racemize

We're not adding. We like what we have and the price we paid. We're up 70% on the equity and our warrants are up 15% now too. We did back up the truck, so it is a big position. We really thought this would be a four-bagger over 5 years, and I still think it's going to hit $25-30 in less than five years barring any significant broad market correction. Cheers! The last time you mentioned it, I think you said it was 5%--did you up from there?

I think it is important to value your own time. For example, since I bill by the hour, I could bring home 100 dollars/hour doing more work, so one could argue that I should value my time at 100 dollars an hour on my stock research. However, when you are learning, there is a lot of future value built into the research. Sure, I may have over-done my AIG research, but 1) it was enjoyable and 2) when there is a lot of capital later down the line, those initial hours and the incremental hours will be worth lots of money. The time/money compounds! Accordingly, I have no issues at all working a lot of hours on any investment, regardless of how much it costs me in the short term.

only 2% of the fund now. http://www.dataroma.com/m/holdings.php?m=fairx

This is where I still haven't gotten to, although with the banks and insurance I've read quite a few (since I'm investing in multiple ones).

88% increase--nice. It would have been nice to know the buyback number though.

Did WFC release payout information? I would bet that WFC's dividend will be a minimum of 60 cents, and I would say it would be closer to 80 cents annually. They could actually afford even more than that, but I think they may back a bunch of shares too. Cheers! That would be 25%-67% increase, in line with what I was thinking as well.

Did WFC release payout information? No, sorry, I was looking at prior payout ratio differences to see what the dividend increase for a comparable ratio for WFC (based on the new JPM ratio) would be. In conclusion, more than a 20% increase for WFC if they have a similar payout ratio for JPM (just speculating).

Lol, if only this were true:

You have double taxation on a dividend, which was already at about 2.5% annually. Whereas a share buyback is much more tax efficient if you believe your shares are undervalued, and your business will do well economically long-term. Cheers! Oh, absolutely, I just wanted both. :P.

Only a dividend increase of 20%--I was expected more like 30-50% for WFC and thought they were in similar boats. That's a lot of buyback though. Looks like WFC payout ratio is 8% lower, so the dividend increase will likely be more for WFC.

do you have a reference for that reserve information (e.g., in the current 10-k)? I just started on it and the section ~page 90 didn't seem very clear about what was reserved and what was not for GSE. See pages 55-62 and page 125 of the recent BAC 10-k So I went back and re-read those sections and then went to note 9--I guess the language in there isn't all that clear to me, or didn't lead me to reach the same conclusion. This seems to be the relevant language (unless I'm missing something you noticed): From the above, it seems as though the total reserves for GSEs is less than non-GSE. It has been my understanding that the total potential GSE liabilities are more than non-GSE, and the reserves are actually the opposite, due to predictability. That's what's driven my thought that there will be significantly more issues with GSE claims than non, which they have already indicated may be 5 billion short. However, I haven't finished reading the 10-K yet as I was mostly focused on AIG and other 10-ks for the past couple of weeks, so I would appreciate your insight if I am off. Edit: is there a table where it breaks out the reps and warranties provisions, or is it just one lump sum everywhere?

do you have a reference for that reserve information (e.g., in the current 10-k)? I just started on it and the section ~page 90 didn't seem very clear about what was reserved and what was not for GSE.

I understand that it is hard to estimate. However, it seems clear that the GSE liabilities will be higher than what is currently reserved, so I would rather that they go ahead and put some amount in--they would get it back if they were wrong. For example, I don't know exactly how much car repairs or house repairs will be at any given moment, but I typically save some money for them anyway. Regardless, I don't think they are allowed to do such reserving, but I would rather conservative approaches be allowed. Moreover, the fact that those losses will show up and haven't been reserved is what bothers me--i.e., that they have unreserved liabilities that could be substantial.

stress test criteria posted: http://www.cnbc.com/id/46709890

Actually, the $5b estimate is for non-GSE claims. The vast majority of the repurchase requests are from the GSEs -- the percentage is stated on page 34 of the 4Q11 earnings presentation. From the 4Q11 earnings presentatio, page 34 "Estimated range of possible loss related to non-GSE representations and warranties exposure could be up to $5B over existing accruals at December 31, 2011" Yes, I'm more worried about the GSE reserves. I think they typically say they can't estimate it well so haven't fully reserved, which is worrisome to me. However, I still think the discount more than makes up for it.

This is probably something very basic, but could someone explain what exactly "Net $3.2B of CDS" means? My understanding is all derivatives are zero-sum games, so if one side wrote $60-70B notional exposure of CDS, another side must have bought $60-70B of it. Why is there a non-zero net amount? The net is how much will be paid out because of the default. The buying/selling of CDS are asymmetric and have different outcomes (non-zero) depending on when/whether the default occurs. So netting is the reconciliation of different CDS contracts. For example: Bank A sells 50 billion of CDS to Bank B Bank B sells 25 billion of CDS to Bank C the net exposure is 25 for bank B and (I think) 50 billion overall, versus gross of 75.

I think this one is what I was thinking of. Thanks.

There was a thread a while back that posted a link to a website that kept track of 13Fs for a lot of people (e.g., Pabrai, Buffett, Watsa, etc.). I have failed in my searches to find it--could someone repost (if this description is accurate enough)? Thanks!

my wife put: "you lose that battle. You lose that battle nine times out of ten." Perhaps not as inspiring as others. =p.

I think they are likely under-reserved for for reps and warranties, but I don't know how much. I guess the other concern is collateral effects from a European melt-down.

Found this to be pretty informative: http://www.bwater.com/Uploads/FileManager/research/deleveraging/an-in-depth-look-at-deleveragings--ray-dalio-bridgewater.pdf curious as to the board's thoughts on it (e.g., any arguments against their reasoning/analysis).

Just a little question: How do we have any idea how big the entire CDS market is when it is fundamentally an unorganized and unregulated market (OTC)? You and I could enter into a CDS contract on Greek debt (but you should worry about be as a counter-party!), and nobody would ever know. Have I missed the creation of some central registry of these types of contracts or something? SJ I think the DTCC reports on 95%+ of the market. http://www.dtcc.com/products/derivserv/index.php

That's pretty great. Dynamic updating ftw.

I would also be very interested in that.

here's the cumulative pdf: http://dl.dropbox.com/u/14968/farifax%20(2012).pdf