One more thing just occurred to me. Berkshire Hathaway’s annual shareholding meeting is tomorrow. Buffet hasn’t really weighed in on what’s happening other than to say they’re increasing liquidity, so it’ll be interesting to hear his perspective. Whether or not you’re a fan, you have to admit he has access to some of the best economic data through the diverse set of companies within his portfolio.
Did they take a premium?
https://www.airliners.net/forum/viewtopic.php?f=3&t=1445491
According to Reuters, Boeing approached the market targeting a $10BN in new debt. However, after a brief but successful roadshow, Bloomberg reported that the company had received $70BN in orders for its offering. The massive, 5x oversubscribtion meant that the company could upsize the offering at will, and what was originally a $10BN bond sale ended up being $25BN - the largest offering this year - across seven tranches, with initial price talk as follows:
- 3yr T+425bp
- 5yr T+450bp
- 7yr T+450bp
- 10yr T+450bp
- 20yr T+440bp
- 30yr T+450bp
- 40yr T+462.5bp
Set out to raise 10B, got 70B of investor interest. Love it.
Obviously debt is bad, but this is mostly best case scenario. No govt interaction.
Adequate liquidity, Massive backlog, secured govt/defense work (40% of revenue), Max ungrounding in fall. I think Boeing is getting past the bad news tsunami. This is my big bet through the crisis.
They took premium. The buyers of the bonds paid a premium upfront, in order to have a higher yearly coupon rate over the term of the loan. Boeing still has to pay back the full amount. The coupon rate is higher, but the yield remains the same. Investors are willing to put down more cash initially to increase their yearly interest.
Edit: I’m not saying this is a bad thing, I’m saying it in response to.
1 Like
I know.
Hell their open market deal is the largest and best I’ve been seeing. The investment community clearly is comfortable with lending to them.
Granted they do have huge $ in assets.
Boeing will be able to cover their debt obligations. Even if commercial aviation lags, or goes to zero, defense/govt will carry them for awhile.
They just need to get out of their own way and for god sakes get the 737 MAX ungrounded and in the rear view mirror…which will be a windfall of cash.
1 Like
I think the Boeing news means the worst case scenario (bankruptcy) is off the table. Not that any of us in this thread thought that would ever actually happen. I do think the government’s steps to increase liquidity in the market have investors confidence to pony up. Still, a 450 point premium is massive and indicates investors see a lot of risk.
With the question of Boeing’s solvency put to bed for the short term, the question is when will demand for its planes pick up? The airlines have shelved a lot of planes, which I expect they’ll reactivate before buying new ones from Boeing.
1 Like
Faster than you think. The world essentially buys commercial planes from two manufacturers. It’s a duopoly where Boeing is the larger of the two. The only major airline carrier that’s not in need of upgrades is AAL. There will be airline bankruptcies, which will spawn new airlines, with fresh funding. They will place orders. Boeing currently has a 70B backlog.
Boeing is a diversified business. 50% commercial airline, 35% defense, 15% parts, service, lending.
I can see Boeing leasing more planes, rather than outright sales.
Trump just placed a nasty tariff on Airbus planes. American carriers will place more orders with Boeing than ever.
AND, their assets on hand is outrageous (MAX planes).
God I’m too bullish
Perhaps, but risk in total market. Remember, they compensated Boeing by paying a premium. Boeing receives more money, investors receive higher yearly interest.
Berkshire Hathaway annual shareholders meeting starts now for those interested.
https://finance.yahoo.com/video/berkshire-hathaway-annual-shareholders-meeting-154143373.html
Well I guess WB officially starts talking at 5pm.
1 Like
I would say he’s very anti Boeing, he’s mentioned oversupply of aircraft several times.
He sold all his airline positions too 
And took the loss willingly. That’s a statement.
1 Like
Buffett said he had not provided financial support to companies [as he did buying Goldman Sachs shares during the 2008 financial crisis] because he saw nothing “attractive” enough, even after the recent plunge in the markets.
Someone send him a log in, help him out.
Awesome. Its a good read. You can get the same basic information from a youtube video or a “cliff notes” version, but those dont do nearly the same job of explaining Graham’s philosophy and the importance of trusting that philosophy.
The vast majority of my wealth is in cash currently, mostly due to laziness, but also due to planning on buying a house this spring/summer and needing cash on hand (or at least thats my excuse and im sticking to it!). I’m waiting until the fall to see how the market reacts to the economic slowdown before i put a large chunk of my cash into a longterm growth oriented portfolio. For now, im just kind of messing around with 10k mostly to learn, and if i can profit a few hundred to a few grand in the next few months, awesome… if i lose a few hundred to a few grand its not the end of the world. It also helps me wake up early every day so i can be on my computer for market open her on the west coast, which in turn typically makes me more productive at work (the REAL money maker, and my best investment).
My biggest hangup is im a super risk adverse person financially, ive always been thrifty, and have a tough time spending money on things… i need to get it through my head that a awful, terrible fall in the stock market doesnt mean losing it all. It means losing a percentage of my money. its not like gambling at a casino (which i hate) because you dont give your ENTIRE bet to the house if you lose, you just give a portion of it. I understand this fundamentally and mathematically, but it still bothers me. I will NEVER short anything haha!
Also, GILD is fucking killing me right now, and i sold USL too early (still at a small profit) when i realized i didnt really have a great understanding of the stock or the business, which is a principle i am trying to stick to when purchasing stock. I am waiting for BA to drop below $100, and i will cost average my down from there to wherever its bottom ends up being. Staying away from DAL for a while, though this winter or spring might be a good time to re-examine.
I am intrigued by dividend investing, but it seems like it only makes sense if you do that with your longterm “large” portfolio, and is a waste of time if you are doing that with small riskier stock portfolio. Is that right?
1 Like
Dividends should not decide an investment, according to Graham. But, I have things largely in stuff that happens to pay dividends and it’s nice. Even when the market sucks I have a trickle of cash coming in. Of course, when the economy in general sucks it can have an impact on dividends - or at least should if the profits are down due to the economy. I am not a gambler at all, so I get where you’re at with that. But, letting “Cash” sit in a bond fund, especially a tax free one, at least provides some return versus the nothing that the bank is going to give you. I’m also try doing hard money loans it looks like. A connection is throwing me opportunities - 15% for a short term loan with real estate as collateral.
1 Like