Happy Hour with Cody and Rebecca

I have never been on live television before; the only other times that I have been on any sort of television was when I taped two segments for TheStreet.com last October. We only did one take of each segment, so I guess that’s as good as live, though there was the possibility of re-taping.

So, it was interesting for me to be on Happy Hour yesterday.

What was I going to talk about? Well, that was uncertain until 2PM today. Cody wanted to talk stocks, but he also wanted to talk macroeconomics as well. I offered him seven stocks, four foreign, and three US insurers. He took the insurers. I offered him four macro topics, and he took the most topical one, Buffett’s offer to reinsure the muni business of the major financial guarantors.

As of 3PM, I had a problem, though. I hadn’t been able to connect to the internet all day long, and though I had talked with many people about Buffett’s proposal, I really did not have any in-depth knowledge of the proposal. The Waldorf Astoria’s free Wi-fi was not working for me, so I retreated to the business center for 20 minutes of catching up. That’s all it took to get the details hammered down, so I headed down to the Bull and Bear for the show.

I got there about four, and a perceptive staff member said, “Are you one of the guests? You have that look about you.” He then seated me at a nearby table and I pulled out my laptop, and wrote out my notes for what I would say. They read like this:

Guarantors:

Company that’s in trouble: sell your good business or bad business?

Buffett wants to buy the good business at what is a bargain price to him, leaving the bad business behind and less wherewithal to pay the claims, because the profit stream from the good muni business will be gone. NPV of the muni business is more than Buffett is offering. A company would only take up Buffett’s offer if they were desperate, or forced to by the regulators.

Now effect on Munis is limited, just because you might lose your guarantee doesn’t mean that the municipality can’t make payments.

Insurers:

  • · Dragged down by financials
  • · Dragged down by AIG
  • · Assets are relatively clean (got religion 2001-2003)
  • · Favorable demographics.
  • · Growth in the markets will raise AUM.
  • · Inexpensive on earnings and book.
  • · High quality balance sheets.

HIG

  • · Very diversified – P&C, Life, Group Benefits – domestic and international
  • · 1.2x book, 6.8x 2009 earnings
  • · Quality company
  • · Variable products sensitive to market movements

LNC

  • · Still room for cost savings from the JP merger
  • · Well positioned in life, annuity, and group benefits
  • · 1.2x book, 8x 2009 earnings
  • · Variable products sensitive to market movements

AIZ

  • · The next AFLAC
  • · Focused on specialty businesses that can obtain an above average ROE.
  • · Warranties, Force-placed Homeowners, Individual Health, Small Group Benefits, Funeral (pre-need)
  • · Deep management team – they invest in their people
  • · Good capital allocators
  • · 1.8x book, 8.8x 2009 earnings

By the time I had written that, David Newbert, of ThePanelist.com showed up, and we began to talk. Nice guy with some heavy duty Wall Street experience. Then the Fanelli twins showed up; bright ladies.

By this point it was close to 5PM. A little powder for my face and balding pate, I am going second at about 5:13. I ask the staff for advice, and they simply tell me to be opinionated and energetic. I try to be self-effacing, but I steel myself up for the task.

The first guy completes and they go to break. I’m up! They tell me to look at Cody and Rebecca, and sooner than I can expect it, we’re off. I had committed my notes to memory, but as in war, as Cody and Rebecca interact with me, I have to deviate from what I jotted out. We talk about Buffett and the Financial Guarantors, then move to stocks. I talk about Hartford, and a little about Assurant, and then, we’re out of time! That was fast! I get to name Lincoln National at the end as an afterthought. (At one point, Cody lavishes praise on me, and I get a little embarrassed. So it goes.)

The rest of the show goes on in the crowded space of the Bull and Bear, and before you know it, it’s over. The staff efficiently shuts down, and in 10 minutes, there’s no trace of what went on before. Cody and I meet for dinner later. It’s good to re-sync in our friendship.

I hope to get a copy of the video clip to post at my blog. If so, you will see it here. I had a lot of fun, and they invited me back. Should I get back to NYC, I will be back on Happy Hour.

Full disclosure: long AIZ HIG LNC