2-min read

Mindless Twitter Rantings

Recently, I got into a bit of a tiff with one of my favorite authors and essayists, none other than Taleb.

Nassim Nicholas Taleb @nntaleb

Explain to me why we should spent taxpayer money to bailout companies (airlines) who spent their cash buying their own stock so the CEO gets optionality, instead of having a crisis buffer. We should bail out individuals based on needs, not corporations. #Moralhazard

March 22nd 2020

8,193 Retweets31,509 Likes

By tiff, I mean I disagreed with a certain statement he made and retweet quoted him:

Viren Mohindra @VirenMohindra

I initially sided with you, but *more* research shifted my opinion: 1) buybacks also benefit the numerous PPFs that hold it, not just c-level 2) management compensation is based off stock performance metrics; they're paid in stock; they will 'look out' for the shareholder * 1/n

Nassim Nicholas Taleb @nntaleb

Explain to me why we should spent taxpayer money to bailout companies (airlines) who spent their cash buying their own stock so the CEO gets optionality, instead of having a crisis buffer. We should bail out individuals based on needs, not corporations. #Moralhazard

March 22nd 2020

Armed with my tech-trash persona of being ‘fiscally conservative but socially liberal’, I went on a 12-tweet rant to demystify the consequences of a bankruptcy for the airline industry and why I thought it was in everyone’s benefit to rescue them:

Viren Mohindra @VirenMohindra

* As long as shareholder’s desired investing time horizons align with the manager’s career timeline horizon.. You might act like they're gaming it for only themselves but they're gaming it for EVERYONE involved. Socialism at its finest. Maybe not so much employees and ESOPs 2/n

March 22nd 2020

Viren Mohindra @VirenMohindra

3) Not ready for Chapter 11s in this industry, too big to fail et all "Since 2000, 51 U.S. passenger and cargo airlines have filed for bankruptcy -- of which 13 were in 2008 alone." - Office of Inspector General on Aviation Industry Performance 2008-2011 3/n

March 22nd 2020

Viren Mohindra @VirenMohindra

4) M&A (well mostly only mergers) assisted in assuaging "previously competing flights" and reducing "redundant hub operations as well as consolidating operations." optimization and a massive overhaul is required, and this is where the government can step in

March 22nd 2020

Viren Mohindra @VirenMohindra

5) socio-economic, political landscape won't allow indictments and punishment for mismanagement/ gross disregard by upper levels, there is too much at stake. Thousands of defense contracts could potentially be null and void.. also who else is there to fill the space

March 22nd 2020

Viren Mohindra @VirenMohindra

6) airlines are a utility, not a service, and without domestic air travel: a) employment rate drops. ATC jobs take a min 3 yrs to fill - See PATCO v. Raegan: FAA initially claimed staffing levels would be restored in 2 years, took closer to 10 before returning to 'normal' 5/n

March 22nd 2020

1 Like

Viren Mohindra @VirenMohindra

Some figures from ICAO.. b) North America accounted for 37% of global employment in the aviation industry in 2004 c) Aviation boasts high occupancy rates of 65-70% – which is more than double those of road and rail transportation. See CASM/ RASM figures and compare 6/n

March 22nd 2020

Viren Mohindra @VirenMohindra

d) Solely from Houston Airport System, US$ 24.2B economic impact in terms of sales, supporting 151,000 jobs in the local economy. Key benefit being it operates as a network, pinning my argument of optimization and overhaul, not complete shutdown 7/n

March 22nd 2020

Viren Mohindra @VirenMohindra

g) economic stimulus is affected and transport + logistic industry falls flat, domino effect h) all benefits of air travel - time, convenience, cost - are wiped out while also causing undue stress on the National Highway System in US. 8/n

March 22nd 2020

Viren Mohindra @VirenMohindra

You can ignore everything up to this point -- i) Fundamental pillar of our global society - Air transport is a SIGNIFICANT tax payer "In the United States, taxes levied on aviation exceeded US$14B in 2004, corresponding to 25% of airfares." 9/n

March 22nd 2020

Viren Mohindra @VirenMohindra

"In Europe, for example, governmental aid to the rail sector represents close to US$ 50 billion per year." Hm. 6) Worst-case scenario ATSB was created for a reason- they're authorized to give a loan, not just 'taxpayer' bailouts. The $ will most likely come back... 10/n

March 22nd 2020

Viren Mohindra @VirenMohindra

There is absolutely nothing wrong with financialization and self-rewarding yourself, I do that every single day Fuel hedging messed them up anyway. 2020 is rough It has been a long year with events completely out of their control - the very definition of black swan 11/n

March 22nd 2020

Viren Mohindra @VirenMohindra

All I'm saying is $UAL, $AAC, $DAL, and $BA are severely discounted and over the next few months it would be a good idea to benefit from the fire sale. cc @EpsilonTheory 12/end

March 22nd 2020

Prof. Taleb went on to add more tweets to his original idea:

Nassim Nicholas Taleb @nntaleb

In PRINCIPIA POLITICA:

March 22nd 2020

510 Retweets2,506 Likes

Nassim Nicholas Taleb @nntaleb

3) Airlines/Boeing are lobbying for bailouts, which they will get. How about the small corner restaurant? The independent tour guide? The personal trainer? The prostitute? The barber? The hotdog vendor living from tourists near the Met Museum? Last time (2008) they were ignored.

March 22nd 2020

884 Retweets3,852 Likes

Viren Mohindra @VirenMohindra

@nntaleb Economic impact from the prostitution doesn’t compare to the aviation industry but I guess I’ll lobby for intimacy.

March 22nd 2020

1 Retweet5 Likes

— and he ended up retweeting the person who replied to me:

Nassim Nicholas Taleb @nntaleb

4) The shareholder should not never end up being rewarded for lack of hedging/insurance. He/she should go first.

nikola @nikola_sock

@VirenMohindra @nntaleb I don't think that prof Taleb is against helping Boeing or airlines, but least they could do is wipe out common share. Next time, shareholders will ask for more accountability from management.

March 22nd 2020

228 Retweets1,288 Likes

I ended up self-isolating after this debacle. He continues with his socialistic tendencies below:

Nassim Nicholas Taleb @nntaleb

5) CEOs of bailed out companies must disburse PAST bonuses. Facing the GBRT (Generalized Bob Rubin Trade) where someone has a free option.

March 22nd 2020

274 Retweets1,253 Likes

Nassim Nicholas Taleb @nntaleb

6) Saying "it is nobody's fault" hence let's help corps is vicious: risk management=cash to face eventualities WITHOUT knowing what they WILL BE: we have 2 kidneys SO we don't have to predict how they one will be harmed. Except that a pandemic is NOT a Black Swan. (INCERTO)

March 22nd 2020

165 Retweets784 Likes

Addendum

My extended conversation with @nikola:

Nassim Nicholas Taleb @nntaleb

3) Airlines/Boeing are lobbying for bailouts, which they will get. How about the small corner restaurant? The independent tour guide? The personal trainer? The prostitute? The barber? The hotdog vendor living from tourists near the Met Museum? Last time (2008) they were ignored.

March 22nd 2020

884 Retweets3,852 Likes

Viren Mohindra @VirenMohindra

@nntaleb Economic impact from the prostitution doesn’t compare to the aviation industry but I guess I’ll lobby for intimacy.

March 22nd 2020

1 Retweet5 Likes

nikola @nikola_sock

@VirenMohindra @nntaleb I don't think that prof Taleb is against helping Boeing or airlines, but least they could do is wipe out common share. Next time, shareholders will ask for more accountability from management.

March 22nd 2020

3 Retweets57 Likes

Viren Mohindra @VirenMohindra

@nikola_sock @nntaleb No issue asking for more accountability - very foundation of of a democracy. But you can’t have your cake and eat it too. Shareholders have benefited from the spike in stock prices from buybacks also.

March 22nd 2020

1 Retweet5 Likes

nikola @nikola_sock

@VirenMohindra @nntaleb Sure. But, i don't see what is the problem with wiping common share now. These companies are example of badly run business.

March 22nd 2020

1 Retweet10 Likes