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GG its not me you need to convince it's Warren Buffet, who has practiced what I've just stated for 50+ years,
Corporate finance can be fantastic, and very complex should you have complex needs, or if you take a straight forward approach it can be very easily understood and used,
As you've just seen by FFCmember it can hard to understand and complex to a ordinary investor, but a great way of making money that you don't have in the bank as clear profits to use.
I do clearly understand how finance works, though it's only complex if you make it complex, burford truly needs these complex ways of raising funding money to make lrofits, that's a given, but as I've stated earlier if we had billions of profits in the bank we wouldn't need a penny of debt, unless it was to reduce our tax bill, after watching Amazon and others avoid tax that way, surly that has to come into question unless it's genuine debts, and not artificially engineered debts.
GLA
Not that it is relevant to what's being discussed, Warren Buffet has invested in some very highly levered companies, so I wouldn't use him as a counter-example.
Futhermore, the ways Burford raises capital is very straightforward - equity, debt, and third party investments.
I'm not saying Burford will need debt, but it will always have debt. I suggest you look at the differential between ROE and ROA for Burford to get a sense of why that is
Warren Buffett buys shares in levered companies/ indebted companies, though he's reluctant to buy any heavily levered company unless it can pay him back . As he's $137 billion in the bank he's a perfect example to show other investors how to use your own money and not rely on complex and often expensive financing, complex as FFCmember the average investor understandable took some time to understand how the bond funding works. For a average investor it is difficult to understand why burford has all these totally different types of funding in place, but once you understand and know it's not.
Burford debt model is not easily understood, I took some time to understand why it needed all these types of funding, it can actually make you feel that there's trouble hiding somewhere, but that's not the case at all, it's debt model is perfect for its current needs, though as I've stated if burford made $10 billion profit tomorrow , does anyone really think they would need any debt other to take money off the tax man ?
I agree with you it's most likely burford will need debt until it makes that $10 billion profit one day. LOL
GLA
I give up on this discussion ThomasBrowne, I don't think you've read what I've written.
Good luck to you and to all
FFCmember that was extremely disrespectful and unwarranted, I myself have struggled for a time period to understand all the funding needs, that level of disrespect has no place on any forum . There's absolutely no need to use that language when you disagree with anyone,
Regards
GG I've read what you've written ok, we just respectfully disagree with each othr, though I have painstakingly went to great lengths to explain my position, Warren Buffets business model et, I don't think I can do no more, though I appreciate your passion in your beliefs and still remained respectful to other posters, that's a testament to who you truly are sir,
Kind regards.
GG, TB and FFC:
Personally I agree with GG but I understand where TB is coming from.
Key factor when making comparisons: BUR is a finance company and so comparing to other sectors doesn't really make sense. To use the Buffet example that's been raised, Kraft may well have no debt (haven't checked) but the banks and other finance companies that BUffet invests in very definitely do (or their own version of it in his insurance companies). The very business of finance companies is to borrow at a lower rate and lend/invest it at a higher (expected) rate.
If you had a 10bn windfall today you'd obviously be unlikely to re-finance any bonds due tomorrow. However, you might still in the longer term if you invested that money *and still had good investments available to make*. Then you'd borrow more to finance those extra investments.
That's all it comes down to and in my view the key to finding the middle ground in this ongoing discussion! If you can make a suitable return on the money over and above the cost you borrow if for (factoring in risk, etc, into the equation), you borrow it. Simple. That's the point GG and I have been trying to make.
However, if you have your own money sitting idle you'd obviously use that first (which coincides with TBs point and aligns with FFCs wishes?).
Therefore, BUR will/should always borrow (prudently) if it can make a good return on that money. If it can't, it won't (and that's when we should be worried because the market is sauturated and growth stops).
Thanks Iaconic
I know more today than I did a couple of days ago ,
I think Bur is an excellent investment although I can't say the last ten months has been as enjoyable as my first three and a half years here ? What I will say is whilst I probably haven't explained myself re the bonds very well I would still like to see us keep our borrowing to a minimum , personally I would very happy if they were to invest all gains and not pay dividends as this was a growth share for me until MW , I certainly hadn't questioned the Bonds until GG mentioning not paying them back anytime soon , I think that's where I stopped explaining my aversion to debt getting out of hand ... Of course I don't want good opportunities turned away due to a lack of funding , Forgetting Petersen for a moment I really do think that so long as they are still picking their "fights" wisely ? the "pending" wins should enable funding going forward .
Regards
ffc
Agreed. You make good posts Iaconic. All too often on here we have seen the same illiterate and verbose codswallop. I hope you continue to contribute.
No problem. In my heart I'm debt adverse after a couple of companies I went for when I first started blew up on that very point. However, the maths is the maths and it does make sense in BUR's case as long as it's at levels that don't mean unwarrented risk.
The last year has been hard for us all here. Luckily I had some spare funds to top up but I'm at a point where adding much more gives me an uncomforably large position. That's why I sometimes disappear off the forums for extended periods - I have alerts set for rises or falls that I might want to know about and then sleep better without watching the price day to day!
Thanks Jammy - can't promise it! If there's another fall and I add again I'll likely switch off anything that could make me see a price quote for a couple of years!
I know only too well what you mean. I have a limit order set at what i believe is recent historic support, as do believe in the company, but cant explain price movements for last couple of months never mind last few weeks. I'm hoping we clear 5 this week and that then becomes the new support.