wknecht

" When the price/value equation is right, this path is the easiest and most certain way for us to increase your wealth." WEB in this report. What is unclear about that which you disagree with.

Think it adds to BVPS simply because shares are being issued at a premium to book. Doesn't mean it's accretion to value.

CACC seems like a decent example. They skip the whole prepared remarks part of calls, repeat the same things over and over, and sometimes buttons heads with analysts. They strike me as data driven, so they don't go out on limbs on the calls making claims they can't back up. Generally shareholder friendly though. Good shareholder letters (a bit repetitive, but a lot of big picture things that shouldn't change much year to year), good shareholder Q&A on webaite, great performance.

Yes, very much so. Especially at the low end. I enjoy browsing Craigslist for cars and trucks, just browsing keeping pace with prices. The prices that people are asking for low end junkers is crazy. 17 year old Tacoma with 175k miles, $7k: http://pittsburgh.craigslist.org/cto/5730759423.html 16 year old Buick Le Sabre $3900: http://pittsburgh.craigslist.org/ctd/5733247620.html (this should be an $1800 car max) 14 year old Camry: 3500 note the hood won't close, obvious accident damage: http://pittsburgh.craigslist.org/cto/5730482118.html Prices for used cars at subprime lots are in the $7-10k range now. In the past they were typically in the $3-6k range. I should have just posted this and let it linger. 1998 Dodge Neon for $800, has a brand new motor (what else is bad..??) has 144k miles cracked dashboard covered with tape. Guarantee this thing shifts like a rock around 2nd or 3rd gear: http://pittsburgh.craigslist.org/cto/5714356377.html That's a crazy price. I remember looking at cars similar to this back before the crisis and they were in the $350 range. Cars are depreciating assets. The system isn't built around the assumption that their value will always rise, which facilitated the credit card treatment of houses and exacerbated the problem when that assumption proved wrong.

Is this thread about the presidential election? Are folks decisions really being driven by differing tax policies? To me, that seems like an irrelevant detail in the context of this election.

If I'm understanding your hypothetical scenario, it sounds like a situation you could pay well in excess of 15mm and very safely earn far higher than 10%. yeah you're right. I didn't verify the math. I guess I could pay at most $48M to earn 10% or greater, as long as I could re-invest my coupons at 10%. Do some research on arbitrage (not saying that in a sarcastic way at all). You could pay a way higher price and still achieve 10%. Ignoring double taxation as your hypothetical was for conceptual illustration not details. Arbitrage isn't really the point though, the point is market prices and different amounts of risk in the underlying investments matter. And risks can often be hedged (if desired).

If I'm understanding your hypothetical scenario, it sounds like a situation you could pay well in excess of 15mm and very safely earn far higher than 10%.

Wells Fargo's online banking platform is the worst of all major banks that I know (far inferior to BofA) and even my small CU is better than what these guys came up with. They have not really changed anything in their banking interface for about 10 years as far as I can tell. And don't get me started in Wells Fargo Brokerage, although the latter has been recently updated. It is simply amazing that a major bank has such an antiquated inline Interface. Their IT budget must be really really small... The point was more thematic, but understood.

VaR (value at risk) was near perfect super computed mathematical model of risk right? How'd that work out in 2008....? If there is garbage data in the system (and any system with humans contains it because we're not rational and do weird things that don't make sense) then you can't predict anything with perfect accuracy. Yes, and not to mention the massive government intervention in all the data all of these models are calibrated to and likely will be in the future.

Sorry it was this one at around the 48 minute mark https://youtu.be/R2MV6CpGCwU

Dick Kovacavich talks about this branch question from a big banks perspective here if I recall: His basic point is it doesn't matter for big banks. Branches are just a different distribution channel that isn't smart to ignore. As long as it's justified from an economic standpoint they'll build branches of one type or another. And they're also a great online bank, so they'll adapt their distribution as tastes change. A good video in general.

Will be interesting to see what happens to the stock today. Might be an opportunity to add. 10 year UST approaching 1.5. If sustained, would be a boost to their bonds, particularly given they have been weary of credit.

How was his compensation similar? My understanding is that it wasn't very similar. They charge on AUM/committed capital, Buffett didn't. Buffett had a true return hurdle (vast majority of PE doesn't, they get catchup or no hurdle; not sure about HF). I thought Buffett's issue with most structures is the pay for non-performance. He only got paid after his LPs made money.

1.4% for the year in USD. Not too pleased with the result. I have ~25% in BRK, so it could have been worse. Averaged 26% in cash.

Thanks. I totally agree and of course feel bad for folks that are starving or struggling greatly. Regardless of whether it was due to bad decisions or something they couldn't control (lost job, health situation etc.). Except for my last sarcastic comment, which I can see the other side of, I was thinking of the retiring generation in general - which is usually the context I hear people discuss this issue. The Fed's trying to get the economy going with low interest rates. That is fine from my perspective because this benefits the most number of people. But is not a big picture result that a gap is being filled by savers (full disclosure: I am one), not the retirees (who are dissavers)? People seem to think that it's the retirees (in general) that are filling the gap via low rates. Wah, wah, life's not fair for savers, I get it. I just think the cause and effect should be understood.

A really great read. Thanks for posting. I know it's only one small point he makes in the Q&A, so I don't mean to detract from it, but it annoys me when people think we should feel sorry for folks retiring now. I find most people think this way, and I don't currently understand it. If I'm wrong, hopefully someone here can set me straight. [/begin slightly off topic rant] Didn't the people retiring now live through the golden age of savers in the US? Someone that is 70 now was 25 when the 10Y treasury was 7.3%, 36 when it was over 15%, and 45 when it was 8.8% - a huge time period to sock away money at very high rates with no risk of principal loss. Then you have the massive tailwind of the 10Y falling to 2.25% today (accelerating future earnings via capital gains) - at which point you begin to dissave. And with the quite reasonable prospects that rates will stay low for a very long time while you continue to dissave (i.e., sell at high multiples to interest/earnings). Meanwhile younger folks (who contributed how much to the financial crisis with resulting bailout via low rates?) are saving at very low interest rates, with correspondent low expected returns. Maybe rates will revert to some "mean", but maybe they'll stay here for two decades ala Japan. So while others feel sorry for retirees, I see a huge wealth transfer to retirees. What am I missing? I suppose there are people who started saving late (or speculatively, and lost money), and understandably expect (sarcasm) a bailout given the Fed bailed out the economy and people that should've gone to jail didn't. [/end slightly off topic rant]

Except, isn't that exactly what it's doing when you register your card with Apple Pay? How hard is it going to be for them to execute agreements once they've essentially "mapped" out the vast majority of people's credit cards using Apple Pay registration? There seems to me a big difference between mapping the network and it being yours and operating it. They would still have to build secure data pipes to all the relevant parties, not to mention all the rules needed to operate it (authentication, charge backs etc). I think it would be very difficult to convince them. Wouldn't it require a huge process overhaul for the banks also? And for what? When V/MA (who they already trust) aren't that expensive and the banks make tons of money under the current arrangement. Using P2P gets around those challenges. But that has a whole separate set of challenges. A secure data pipe is less about the physicality and more about the encryption at this point. I'm unclear about the rest (authentication, etc.) -- and if anyone has any insight, please feel free to contribute. I'd love to know more. I'm also not 100% about the process overhaul for banks to get onto the new system, but, again, if someone has insight, then I'd love to hear it. I suspect that because of the fact that Apple/Google would be grafting onto an existing network that they'd be able to charge less than V/MA and still be profitable, so maybe they can incentivize banks by giving them more of pie? i.e. if transactions come to 2% and V/MA's share was 15 bps, Apple/Google can charge 5 bps and give another 5bps to banks while giving 5bps back to merchants? Also, unclear. Agreed the pipes don't need to be physical. But they need a set of rules to find all the relevant parties and transfer data. I think Apple charges 15 bps, compared to the 10 bps charged by V/MA. I think their sell is that they reduce fraud because you have to use biometrics or a password to login before you can 'swipe'. If they reduce enough fraud they may be able to grab more of the pie.

Except, isn't that exactly what it's doing when you register your card with Apple Pay? How hard is it going to be for them to execute agreements once they've essentially "mapped" out the vast majority of people's credit cards using Apple Pay registration? There seems to me a big difference between mapping the network and it being yours and operating it. They would still have to build secure data pipes to all the relevant parties, not to mention all the rules needed to operate it (authentication, charge backs etc). I think it would be very difficult to convince them. Wouldn't it require a huge process overhaul for the banks also? And for what? When V/MA (who they already trust) aren't that expensive and the banks make tons of money under the current arrangement. Using P2P gets around those challenges. But that has a whole separate set of challenges.

See HJ's post. Here's another nice summary of who gets what.

At some point, wouldn't Apple or Google would have to set up a payment network? Transacting with phones is just a different way to connect to the network than plastic. Not an actual network (set of rules to find banks, deal with charge backs etc). Apple already costs more than the networks if reports I've read are accurate. 15 bps vs 10 bps. So are V/MA really that expensive? It seems the best way to reduce costs is to reduce fraud not cut out V/MA.

I read in WSJ today that Apple charges 0.15% per transaction in Apple Pay. Is that correct? Presumably they add value by reducing fraud, but that is more than V/MA's cut.

Here's a recent conversation with Richard Davis (US Bank CEO) talking a little about payments and Fintech (starts around the 25 min mark). It's from a bank's perspective. What worries him and what doesn't. http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=117565&eventID=5212123

I'm not a payments expert, but even beyond obvious network effects, it's not clear to me why any buyer would want to use this. There's no credit involved, so you don't build credit history or earn rewards, and you can't spend beyond what you have (which apparently a lot of people like to do). I doubt it will be cheaper (price minus interchange), just like it's almost never cheaper to use cash, and banks can give rewards/cash back to incent credit/debit card use. It's ACH, so if you don't have a balance sitting there (why would anyone when they can use debit?) it's slow and payments aren't guaranteed. Plastic will probably die (John Stumpf has even said as much), but I have a hard time imagining the current payment ecosystem changing much. At the end of the day, it's controlled by the banks. Maybe the interchange will go way down as fraud is reduced by non plastic.

What is Google Pay? Can you post a link to what you're referring to? Android Pay, Google Wallet, Google Wallet Card? Other than Google Wallet Card, what Google service circumvents the current payment system in any way?

Their willingness to write down to WACC doesn't bother me too much. (a) It's economically rational behavior, which actually doesn't seem super common. Of course if they write there for a long period, we clearly are overpaying by buying at current prices. They've repurchased shares not much below current multiples which tells me that's not their baseline playbook. (b) I haven't done the math, but it seems hard to think that subprime credit as a whole's cost of capital (diversified as it is) could fall so low as to produce that result. © Things are cyclical, so it wouldn't happen forever supposing it did at all, because (d) subprime credit is hard to underwrite, so it's not just a lowest cost of capital takes all game (and the weak links eventually go broke). The purchase loan % is worth watching in combination with collection forecast backtests they report. It sounds to me like they tested the pricing pretty systematically so I'm again not too worried given their track record. Maybe I've drank the kool-aid though. I'm honestly less confident about the addressable market question. It just strikes me as a huge market and they're not that big.