Arden

A 34 cent dividend would have been huge for the warrants. It would have taken the strike down by 1.36$ this year, this would justify a 10% rise in the warrant IMO. Instead we get lost equity of 0.88 a year. At least we get some buybacks. Anyways, The equity and the warrant are still changing by the same percentages, While it should move about double in my opinion, so despite all this, the warrant is still looking pretty good.

0.22$ is of no help to the warrants. sucks.

Thanks for the reply Sharper, I don't understand the meaning of margin equivilancy ,warrant 1/2 life and max margin (marked above) It's only recently that I've begun to think about options, and that's only because of the bank warrants, So thanks for helping out. BTW, who is this forum's admin? I tried registering 4-5 times until I was approved, and I'd really like to change my nick :)

Sharper, Can you please use an example? What do you mean by "max remaining warrant increase"?

So, using this logic- what's the right price for WFC warrants? strike 34 current price 31 expire in 6.5 years. Or maybe not the right price but how should I think about the warrant. I can figure out that if the price was 43 now and the warrant was say still 9, then from now on I will have a X4.5 leverage on WFC's results, but what can you tell me about my leverage now, when Im not yet in the money. Even if I were right on the money- 34$, what is my leverage from now on? you can't just divide the mkt price by the warrant price because that's the leverage that very moment, but after a rise of 1% in price which will cause a 3% rise in the warrant the leverage is different.

Intrade is a prediction market, you buy option on yes or no events (Obama will be elected in 2012)- If the event come true, the option is worth 10$, if it doesn't it's worth 0$. You have predictions in various fields, from whether the god particle will be discovered by 2013, or on what price the DOW will closed. The bets are using real money, but pretty small amounts. It's like a casino, but the odds aren't stacked against you- it's a zero sum game. This site is great for 2 reasons: 1. Markets are more efficient than any survey. If you want to know the odds of obama being elected, you can see the price of the option is 6.06 and know he has 60% of winning- and this is as accurate as you're gonna get, since the traders trying to make money use all information available. It has been proven in research that prediction markets are in fact the best predictors. 2. As a value investor, I use this as a hobby, it's great practice to finding inefficiencies and you use the same state of mind as in investing. Right off the bat I can see that Mitt romney has 81%, and Newt and Santorum have 4% each to be the republican nominee. Something is inefficient here- The odds none of them will be the nominee is more like 1-2%, and there's a chance to make money here by using simple math and building you position so that you win a little no matter who wins. I highly recommend it, it's a lot of fun! http://www.intrade.com/v4/home/

Since when is war won by the size of the country? It's just the opposite- larger countries are harder to defend. How exatly will Iran "squash" Israel? I also believe that even if Iran gets nuclear weapons they won't attack Israel. Israel is leading the world's anti-missile technology, and since it's so small and easy to defend- it's very very likely that if Iran sends a nuclear missile, Israel will hit it while it's still above some arab country, and retaliate with some nukes of their own, which they have little chance to defend against. That will make Iran look kind of stupid, don't you think? BTW, even if by some miracle they do hit Israel, Israel has several nuclear submarines that assure mutual destruction, and will "squash" Iran. I think the ones that should be afraid are the neighboring arab countries. Their military power would mean nothing when Iran goes nuclear. That's is probably the main reason the US hasn't left Iraq yet. Saudi arabia, Egypt, Iraq, should all be much more afraid than Israel.

The link works, but as you see here are some spaces in it -just before the word letters. Try this: http://dl.dropbox.com/u/14968/Leucadia Letters (2010).pdf

Thomas Crapper? really? :P

Uccman, I feel similarly about computers. Most of my engineer friends tend to overestimate computers and technology IMO. About the wheat crops- We don't grow as much wheat as one might think, the plant we are most dependent on is... corn. it's practically everywhere, and we're so dependent on it that a virus could really do some serious damage ,I don't think it will come from a lab though- as smart as we think we are, evolution is way, way better than us at designing things - we can't even cure AIDS because the mutations keep beating our best attempts, and that's when we know the enemy. The real bummer is that the faster we advance in medicine- the more we need it. a century ago it would be rare to meet someone with glasses, now that bad eyesight doesn't get you killed- it's almost 50% in some countries. fertility treatments mean more genetically infertile people. as we advance, we will become a more dependent animal.

Steel is better- the railroads they've been building like crazy are made of steel, not cement. More importanltly, Steel is recyclable, so just a small drop in construction and they need no more imported steel.

Why go so far? Just short a steel exporter to china- like RIO or VALE.

Wow what a comment Nate! well done :) Dunno about portugal but I have a few ideas in Europe- RNO- Nate mentioned it in his blog- there is a discussion in the comments, basically renault holds 43 of Nissan, whose shares are also traded- and the market value of the share in nissan is worth more than RNO itself (about 14B vs 10B). on top of that - RNO owns a bank that's worth about 5B, part of autovaz and a part of volvo and daimler. RNO itself is currently making 400-500M on the auto business. Sum of the parts is about 30B ,RNO is trading for 10B. ETI- A british pub company. 5000 pubs, 4.5B assets, Around 3B debt - 1.5B equity, 80-90m FCF, market cap- 250m. decline in the beer business in britain and a rise in beer tax made people dislike the industry which was loved back in 2007.The stock dropped more than 90%, while the Book value didn't really move- the assets are appraised yearly and the last appraisal was a 2-3 months ago, so you can trust the BV IMO. when inflation starts doing its job- real estate prices will rise with it- and even with a mild 2% inflation profits will double. The company is selling assets at BV and closing debt. I see it as being worth around BV in more normal times.

Does anyone know what's the PE in china?

Technology is a bit too broad to choose winners. Don't forget - 100 years ago airplanes were high tech. These days, everything that's "computery" is considered advanced, but do you think that 15 years from now we will still be impressed by software is? maybe, maybe not. Maybe we will have nanochips that cure diseases, and the ones that make tons of money will be biologists and bio companies or something. I do hope technology will live up to what we hope, But I doubt there will ever be a "singularity" (for those of you who don't know- it's the theory that says that one day we will make a computer smarter than any human, and use it to build even better computers which will build better ones, so at that point technology and advancement will rise infinitely very very fast)

I don't think you appreciate the magnitude of Real estate and construction in a country like china-. printing money is just a form of tax, but it is not smart when a huge part of your population live on nothing but necessities and make in a month what you make in an hour. it won't solve anything if people don't buy anything if tens of millions have no jobs, and in country like china- for millions to reach complete poverty (I talking about starvation levels poverty). Besides, I don't see that overspending on the government level helped Japan shorten its 20 years of financial weirdness, even though they are now at 250% debt GDP or so. About the reserves- beyond the fact that a few billion or even a trillion in reserves is nothing compared to the debts the banks and the municipalities are accumulating, they did not keep reserves "for a rainy day" but to lower the price of the yen to keep the manufacturing advantage. Now, let's imagine they do sell a trillion dollars and buy an equivilant amount in yuan- this will be enough to raise the value of their currency, not lower it!! and in combination with the drop in commodities and the drop in real estate, and a billion chinese now trying to save money (such is their culture), the risk here is a huge, huge deflation, with huge unemployment and suddenly- buying things from china won't be so cheap anymore. And then, what will a billion point three chinese do for a living? The common error is that the US depends on china, when really China seems like it's operating as a country for the sole purpose of making pretty things for americans for cheap. They are in a risky place right now..

No one can stop a Real estate collapse, not the japanese, not the U.S, and I would certainly wager that a socialist government would do no better. All that's needed now is a change in perception- a slowing down in growth, a little drop in real estate prices, a bank or construction companies collapse, and the cycle begins. Having a central government does not enable the chinese to control minds, and as a matter of fact a crisis in china may very well finally bring to a revolution in china. Part of the growth in china is almost fake. when the chinese announce that in the next year GDP will grow by by 8 percent, they are not forecasting- they are ordering. To fulfill this goal they will build redundant and massively indiotic things, like a super train that's so expensive the vast majority of the population can't buy a ticket (typical socialist ego boosting), and ghost towns on massive scale, or universities with a capacity of 2 million students , and actually being used by 30-40 thousand. So you get your GDP growth you have only grown in terms of BS. I believe this can not work. I believe not in some central government planning but in having millions of tiny brains thinking of how to make money and letting them do as they please and letting the invisible hand do its job. BTW, there is a chance the fall in china will bring a drop in commodity prices, and especially some like steel, which china is buying in unimaginable amounts to build redundant railroad systems and ghost towns. Maybe this will make some more commodities drop and maybe even... gold. on the other hand, maybe it will make gold rise.. I just don't get this thing..

Banking should in theory be a commodity, but in practice it doesn't seem like it, otherwise everybody would move to a credit unions (some do, but not in droves as you might expect), so maybe it's not as commodified as you might think. I don't remember the numbers (maybe one of you does), but in the last few years the 10 biggest banks increased their proportional size in relation to all banks by A LOT, esepcially in the last 4-5 years. I think the problem will be maybe 5 years from now that there won't be enough people taking loans, and the winners will be the banks that find usage for their money and giving customers the greatest number of different services. WFC. I just think WFC will have plenty to do with its cash for longer than BAC, and seeing how beautifully they took over Wachovia and how they focus on cross selling to their new clients makes me think that maybe they do have a true advantage . The premium WFC has compared to other banks isn't something new. (Of course, I may be wrong and I truly hope that BAC jumps to 70 and we all make tons of money) Edit: to elaborate a bit, if BAC or WFC have excess capacity, they can always do a buyback - but if they do, then, as we learn from BRK, they deserve a multiple not much better than 1*BV (unless, of course, they do it while they're undervalued compared to BV like BAC is now), so again- this game comes down to having a lot to do with your money for the next 10 years, because the stock price 7 years from now, will be determined by the guy looking 3 years to the future. On a side note -I would love if someone could explain to me why BAC are firing 30,000 workers. In first glance it seems nice, cutting costs and etc.,but on further thought this is weird to me. I bet many of these workers have a lot of experience and are great workers, So what possible reason do they have for these massive layoffs? Did the work load on BAC diminish in the last few years? do they expect it to? are there less customers, or were the workers redundant in the first place?

I think the WFC warrants are better than BAC's. Assuming 13% compund growth for WFC in the next 6.5 years, and a conservative (for WFC) multiple of 2 BV, the price should be around 120$ and this is my base case. If this happens, the stock will yield about 300%, the warrant will yield 850%. For BAC, even if I ignore various risks, I assume they will average compound BV at 7%, and that in the end they will trade for 1.2 BV. The price should be about 45- 460% yield for the stock, 810% for the warrant. As you can see, the difference between the stock and warrant in WFC is much greater than in BAC (in part because than the duration is a bit longer). Out of all of those, WFC warrants seem to me as the best out of all of the above. If you see a different scenario I'd honestly love to hear it. On a side note, I think that by 2018 companies tax in the US , which is the second highest in the world, might be reduced to around 25%, which may help WFC- one of the biggest tax payers in the U.S. If this happens it will add 15% (10/65) to it's earnings. I'm not counting on it , but I sure hope this happens :)

Would you consider shorting facebook?

What tax rate did you pay? at least you can use your losses this year for the next few years!