No. of Recommendations: 1
Sometimes capitalism looks bad. Sometimes it looks real bad.


https://www.marketwatch.com/story/seth-klarmans-baupost-is-s...
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No. of Recommendations: 5
Blacktreechaser,

You wrote, Sometimes capitalism looks bad. Sometimes it looks real bad.

I don't see a problem. The claimants wanted certainty and the fund wanted to bet on the bankruptcy risk. The claimants can't get an advanced settlement without paying a price for it.

Heck, I think I made better deals than the hedge fund manager did back during the credit crisis. People were dumping bonds and prefers at absurd prices. I happily paid a fraction of what they were worth, took the risks and pocketed the profits.

- Joel
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No. of Recommendations: 3
Pretty pathetic to say that buying undervalued bonds is similar to taking advantage of devastated people who have just lost everything material, (and in too many cases still getting over the loss of loved ones), living in school gymnasiums or in tents on other public land, wearing donated clothes, eating red cross meals; by offering them some crumbs with the sole intent of reaping a nice fat profit.

Our civil court systems, tort suits, arbitrators, networks of insurance companies, etc, are there to help make deserving people whole again. They don't exist for slimy vultures to move in to profit from the misfortune of others. You find that admirable?

Sometimes karma does kick in. Maybe a few will buy something sleek and fast and give it a collision test into an overpass abutment or the back of a log truck. (One can only hope).

Maybe a hedge fund that locates people with stage 4 cancer and buys out their life insurance policies might be to your liking?
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No. of Recommendations: 6
blacktreechaser,

You wrote, Pretty pathetic to say that buying undervalued bonds is similar to taking advantage of devastated people who have just lost everything material, (and in too many cases still getting over the loss of loved ones), living in school gymnasiums or in tents on other public land, wearing donated clothes, eating red cross meals; by offering them some crumbs with the sole intent of reaping a nice fat profit.

People didn't have to accept their offer. And you seem to be the main person accusing the hedge fund of shady behavior here.

Judgmental much?

Also, Maybe a hedge fund that locates people with stage 4 cancer and buys out their life insurance policies might be to your liking?

I've certainly looked at viatical life settlements in the past. I think they serve a purpose - they allow the terminally ill to pay for necessities like healthcare before they pass away by using a life insurance policy for something it was never meant to do. But in the past settlements for AIDS patents turned out to be a disaster for that industry because people with a terminal diagnosis kept having their lives extended.

In those cases the viatical life settlements were a huge benefit to the insured and pretty much a disaster for the investors. So these things swing both ways. But I'm guessing you're probably okay with that, right? Kind of a two-faced position to have, isn't it?

- Joel
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No. of Recommendations: 8
Pretty pathetic to say that buying undervalued bonds is similar to taking advantage of devastated people who have just lost everything material, (and in too many cases still getting over the loss of loved ones), living in school gymnasiums or in tents on other public land, wearing donated clothes, eating red cross meals; by offering them some crumbs with the sole intent of reaping a nice fat profit.

Except that the claims weren't purchased from individuals. They were purchased from insurance companies, and were claims that PG&E owed to the insurance companies when they declared BK. From the WSJ article https://www.wsj.com/articles/klarmans-baupost-poised-to-cash... that was referenced in the article you linked to (my bolding):

The exact amount Baupost stands to make couldn’t be learned. As of March it owned $2.5 billion in insurance claims, according to court documents. It bought the claims at steep discounts as early as last year from insurers anxious to shift the wildfire losses off their books, the records show.

Regulatory records from one major insurer, CSAA Insurance Exchange, say Baupost paid 30 cents on the dollar to 35 cents on the dollar for a significant number of California wildfire claims in late 2018 and early 2019, as it rolled up a stake in PG&E insurance claims.


Since PG&E declared BK, at least in part, in order to limit what they would have to repay to the insurers, please explain how this is any different than buying undervalued bonds. Baupost was willing to take a risk that the BK court would pay the insurance company's claims more than Baupost had paid for the claims, and the insurers didn't want to wait for the BK court to resolve the claims. It could have gone the other way, with Baupost paying 30 - 35 cents on the dollar for the claims, and only receiving 10 - 15 cents from the BK court. In that case, the insurers would have been the ones who 'won'.

AJ
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