multi-family construction lending standards and that the latest report shows 70 percent of banks tighten their multi-family construction loans last quarter which we haven't seen those levels since 2008/2009. And so I think part of it's the lenders are trying to make sense of what they have in terms of all these other asset types in terms of real estate or retail, lodging, office loans, they're trying to you know spend a lot of time working those out and so then you add on the uncertainty in terms of the economic recovery etc, they've pretty much put a halt on new construction loans. And so that's been a big change here in the last two months call it. Then on the equity side I think returns have been increased but still available and interested but you know a lot of you know equity and especially focusing in on the new starts pipeline if all the deals that have been started are continuing and it's kind of a mixed bag from our clients in terms of are you seeing delays or actually some other clients that reported these they were able to speed up the timing in terms of getting able to get trucks into sites very easily and then also the construction workers that were on you know working on hotels motels those have come into the apartment sector and so that's provided more manpower in terms of getting these deals done. And so those that were under construction are continuing to proceed, those that were capitalized I think that but haven't begun those have been they haven't pulled out completely they just said let's press pause to see let's say can we get any break in construction costs over the next several months and so the equity and banks they're still willing to do it move forward on those deals that have been capitalized but are you know slow playing it. And then you get to the others where there's land sites and they hadn't been entitled and haven't been capitalized those deals we think have been shelved for right now and so it kind of where some opportunity could be is on the land side of you know potentially purchasing some land sites that might be teed up for development as we get further along in this recovery. Buck: Again one of the things that you're saying though in terms of construction loans not being there again it helps us for those of us who have apartment portfolios already that are already there that that again goes to the issue of a simple supply and demand issue which we can benefit from if there's not a whole lot of new builds. You know this is a major driving variable in in apartment buildings nationally can you give us a little bit of the idea of you know just not being able to keep up with you know population growth in various parts of the country, can you give us a little bit of you know sort of a thousand-foot view on the perspective on how big of an issue that actually is? Ryan: I don't know if it's that big of an issue you know on on the whole and I think that you know some of these higher growth markets in terms of where we've you know call it the Atlantas and North Carolina markets, Central North Florida, Texas, the inner west regions where we've seen large population growth statistics you know high growth markets but they're also they also tend to be the highest in terms of supply for housing and so it's more easy to build in those markets especially you know out as you get away from the know central cities etc and so where we've seen the the biggest barriers to supply are out on the coast and so we've seen you know job growth be pretty good in those markets but the supply hasn't kept up at all and so that's why you're seeing you know these big you know rent affordability you know problems in the coastal markets and so we think that supply not keeping up with the population dynamics is more of a coastal problem but then you know as you get into the markets that are more accepting of new development then you know we've seen housing supply increase at a rapid clip in many of these other markets I think you know Austin you know even through the June of this year permit activity for multi-family continued to set it reached big big levels and so I think year to date in Austin it's already pulled permits on almost 10,000 units already which is you know huge numbers. And so I do think that while these population growth numbers and some of these markets are you know off the charts especially compared to you know some of the coastal markets, that supply has been able to keep up there and so yeah you see pockets of where you know rent growth you know bumps up to you know five, six percent levels, it's especially that was the case in Phoenix and Las Vegas over the past two to three years where those markets were leading in terms of rent increases but they tend to you know be markets that you know will accept more new supply and so that will tend to even out over the long term. Buck: How's Vegas doing out of curiosity because that one was just crushing it. It seemed it seemed a little dangerous you know it seemed like one of those markets where it's like wow is it real or is it one of those things that's just gonna go back to Vegas. Ryan: Yeah exactly and yeah kind of thinking that you know before kind of goes back to your comment earlier about people moving from the coast to getting in their car and driving to the riverside and then Las Vegas and Phoenix and so it was benefiting from a real out-migration from expensive coastal California. That said that just the nature of this pandemic crushing leisure and hospitality and the conference circuit that the job losses in Las Vegas I think you know through April into May led the nation. We've seen some a bit of a bounce back there but really the question is you know how fast does the the conference you know a circuit come back, how fast are people willing to travel to casinos, I know they have already, but I think that pre-corona the growth was real and yeah absolutely now it's a little bit different you know market in terms of the cost and you don't want to go in there and if you're a developer you don't you know want to build a high-rise there and so your strategy is a little bit different but so far it's held up relatively well, all things considered, but still a lot of weakness that is materializing in Vegas. Buck: Interesting stuff. Well listen I don't want to keep you all day long, Ryan, but it's been great talking to you. Where can we learn more about your work? Ryan: Sure. Probably the easiest is wittenadvisors.com you can go there, all our contact information is there, feel free to reach out with a phone call or send me an email anytime and I'll be happy to give you more details on the services that we provide and how we add value to many clients that are in either owner, operators, developers, equity or lender clients. Buck: Fantastic thanks again and we'd love to have you again you know in a few months to reassess where we are at. Ryan: All right. Sounds good. Looking forward to it. Buck: We'll be right back
Banca Sistema SpA – 18% ROE, Trading at a Discount to Tangible Book Value
Italian specialty bank with 9% earnings growth and > 18% ROTCE, trading at 5x P/E and below TBV.
Dividend yield of 5% at 25% payout ratio; room for increased shareholder returns due to overcapitalization of more than €80 million (57% of market cap) on a pro forma basis.
CEO with significant private share, last stock acquisition in mid 2019.
Regulatory risk from new regulations on the definition of default and calendar provisioning is a non-issue according to management.
Introduction Banca Sistema SpA (BST.MI) is an Italian small specialty bank, providing factoring services to suppliers of public administrations (64% of the company’s outstanding loan volume), salary and pension secured loans (31% of outstanding loan volume), as well as gold and jewelry backed loans. The company’s business segments are characterized by low risk (36 bps cost of risk) and relatively high returns (18% ROTCE). Total outstanding loan volume exceeds €2.6 billion. Interests of shareholders and management are seemingly well aligned, with management owning a significant portion of the company. The ownership structure looks as follows: 38.4% of the company is owned by a shareholder’s agreement comprised of two banking Foundations (collectively 15.3%) and SGBS (23.1%), of which Gianluca Garbi, the CEO of the company, is the relative majority shareholder. The remaining shares (61.6%) are floating. Mr. Garbi acquired an additional 170,000 shares in June of 2019 at a price of around €1.14, when the stock was near its all-time low to date. Other insiders have bought in August at prices between €1.25 and €1.30. Since the stock was floated at the Borsa Italiana in 2015, Banca Sistema SpA has grown its assets by 75%, from €2 billion in 2016 to €3.7 billion in 2019. The profitability has been stable and growing, with net income of €26.4 million in 2016 and €29.7 million in 2019. Meanwhile, the stock price has fallen from €3.75 to around €1.90 during the same time period. For full year 2019, the company has managed to grow earnings by 9% and maintain a ROE above 18%, while being overcapitalized by more than €80 million on a pro forma basis. Evidently, there’s a divergence between fundamentals and stock price development, creating a bargain opportunity at low multiples of 5.14x earnings and 0.88x tangible book value. The Main Business – Factoring Factoring of receivables towards Italian public administration entities is the main business segment of Banca Sistema SpA. Customers are utilities and companies, who provide healthcare products and services, food, transport and entertainment to local state-owned healthcare companies, regions, municipalities and ministries. Due to structural reasons (bureaucracy as well as liquidity), Italian PAs are significantly slower to pay their open invoices than the EU average. In fact, out of all the EU countries, only Greece is slower to pay. Source: European Payment Report 2019 Although payment times have come down in 2019, it’s questionable how sustainable this new level is. Greece had improved its average payment time from 103 days in 2017 to 73 days in 2018, just to see it increase back to 115 days in 2019. The reasons for these late payments are deeply rooted structural issues that have persisted for a long time. They will unlikely be solved overnight. The profitability of the business comes from the ability to collect the purchased receivables faster and/or recover a higher value than the original creditor expected. The data driven underwriting is based on information about payment times from past collections with different public administrations. The company’s proprietary tools and comprehensive data basis are constantly fed with new data and enable them to effectively price receivables for profit. Payment times are accelerated by established relationships with key people at the PAs. The key particularity about this business is that the vast majority (84%) of obligors are public administrations; a reference market without default risk. Although payment time can be further delayed, if PAs enter into financial distress, the exposure to credit risk is not a concern, because public administration entities can’t default and are not subject to Italian bankruptcy laws. As long as the company doesn’t accept any haircut proposal, a full recovery of both capital and interest at the end of the financial distress is possible. There is only a time value effect due to the longer collection process. The majority of factoring turnover of Banca Sistema SpA is non-recourse (62%), with recourse factoring representing 11% and tax receivables 27%. Source: Banca Sistema Q4 2019 Results Favorable Market Backdrop and Legal Framework
European Late Payment Directive (2011/7/EU)
To protect European businesses, particularly SMEs, against late payment, the EU adopted Directive 2011/7/EU on combating late payment in commercial transactions in February 2011. Under this directive public authorities have to pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days. Companies are legally entitled to late payment interest from the day following the terms of contractual payment at a statutory interest of 8% above the ECB reference rate. The late payment interest (LPI) is an incentive for the counterparty to pay the debt in time and negotiation lever for the company to get accelerated payment. If the payment is overdue, the LPI is accrued and eventually collected after legal action. For 2019, LPI from legal action has made up 36% of factoring interest income.
VAT Split Payment System
In January 2015, the Italian government first implemented the split payment method of VAT collection to combat VAT fraud and non-compliance, which has been extended since. In this system, VAT due from goods and services provided to public entities are directly paid to the Italian treasury and not the supplier. The split payment method generates liquidity problems for public administration suppliers, as they find themselves in a permanent VAT credit position on transactions made with public entities. Companies subject to split payment continue to pay VAT to its suppliers, but no longer receives it from its customers, who pay the tax directly to the state. This mechanism creates an imbalance of incoming and outgoing cash flows, further amplified by the delays in obtaining VAT refunds, which, on average, takes 95 days. The increased volume of requests for VAT refunds that can now be filed quarterly to reduce the negative financial impact, is expected to lead to further payment delays. The total expected business opportunity for factoring providers created by the split payment system is estimated to be around €15 billion, according to a study by Bain & Company.
Growth of Government Spending
The European Commission’s spring 2019 forecast revealed that Italy will be the slowest growing economy in the EU during 2019. Technically, the country was in a recession in 2018, with two back to back quarters of negative GDP growth. With monetary policy being exhausted as a means to accelerate economic growth in the country, Italy has to turn to fiscal policy in order to support its economy. Italian government spending is projected to increase by almost €100 billion, or 2% per year, over the next five years, from €864 billion in 2019, to €957 billion in 2024. Government revenues are projected to increase roughly in line with spending(€921 billion in 2024). Thus, even with no GDP growth (€2.076 trillion GDP in 2018), the projections do not imply a breach of the EU’s rules, by which member states are not supposed to run a budget deficit above 3% of its GDP. Source: International Monetary Fund – World Economic Outlook The positive effect of increased government spending works in two ways for Banca Sistema SpA. First, more spending means more potential factoring volume in total. Second, more spending can result in higher payment times, because of the increased volume of payments that have to be processed; this in turn should create higher demand for factoring and enable more profitable underwriting (higher margins). Salary and Pension Secured Loans (CQ Loans) The Bank’s second largest line of business, with 31% of total outstanding turnover, is salary and pension secured loans. Loans outstanding have grown 25% y/y (FY19 vs FY18). It’s a lower margin business compared to factoring, with current net interest margins of 3.3% vs. 5,9% for factoring. However, secured loans are considered very low risk, because the borrower’s loan is repaid directly from their salary or pension by the employer or state pension body. The following attributes are additionally contributing to the low risk profile:
the monthly installment can’t exceed 20% of the salary/pension,
the loan takes precedence over any seizure of salary/pension amounts, and
insurance is mandatory by law and covers in case of death, disability and loss of job.
Moreover, out of the outstanding borrowers 50% are pensioners and 32% are employees of public entities. The probability of default (PD) is very low and loss given default (LGD) is almost zero (thanks to the insurance). Since the recent acquisition of the broker Atlantide, the company is able to originate the CQ loans themselves, instead of relying on intermediaries, like it has in the past. This will increase the net interest margin of the CQ business in the long run, although it might not have an immediate impact, because only 5% of the currently €817 million outstanding CQ loans are originated directly by the company. Gold/Jewelry Backed Loans The company has first tested this business in 2016 and has grown it organically as well as by way of acquisitions since. The pawn loan is a particular form of short-term loan with a collateral on property goods; the focus is on gold, jewelry, diamonds and selected watch brands. The gold and jewelry backed loans only make up a negligible portion of the total turnover, with €70 million in currently outstanding loans, even considering the recent acquisition of the gold/jewelry backed loan line of Intesa Sanpaolo SpA Group of €60 million in outstanding loans. This is not a business that many banks are focused on. Nonetheless, it’s characterized by very high returns and low capital absorption. The gross annual interest rate on the loans is 12-14% with 50% loan to value. Most pawns are paid back at the expiration date, between 5-8% are sold at auction. The majority of outstanding loans are backed by gold. Management has talked about prospects for double digit annual growth in this business segment in the Q4 2019 earnings call. Regulatory Capital Well Above Minimum Requirements The Common Equity Tier 1 (CET1) ratio stands at 11.7% at year-end 2019, compared to the minimum requirement of 7.75%. Total Capital Ratio (TCR) at 15.0%, exceeds required minimum of 11.85% by similar amount. Moreover, the European regulatory bodies have recently decided to reduce the risk weighting of CQ loans to 35% from 75%, starting September 28, 2021. Since the CQ loans business makes up a significant part of the outstanding loans of Banca Sistema, at €817 million or about 42% of risk weighted assets, the new directive has a significant positive impact on the company’s regulatory capital ratios. Once the directive is officially implemented, the CET1 and TCR ratios for Banca Sistema will stand at 13.9% and 17.8%, before accounting for the most recent acquisition of the gold/jewelry backed loans business from Intesa Sanpaolo. In absolute terms, approximately €31 million of capital will be made available, 20% of the current market cap. The total capital surplus will add up to €87 million (pre acquisition), 57% of the current market cap. This large capital surplus makes the stellar returns on equity even more impressive. It will also enable accelerated growth in factoring and loan volume, additional acquisitions or a higher capital distribution to shareholders through dividends and buybacks. Valuation As of my writing, the share price stands at around €1.90. With 80.3 million shares outstanding, the current market cap is €153 million. EPS for full year 2019 was recently reported at €0.37. That gets us to a P/E multiple of 5.14, implying a 19% earnings yield. The acquisition of the gold and jewelry backed loans from Intesa is expected to add approximately €3 million in annual profits, or €0.04 in EPS. Even with zero growth in the other lines of business, next year’s EPS could reasonably come in at €0.41. Based on the current stock price, the multiple on my conservative earnings estimate for 2020 stands at 4.63. That’s cheap by any measure and leaves a margin of safety for some unforeseen risks and uncertainties. The company is also very cheap in terms of book value. Tangible book value per share for the most recent quarter is €2.16. At the current share price of €1.90, you get a discount to tangible book value, for a company earning a return on tangible equity above 18%. Putting a more reasonable 10x multiple on net earnings, gets you to a share price of €3.70 on FY19 earnings and €4.10 on my conservative expectations for FY20 earnings. That’s an upside of around 100-130%. Following Warren Buffets logic of valuing J.P. Morgan at 3x tangible book value (18% ROTCE divided by his assessment of risk-free rate of 6% = 3), Banca Sistema should be worth more than 3x the current price. Regulatory Risk Two new EU regulations could potentially have an impact on Banca Sistema’s factoring business: the EBA guidelines on the definition of default and calendar provisioning. The risks emanating from the new regulations were previously discussed here on Seekingalpha. Essentially, the regulations change the definition of default and the way the company has to treat its nonperforming exposures. By the new definition credit exposures that are due past 90 days are considered defaulted and have to be written off within 3 to 9 years depending on the type of exposure. However, for exposures to central governments, local authorities and public sector entities, which make up 84% of Banca Sistema’s factoring turnover, special treatment may apply, as long as:
the contract is related to the supply of goods and services,
the financial situation of the obligor is sound and there are no reasonable concerns that the obligation might not be paid in full,
the obligation is past due not longer than 180 days.
Fortunately, all criteria are met for most of Banca Sistema’s public sector exposures, because:
factoring receivables from suppliers of goods and services to public administrations is precisely what the company does.
PAs can’t default and are not subject to Italian bankruptcy law; thus, there is no concern that the obligation might not be paid in full.
the average payment time of Italian PAs was between 67 and 104 days during the last three years, well below 180 days.
From a pragmatic perspective, the change of the definition of default has no impact on the actual collectability of receivables towards public administrations. Bad loans from PA exposure have not led to actual losses for the company. Still, concerns remain that the new regulations will have an impact on the accounting (in terms of provisioning and write-offs) as well as the regulatory capital requirements, which could adversely impact returns on equity or even necessitate a capital increase, diluting current shareholders. Meanwhile, the CEO has stated that the impact of the new regulation is very limited, if not zero, on the most recent Q4 2019 conference call. Although I’d normally be hesitant to take managements word at face value, the high insider ownership and further acquisition of shares, gives me a higher level of comfort. Why This Opportunity Exists Banca Sistema is a small, relatively illiquid, Italian bank stock. There are multiple factors depressing the current share price. First, the European financial sector couldn’t be more hated by investors. The increased regulatory requirements since the Great Financial Crisis, paired with the sustained unfavorable interest rate environment in Europe, have greatly reduced the returns on equity European banks are able to generate. A traditional European bank is happy to earn 9% ROE these days. Banca Sistema has thus far been able to earn more than 18% ROE, in the same regulatory and interest rate environment, running a significant capital surplus. This is one of those cases, where the baby is thrown out with the bath water, creating an opportunity for the attentive investor. Second, Italy has had its fair share of bad headlines in recent years: government crisis, low economic growth and a large government debt burden have weighed on Italian stock prices. Unsurprisingly, Banca Sistema hit its all-time low of €1.10 per share, in June of 2019, at the height of the government crisis. Third, small cap value stocks, as a group, have had a historically bad run in recent years. The relative underperformance of small cap value has only been more extreme in 1929, right before the Great Depression, and in 1999, at the very top of the Tech Bubble. In the current environment, companies like Banca Sistema tend to stay undervalued for a while, and in many cases, continue to fall further and further in price, as funds get drawn out of value strategies and get reallocated to strategies that have performed best in the most recent past. With capital continuing to flow into ETFs, companies that are not included in the prominent indices lag behind the largest capitalization stocks - the biggest beneficiaries of the inflows, who move along the fund flows seemingly irrespective of fundamentals. Conclusion Over the long run, fundamentals matter; share price and value tend to converge and major mispricings are corrected. The catalysts can either be abrupt, like a private buyout or a large share repurchase, or more gradual, like continued showings of good business fundamentals and high shareholder yield over time. I think the latter is more likely for Banca Sistema, although a buyout or some other M&A event is certainly not out of the realm of possibilities. If the company continues to prove its earnings power over the long term, compounding its equity at a high rate, the stock price will eventually meet its intrinsic value. In the meantime, you’ll receive a decent dividend yield of around 5%, at a conservative payout ratio of just 25%. This is the type of company that I wouldn’t mind owning even if I couldn’t get a quote on my shares for the next 10 years. Your incentives are aligned with Gianluca Garbi, the CEO and single largest shareholder, who presumably has the majority of his net worth tied up in the company. He has every incentive to not only run the company well operationally, but to also eventually bring share price and value into alignment, if the gap doesn’t close organically over time.
What doesn't kill you... With every blow he takes, every bullet that strikes his aura, Mint's aura grows only more steadfast. As attacks land on him he accrues a faint purple glow around his body, the telltale sign of energy built around him. By itself it does little, but with a moment of focus and sharpened intent it can form itself as an incandescent construct, searing with light that seems to dance across its surface. Whether used as a shield or armour, or even an anchoring force, he truly becomes stronger with every challenge he faces.
Though Mint's Semblance grows in strength with everything that he endures, it can also draw from his reserves of aura, burning through it like fuel in order to shine that much brighter. The light that wreathes his body burns brighter, turning into a surface of swimming brightness that can catch the eye or shine oppressively bright.
For every attack directed at Mint that is not a critical failure (results in a negative number of successes), he gains a charge passively, with a maximum of [Resolve]. He can also choose to expend up to [Semblance] AP to gain charges (with a minimum of 2), gaining [AP Spent/2] charges. When this ability is activated, he gains advantage to checks to Inspire, as well as to Intimidation checks.
Drawing from the energy of his Semblance, Mint focuses its power out of his hands or even a weapon he holds within them, creating a shield for all who stand behind it.
For the following [Resolve/2] turns, Mint gains the ability to produce a piece of cover [Presence] yards wide that applies a [Semblance] penalty to all attacks that cross through it, whether they are targeted at him or not. For the duration of his ability, he is able to change the direction it faces, but it must move along with him, and when the ability stops the piece of cover is considered to no longer exist. If Mint chooses to attack while this ability is active, it is immediately cancelled and any of its effects will cease.
Mint releases the purple glow he accumulates over his body, wrapping it around his body in a manner not so different from a suit of armour made of light.
In order to use this ability, Mint must have at least 1 charge. He may expend up to [Semblance/2] charges, and for the next [Resolve/2] turns, he gains armour equal to the number of charges expended, up to a maximum of [Presence/2]. While this ability is active, he cannot gain any additional charges.
Where the barrier and armour that he creates around himself are obvious and flashy, he is able to use his Semblance in more subtle ways too, using it to wrap around select parts of his body to keep himself grounded, anchored, and even to let him shrug off the devastating effects of winding blows.
Mint gains [Semblance/2] dice to checks made to resist involuntary movement, being knocked prone, and treats the knockback effect of attacks as though they dealt [Semblance/2] less damage. If he has charges available, he can additionally choose to expend the charges to treat the penalty of called shots as though they dealt [Charges Expended] less damage.
Standing at 6’1”, and with a balanced build that matches his height quite handily, Mint is an easily spotted figure even on his quietest of days. Though he’s not particularly muscular, he’s not terribly lean either, and has the broad shoulders necessary to fill out his suit with ease. It certainly helps that he holds himself with a certain bearing that speaks volumes of his confidence. That he fills it out so easily is probably a good thing, considering that it’s tailored, consists of the following: A two-buttoned (but typically left unbuttoned), black suit jacket with a notched lapel, and a breast pocket with a pocket square of the pastel purple variety. Beneath that, he wears a black and green patterned tie, and a white collared undershirt. The interior of his suit jacket consists of once again, an understated, solid hyacinth purple. On his right wrist, he wears a watch with a black leather strap, black finish, and a silver rim. His cuffs are bound with a pair of cufflinks, each with a silver metal rim and a round, black center with his personal emblem on it, its components all in green with the exception of purple along the two center portions. His trousers are a simple set of black dress pants to go with his jacket, and he wears black leather shoes to finish off the look. If one decides to take a peek while the legs are pulled up, he wears a set of simple green socks. With a clean-shaven face, features that are sculpted and sharp, a pale complexion, light pastel green hair and chocolate brown eyes, he has a fresh-faced look tempered by a thick (and somewhat disheveled) haircut swept straight to his right side, as well as the faint bags under his eyes, evidence of his poor sleep.
At a first glance, the Hyetal Recourse looks to be nothing more than a timeless, classically styled umbrella of Valean make. Its handle consists of a wooden crook, much like a cane, with an understated finish that gives it the appearance of being well maintained, but not terribly fancy. Its canopy consists of a dull, solid black fabric- kevlar, not that most people would notice it without touching it. Once opened, it reveals much of what one would expect out of an umbrella, a wooden shaft polished to a glossy finish- admittedly though, it’s a little thicker than what one would typically expect out of an umbrella. Its runner too, is in fact slightly thicker than usual, and actually longer than necessary for his hand to fit around it. A close inspection reveals that the runner is actually partitioned into two sections locked together. A twist of the front part of the runner in the anticlockwise direction unlocks each section from one another, allowing the one closer to the ferrule to control whether the umbrella is open or not and the one closer to the handle to act as a pump action mechanism. This triggers a series of transformations along the umbrella, causing a trigger and guard to flip out from the shaft just ahead of its handle. The tip of the umbrella opens up, revealing a suppressed muzzle. While it doesn’t exactly silence its gunfire, it at least serves not to make it a little less deafening. A fair several inches behind the runner, a magazine loading port opens underneath the shaft of the weapon, and an ejection port closer to the handle and off to the right side, revealing a metal interior to the wooden exterior of the shaft. The rounds loaded into Hyetal Recourse are Dust buckshot cartridges, but can be rapidly ejected and replaced with slug rounds instead, providing him the option to switch between the short-ranged firing option of buckshot, and the longer ranged option of the slugs.
Mint was born to Ovata Jade and Garnet Hyacinth. The former was a veteran Huntress that came from the long, long Jade line that now consisted of Mistralian immigrants who’d moved to Vale, while the latter was a foreign diplomat working for Vale from the Hyacinth family, notable for their many positions in Vale’s government and diplomatic community (a few outliers notwithstanding, including Garnet’s brother, who happened to be how Ovata and Garnet had met). Ovata was a stickler for the rules, serious, and conscious of both face and appearance in a very typically Mistralian manner, but someone who could pay meticulous attention to detail. Garnet on the other hand was someone who always looked at the bigger picture and improvised his way around obstacles that appeared, sociable, if harmlessly eccentric. While the two couldn’t be any less alike, they both shared two very important things: A sense of duty to do what they had to for the people, and a certain pride in their heritage. This was a fact made particularly apparent by the double-barrelled surname that they compromised on to give to their son. Both unwilling to give up either their last names or the opportunity to pass it down to their son, they made a compromise and named him Mint Jade-Hyacinth. Born prematurely in a Mistralian hospital not far from Vale’s embassy in the kingdom, Mint had to be kept in an incubator for weeks before he and his mother were released from the hospital. Despite the complication, it didn’t seem to affect his health all too adversely as he grew older, aside from leaving him a little scrawny and tired more easily than most. Mint’s life, while not exactly a difficult one, wasn’t exactly a normal one from there either. Garnet being a foreign diplomat meant that he (and by extension, the family) had to move from kingdom to kingdom relatively frequently, staying anywhere from six months to two years at a time before moving to the next one. Sometimes that meant going back home to Vale, where the two would rent an apartment, but most of the time that meant moving from one Valean embasssy to another. Both Garnet and Ovata were busy, their time respectively taken up by diplomatic affairs and the various missions of a Huntress, but did their best to find time to take care of him. On days where Ovata was out on her missions and patrols, Mint would simply follow his father around and when told to, would simply sit outside of a room as discussions occurred, almost inevitably leading him to wander about as children tended to do. Still, life wasn’t exactly ever boring. With there always being something to see, something to do or ask about, Mint seemed to be constantly whetting his appetite towards all number of things, the lives and experiences of his parents included. Both were more than happy to answer his questions. Soon, it became normal for them to tell various stories from their own lives and lines of work. From Ovata, these were tales about Huntsmen and Huntresses— many of them Jade’s. While she pulled no punches about the difficulties and tragedies of the job, the way with which she spoke about it showed such an utter conviction that it was the right thing to do that it captivated Mint. Garnet on the other hand, spoke often about his work, and while one would think that the job of being a diplomat would deter the interest of a child, he had something of a talent in making even the most boring or frustrating diplomatic tasks seem entertaining and interesting, breaking them down into something even Mint could understand, painting it as a duty done for the sake of people to protect the from war and greed. Over time, a playful competition grew between Ovata and Garnet to tell the most interesting, most intriguing stories that they had to offer about their jobs, and almost inevitably sparked an interest in both occupations for Mint. There was after all, something about being just like his parents, of working for the sake of protecting others that captured his imagination. In the end though, it was the heroic tales and flashy combat of being a Huntsman that appealed to him most. While his mother was more than happy to foster his interest in being a Huntsman, she was sure to remind him that he’d have to study hard in order to become one. Given who his parents were and how busy they were, hard work was not an idea that was at all foreign to Mint. Though a child easily tired by even the normal studying in a day’s school (and therefore often one who struggled to learn properly as the day went on), he was not one easily deterred. If nothing else, he was good at putting his head down and learning, even if it was through rote memorisation. After all, if it was all to be a Huntsman, it was time well spent. As he grew older, this became a more and more difficult task. While other students were able to connect the dots and apply what they learnt easier, he continued to struggle in that aspect, merely powering through the material that he was being taught by dedicating much time and willpower to learn what he needed to. It certainly didn’t help that he moved from kingdom to kingdom so frequently, which meant that he was also moving from school to school on a semi-regular basis, and that it was that much harder for teachers to help him because of that. While this was the case, it wasn’t all a bad thing. While teachers might not have been able to help him as much as he’d have hoped, he’d learnt quickly on that with some of the mimicked outgoing confidence of his father, he was able to make friends and get their help with his studies. While leaving them was always painful no matter how many times it happened, he never really seemed to reserve anything, making friends and dedicating himself to them as closely as anyone else around him would. As time went on, he would learn to use the CCTs to remain in contact with them, even if the calls became less and less over time with all but a select few. While this might have left some people feeling isolated, Mint learnt to simply shrug it off and continue. Of course, it helped that beyond his family, there were other constants in his life. For instance, there was his father’s attache, Hiili Lumi, who along with his family accompanied them from embassy to embassy. While the age gap between Mint and the family’s sole son (a boy by the name of Liuske) that put him two years ahead of Mint had deterred the two from making friends, as they grew older, that became less and less consequential. So, the two became fast friends. In time, he’d learn that Liuske shared much the same interest in diplomacy, hence why he was so often seen running errands in the embassy, even if it mostly ended up being delivering the odd piece of paper or another to someone on behalf of Hiili. Despite all of his difficulties in school, he never wavered in pursuit of that goal ahead of him, to become a Huntsman. As soon as he was old enough, Ovata enrolled him in a preparatory combat school. Of course, given Garnet’s occupation, that meant he had to be enrolled in three separate preparatory schools at different points. If nothing else, his hard work in school up until then had ensured that there was no outstanding reason for them to turn him away. While he didn’t struggle with the curriculum (it being much simpler than what would have been demanded in a typical high school), it brought a whole new set of challenges. Though not so scrawny as he had been when he was younger he was still somewhat lean compared to many of his fellow classmates, and his energy seemed to flag quickly both in and out of fights— not that it stopped him from pushing himself to everything short of collapsing in classes meant to build his physical conditioning. In the end though, he only saw marginal increases in how much longer he could run, or how much more he could lift, much to his despair. Seeing her son so disheartened, Ovata took what time she could spare to train Mint instead. While she’d initially hoped that he would take after her and learn to use the hook-swords that had become her signature weapons, that hope was quickly dashed. The constant swinging of those weapons exhausted him quickly, rendering his blows ineffective, to say nothing of his attempts at using them to grapple much as she did. His ineffectiveness with them only seemed to worsen his despair, and so Garnet took the opportunity to distract him in the only way that a man as busy as he could: By bringing him around for work. It certainly didn’t hurt that it would be a nice father-son bonding experience, something that Garnet felt was sorely lacking ever since Mint had begun attending a combat school. While there were no small number of meetings that Garnet had to attend that meant leaving Mint to wait outside, he at least had company in the form of Liuske. Whenever Garnet had events to attend at night, things such as various fundraisers or cultural exchange events with important political figures, he brought Mint along. There he learned to put the sociableness that he’d learnt to use to make friends at the various schools he’d been to to good use, variously striking up conversation with those he met and in the process, finding answers to all number of questions that he had about these people. Slowly, he discovered a sort of thrill to it all, the meeting new people, the talking, the simple fun of being so easily able to befriend others. Between that, and the conversations he now had so much more frequently with Liuske regarding the job of a diplomat, his interest and understanding of the career grew. Had it not been for Ovata’s last gambit to keep her son on the track of becoming a Huntsman, he might even have given up and chosen to become a diplomat then and there. One night, instead of bringing him to a training grounds, she decided to have a conversation with him in their living room. Putting a hand on her shoulder, she told him to close his eyes spoke words that he still remembered to this day. The next thing he knew, his body rippled with a vibrant green light: his Aura. He’d gotten a lucky draw with it, with Aura reserves that even while unrefined, were large- large enough that he could rely on it to power through physical activities and fights. Now that much more durable, that much able to last through a fight, his goal of becoming a Huntsman no longer seemed so far away. Sure, he wasn’t the toughest student without his Aura, but that just meant he had to capitalise on it more. And so, he spent his time training, refining the natural potential he already had. Now that his most glaring issue had been dealt with, he began to search for some way to put the hurt back on his opponents. With the help of his mother, he found an alternative to the hook swords as his weapon, a crude, violently effective solution: A gun. At first, it was just a handgun, then it was two, and then a rifle, but there was none that felt more natural in his hands than a shotgun. While most people who favoured firearms would’ve preferred to keep their enemy at a distance, he had no qualms with getting close up, finding a certain thrill in it. While this made him a middling student in class at best, it was still a far cry from where he’d started at the bottom. It wasn’t until he unlocked his Semblance in the middle of a spar, taking a blow that would have otherwise ended the fight with a luminescent shimmer over his body, that things would really take a turn for the better. Now, he had another thing to practice beyond his marksmanship, a new weapon to add to his arsenal that he could even use to continue training up his Aura. As he went, he refined his control, learnt the limitations of his Semblance, and learned to meld it with the close-up, controlled chaos of his favoured style of combat. Curiously, despite the fact that his Aura was most definitely green in colour, the light that surrounded him whenever he activated his Semblance was purple— a certain shade of purple that one particular Huntsman in the Hyacinth family happened to use as part of his own Semblance quite often. After a bit of asking around by the curious Huntsman-in-training, Mint found out as much. A hereditary Semblance from that side of the family, though of course it had gone dormant in his father’s case. It didn’t strike him as any particular surprise, given its protective nature. If any family would have gotten that particular Semblance, it would no doubt have been the Hyacinths. Despite this sudden shift in his abilities as a Huntsman-in-training, he continued to accompany his father whenever possible, perhaps figuring that it was only fair if he spent as much time with Garnet as he did with Ovata during his time training after school. As he grew more and more well acquainted with the political situation across Remnant and the nature of his father’s work, they started to have discussions that led late into the night. During them, his father didn’t just lead the conversation through the negotiations he was taking part in, as well as the thought process he had behind them (which slowly, Mint had even begun to provide occasionally insightful looks into, not that his father hadn’t already made them), but also such things as the idea of what being a diplomat really was. While Ovata had drilled it into Mint’s head that the role of being a Huntsman was an important one ultimately because they were meant to protect people, Garnet had a much more nuanced look on being a diplomat that Mint slowly began to pick up for himself. While many looked at a diplomat and saw a government official looking for the best deal for their own kingdom, he saw it differently. It was not a job about getting the best, selfish outcome for one’s kingdom, but about putting aside the short-sighted desires of both individuals and their government in order to make the best deal for every kingdom involved, to preserve relationships, and by extension the peace. In other words, it meant protecting people from themselves… whether they understood it or not. While it dug into his sleep, he didn’t seem to mind it much. After all, it was opening his eyes to an entirely new world of dangers that people needed to be protected from. Because of that, he didn’t complain when Garnet began to ask him to run errands along with Liuske, though it was mostly Hiili who told them exactly what they were doing. At first, it was simply taking a letter from one person in an embassy to another, but as time went on they became more and more involved. At various points he would be asked to entertain someone for his father, or to claim that his father was busy off doing something else while he went into someone else’s office for a short while— all for a conversation, or so Garnet reassured him. Of course, he believed his father. After all, a goofy, harmless man with such convictions in his belief of peace and cooperation between the kingdoms would never get up to any form of deceit. So, he continued to trust his father, even as he was lead by Liuske to listen in on the odd conversation along hallways, (all perfectly legal, he was reassured), or to drop off and pass along a thumb drive or package to another Valean diplomat stationed at the embassy with the little tricks that his father referred to as ‘tools of the trade’. Just another side of the job that Mint had yet to have seen until then. Admittedly, it struck him as… a bit off. It didn’t seem much like what diplomats would do as he’d seen, but then, that would have been the entire point of it. As far as he was concerned, it was strange, but he had faith in his father and his convictions. It helped that what time he wasn’t spending helping his father was still dedicated to Huntsman training. By this point, he had rarely any free time left, not that he particularly minded. Having long since settled on both being a Huntsman and in his chosen style of weaponry, all he had to do now was to get a custom weapon made. A cane-shotgun was his mother’s suggestion, incorporating both a slim, light design that would work in close quarters and a hooked component, so that he could at least use some of the training he’d gotten with a hook sword. While Garnet was no particular expert when it came to combat, he was someone who appreciated the power of subtlety. His suggestion was simple: Why not make it an umbrella instead? Keep everything, but add a canopy. The idea stuck. As time went on, he became more and more accustomed to the weapon. While simple in design, it was that much more comfortable than the clunky shotguns he’d practiced with in class. And so for a while, things were well. He wasn’t exactly in the top of his class, but he wasn’t doing too terribly either. By that time, Beacon had already given him an offer to take examinations on its campus for entry. The hope was that while Garnet and Ovata would continue to travel from kingdom to kingdom, Mint would stay and study in Beacon, with his parents visiting him when they got the opportunity to. Right then, that’s when complications struck. Even as Beacon was in the middle of reviewing his application, something happened. A letter came in from the mailbox declaring the following: Garnet Hyacinth and Hiili Lumi were now considered persona non grata by the Atlesian government, whose embassy they were currently staying at. As a result, they were to be recalled by Vale’s government, or were to be no longer officially recognised as members of Vale’s diplomatic mission on account of charges of espionage. During that time, a close eye would be kept on them and they and their family would be confined to select areas of the embassy until they were sent back. These things did happen, Garnet assured Mint. Since Garnet and his family had diplomatic immunity, it meant they couldn’t be arrested, but that often meant that such censures as the one that had been placed on them didn’t need a full investigation. It struck Mint however, that despite his father’s reassurances… it didn’t seem as though anyone was up in arms about it like they really ought to be. For one, neither Garnet nor Hiili seemed surprised by it, nor did Ovata or Liuske for that matter. Though he might have been willing to put his head down and work, he was no idiot. The suspicions that he’d ignored because he had so trusted his father resurfaced, and during a late-night conversation with his father that would normally have been about his work turned into a confrontation. Mint all but exploded into rage, listing out all the supposedly innocuous things that his father had been doing, all the things he’d been made to do without even knowing what they would lead to. His father’s too-calm attempts at defusing his anger and suspicion only exacerbated the situation, and eventually, he confessed. Yes, it was true that he was a spy. And who else had been in on it? Ovata. Hiili, who had in fact been his handler, and even Liuske, though just like Mint, he had no real connection to Valean intelligence beyond his father being part of them. Mint’s next questions were obvious: So why all the talk about how his job was about the greater good, for all people rather than just one? Why lie to him? Was that all just a sham? All another ploy to trick him into playing along? That… that was a difficult one for Garnet to answer. In his eyes, that was indeed the role of a diplomat, that was true. But the fact was, it was an idea entirely incompatible with being a spy. At the end of the day, that was the simple truth. But just because he couldn’t uphold those ideas, didn’t mean that they weren’t important ones anyway, ones he knew Mint would need whether he chose to be a Huntsman or not. And why foster his interest in it— just to train him up and use him as a tool? Of course not. Whatever Mint might have thought of his father, family came first for him. At first it really had been every bit just a means to keep Mint’s head up, but when it turned out that he was not only good at speaking to others, that he was truly interested in diplomacy… they had become attempts in earnest to if nothing else, teach him something important. And for a little while, he’d hoped that Mint might even be able to take after him as a spy. Now that he knew that Mint had fooled himself into thinking it had just been another part of being a diplomat though… that boat had sailed. Mint snorted, and left. That night, he didn’t get any sleep. Things didn’t get much better between the two. While Mint could certainly understand why his father thought the way he did, he simply didn’t accept it. Beyond the ethics, the morality, was the simple fact that his trust had been betrayed, and by his father of all people. That his mother, that even his most constant friend had known didn’t help things either, but at least he could forgive them for that (begrudgingly though it might have been). While he expected no less from them than to try and preserve the peace by keeping his father’s occupation secret, it was something else entirely for his father to deceive him so purposefully… that was just something he didn’t know how to handle. This confinement in the embassy lasted for months, even as the year at Beacon that Mint was supposed to attend began, due to various legal circumstances surrounding the families’ expulsion, including an attempt by Vale to dispute it. Slowly, the tension between Mint and Garnet in their everyday lives died down, but the warmth that used to be there was subdued at best and absent at worst. In his time during confinement, he kept himself occupied with learning the curriculum that he’d have been expected to learn during the time that he was supposed to be at Beacon in. It wasn’t until much later that they were finally expelled from the Atlesian embassy. By the time they’d returned to Vale, nearly half of Beacon’s school year had passed. Thankfully, Beacon was still happy to allow him a late entry into the year provided that he passed the entrance examinations. Though he’d managed to keep up his studying in his confinement, he’d been sorely lacking in training. Just to make sure he didn’t fail during his combat examinations, he threw himself back into training with his mother for the following month. What distance there was between the two lingering after the reveal of his father’s secret slowly eased during that time. Slowly, things came closer to returning to normal, though things had certainly changed. He spoke with Liuske as though nothing had changed, and in time he would talk with even his father, though there were no small number of tense moments between them. Conversation almost inevitably lead to the simple question of what the future held, not for Mint, but for Liuske, for Hiili, and Garnet. Now that they’d been found out, any chance of business as usual for the three had been thrown out the window. From what they said it seemed that Hiili and Garnet would likely take jobs in Vale working for Valean intelligence, and Liuske would likely be following in their footsteps. The knowledge felt as though it put a distance between him and them, but it was these conversations that let him to some degree grasp why they did what they did. Maybe he couldn’t fully accept it all, but he could certainly understand it. To say that a real reconciliation had been made between Mint and his father would be a stretch, but at least he could say that he’d reconciled the man he thought his father had been, and who he really was. Soon though, those thoughts were the last thing on his mind, replaced by the nerve-wracking anxiety of the days leading up to his combat examination. Once that was over, he had an equally nervous wait of a week until he got a letter back from Beacon: his offer of admission. Despite all that had happened, despite how much he hated the thought of the constants in his life being taken away from him (even if it was just for four years), there was a strange sort of certainty that came with it. Maybe he couldn’t be the diplomat that he’d often considered becoming during his worst moments, and perhaps he couldn’t be a spy like his father, or Liuske, but being a Huntsman? He could do that.
Mint is at first glance, simply a particularly outgoing Huntsman-in-training. Between the confident air he carries himself with, and the friendliness with which he engages others in conversation, he makes making friends look entirely effortless. While not terribly formal, he’s polite and affable, taking everything in his stride. Admittedly though, this ability to make friends has left him with the impression that there’s nothing he can’t solve without a well-placed word, which always leaves him a little surprised when his words don’t work out in his favour. Despite this ease with which he befriends others, he’s very rarely emotionally intimate with others- not out of some deep-seated issue, but simply because he’s unaccustomed to it. He rarely talks about his own emotions, and while he certainly can understand why someone feels a certain way, may not have enough understanding to actually provide useful support or advice. At the very basis of who he is though, he’s ultimately someone who lives in dogged pursuit of a goal held above all else: To protect people, be it from themselves or Grimm, whether that means fighting, or going behind their backs to prevent them from doing something dangerous. While he has rather little hesitation when it comes to using deceit (provided he can justify it to himself as for the sake of protecting others), he despises when anyone else works behinds his back to do what they feel is best for him in turn. The personal cost of the work means little to him, and is likely the reason why he’s a workaholic, and could in part explain why he seems to treat even making connections and friends as a project rather than something fun. His protectiveness of others has left him as a person constantly wary of dangers to others, and so even the hint of something suspicious is enough to garner his interest.
Airports, not airlines, are the rebound play for air travel
I will begin by saying I AM AN AMATEUR RETAIL INVESTOR AND NOBODY SHOULD EVER TAKE MY ADVICE FOR ANYTHING RELATED TO INVESTING. With Boeing and the airlines running to the USFG for bailout money and share prices in the tank, a lot of people are starting to poke around tickers like $UAL, $DAL, $LUV and $BA thinking that there is a lot of value to be had. This is largely on the theory that air travel is part of the backbone of the world economy and, whenever the crisis subsides, there will inevitably be plenty more money to be made in this industry. That is definitely true, but I don't think that trying to go for individual airlines (or even Boeing) is the right way to chase this opportunity. The reason is that these companies go through bankruptcy and restructuring all the time. United, along with several predecessors to Delta, have done so as recently as this century. If these companies end up having to drink from the government trough, especially with the widespread public sentiment against further bailouts, a wiping out of the existing shareholders seems to me to be a real possibility. Airports, on the other hand, seem to me to be a much more exciting opportunity. Most American investors don't think about airports as an asset class because all airports in the US are publicly run. Outside the US, however, there are a number of publicly-traded airports that are run privately, often on a concession basis. Airports are a much more natural monopoly than airlines and, since most airports get much more attractive margins than airlines, tend to have better balance sheets and therefore face a much lower possibility of bankruptcy or restructuring. Airport stock prices have seen similarly drastic haircuts as the major airlines, but seem much better positioned for a safe rebound than airlines. I am personally invested in $PAC (a collection of Mexican airports) and $AUKNY (Auckland NZ), both of which have seen >50% drops from their recent highs, and am rapidly expanding my positions at these low prices. In anything less than an end-of-the-world scenario, air travel will return to its highs and continue to grow, and airports' revenue numbers should bounceback at the same time.
Surfing the Electro-Magnetic Radio-Waves of Subdimensional Space, for Dummies, CH.1, Big Wednesday
This story will also be posted on Royal Road by the account that I own there with the name Kem_oSabe Chapter 1 Big Wednesday A sound akin to a klaxon moaned out through the salty, humid atmosphere of [FTL Transport Vessel #0127] as yellow emergency lights rolled down the hallways through illuminated tubes behind transparent guards. [Chromosphere of Ts'drp't'ss] gripped a handle on one of the walls and was pulled down the hallway. Artificial gravity had failed some amount of time ago, while she was still unconscious from the initial impact. Her left rhinopore was bent crooked from the sudden jostle and wouldn't be right for several more hours. Her thick, jointless right arm compressed as the handle stopped at the intersection of 6 hallways, absorbing her momentum so that she could switch direction, her left arm swinging around in an arc, extending around the right angle, gripping the next handle and pulling her around. A four-part door was almost pinned open as so much traffic was going into and out of it, two wall handles moving constantly out of the door way, while the two alternating were moving into the room. Nearly one hundred of [Radiance of the Magnetosphere caused by Solar Winds]'s crewpeople were frantically working their posts, their handparts planted to their input peripherals. [Chromosphere of Ts'drp't'ss] activated the 0-g walking mechanism in her suit, the magnets in her feet grabbing the floor and alternating their charge automatically as she stepped, as she ran, to the central control table of [FTL Transport Vessel #0127]. She withdrew her rhinopores and vertically compressed her torso to lower her height in a deferential display, as little and as quickly as propriety would allow in the current circumstance. "Captain [Film of Oil on Water's Surface], [Chromosphere of Ts'drp't'ss] reporting, what is happening?" The Captain of the vessel, his rank obvious by the polished, shimmering ceramic badges and rank denotators on his suit, returned the gesture but didn't lower himself below [Chromosphere of Ts'drp't'ss] before responding. "Your familiarity with the Navigational A.I.s is required." He gestured above the table, and holograms in three-dimensions came to life, the holograms already displayed minimizing automatically. "89.434% of their computational capacity has been corrupted or irreparably damaged. We have the power required for two jumps, but the [Children of Krrk'k'k'tshk] have us blocked from safe space buy a minimum of 4 vectors." He showed her the damage to her A.I.s, watching their slow, desperate flailing attempts at computation, at course navigation and attempted prediction. [Chromosphere of Ts'drp't'ss]'s eyes sunk into the soft flesh of her face, an instinctual unhappy reaction. They were repeatedly, consistently, coming to the same conclusion. The safest and most reliable opportunity to escape this situation was a jump into unknown space. Unexplored space. [Film of Oil on Water's Surface] increased the size of the window showing her A.I.s computations, adding a few windows showing more granular data of their function that few even in this control room could read, the captain himself only having moderate understanding of how it worked. "We lack data on your A.I.s target destination, and thus cannot compute an accurate cost/benefit analysis. To stay and endure this attack will be certain destruction. In your experienced opinion, should we remain and mitigate our losses by causing the maximum destruction to enemy forces, or can we trust your A.I. to deliver us safely and attempt a homeward jump from wherever they guide us?" [Chromosphere of Ts'drp't'ss] had to take a few moments to think. Her emotion wasn't exactly grief, grief was something you would feel for a living being, or at least an emotionally complex companion A.I.. It was a severe loss of time and investment. Six generations of [Chromosphere of Ts'drp't'ss] had worked, farming and training these A.I. in Sub-Dimensional space, and this one, the seventh, was the first to bear the privilege of taking them to space. And it was all destroyed in an instant. Obviously there were backups on [B'wee'ts'ks], but they wouldn't be the same as these instances, copied and pasted A.I. were always unique from the original. There was a tinge of a shame-like emotion at considering this before thinking of the lives of her shipmates that had obviously been lost, but in a time like this she supposed she was emotionally prepared for that, the loss of life, more than the loss of these instances of her A.I.. "Hrrr…” she churred hesitantly. “They do not look to be malfunctioning. Functioning slowly, due to their loss of computational ability, but it looks to be within the margins of error." She leaned her trunk against the table, looking over the projected routes. "We would survive the jump, and we would survive the travel through T.D. Space. What we're jumping into if we follow this route, I cannot speak to." She turned back to the captain. The captain looked down at her, appraising her expression, the carrying of her Rhinopores. The cerata on her shoulders, the back of her neck, and her head, were standing up, the cnidosac's swollen and giving a slight luminescent glow. The captain's mouthparts arranged themselves in a 'W' as he expressed what would best be described as confidence. "Prepare for jump! Accept coordinates and direction the navigational A.I., inform all crew to brace themselves and seal all bulkheads!" Crewmen throughout the ship closed bulkheads, braced all unsecured objects, and then themselves, laying on the floor and letting the magnets lock them down. [Chromosphere of Ts'drp't'ss] moved to an empty seat, and let the maglocks automatically engage. All monitors displayed the progress of the jump. Everyone's visual perception distorted. Then their audible perception distorted. Then they felt the odd spatial distortion of space and all physical matter distorting as it transported into TD Space. ----------------------------------------------------------------------- "Melvin!" The silver haired old man yelled from inside the second of two stalls at the Litsky Bros. Esso Station, poking his head from underneath the hood of a shining, new-ish 1955 Chrysler something-or-other. He pulled the hat off of his head and wiped the sweat from his bald and liverspotted brow, the hair at the top of his head yellowed around the band of his hat. "This 331 is about to beat me, when you get finished on that Jet come on in here!" Outside by the red, white, and blue enamel-painted gasoline pumps a boy was standing over a waist-high Hudson, wiping down the front glass. The car was diminutive and the boy was lanky, reaching across the vehicle as the pump slowly chugged gasoline into the tank. The young lady in the car was wearing a large colorful hat and a pair of green-tinted glasses, reflecting the boy in the reflections in a fish-eye perspective. His coveralls were only buttoned about up to his navel, a darkly tanned flat stomach and a smooth chest on display, the boy's sleeves rolled up to his biceps and the stays buttoned there, his arms a matching bronze. His hair was mostly hidden by his hat, a pair of cheap plastic sunglasses resting on the brim. She was looking quite closely though, and could tell he was some kind of dirty blonde. When the old man yelled, the boy hurried through washing the windshield. "Does that look alright to you?" The boy asked, a little bit of a heavy tone, like his tongue was a bit too big for his mouth. The girl smiled and lowered her sunglasses, looking up the boy's chest through the windshield. "Looks great from down here," she stopped to look at his nametag. "Mel." She giggled a little. "I think your boss wants you." She nudged towards the portly Polish man, pulling at the back of his trousers as he kicked the tire of the coupe in the garage and muttered something unintelligible. Melvin turned to go look back at Mr. Litsky, putting his back to the young lady. A few strands of his hair hung down, an inch or two below his shoulder which the girl noticed. She pushed her sunglasses back up onto her face and reached up, yanking his hat off of him, revealing long hay-yellow hair that hung down past his shoulder. The girl laughed at him and threw his hat behind her as she dropped into gear, leaving him standing in the dust unawares of what was happening before it was already over. "Dude... Harsh." Melvin said, bending down at the waist to pick up his hat. "Hey, brother, what happened?" A shorter, dark mahogany skinned boy said as he was running up behind Melvin, smacking his back as he got over to him. This boy had an incredibly thin pencil mustache, and tight, wavey hair worn close up to his head with a sharp razor part. "That girl was totally checking you out, did you say something goofy?" "Nah dude I just turned to see what Mr. Litsky wanted and she yanked my hat off." He said, stuffing all of his hair back into the hat as he wrestled to put it on. He patted the shorter boy on the back. Old Mr. Litsky was standing at the entrance, watching them both since he heard the girl's tires bark. "I hope she paid you for the gas before she tested her tires, there, Melvin." He said, slapping the boy in his bare chest with an oily rag. "And you gotta go cut that hair. It's hard enough keeping business with a mulatto pumping gas, I wont have anybody coming in here if they think I got a queer too, and then where will ya work?" When he turned back to face the car he'd been fighting with for the last hour, the darker-skinned boy made a rude gesture at the old man, walking along to follow him. "What's giving you so much trouble with this thing anyway?" He asked walking around to the other side and poking his head in. "Eh, it belongs to one of them hot rod boys and he tried messing with the carb himself until he messed it up five ways to Sunday. And I don't play with these things every day so I ain't exactly the expert on un-messing it." He looked down and saw the boy playing around with it some with his hands, then grabbing a screwdriver and playing with it. "What are you doing in there Juan? You know what you're messing around with?" He asked, leaning in close as well, while Melvin prepared himself, walking around and getting in the drivers' seat. "Turn her over, Goofy Foot." Juan gave the command, knocking on the inside of the steel hood making a heavy resounding gong. Melvin turned the key and played with the gas a little, the 331ci Hemispheric engine cranked over and started rolling. It coughed and fought a little bit, the old man watched as Juan got deeper into the engine, laying across the fender to get in and adjust a few things while it was running. Melvin played with the gas a little, keeping things running while Juan worked, and soon, lifted his foot off the trottle entirely, the cast-iron beast finally idling on its own. Old Mr. Litsky clapped his hands and hollered, "BRAWO!" He exclaimed, then almost shut the hood on Juan as he was scrambling out from under it. "Skurwysyn!" He kicked the front tire of the shimmering, mirror polished Chrysler. "I'm going to charge him thirty dollars for this and five of it will be in your pay on Friday." He pointed at Juan with an excited smile. "I knew I kept you around for something besides polishing the gas pumps." He said, walking to the garage door and grabbing the greasy, heavy chain and rolling the door down. As Melvin turned the roaring Hemi off and a dark, buzzed-headed boy in the same uniform as Juan and Melvin was standing in the door, a cone-shaped brown paper cup in his hand, full of steaming black coffee. "Hey Frank," Melvin said, gingerly shutting the door of the Chrysler and walking to the door into the lobby of the gas station. "It already that time?" Frank stirred his coffee with a little wooden spoon, the steam starting to disippate as the cream and the sugar started to take the heat out of it. "Yeah, yeah dude it's about that time. Missed you at the dawn patrol man, it was going off! No frubes no hodads, Kelly brought in his new funboard and took a big header off this overhead. Was killer." The two bumped elbows as Melvin walked by him into the lobby. Juan following beside him, giving Frank an elbow in the ribs playfully as he walked by. "I saw that board when he bought it! It's too cherry for a kook like him, he needs to give it to me or Goofy Foot over there for us to really stretch its legs." "Hey at least he aint being jakey anymore." Frank said, sipping a bit of his coffee, jumping and hissing a bit as it was still too hot. "Little brother drove me up the wall cutting in the lineup. And remember that time he bought everybody milkshakes and dumped em all in Bill's car?" "Yeah, yeah, but remember that important part, 'bought everybody'." Juan interjected, reaching behind the counter and pulling an only-mostly-warm bottle of coke out of his lunchbag. "If Kelly's daddy wasn't helping him out, we could say goodbye to the pad." Melvin peeled the top of his coveralls off and tied the sleeves around his waist as he walked to the coffee machine, making himself a cup that was mostly milk and sugar and only a little bit coffee. "And most of the food in the fridge... and, like, the electricity." "We went without electricity for like two weeks last month!" Frank interjected. "Yeah but," Juan ate a mouthful of his snickers bar. "That was because he forgot to pay it, not cause he didn't have the money." Mr. Litsky finally came in, pushing Frank out of the doorway and going to the cooler in the corner, getting himself a fresh and ice cold Upper10. "If you guys are still here when a customer shows up I expect you to hit em like ants on a hershey bar." he said to Juan and Melvin. "Get outta here if you're gonna run around naked, Melvin!" He took a piece of ice from the icebox and threw it at the boy, the cold hitting him and making him jump, laughing a bit as he started running towards the door. "And get a haircut!" At the front door, a smaller, paler boy sat sideways in a canary yellow Hudson 1948 Hudson Commodore 8. He was wearing tight-shrunk blue jeans tucked into his Wesco lineman boots. The boy had on a tight, light grey ribbed shirt with a high neck and three buttons on the collar, all three unbuttoned. Over the shirt he was wearing a Busco J31 leather jacket, the leather oiled, waxed, the buttons and buckles polished. His hair was in a messy jelly roll. His head rested on the drivers' side door as his feet stuck out the passenger side window. STOCK CARS CHALLENGE PIKES PEAK read the cover of the magazine the boy held above his face, a young man wrenching on a little red coupe on the cover. The back glass of the Hudson was broken out, and there wasn't a radio, or any kind of air conditioning, but it was fine. It drove like a dream, so long as Billy was in the mood, and it ran like a scalded dog when Billy was in the mood, too. Billy liked to say that he made it from Memphis to the beach in ten hours but nobody usually believed him, at least not until the first time they went down a mountain with him. Four surf boards were strapped down onto a rack on the roof, the longest one about 12 foot. Juan grabbed the roof of the sedan and shook it, on the shortened springs it didn't move much, but it was enough to get the boy in the car's attention, to make him jump and holler. "Rise and shine, Billy boy! We got waves to catch!" The slender Juan threw his lunch bag in the back seat and slid in through the back window, hitting the back bench with a pomf. "Jesus H. Christ, Juancho yer gonna kill me one of these days, doggonnit!" Billy said, sitting up, getting himself into the driver's seat, rolling up his magazine and throwing it onto the dashboard along with a half dozen other copies of the same rag and a faded and dog-eared playboy. With one hand on the steering wheel he turned and hung the other arm over the back of the front seat, looking back at Juan. "Ya got 'nythin' in'at lunchbox fer me r'ya expectin' me to drive ya outta the goodness'f'm'heart?" "And the first thing I'll do when you pass is take this sled to Pasadena and let Felix give me a Corvette to heal my sorrow." Juan replied, jumping back into the corner to dodge a punch coming from the red-haired boy. "Hey! Watch it! I got you something, dang." He reached into his lunch bag and threw a Big Red soda at the boy in front. "I got my cousin in El Paso to mail some to me, so make it last." The boy in front took it, held it to his face and smiled. "Aaaaah... Red Cream... okay, yer forgiven fer now, but stop tellin'er you'll trade'er fer'a Chevy, she 'on't deserve 'at kinda fate." Billy turned to the front, setting the bottle in the center as he turned to the open passenger door. "Ya comin' r'not Goofy, if it's gonna take 'is long I coulda stayed asleep." The hot coveralls flew into the open door and Billy barely swatted it out of the way and onto Juan in the back seat and made him holler. Melvin, Goofy Foot, threw his work shoes into the floorboard of the Hudson and jumped in, now in nothing but a pair of white shorts with two red pocket flaps and a red string lacing up the front. Billy turned his head away quickly, his hair bouncing on his forehead as he turned the key and turned the car over. "Damnit Mel can't ya keep yer dang shirt on fer like two minutes?!" He yelled, slamming the car into first gear and doing a short, barky peel out of the parking lot and onto the road. ---------------------------------------------------------------------------------- Three young men sat on boards in the middle of the ocean, watching the waves rise, fall, break, reform, come and go. One dark skinned, dark haired, short and skinny on a short fat board, wearing yellow, tight shorts. He was wiry built, the muscle tone there, strong, but not very large at all, with a mildly woolie chest. Another boy was tall, bronze-tanned with long hay-colored hair in white shorts on a board just a little longer than he was tall. He wasn't heavily built, but he was toned, and had very little fat on his body. The third boy had mid-length light brown hair, a clean shaven face, and was remarkably pale given they were on a beach. He wasn't very well built at all, soft in the belly with little definition on the back, and clumsily sitting on the board, spending a lot more effort than either of the other two quite obviously. "Man we got to get Bill out here sometime." Melvin said to Juan, before turning back to the beach, seeing the boy at the beach, having already built a fire, his Hudson parked at the top of the beach and his jacket hung up on somebody's surf board. "He was so aggro though, Goof." Juan replied. "A real junkyard dog-" the other boy said, his voice a little nasal. "At least he's not a kook, Kelly. You been out here what, 2 months? Go get your self a nug." Juan said, pushing Kelly with a smile. Kelly gripped his board and struggled to stay steady, looking up at him. "Ah, uh, I think I might be a little outgunned..." He said, trailing off looking out to the waves. "Come on, don't be a paddlepuss," Juan said, patting the boy on the back and helping him steady himself. "Hey Mel, think we can make that a party wave?" He pointed out to the beginnings of a nice, calm, fairly safe wave, barring anything unexpected happening. "There's room in this here town for the three of us, cowpoke~" He poked the younger, paler boy in the ribs and laid forward, starting to paddle out of the lineup. Kelly looked up to Melvin, "You uh, think it's a good idea, Goof?" Melvin smiled and shook a shaka at him and leaned forward, paddling out himself quickly. "Wait up, Juan, we're coming!" Kelly swallowed and took a deep breath, putting a smile on his face and building up his confidence to go up with the other dudes. The three boys all came up, and aside from Kelly, who lagged behind a little, made it to pop up together. Watching from the beach, it was clear to see one of them standing out. Juan played and tricked as he rode the wave, skillful in his own way. Kelly, to his credit, stayed to his feet. It took significant effort, but he kept to his feet. Melvin though, Goofy Foot, rode like he was standing on dry land. So smooth, so stable, in complete control on his board, moving with the waves like it was nothing at all, like he was a part of the ocean itself. "Hey Goofy! Check out that bunny watching you!" Juan hollered, pointing to the beach. Nearby where Bill had parked the hudson was a stark white girl with black hair down to her collarbone, in a yellow one piece bathing suit with a large, white bow at the front. Her eyes were almond colored and her skin was pale and freckled. She didn't look like her skin had ever been touched by sun in her life. "I haven't ever seen her here before, have you?" "Nah, never..." He said, almost entirely fixated on the girl now that she'd been pointed out to him. He couldn't exactly touch it, there was something about her, something special, and-oh that's a lungful of saltwater. He wiped out, and almost took out Juan with him. By the time he was at the surface the boys had already made it up to the beach and ran up to meet the new girl, getting themselves acquainted. "So uh, hey I'm Juan, this is my friend Kelly, and my wet big brother over there is Melvin." He said, pointing back at Mel as he climbed out of the surf with his board under his arm. The girl looked at him, and at Kelly, and down to Melvin. Her face was oddly devoid of expression and she didnt say anything, just stared at him oddly. Not appraisingly, but just.... taking him in. Obviously thinking about something, trying to figure something out, but what he couldn't think of. "Uh... what's... your name?" Juan asked, moving himself in between her and Melvin, trying to break that odd stare. "??" she vocalized an odd kind of interrogative, that seemed to surprise even her when it came. "Uh, your name? When people introduce themselves, you know, it usually goes both ways?" he said, being a little bit of a smart aleck now, but not too much yet. "Ah. This one is called Kore."
A haircut can also be referred to as the difference between the buying and selling price of a stock share, bond, futures or options contract, or any other financial instrument. Buying on Margin Buying on Margin Margin trading or buying on margin means offering collateral, usually with your broker, to borrow funds to purchase securities. In By applying a haircut/initial margin, the quoted market value of a collateral security is translated a into probable future liquidation or restoration value. 3.2 In practice, a haircut/initial margin must also look backwards and compensate for lack of or inefficiencies in margin maintenance. This is a summation of A and B [Funds + Value of Securities after haircut]. This amount can be used by you as margin for BUY or SELL trades. The total available margin = 5431.54 + 1906.60 = Rs.7338.14. Total Upfront Margin (required) (F) Margin Trading Funding (MTF) is a flexible option for investors; it enables them to trade beyond owned resources and boost their profits if the prices increase on expected lines. The facility is provided against a pre-approved list of securities by the broker, subject to predefined haircut for margin. A Haircut in Stocks is the difference between the market value of the stocks collateral and the margin that the lender (stock broker like Angel broking or Sharekhan) gives to you in order to trade in stock market. It is generally expressed in terms of percentage. While giving margin to trade, the broker firm keeps in mind the volatility related to the stocks pledged.
I Got a DRASTIC HAIRCUT Without Telling My Husband (he had ...
Margin Trading Risk - शेयर मार्केट में नए लोग जरूर देखें। - Duration: 10:09. All Money Mantra 59,454 views 10:09 I chopped off nearly a foot of my hair and filmed my husbands reaction! He was so sweet and really made me feel beautiful! Thank you so much for watching! We... Can we consider only Var as Haircut (No Elm and Additional Margin) or we need to block all (like Var + Elm + Addtion Margin + etcs) as haircut of pledge stock? 52:20 - 50. I'm getting a haircut and trading my long hair for a wifey haircut. - Make sure to like and subscribe! Halo Genesis Trader dan Stock Farmer Indonesia, Yuk kita simak perbedaan rekening reguler dan rekening margin untuk berinvestasi saham. Simak juga apa artinya istilah haircut di dunia saham ya..