(Ep.101) The Acquirers Podcast: Michael Mitchell – No Narrative: Deep Value, Special Situations, Working With Michael Price

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In this episode of The Acquirers Podcast Tobias chats with Michael Mitchell. He’s IgnoreNarrative on Twitter, and a former partner in a hedge fund. During the interview Michael provided some great insights into:

  • The Simplest Form Of Investing
  • Paying A Low Multiple For Cashflows Is The Right Choice
  • Working With Michael Price
  • Forget About The Business, And Get Your Initial Investment Out
  • Reversion Of The Mean Caused By Private Equity
  • Why QRTEA Was Such An Easy Bet
  • Invest Based On Your Personality
  • Burry – Right On The Short And The Long
  • wallstreetbets Is Democratizing Investing
  • Buy Something Cheap And Flip It
  • Malone – Wrap It Up And Put Bonds Around It
  • Lynch – Let It Double, Sell Half
  • Treating Stocks Like Free Options
  • Sit On Your Hands Rather Than Chasing Something
  • ijob.com
  • What Would You Pay For A $1?

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Full Transcript

Tobias: Hi, I’m Tobias Carlisle. This is The Acquirer’s Podcast. Today, my special guest is Michael Mitchell. He’s IgnoreNarrative on Twitter. He’s a former partner in a hedge fund. He’s a deep value guy through and through. We’re going to talk, how he assesses opportunities, how he met and worked for Michael Price, the Qurate deal that he and Bill Brewster were involved in, right after this.


Tobias: You’re one of the rare birds who has actually managed to go through, work in a hedge fund, and then retire at what looks like a reasonably young age.

Michael: Thank you.

Working With Michael Price

Tobias: How did that all come about? How did you get started? How did it happen?

Michael: I started my career in 2004. Well, really, I started in 2003, I interned for Michael Price at his family shop, MFP Investors. I fell in love with investing when I met Michael Price. It was like stars aligning for me. This is the first billionaire I’ve ever met. He’s just so matter of fact, it makes everything so simple. He walked me through me a group of people through his thought process on Martha Stewart Omnimedia back in 2004 and how he had his analysts do some of the parts, stuck an enterprise value on, subtracted that, divided the equity by the share count.

I was like, “Oh, my God, this is the easiest thing in the world. This is so easy.” The guy made himself a billionaire doing it. It’s like I could absolutely do this. I fell in love with it. I got an internship with him in 2003, which is a lot of fun. I asked him at the end of the internship, I psyched myself up, I went in as Michael. He’s a larger-than-life character. “I really would like to work for you. I’ll do anything you want, and I will work for free.” He actually said, “I’m sorry. You’re overpriced.” [chuckles] I said, “Okay.” “All right. Well, I can’t afford to pay you.” “It looks like I’m going to have to go find another job.”

He helped me get a job at Jefferies in research. I was there for a year. It was a great job in ‘04. I covered post-reorg equity. Companies that Jefferies bankers– at the time, I don’t think this is the case now. At the time, the banker, especially in high yield was just like, whatever. Whatever needed to get financed, they would finance it, and so the lifecycle company would go get high yield from Jefferies and inevitably would default. then the high yield team would pass it over to the equity team and the equity guys didn’t want it because it was in reorg. I was this weird hybrid analyst, junior analyst, I work for a guy called Farooq. Farooq, he’s a wonderful person. I was this weird hybrid guy who–

Tobias: I know Farooq.

Michael: You know Farooq?

Tobias: Yeah.

Michael: I worked for Farooq for two years. Actually, one at Jefferies and then one at Kellogg Capital. We picked up the paper when it was in bankruptcy, and then would cover the reorg equity. I loved that job. All the jobs I’ve had, it was my favorite. After a year, Farooq had become this very popular character. We’d done well and it was a great time to be in restructuring in ’04. He got a job at Kellogg, so I was stranded. I didn’t know what I was going to do, and I begged Farooq for a job at Kellogg.

He said, “Well, we’ll see what we can do.” Then somehow, I just– my bet, he just got tired of hearing me beg, he was like, “Yes, you can come be my junior analyst at Kellogg.” I did that for a year. I enjoyed Kellogg. They actually were based in New York office where I worked, but they were based in La Jolla. I got to go to La Jolla once a quarter, stay as I think it’s the nice mission hotel, I forget the name of it.

I was in La Jolla one week for every three months, it was amazing. It was a scam. You may have a different plan. They always tell you, “Oh, it’s California.” It’s just three hours later, we start work at 4 AM, but we get off early. We never got off early. We always worked until 5. I was like, “What? I’m working 13 hours here.” The view was better, I guess, and the weather was amazing. I was there for a year. Farooq left. The fund was small, $50 million, did special sets and had amazing performance in 2004. In 2005, it was flat and it was like there’s not enough economics to go around. Farooq was like, “I’m just going to do my own thing.”

He left and that put me into another holding pattern that I didn’t know what I was going to do. It just so happens that one of Michael Price’s senior analysts got a job at Breeden Capital, as a head of research in trading for a new startup hedge fund, and he needed an analyst, so he called me. I needed a job, he needed analyst, it was perfect. The timing was great, it was just as Farooq left, the next week, Bob calls and says come on over to Breeden.

I went to Breeden. I was there for five and a half years, four of which Bob was there. He left to start his own fund. He now is a partner at Cardinal Capital, made some of the best friends of my life when I was at Breeden. I have interesting stories, which you’ve probably heard me tell, which I’m happy to talk about it again if you want. Then, Breeden after Bob left, it was obvious to me that I didn’t want to be there anymore. I spent 18 months looking for another job.

Finally, the guys at Locust Wood Capital took pity on me in May of 2011. I really liked the structure of that fund. It was a $400 million long, short– but mostly very long bias, but event driven, special situations fund. The guy, Steve Errico, who runs it had been there for over a decade, his number two, a guy called Bill Gibbons had been there within the entire time, the turnover was low. There were three guys, $400 million. I thought, “My God, if I could get this job, and we could grow from $400 million to a billion, it could just be a wonderful setup for me with being the fourth guy.” Sure enough, it was great. We grew from $400 million to $1.2 billion when I left.

I had a very, very, very good run there. I did well from really 2012 all the way up to 2017. In 2018, I kind of came to a crossroads where I had been pushing the firm, to get more concentrated to take bigger bets. What I had noticed over time– Toby, you should just stop me because if you let me go, I’ll just–

Tobias: No, keep going.

Michael: This will be like 45 minutes–

Tobias: That would be ideal, I don’t want to talk.

Michael: [laughs]

Tobias: Go.

Michael: I had been pushing for– at Locust Wood, what I noticed I knew this myself coming out of Breeden. What really struck me at Locust Wood was, our best ideas generally were homeruns. Generally, we were very– When we had a lot of confidence and conviction in something, it generally worked. For whatever reason, the midfield ideas for us, the things that we– I like it, I see how it could work, like Eastman Chemical would be good example for me. I like it, I see how it can work, but it’s a low conviction bet.

There’s commodity cycles I don’t fully understand, and one of them has been beneficial, two of them have been terrible, is that going to continue? Their acetate tow business I like but the end markets, not necessarily, you get all this. What I found over time was when we really had confidence it did well, so what I was pushing the firm for years, really in 2016-2017, because I was doing so well, I had a lot of political capital, I was trying to use my political capital to get us just to focus on our best ideas.

My dream for that portfolio was no more than 20 securities, of which I was arguing that no more than 10 of them should matter and 10 should be on the farm team. My spearhead of that was Charter, which we had made a really big bet on when they announced their merger with Time Warner, they’ve done really well for us and I thought it had a lot more to go.

We were moving that direction. Another guy joined the firm in 2016 or 2017, had a very different view. The view was for more diversification, looking at the index that we had benchmarked ourselves to the S&P and then trying to talk in terms of we’re short this factor or we’re short this industry, and we’re long this one because we’re not long in it, and that never really resonated with me. That’s the way he thought about the world. Ultimately, in 2018, I had a material drawdown, and I think I ended that year– Personally, I was only down 4% or 5%. But in the fund, I think I was down 20% or 25%. At one point, I was down like 40%. The push was, “Mike, you need more ideas, different businesses.” I just was like, “Man, I don’t need different businesses. I need to buy more Charters, how much Charter can we buy?” I think Charter was like 275 or 300 times, I was like, “This is the only thing we should own.” It was clear that I lost that fight.

I had two aha moments. There was one where my boss was like, “You’re just going to have to change.” I thought about that very seriously of like, “Well, do I want to do it?” And could I do it?” Ultimately, he said– I’ll never forget, it was great. It was this aha moment where he said, “Mike, I can’t fire myself,” and I thought about that and I was like, “You know what? You’re exactly right.” You can’t you’re the guy, this is your fund, you’re not going to change, you can’t change and this is what you’re doing. You can’t fire yourself. If I want to do something different, I have to quit. There isn’t a solution. There’s not a middle ground here. I can’t fire you. If I was the PM, I would fire you. I’d fire the factor guy. I was pretty open about that. I’m the problem and I think differently, I’m just going to leave, and that was the first aha.

The second was, I took a week and I went to Colorado, my wife and I have a place there. We’re moving there, but we have another place there where we vacation. I took a week, it just struck me that is a really– Tobias, I’ve been so blessed. It struck me that a million-dollar bonus didn’t mean anything anymore. It really didn’t move the needle. It’s not that I have this enormous amount of money, I’m Chamath, I’m just as wealthy dude, it’s not true.

I have way more money than I need, but regardless of how much money I have, I didn’t need any more. If you gave me another million dollars, I would still be in this house, I would drive the same car, I would eat at the same restaurant, my kids will go to the same university, whatever that is. There’s nothing about more money that was going to change my life. When I got to that moment, I just asked my wife, I was like, “Why am I doing this? I’m miserable. I’m getting home late, I’m stressed. What’s the point?” She said, “Well, there isn’t.” I said, “Well, let’s just move to Colorado and open a practice for you there. I’ll do that, and I can invest our money.”

I showed her how compound interest works. I told her, I was confident that over time, I could compound our money at 10% that it would be lumpy, but that was my target. I showed her that based on how much we have and how much I think we’re going to burn, and me doing 10%, we’re going to die with so much money, we’re going to give it all away anyway. Really, it’s a question of, am I giving away a pile this big or, am I giving away a pile this big? It’s not going to change my life. That was the decision tree. I retired at 39. I wanted to get in just before my 40th birthday, so I could say, “I retired in my 30s.” [chuckles] That was it. I’ve been on my own for two years. It’s been great.

Tobias: Well, congrats.

Michael: Thank you.

The Simplest Form Of Investing

Tobias: What changed? I know exactly what has changed, because I think you just said so, but I just want to– you’re probably running a little more diversified than you wanted to be in the fund, but so now it’s your own money, you don’t have anybody looking over your shoulder. It really is just your own assessment of risk and return. How do you now run your personal capital?

Michael: I am a very simple human. The world for me is simple. I eat hot dogs for lunch every day. I’m a simple guy. I think about the world very simply. I want to make 10%, so what I need to do is go out and find something that will pay me 10% a year. That’s much easier said than done, but it’s very simple. You think about how you can earn money on an investment, well, there’s two ways. One, I can go buy an asset, it’s cheap, and then I turn around and sell that asset, and I get gain on sale, but still I make my return. The other way I could do it is I could buy a stream of cash flows, and that cash flow stream, as far as I’m concerned, can look like anything. The important thing to me is that I’m feeling– [crosstalk]

Tobias: [crosstalk] -sense of like lumpy or growing, or cyclical–

Michael: Oh, sure. Yeah.

Tobias: You’re not necessarily looking for something that’s compounding over time, you’re just looking for– how you get the 10% is relevant.

Michael: Yeah, how I get the 10% is relevant. There’s two things that are relevant. It’s not where the money comes from. The two things are– well, I shouldn’t say that. If somebody pitches me to be a drug dealer, sell illicit substances, the answer is no, I don’t care what the returns are. They’re short of something illegal, I’m saying– so short of that, all I care about are that I understand it. It has to make sense to me intrinsically. It can’t be something where I’m like stretching out on a spreadsheet to get the return. I have to know this is how you make your money.

This is how I’m going to make my money and it has to be obvious to me. It can’t be something where I’m like, I really need to spend time thinking about it. The benefit of retirement is I can do anything I want. I don’t have to work, so I read a book, I play a video game. Anything I want to do, I can do. If it’s not just absolutely obvious to me, I don’t do it. That’s the one thing, it has to be obvious. I’m not smart enough to be things to be obvious in a lot of spaces so. For me, like cable, it didn’t take me long to figure that out.

It wasn’t obvious to me early, but I got it explained to me and it made a lot of sense. QVC was pretty obvious to me for different reasons. It just has to be obvious. I spend a lot of time in liquidations. I haven’t recently, but historically, I have because they’re just so simple. That’s usually the gain on sale, unfortunately, is you only get paid once but I’m okay just getting paid once. It’s fine as long as I can find something else to do later. One thing I have to understand it.

Invest Based On Your Personality

The other thing is, even if I understand it, it has to fit my personality. If I were going to give one message to an investor or a professional starting, I would say, the most important thing, and the one thing that you absolutely can do is know yourself. Howard Marks has a great framework for this for market cycles. He says, “We don’t have the ability to predict where we’re going tomorrow, but we ought to know where we are now. We should spend a lot of time thinking about where we are now and that can help us in our decision-making process today.”

Well, I use that same heuristic for how I think about investing. I don’t know necessarily how markets are going to behave. I don’t necessarily know how people are going to behave, but I can know enough about myself to know how I’m going to behave. If I understand it, I also need to know that I’m going to behave well around it.

I’ve seen so many times at all the different stops I’ve had on Wall Street– all four different stops I’ve had on Wall Street, I’ve seen so many times people make huge mistakes that they almost know they’re making in the moment, but they just can’t help themselves. Today would be the guy, the SPAC King buying GME calls. He just can’t help himself. For me, I know I’m not going to buy GME calls in a healthy way, so I’m just not going to buy any GME calls. I think those are really the only two things that matter, matter to me anyway. If I know what I’m getting, I know how to think about it, I understand it and I know that I’ll behave well and rationally and thoughtfully when things go against me, then we’re off to the races.

For me, to get excited, it has to be comfortably over 10 because I believe, fundamentally, in this idea of– it seems like a lost art now, but the idea of margin of safety is incredibly important to me because there’s lots I just don’t know. It has to tee up in there. It doesn’t seem like there’s much of that in the world these days. Yeah, that’s it. Not sure if that makes any sense. In my mind, it makes sense.

Forget About The Business, And Get Your Initial Investment Out

Tobias: No, that’s perfect. I think about it exactly the same way, so it makes perfect sense to me. When you’re sizing these positions, so you find something that is tractable, it’s understandable. You can see yourself holding it if it goes against you because you’re going to understand the mechanics of the business, or the mechanism that’s underneath, whatever is happening. How much capital are you then thinking about I want to allocate to this thing? How does that thought process occur?

Michael: I think I’m different from most people– I’ve listened to just about anything I could get my hands on from Munger or Buffett, I try to listen to or read. If they’ve said it, I want to hear it. I forget the year, you may actually know this, I forget the year where Warren talks about concentration. He says really you should not have more than– if you’re an active business analyst and stock picker, you really shouldn’t have more than four or five stocks, that should be plenty. If you feel you need more than that, you probably should just buy a low-cost index. I took that in that meeting I was like, concentration makes sense.

I actually took it a step further, and when Charlie talked about at one time having over 100% of his net worth in a single idea, I think that just hit me as like, “Well, wait a minute. I bet you I could find something so easy and obvious that it’s worth borrowing money to do.” My wife won’t let me borrow money. I would if she would let me, but she will not let me. She’s way too conservative to do that. I promised her I would never take margin, but that resonated. I heard that and I was like, you know what? I should be looking for something that’s so easy and obvious, I’m willing to put 100% of my net worth in it.

QVC came very close to that for me. The analysis is, again, it’s really simple forgetting that business… we don’t have to talk about the business. If you, Tobias, tell me, “Mike, you give me $100 today, and I’m going to give you $50 next year, $50 a year after that, and then we’ll see.” “Well, I’ve read your books, I like you, you know Bill, you’re a good reference for me. Take all my money.

See you in two years, and we’ll see what happens.” To me, that’s an easy bet to make. I don’t have to think about it. It’s two years, I get all my money back. The risk is zero. Once I think the risk is approaching zero, I just push money in. I don’t care so much, that’s another Howard Marks thing for me is, I just focus a lot on the downside and I just let the upside take care of itself. If I know I’m not going to lose money, and I don’t do it so much and thinking like I’m paying a little multiple for a business, so I’m going to be fine.

I don’t think of it that way. You’re giving me my money back, that was the change I think that happened with Qurate that got me really excited, is I know those guys pretty well. When they made that switch to, we’re going to buy back stock, we’re just going to give you capital, in my mind, the risk reward equation changed really dramatically, and it just lowered that risk. I pushed a lot of chips on the table, I wish I would have pushed a lot more. I sold everything I could to buy it, but I didn’t sell everything at all. I have some illiquid positions that I couldn’t sell, I probably would have to do it.

Why QRTEA Was Such An Easy Bet

Tobias: Why don’t we go through Qurate? Folks who followed, Bill will know it, but folks who have followed this podcast may not know it that well. Let’s talk about the opportunity from when you found it to– I know that you had covered it in the past. How do you think about that opportunity? How did you think about it?

Michael: I had found QVC, a friend pitched me on it when it was part of Liberty Interactive, and Liberty Interactive was spinning off another business called Liberty Ventures, which turned into GCI Liberty. They’re fun people to follow, because there’s always something happening. I picked it up in 2012, and I really did it– for me, it was a very deep dive, talk to management, go see the plant, watch the show, understand the depth of financials, look at the competitors, try to understand the industry.

I did a lot of work, and I decided that it was a business that was worth owning. I thought I was buying it for 10 times free cash flow, and that is a 10 times free cash flow for a business I know and like, it’s a magic number for me. When I see that, if the number, if free cash flow is growing, and I like management, that’s when I’m like, “Okay, I love it.” I found that with QVC and I thought, this is a business I can understand, it’s misunderstood by the populations why it’s so cheap. I love management, they’re buying back stock and I’m sure you’ve heard this pitch a million times.

The narrative on QVC forever has been at the business is in decline. Depending on who you ask, they’ll give you a decline of like, “Well, it’s actually declining because they’re losing customers,” or the business is deteriorating because you’re losing linear video subs or whatever, that had been the narrative.

My view was very simple. If you look at their core customers, their core customer count is growing, and their core customers are spending more. The margins of returns on the business are phenomenal. As long as those people keep spending what they’re spending and we keep adding to the funnel every year, I can grow small, my EBITDA can grow small, the free cash flow is massive, 50% of EBITDA flows through the free cash flow. Free cash flow is massive, and I’m paying a little multiple for it. Plus buy back stock, it’s fine, it’ll be a creeping public LBO. That’s my downside, so maybe I’ll get multiple expansion, it can be a trade, or if not, I’ll just own the whole business in 10 years, so that was the whole pitch.

Tobias: Let’s talk about the difference between subs and core customers. How do you make that distinction?

Michael: Well, I’m sorry, I bleed over into cable in and I start talking about subs. Linear video is in structural decline. There’s just no doubt, nobody thinks it’s growing. It’s in structural decline. It’s a question of how quickly the cable and satellite providers, video subscribers are leaving. Unfortunately, QVC’s business is based on video. Their customers skews, we know, the more video you watch, the more valuable of a customer you are, the more you spend it, there’s a direct correlation. If you’re a linear subscriber and you watch a lot of TV, you buy a lot from Q. If you stream occasionally, you buy less. If you don’t stream at all, you buy even less. Linear subs, TV subs do matter, so the idea always for Q has been, “Well, as they’re pivoting, how do we pivot our product to sort of meet those needs?”

They had been able to do it actually. You saw over time, as people were leaving the linear cable TV bundle, QVC’s numbers were still going higher, so it was indicative of they can manage to this. It’s a question of how well they can manage to it, but my whole theory was like, “Who cares?” If the cash flow is going high– I have a stream of cash flow. I’m paying a very small amount for that stream of cash flow and it’s growing. What else do you need to know? You believe in it, it’s going to be there 10 years from now? Yes. Okay. Bye. It’s pretty easy. The sub is somebody who watches TV. The customer is somebody who watches Q and then shops. The more linear that they watch, the more valuable they are. It’s pretty simple.

I owned it for a long time and got burned in it. I actually lost a little bit of money over time or maybe broke even, but it ended up being a bad investment for me because the opportunity cost. The value was all added on the Liberty Ventures which I got even bigger in, and so I ended up making a lot of money on the complex, but Q, I didn’t make much money on. The turning point for me was in 2019, their customer accounts and revenue started declining precipitously. It was a flat business forever that just like now it’s down four, now it’s down five and that continued for, I want to say, six quarters. I gave them one quarter where I was like, “Okay, we’ll see if we can get through it.”

Then the second quarter, it happened, it’s clear that I was wrong and so I try to be as– You can fool a lot of people, I just don’t want to fool people, but I really don’t want to fool myself, that’s the main thing is like, I just want to be open and honest with myself. If I’m wrong, fine. I’m a big boy, I can be wrong, I can lose money. At that time, in 2019, I was like, “I’m wrong, we’ll sell it, we’ll move on, we’ll find something else to do.

I sold it, and then I had followed it. I’d followed Bill, I followed all the quarters, because I’ve been involved with it for so long, and COVID hits. I immediately think this probably is good for Q because people are home watching TV and you’re seeing retailers that– there’s retailers that have been winning in a COVID world, like Target and Walmart certainly, but then also online, e-commerce. That’s Q makes money when people watch TV. We’re all home watching TV. I logically thought they’d be doing better. I did nothing with that information, until in the second quarter, they released results, and what caught my attention was not the results and that turned into business, obviously happened because the COVID, it was that they changed their capital allocation strategy.

One of the ways I’ve made enormous amounts of money over time, is when a business is able to change their cost of capital structurally, and that’s part of the bread and butter of event-driven investing. You have two businesses, one is highly valued, one is low value. You spin off the high value one, and boom, all of a sudden the market sees it, and the whole structures and cost of capital changes overnight. It happened two years ago with KAR Auction Services. It happens all the time. It’s a way to make a lot of money really fast.

I thought with QVC, or with Qurate, when they changed their capital return policy from share repurchase to dividend, my mind sees– and by the way, one of their dividends was a preferred security, which is brilliant, which we could talk about. But in my mind, I see this and I think cost of capital changing, money coming back to me, and, oh, by the way, on a pro forma basis, it’s two times earnings. It’s two times earnings, it’s levered, but it’s two times earnings. If you think the business is going to be around two years from now, and you think they’re going to keep returning capital, the decision becomes really easy. You don’t have to really think about it. You’re just like, okay.

Greg Maffei is wonderful and also has an ego on him, and he likes to win. In my mind, QVC had been a big loser. They know QVC had been a loser, it’s problem for them. All of a sudden, they changed the capital allocation policy, and it works. My guess is, they’re probably going to press it. It turns out, that’s exactly what happened. It happened faster than I thought, but they returned capital to us, they gave us $4.50, a special dividend and a preferred on a $10 stock. I mean, 45% of my capital came back right away, which is basically like a public liquidation.

Then two months later, they announced $1.50 on a special cash dividend, so 60% of my basis came back pretty much right away. My guess is that they’ll continue to do more. It works. That change the cost of capital was not just the dividend. This preferred security they gave you yields 8%, so think about– and it’s trading today, I didn’t see it this morning, but it’s trading right around par, right around $100 a share. It’s actually yielding 8%. This is just brilliant.

They took a billion dollars in free cash flow run rate, it’s actually quite a bit more than a trillion basis, but run rate’s a billion. They carved out, at the time it was trading for four times free cash flow. Billion dollars trading for $4 billion. They carved out $100 million in free cash flow of their billion and they put it in a preferred security. That preferred security, they said yields 8%. What does that mean?

Well, it’s trading at 12 and a half times free cash flow, so you took 10% of your cash flow, and you put it in a vehicle that now trades at 12 and a half, that’s how you create the stub for two. In my mind, it’s like, “Well, that changed your cost of capital.” Now I have a stream of cash flow over here value to 12.5% that I just got, and I get what’s left. Why wouldn’t you just do that with another 100 million dollars? They very well might. I’m not going to, but I’m hopeful they do because it worked. It’s pretty straightforward, so that’s what got me– that was the reason to buy Q last year, was that they’re changing their cost of capital and this event is very meaningful.

Now, it’s a little different because the stock is at where it’s basically been– I haven’t seen it today, but it’s up 90-ish percent from where we were buying, almost doubled, and that changes the equation. There isn’t a known event now. Now, you’re looking at the business and they generate about $2.50 a share in free cash flow and you’re paying about $12 for it. You’re looking at the business and saying, well, is that worth four times, five times forever? It was worth 10. Maybe is it worth more, because when it was worth 10, the market was at 13 and now the market’s at 22.

Lynch – Let It Double, Sell Half

If that becomes a harder game, where you really do have to have a view on the business to say six times should be 10 times, that’s where you’re saying– we’re getting closer to a duration where business view really matters. The stock going back down to 6, like, well, if that happens, then all of a sudden, the duration conversation becomes pretty easy, because I’m only underwriting two to three years. We’re at a little bit of a different time. I was huge in it and I basically now have taken all of my basis out of it and I’m letting– it’s very Peter Lynch of me. It’s like, “Oh, let it double, sell half, leave the half in,” that resonated with me, again, because it’s just so simple. That’s basically what I’ve done. I’m letting it ride and we’ll see.

We will know, in my view, if the business, if what happened during COVID has structurally changed the business and it could. Management thinks there’s actually a pretty decent shot that’s the case. We’ll find out in the second quarter. They’re going to lap really good numbers from COVID, and if the numbers are flat, maybe we get lucky and it’s slightly up, then I’ll be a very happy shareholder. If not, then back to square one. But it’s okay, because I’ve got my basis out, so who cares?

Treating Stocks Like Free Options

Tobias: Yeah. The opportunity from your perspective was, their downside risk here is very low, approaching zero, because there’s a very clear path to getting the money back, including a big payment right out of the gate, that 45% payment out of the gate. Then, they’re restructuring some of the cash flows where previously they’ve been trading– you’ve got to assess the business, you’ve got to have a view on what multiple they should trade at. There’s some decline. There’s a lot of moving parts to saying, we’re just going to say, we’re going to issue a pref with an 8% yield. Then that, of course, that’s– you’re embedding a 12 and a half times multiple in that [crosstalk] keep on doing that. It’s a very simple and you really don’t have to have a great view on the business because you’re saying, “I’m going to get my capital back.” Then what I have– that can just trade where it trades and I don’t mind.

Michael: Now, it’s an option that I ended up getting for free that it looks like it’s worth a lot and we’ll see. I’ll really know, like I said, mid this year, towards the end of the summer, I think I’ll have a much better perspective on whether that option that I got for free is worth– Tobias, it could be worth $10 billion. I have no idea. It really just depends. If that billion dollars in cash flow is stable and growing, I promise you, it’s not worth $5 billion. If it’s declining, then it’s a debate about, well, is it worth 5 billion? It’s roughly where the market cap is now is, or six? Is it worth 2 billion?

If it’s growing, it’s worth a lot more than $6 billion, that I know for sure. If it’s shrinking, then it’s anybody’s guess. I’m not 100% sure, but I do think there’s a very real chance that we’re grow, grow, baby. Or, maybe you don’t even have to grow anymore, if you’re a retailer people, I have heard of that. It’s a massive decline. Maybe it is worth $27 billion. I don’t know what the GME market cap is now. Maybe I’m looking for the wrong thing. Maybe I do want the cash flows to go down, so we get the– [crosstalk]

Tobias: You’re going to update your browser pretty quickly to find out what the market cap on GME is. It swings around the little bit.

Michael: I can’t buy it anyway. I do business with TD Ameritrade, so I can’t buy any stuff.

Tobias: [unintelligible [00:33:42] yeah. It’s nasty, isn’t it?

Michael: Yeah, it is. What a time to be alive. But yeah, that’s Qurate. I love stuff like that. I think that it just speaks to me at a fundamental level. Those are the situations where– and I talked to a couple of guys who are very sharp who were really on top of it and didn’t do anything. Those were the situations where if being intelligent actually worked against you. If you really-

Tobias: Who’s smart.

Michael: -stopped. Yeah, if you stopped and really wanted to understand what was going on, you missed it. Those are great for me because I’m able to dial back and just take things really– get them to the base level pretty easily. A lot of guys missed it just because they were overthinking it, it really wasn’t that complicated.

Tobias: To me, that’s a pretty good description of what I’m looking for on the market. That’s a deep value trade where you can see the way you get your capital back, don’t really know about the business, like the business could be up or down, it’s hard to assess, but that’s not really what the opportunity is. What the opportunity is, is just to get a lot of your capital back and then just to find out.

My strategy really topped out similarly to the way that you describe it. Up to 2017, felt really easy. In 2018, to date, it’s been just absolute misery. Just going backwards and for whatever reason, it’s not working. I try to listen to a lot of other guys who are doing well in this market and what seems to be working in this market is people who are very good business analysts, who are looking at the business and almost don’t care about the capital structure, because I look at some of these capital structures and I think you’ve really got to be right here on the business.

Michael: Oh, my gosh, you’ve got to be exactly right. You have absolutely no room. Talking about that margin of safety that I look for, it’s not there. Maybe it doesn’t need to be, I don’t know.

Sit On Your Hands Rather Than Chasing Something

Tobias: If your definition of a great business is a 20% plus return on equity, 35% plus margins growing over time, there’s nothing in the market has got a 10% free cash flow. A fat free cash flow yield on something like that is 5%.

Michael: Yeah, that’s right. I’ve sold a lot of the 5% yields, I had a pretty big position in Charter, which I just sold last year and paid all my taxes on it to buy Qurate. Formula One, I’m very small on. I would so much rather– The gain on sale businesses, the game that you’re talking about that I’ve been playing recently, it’s not as good of a business. It’s just not. I have to pay taxes, I’ve realized returns, which really stinks, and I have to go recreate it. I have to recreate it again and again and again.

There’s no guarantee that you and I are going to find another Qurate or that I’m going to find another liquidation. In my mind, I’m confident I’ll always find something but is it going to be really juicy? I may be sitting on my hands for five years, I have no idea, and I’m okay. I’d rather sit on my hands than chase something. But it’s not as good of a business. I would so much rather find Charter at $300, buy it and just own it forever but that doesn’t fit my personality. When something gets to fair value, I just have a hard time owning it.

Some people will tell you, like, “Charter is not fair value. It’s very cheap, because look at interest rates being zero and that’s yielding 5 and you should want it 5.” I say, “Well, 5, isn’t my hurdle. My hurdle’s 10. I don’t care where interest rates are. I don’t have the view on interest rates.” For me, it’s like I just like owning mispriced securities. I don’t like owning fairly valued securities, it feels bad to me to own it, I get–

Ironically, I don’t mind owning something that’s a piece of crap at two times earnings if I really believe that I’m getting all my money back, but something 20 times or 25 or 50 times, it gives me heartburn. That’s been the wrong way to behave. By the way, that’s been incorrect. You should be more excited about the high multiples, not less.

Tobias: What changed?


Michael: Everybody’s a product of their environment. I started really paying attention to the market in the late 90s, in the dotcom boom. My father was a college professor, started in a really interesting online business. He was a psychology professor, a corporate psychologist. He did pre-application screening for executives. You’re going to hire at the Acquirer Fund the new chief marketing officer. My dad would say, “Well, bring him into me, we’ll do a personality assessment. We’ll also just look at their background and history and I’ll give him a psychological evaluation just to see if this person will culturally fit into the Acquirer Fund group.” He did that and did very well. He had a lot of blue-collar hire, so think nurses, truck drivers, and he would have a written personality exam for them to go through, like a psychological profile, so you fill out, like think fill in the blank, fill in the dots kind of thing.

In the mid-90s, he decided that that would be way better done on the internet and he created a company called ijob.com which he ended up selling to– it wasn’t pre-revenue, but it’s like a million in revenue and he sold it to Lawson Software, a public company, I think it’s still public, I don’t really follow them, but sold it to Lawson Software with a small, but for us because we were essentially broke, was a big number, but a small upfront payment and then a lot of backend which of course never materialized but it was enough to change my family’s– Yeah, of course. Shocker, never–[crosstalk]

Tobias: I thought you’re going to tell me you got the equity– It’s up 500 times or something.

Michael: No. All this wonderment you see around you is all my own earnings. There’s no family contribution to this. Although my dad– I didn’t have any student loan debt. My dad was able to pay for my entire college, which I’m immensely grateful for. Also, there’s a safety net embedded when you feel like your dad did something like that because you’re like, “Well, I could go take a chance on Wall Street. If it doesn’t work, what’s the worst that could happen? I move back to Oklahoma, I’ll get a job and it’s not the end of the world.” There is a psychological safety net in there for me. All this wonderment in White Plains, it’s all me. He did that, I saw that happen, I was like, “This is amazing.” I started a business myself. I dropped out of college actually to do it. I raised a million bucks. I started an online business that was focused on college students, predictably. Now that really was pre-revenue, it never became revenue. It was always pre-revenue right up until I had to shut it down, because funding dried up.

What Would You Pay For A $1?

I watched that happen and then I watched the fallout from that. Set the scene, then I meet Michael Price. It’s like a classic value, it’s like buy stuff cheap. First chapter of The Vulture Investors and he tells me what he does. This is before I even heard of Warren Buffett. He tells me and I’m like, “This is so obvious.” Of course, this is how you do things. Everything has a value associated with it. What you want to do is go– when I was interning for him, he said, “Mike, what do you want to pay for $1.” He gave me this class, “What do you want to pay for $1?” I was like, “50 cents,” and he goes, “You’re going to do fine in this business.”

That’s the kind of stuff, it just resonated with me. I was like, well, yeah, of course, I want to buy something cheap and sell it at fair value. That’s the way to make money. That little grain stayed in me. I got a big hit when I invested in Zale, Breeden, and Zale effectively blew up. Like a phoenix, because of the CEO rose from the ashes and then ended up getting sold and ended up being fine. I had a front row seat to misery of buying an average business and then having some leverage on an average business is not a fun place to be in a recession. I can tell you, it’s not always–[crosstalk]

Tobias: Was it the Diamond?

Michael: Yeah. There’s two large–

Buy Something Cheap And Flip It

Tobias: There’s a [crosstalk] one stage, back in the 2008 or 2009, I owned it for a 50% pop or something like that. [crosstalk]

Michael: Oh, wow. I bet you when you were buying it, the CEO at the time was a guy called Neal Goldberg who’s a sweet human being. We were all using Blackberries at the time. I was in the Dallas headquarters. My boss basically moved me there. He’s like, “You’re not coming home until the stock goes up.” “Okay.” They gave me a little office and I didn’t do anything all day. I was like reading the news, but of course, management team didn’t want me there.

What value do I add? I’m a financial analyst, I don’t help anybody. CEO comes in. He shows me his Blackberry, stock was like 35 cents. My basis was $18. It’s just brutal. Then they got sold, I forget the number, I want to say it’s mid-20s. They got sold to Kay Jewelers to Sterling. It ended up being fine, but it was a tough place to be. I learned in that lesson, I was like, “Oh, wait, business quality actually is important, and if I would have owned Ecolab instead of owning Zale, then I wouldn’t have had this problem.” So, my “Oh, just buy something cheap flip it,” I learned the lesson in a way that like, “No, no, stay away from toxicity.”

I got lucky. When I went to Locust Wood in 2011, you could buy quality for 10, 11, 12 times earnings. You could buy it at a number that I could really jump up the spectrum and own something. I bought Ecolab pro forma for their Nalco deal. I want to say that was 2011-2012 for pro forma 10 times earnings. 10 times earnings for Ecolab. Which now just seems, like, “Oh my God,” but at the time, I would call that a pretty target-rich environment. You really could go up the quality spectrum, and you could still get a deal. The market was 12 times or something.

Tobias: You’d have to find out what’s wrong with it now, if you found it trading at 10 or 11 times earnings. You couldn’t accept that at face value.

Michael: No, a certain fact, it’s probably a short. Well, actually, I shouldn’t say that in the current environment. Nothing’s short, but if it’s trading at 10 times earnings, it’s probably a short because everybody’s already looked over it and found all the problems. When I transitioned to buying better businesses, and the cherry… was Charter, that was my last business that I owned. For me, I just look at the world and I try to find the best thing to do. My brain has just gone back to, you’re buying cheap cash flows again, because that’s where the opportunity set is.

The opportunity set is not in the best businesses. I have this crazy belief that if you want to outperform over a long period of time, you have to do things that other people aren’t doing. I realize that that has not been right for the last 10 years. But I’m all in on the idea that if I want to outperform and I want to do stuff that actually is going to work over time, it can’t have a lot of competition. If everybody’s already playing the game, I’m not going to add anything. What am I going to add to the game?

Reversion Of The Mean Caused By Private Equity

Tobias: I couldn’t agree more, and I had a similar experience. The first decade of the 2000s, I watched all the really great businesses just went sideways for an entire decade even though the underlying was doing well because it was so expensive. It just took years and years and years to work off the overvaluation. The opportunities were in things trading at three times EBITDA, that might get bought out. It was just an easy game. You didn’t really have to do that much work on them because the business is almost irrelevant at three times EBITDA with a whole lot cash on the balance sheet and activists roaming around looking to do something.

Michael: Tobias, it’s almost like somebody should write a book about reversion of the mean caused by private equity buyers of inexpensive assets. [laughs] I feel like I’ve read one of those.

Tobias: It feels like such an old-fashioned strategy. This is the thing. I’ve been doing it for 10 years, I’ve been doing the wrong thing for 10 years, basically, even though it did work up until 2017, but it wasn’t like a standout easy. The first part of the decade was like a 45-degree ramp. The second decade of the millennium was like maybe a 15-degree ramp, something like that. Then, the last three years have just been misery, it’s sort of all gone backwards.

Michael: I would have lost the bet. I would have told you– If we go back five years ago, and you said, “Well, this is what I’m doing.” My belief is, at the time, I forget the number, but private equity sitting on $100 billion of cash and Berkshire Hathaway has a similar amount of cash, I’m like, “What are you going to buy? Are you going to go buy Amazon at 20 times revenue?” By the way, they should have, that would have been the right move.

Tobias: Evidently.

Michael: Yeah, that would have been the right move. My thought would have been like, “Oh, no, we’re going to go buy things that are–“ There is a discount embedded in the valuation because of something I can fix. There’s some strategically they’ve got maybe a good group of assets, but they just can’t bring them to market. Well, I’m a little bigger than them, I can do it, or their access to capital has been constrained and some private equity are buying. Private equity hasn’t touched that stuff maybe that’s going to continue. I really don’t know.

Tobias: Why is that do you think?

Michael: That’s a great question. That’s what I’m saying, I would have been wrong. I would have told you that’s a logical outcome of all of this, but that’s not where private equity is. They’re just not there. They’re doing other things. I don’t know why they’re not interested in that stuff. It may be for the same reason that the public markets aren’t, because they look at public markets to tell them what’s going to work in an IPO, and if they can’t underwrite a high terminal value, then they’re just not going to do it. That would make sense to me, but I confess I understand very little about most things, I understand even less about the internal workings of large private equity firms.

Tobias: I remember very clearly, in 2014, when I pitched [unintelligible [00:47:22] for Deep Value, I said, there’s a whole lot of private equity capital out there. In fact, it’s like it’s a cyclical high, so that means typically what that has meant is that in the next five years, there’s going to be this cyclical boom, in–

Michael: Tidal wave.

Tobias: Yeah. It didn’t eventuate, it didn’t come through at any stage. I feel like we really hit an air pocket from 2015 to date where they’ve been silent. I don’t know why.

Paying Low Multiple For Cashflows Is The Right Choice

Michael: Well, it almost, for me, as I look at the world today, as long as you have the right people who really have your back managing your business, and the business generates cash and it doesn’t go away, it’s almost like it has to do okay. It’s almost like it has to work. Of course, there can be bad luck, but as long as the guys running the show are trustworthy, honest people, the business itself isn’t just completely getting disintermediated by Amazon or somebody of the like, the worst-case scenario is you have a returned is inefficient, in my view.

It’s also so much more logical to me that if I buy something that’s– say I buy a dollar’s worth of cash flow for 50 cents, it’s so much more logical to me that, I’m going to get that make more money over time and do better than if I pay $1 50 for that cash flow of $1 because there’s some magic at the end of the rainbow that’s going to pay us all. It just hasn’t. You can read, there’s so many books about this maybe the world is different today. O’Shaughnessy wrote a book called What works on Wall Street, and he walks through this from the late 60s until 2011.

Over time, paying a low multiple for cash flows has been the right move. It hasn’t been recently. I think it probably will be again. I just think about things so differently for most people. If I was going to go underwrite a business and own the whole thing, would you rather pay a huge number for it or a small number for it? It’s like, “Well, obviously a small number.” The outcome for me and my family over time is going to be very dependent on what the business does, but also, if I pay $100 million for a business generating a million dollars in profit, probably not going to work out very well for me, or I should be able to find something better to do with $100 million. Sorry, Tobias, I told you, I’ll just keep– if you pull the string on my back, it’ll just all spew out. It should work that way. Balance sheet should matter, capital allocation should matter. It hasn’t, but it should. I think it will, that’s my bet.

Tobias: For me, in some ways, it’s been a good experience, because I think that I did focus too much on what the stock price did after I bought some because it’s just sort of– the relationship had been quite tight through most of my investing career that if you bought something cheap enough, the market did wake up to it pretty quickly and then you got paid. More recently what’s happened is that just hasn’t happened. Even though the underlying business has done reasonably well.

The yield is still pretty good, the cash flows are growing, it’s a much fatter cash flow than the market. That should be something that would work. For the last few years, that hasn’t been something, that’s been the thing that has driven me the most crazy until I got to the point where I was like, “Well, the opportunity doesn’t exist until that happens before you buy it.” There’s no reason why this is going to rectify itself quickly after you buy. You’ve just got to get more used to that being the case.

Michael: Well, I wonder too if there’s not a– I know what Henry Singleton would have done in that situation. I know, because he has a book and he did it. [crosstalk] Yeah, massively. By the way, he would have told you, like, “I don’t care whatever you think. But if you’ll sell me stock, I’ll buy 80% of my float.” It creates enormous value for the people who stick around. It’s the same with Malone, is what they would do is take advantage of that situation. By the way, they caught a lot of– excuse my French, they caught a lot of shit for it. It is interesting to me that CEOs are not doing that.

I can think of one in particular, these are friends who I’m like, well– because of the social nature and the immediate nature of information because everybody knows everything, that there’s an image thing that people are very focused on, I think a lot of these gaps would close if the same thing were happening in the 60s, 70s, 80s, where we didn’t have Twitter, and people were just like, “This is the right thing to do, I’m just going to do it,” versus you get shamed for like, “Oh, maybe sell you my stock at $2,” and it turns out was worth $8. I probably would have seen more of that. I haven’t seen any of that. I don’t see any of that anywhere.

Tobias: I think part of the reason is many smaller businesses typically that are run by the founder who went through the IPO and is still there, they’re more of an engineering type and haven’t– nobody has come and said to them, one of the options that you have is to buy back stock in your business. This is what impact it will have on the business.

When I was working in an activist firm, we’d go in and have that conversation. Many times, there’d be no need for any activism, because they’d say–, and then we just explain it, then they sit there and think about it. Then, a few months later, the buyback would emerge. You think, “Well, they just hadn’t had any–” nobody had said that to them at the time.

wallstreetbets Is Democratizing Investing

Michael: Well, it makes sense. The active managers have been so just decimated and now they’re chasing the top names, there’s probably nobody in that room anymore. That’s probably the problem is there [crosstalk] it’s just you and me on podcast– [crosstalk]

Tobias: WallStreetBets.

Michael: Yeah, WallStreetBets. [laughs] Exactly. Wall Street bets is democratizing investing for the masses and making millionaires by the day.

Tobias: They figured that out GME, which, like I saw Mike Burry go into that, and it was in my small cap screen for a long time, it’s the cheapest thing on the screen, because it was trading below in net cash, they’ve got some liabilities in the leases. You don’t need to be a genius to repurpose those things. Then the Chewy guy comes in, take some board seats, take some capital, you could see something potentially going to happen there.

Michael: Yeah, [crosstalk] bubbles. You really could.

Tobias: I had Scott Jackson, who’s a fund manager, on my podcast in August, and he laid out the whole thing for me. I just thought that I didn’t appreciate how powerful WallStreetBets really was at the time, I laughed, I thought they could do it. Now they’ve done it. Maybe there is a big return to deep value now for that reason.

Michael: Oh, they’re very well, maybe. The problem with going deep value, the problem with the way I think about the world is, I’m very concerned about how balance sheet looks, it matters to me. When I look at business, I’m like, “Well, let’s look at the balance sheet. Let’s see how much cash they have. Let’s see how it’s changed over time.” It’s the way I think about– I think about businesses the way I think about myself, like the most interesting metric for me, at the end of every month or the end of every year is what my net worth has done. It’s my balance sheet.

It’s not the income I don’t bring in income, my wife does, that’s not as important to me. It’s the balance sheet. I’m sitting here and going through balance sheets and saying, “Well, this is an asset. That’s not appreciated.” That’s not for the masses, and that’s not the market we’re in. The market we’re in is, there’s a ticker symbol. By the way, Elon says signal, so I go by SGNL. That has nothing to do with the signal.

The market we’re in isn’t one of like, “Oh, let’s go discover a hidden gem and then expose it.” The market we’re in is, “Well, where are the flows going to go next?” That’s the question where the flows going to go next? Are the passives going to be buying the megas? By the way, I’m fascinated with that. I love market strategy. I’m addicted to it. I really love it. I don’t do anything with that information. I don’t buy anything or sell anything. I don’t profit from it. Watching this GME and AMC, and people talk about reflexivity with that, I am just fascinated, but I don’t own any of them. I would never buy them. I would never short them. I have no view on them whatsoever, but I’m fascinated by it.

Tobias: That’s the problem that I have. How do you figure it? How do you assess that opportunity? I can understand value. I can’t assess operations.

Burry – Right On The Short And The Long

Michael: Again, it gets back to the first thing we were talking about, which is, do I understand it? Does it fit my personality? I don’t understand it. It certainly does not fit my personality. Being up 300% in a day and it being down 300%, you’re losing it all and more the next day. I don’t want to play. I’m looking for 10% a year, these guys are making 30X that in a day, that just doesn’t fit my personality. It’s not for me. I watch it and I just smile. Last night, I was watching, I couldn’t help myself. It’s so perfect, that The Big Short, Michael Burry was The Big Short and then he was the long that blew up–[crosstalk]

Tobias: It’s crazy.

Michael: I know it’s insane. It’s just so perfect. I was watching The Big Short and I put out a tweet last night, which I thought was like the funniest thing I’ve ever tweeted, and nobody liked it. Of course, my humor just sucks. I was like, I had a glass of wine, I was just like giggling to myself, as I was tweeting this out. I get it, there’s pain and it’s bad for society. I’m not trying to make light of something that’s going to end up hurting people, I think. I just thought how perfect is it that Burry was in the movie, was at the center of that short and then in now in current market narrative he was early to that party that’s blowing up the shorts. I was like– [crosstalk]

Tobias: That’s the thing now [crosstalk] both ways.

Michael: I love that. I don’t know Burry. I’ve never met the guy, I don’t know him, but I just love, love that that guy really could care less what everybody else thinks. Say anything you want about him, he could care less– he was eviscerated for GameStop long last year. I remember people were like, “This guy is a complete moron. He’s gone off the deep end.” It turns out, he had the best security of the last 10 years sitting on it. I don’t know if he still owns, I have no idea. It turns out, he was the smartest guy in the room. He had the best security of the past decade sitting on his balance sheet. I was like, “Man, that guy’s crazy.”

Tobias: He’s got that approach where he just says, “I don’t know how this is going to work out– I don’t know how I get paid, but I know how I don’t lose money here.”

Michael: Yeah, sounds smart, Tobias, sound smart.

Tobias: That’s a good approach.

Michael: It resonates.

Tobias: Hasn’t worked for a long time.


Michael: Well, you and I’ve just owned the wrong stuff. That’s our– [crosstalk]

Tobias: I told my wife about it and she was like, “You had that in the screen and you didn’t buy it?” I said, “It ran before I got to put together the portfolio. It just didn’t wind up in anything.”

Michael: Well, in your defense, in our defense, it was a lottery ticket that just hit.

Tobias: Well, that’s true.

Michael: Who would have thought that $7 goes to $400? That wasn’t on my bingo card.

Tobias: It wasn’t clear that management was going to do anything now with the cash that they have on the balance sheet either. Something like you need the Chewy guy, Ron Cohen, I think his name is to come in.

Malone – Wrap It Up And Put Bonds Around It

Michael: To come in, yeah. It’s interesting to me that I heard Malone say this about. Malone had a similar problem in the late 90s. He had a lot of investments in some small companies, their stocks just exploded. That’s Malone strategy. They’re operating a business and somebody wants to come in and partner with me, we’ll partner, but I want equity stakes, that’s how Liberty Media was born out of TCI. I think it was a YouTube that he gave to– a presentation he gave to the University of Denver and he was talking about its history.

I think that’s where he talked about this, he said, it’s a really difficult problem, because you have this basket of assets that have just ripped and if you’re the manager, if you sell, you’re going to get sued. If you issue stock, you’re probably going to get sued. People are going to eviscerate you and hate you. It’s this weird problem of like, “Yeah, it seems like it would be so great, but at the same time it’s really not wonderful.” John’s strategy was rather than– this is– I’m going to say the way I interpreted that I’m sure if John were on this, he would probably take exception to the way I’m describing it.

John’s idea was rather than sell it and pay taxes and have a bunch of bag holders, or keep it in his equity, he decided to wrap it up, put bonds around it, and then basically make the bondholders the bag holders. That’s exactly what happened, the vast majority of the securities were wrapped in those bonds and sprint backs, exchangeable bet is still well below par. They can’t be put back to the company until 2030. He created 30-year bond bag holders which I think is pretty funny. Short of that, I don’t know what AMC– I guess, they’re raising equity, and GME should. I don’t know if they are, but I get that it’s tough. People are going to be upset, probably lose money, and–

Tobias: You’re going to get sued either way.

Michael: Yeah, you’re going to get sued either way.

Tobias: Hey, Mike, we’re coming up on time. You’re retired, so you’re not promoting anything, but if folks want to follow along with what you’re doing, how do they do that?

Michael: Oh. Well, the easiest way to do it is just to follow me on Twitter.

Tobias: @IgnoreNarrative, is there any underscore or anything in there?

Michael: No. @IgnoreNarrative, that was free. It turns out was a horrible name choice because it was available in 2018 when I joined Twitter, but, yeah, follow me in. I post my portfolio every month. I should have said last time I posted it that I now only own two securities, so it’s going to be very volatile. Bear with me if I have a good month or a bad month. It doesn’t mean anything. It just means I’m very concentrated book.

Tobias: I should send people to your podcast with Bill Brewster on The Business Brew, is outstanding.

Michael: Oh, thank you.

Tobias: That was the first one that he did. I love chatting with Bill. Bill and I laugh until we cry when we– [crosstalk]

Michael: He gave me the inside scoop on your podcast, which I just found to be hilarious. I thought it was great.

Tobias: You guys did a good job on that, so that was fun.

Michael: Thanks, man.

Tobias: Michael Mitchell, IgnoreNarrative, thank you very much for your time.

Michael: Tobias, this is awesome. Appreciate it. I’m honored and humbled. Thank you.

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