blainehodder
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Posts posted by blainehodder
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SD.
I guess a have a couple questions that I have since I don't know enough about the technology.
1. Why doesn't V/MA develop a similar technology they can exploit?
2. If a decline is imminent and coming soon why haven't V and MA seen this/thought of this yet?
They can see it but what can they do about it? Lets say Apple and JPMorgan partner to offer credit and payment through the phone... Visa would like to be in the transaction somehow, but what can they really do about it? They may offer similar services, but market share goes down, competition goes up, and margins go down.
Further, p2p margins go to zero. Whether Apple, Google, Paypal, JPM, or V/MA or some combination are the ones that do it, it is irrelevant. That cow is milked.
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What I meant is that to grant credit to consumers is not like developing video games. Whenerver you grant credit, you'd better make it your core business, or don't make it at all... The risks are much higher than putting together a bunch of smart app developers and producing video games.
Am I wrong?
Cheers,
Gio
I honestly don't know if you are right or wrong. Which is why I wouldn't buy the Visa shares at 30x PE.
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I am assidous buyer of both Amazon and Apple's products... And to do so I always use my credit card... Cannot say about Google...
Though I think I can see how Apple and Amazon might compete in the payment business, I don't think it will ever become their core business.
Cheers,
Gio
I think you may be missing my point. You probably have an iPhone or an Android phone. If Apple or Google (or Amazon through an application) waved a wand tomorrow and offered simple payment services, p2p pay, and even credit through the phone (at likely far cheaper rates), it would be more convenient, and save both merchants and consumers money. Need to transfer 20 bucks to someone in Turkghanostralia for close to free? No prob. Need to pay for a new computer or restaurant bill? No problem.
Since that is definitely possible, and is obviously profitable, can you imagined the armies of engineers at those companies not waving that wand?
I don't think the 'not a core' business argument applies. Apple and Google aren't core gaming companies, but oops, they wiped out Nintendo and swallowed the profits. They pursue massive growth using the excellent platforms they have created. People even like them! This is simply another avenue of growth leveraging off the same platforms. And I imagine people would love any excuse to switch to them for p2p, payments, and credit. I would.
As SD has pointed out, the foundation is being laid out for this. People under 50 will likely shift quickly. V/MA will become the AOL of payments:
-a complete rip off
-a terrible, broken experience compared with what is possible
-targeted at old people and slow adopters.
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Gio; a lot has happened - it just isn’t visible yet.
No different to rust on a car; by the time you see it, it has already occurred.
V/MC is just a payment system; one of many, all competing to allow person A to pay person B as cheaply and efficiently as possible. It is the plumbing that allows the payment to occurr. Cash, digital P2P (peer-to-peer), debit, crosses, Hawala, etc. are just different kinds of payment systems – unique plumbings, each with their own pro’s & con’s. The customer uses whatever best suits their purpose.
Business wise this is identical to multiple vendors offering the same commodity product – a process by which to pay. Lowest cost producer wins; scale up to minimize fixed cost per transaction.
Add a new & viable payment system (P2P), and everybody gives up some market share; the more mature the product is in its life-cyle - the more market share the product is likely to give up. V/MC is mature product.
Block chain technology is not a payment system, but it can be used as one (ie: Bitcoin). It is simply a robust digital token ID verification process, with a low cost audited transactional history of all transactions that the chain has been through. The chief cons are its slowness, and CPU processing requirements.
Used as crypto-currency - block chain technology allows anonymous, unlimited sized payments to be made; in zero trust environments, entirely outside of the global banking system. Hence the global AML/ATF interest in the technology.
P2P transactions are dirt cheap, so long as both parties are on the same network; if one of them isn’t – you have to touch the banking system; & pay. To avoid V/MC machine & processing fees, all a restaurant or bar owner need do is open an account on each of the major P2P networks, & advertise it on the door of their establishment.
The mystery is to what extent establishments will do it, & to what extent will their clientele use it. Usage is likely to differ widely across both generation & type of clientele. I advocate a more rapid than expected take-up by the young and disaffected; and by those in Asia.
At present; game theory argues working with versus against P2P rivals. Anyone's guess as to how long that will last.
SD
Thank you SD!
Just let me put it this other way: do you have a name?... I mean of course the name of a company that could disrupt V and MA business.
A technology is never enough imo. There must be the willingness and the ability to take away business from incumbents so much entrenched and mighty as V and MA are.
Which is that company?
Thank you,
Gio
I can think of 3 that are already on the path:
Amazon, Google, and Apple. I agree 100% with SD, and I think the rate of displacement will be shocking. 5-10 yrs from now, I imagine V/MA market share will collapse on transactions.
The real question in my mind is why wouldn't Amazon, Google, and Apple wipe them out and swallow up what has been a fabulous, scalable business? They already have the keys to your pocket and your mind. They have the capital to compete. Now it is just implementation.
The moat has proven extremely durable in the past but I believe ubiquitous smart phone use completely nullifies it. The phone allows easy access on the consumer side to replace the cards. As consumers shift, so will merchants, particularly if it saves the merchants money, which it will.
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On the Greenblatt course notes, he talks about how Linda Greenblatt focuses only on retial turnarounds and kills it. Worth a read, but I can't find a link to the notes anymore.
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I think you should take a look at the fees being paid to hold PSH and Third Point. Are you okay with the fees that the holding cos pay to the funds? I think you would be better off with an index than paying those kind of fees.
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Ok, that was a really fuckin' ugly way to end Tuesday trading.
What happens in China market tonight will be entertaining. they cut the rate as requested/demanded by the market. Now if it drops a further 10%, then are we going to see china do QE? Will fed have the balls to raise rates in a month? or will they fold and go for QE4?
We live in interesting times...
The reason this could get ugly is the Fed can not do a uturn immediately towards QE4. First they are going to come out and say something professional sounding like "Hey, you know about that rate raise, we were just kidding - again!". They may even think that will make a difference to the market, but at that point they may be bringing the equivalent of a knife to a gunfight. In which case, they will be caught off-guard by how little they actually helped the market.
Remember, these are my humble prognostications only...odds of them all turning out to be correct is very low.
Personally, I think they can absolutely do a u-turn. Running the Fed isn't a job for people who can't take criticism. If the Fed felt more QE would somehow help the economy get some legs, I see no reason why they shouldn't or wouldn't accept some criticism and make that choice. The problem is really that QE may not provide much for economic stimulus.
Along with not raising rates, Yellin should take a more vocal approach about Washington's failure to implement meaningful stimulus.
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Ok, that was a really fuckin' ugly way to end Tuesday trading.
What happens in China market tonight will be entertaining. they cut the rate as requested/demanded by the market. Now if it drops a further 10%, then are we going to see china do QE? Will fed have the balls to raise rates in a month? or will they fold and go for QE4?
We live in interesting times...
The question I have is why would the Fed raise rates? Having rates at some "normalized" level is not a goal. Raising rates is to slow down overheated inflation and economic growth. US inflation numbers are not even at the minimum target. What good could possibly come from boosting the USD and raising borrowing costs on businesses and consumers right now? At best the economy would cope with higher rates. More likely, higher rates would shrink growth and inflation further which would be directly blamed on the fed raise, whether or not that was the real cause.
Yellin knows this. I don't think near term rate hikes are even being contemplated seriously behind doors right now.
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History would suggest that getting creative is unnecessary, and that buying XOM has always worked.
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My money says that the vast majority of dividends first suffered the insult of taxation, and then were just reinvested in overvalued stock by the dividend recipient (in the name of "dollar cost averaging") at the inflated price.
Why do you assume that dividends will be reinvested into something? Investor could be buying booze...
True, but for Americans investing in taxable accounts, it makes more sense to sell equity into a buyback to optimize the amount of booze you can purchase no? No point in giving the government your beer money!
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Looks like a redcorner clone portfolio.
My critique would be to broaden your info sources. What do you like so much about each of redcorner's ideas other than his historical performance? What were you doing 6 months ago? What are you doing differently today?
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"if the New Neutral real FF (federal funds) rate is 0% instead of the Fed’s currently presumed 1¾%, then not only bonds but all financial assets might logically be repriced relative to historical experience. Even after accepting the historical validity and predictive capability of Robert Shiller’s CAPE (10-year cyclically adjusted P/E ratio), it may be necessary to make adjustments to it, if in fact real policy interest rates over the long term have settled into a lower New Neutral"
Profound... his "Big Idea" is basically what is taught in every intro to finance course for decades: Lower discount rates = higher valuations.
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@ blainehodder:interesting list, was this the result of a screener of some kind or just a portfolio snapshot? I own or have owned about ten names on this list and have studied another dozen. Probably because they all were featured on some popular value blogs. Might make sense to look at the rest too.
The pasted ticker list of community banks and netnets is from Nate (Oddball). The whole post above isn't a pure portfolio snapshot but I would be happy with the total list for sure. I would sleep well at night owning all of those, ETFs, netnets, megabanks and all... I do own a little of many. I want 15%+ returns though... not 40%+.
turnkeyanalyst has some cool screeers too. I quite like Greenblatt's magicformula idea as well! LO (pretty much milked now), PM, GPS, RGR, SWHC, BCOR (went on sale today!), EBIX looks set for a squeeze.
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Why is it a tough market? I just ran a screen for companies in France selling below 85% of book value with an ROE > 10%, there are 20. I can run the same screen around the world and probably come up with 30 good investment candidates, sure it's not 200 or 2000, but to those willing to turn over rocks I think there are great opportunities out there.
I just ran my screen, there are 682 companies worldwide that are selling for less than 75% of BV with ROE's above 15%. Maybe half of those results are junk, so 321 names that are potential purchases, it seems like there's a lot of opportunity...
Spot on.
Even in the US markets there are cheap behemoths and tiny companies alike.
BAC
JPM
C
AIG
GM
F
HPQ
NOC
TRV
...alll pretty cheap.
On the tiny side, I own companies like REPR that trade sub 15 P/E in spite of 40% annual growth, and 60% gross margins.
Nate blogs asset bargains every week. You could just go buy all of those and do pretty well.
Packer posted some pretty great ideas in the US telecom realm. ALSK and GNCMA are cruising along nicely. I own some of those.
Saj Karsan has a killer cannibals list site... ASBB repurchased 11% of shares last Q. Trades at 80% of BV. JCTCF is another 10%/yr cannibal that is basically a microcap magicformula type stock.
There was a thread here yesterday with a list of Japanese net-nets:
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/finding-japanese-net-nets/50/
You can buy the whole Russian ETF at a P/E of 6. Gazprom has a monopoly on gas and trades at a P/E of like 3 or something stupid. Pretty hard to go wrong on that with a couple year horizon.
Most of Europe trades dirt cheap. Buy the EWI, GREK, EIRL etc. ETFs, the banks, the telecoms... the zipper makers, whatever... pepole are giving these things away... I think you could buy GVAL and I bet you'd get double digit returns over 5-10 yrs.
Nate posted this huge list a while back. Tons of great stuff on here. I am sure he has sold some, but there are a pile of bargains:
ANCPA ANACOMP INC IND NEW CL A
GAV:CH CARLO GAVAZZI HOLDING AG CHF15.00 (BR) B
9476:JP CHUOKEIZAI-SHA INC NPV
CDU:PT CONDURIL-ENGENHARIA SA EUR5
7591:JP EXCEL CO LTD NPV
FAVS FIRST AVIATION SVCS INC CL A NEW
ALGEV:FR GEVELOT EUR35
GWOX GOODHEART WILLCOX INC
STAL:FR INSTALLUX SA EUR16
KRK:NZ KIRKALDIE & STAINS NPV
MA MASTERCARD INC CL A
ALNEX:FR NEXEYA EUR0.50
6149:JP ODAWARA ENGINEERING CO NPV
PREC:FR PRECIA NPV
RBRG RANDALL BEARINGS INC
REOP REO PLASTICS CORP
SVIN SCHEID VINEYARDS INC CL A
SHFK SCHUFF INTERNATIONAL INC
9932:JP SUGIMOTO & CO NPV
TTHG TITANIUM HLDGS GROUP INC
3331:JP ZAKKAYA BULLDOG CO LTD NPV
6947:JP ZUKEN INC NPV
BWLA BOWL AMER INC CL A
HNFSB HANOVER FOODS CORP CDT CL B
IVWIX IVA WORLDWIDE FUND CL I
MPAD MICROPAC INDUSTRIES INC
OPST OPT SCIENCES CORP COM
PDRX PD-RX PHARMACEUTICAL INC
RSKIA RISK GEORGE INDS INC CDT CL A
SODI SOLITRON DEVICES INC COM PAR $0.01
SSY SUNLINK HEALTH SYS INC
WEBK WELLESLEY BANCORP INC COM
WEIN WEST END IND BANCSHARES INC
FIRT FIRST BANCTRUST CORP NEW COM
FRMO FRMO CORP COM NEW
KOGL KOPP GLASS INC
SPCO STEPHAN CO (FL)
53994158 AVALON CORRECTIONAL SVCS INC COM TENDERED FROM CUSIP 0534361
CNRD CONRAD INDUSTRIES INC
FSBW FS BANCORP INC COM
NSBC NORTH ST BANCORP
SVCTF SENVEST CAPITAL INC COM NPV ISIN #CA81731L1094 SEDOL #279629
SFBC SOUND FINL BANCORP INC COM
UCBA UNITED CMNTY BANCORP IND COM
BOTJ BANK OF THE JAMES FINL GRP INC
CZWI CITIZENS COMMUNITY BANCORP INC
PBCP POLONIA BANCORP INC MD
WBB WESTBURY BANCORP INC
WVFC WVS FINANCIAL CORP
I don't know what will do the best, but I bet if you buy the whole pile of stuff above you would do very well... maybe not at Ericopoly pace, but I don't need to do that well!
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This somewhat obnoxiously ad filled site has some great charts on Canadian housing and income.
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Here's an easy lesson, right here on this thread. Pull up the charts since the date of the class for the three retailers Diana Greenblatt talked about in that link. (American Eagle, Abercrombie, Aeropostale.)
What is the lesson?
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Buffett couldn't have sold since it would have triggered a massive sell off. That's life when you become the market, but to say he just sat on the stock is a mistake.
If Buffet not selling KO at 35, 38, 41 back in the late 90's was NOT a mistake, then nothing is a mistake...He could have sold PART of his position, or maybe sold covered calls...
Buffet is pretty darn good, but I don't think he is infallible, he makes mistakes from time to time.
Pretty sure Buffett admitted that selling KO then was a mistake.
2004 letter:
"Clearly, Berkshire’s results would have been far better if I had caught this swing of the pendulum. That may seem easy to do when one looks through an always-clean, rear-view mirror. Unfortunately, however, it’s the windshield through which investors must peer, and that glass is invariably fogged. Our huge positions add to the difficulty of our nimbly dancing in and out of holdings as valuations swing.
Nevertheless, I can properly be criticized for merely clucking about nose-bleed valuations during the Bubble rather than acting on my views. Though I said at the time that certain of the stocks we held were priced ahead of themselves, I underestimated just how severe the overvaluation was. I talked when I should have walked."
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Buying BAC this morning. -5.3% seems crazy high for a revised cap ratio of 21 bps.
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JPM warrants.
JPM seems like a fantastic deal at these levels if Jamie Dimon is even close in his assumptions of return on TBPS. I guess the market doesn't believe him. I do.
-TBPS of 40.82 x 15% ROTCE = 6.12 EPS
-TBPS increased at 12%/yr since 05, no dip in crisis, no dip from settlements, no dip from Whale losses
-Maintained 15% ROTCE as capital requirements have increased.
-Pruning the loser businesses.
-Fastest growing deposits.
-Uptick of 6B if interests rates "normalize"
I hope they are executing on the buybacks right now in a big way.
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"While promoting stocks is legal -- Wall Street’s biggest banks send reports daily advising investors on what to buy, often in companies that are clients -- U.S. securities law prohibits market manipulation."
No follow up commentary.
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I agree,
It is hard to go wrong with the ETFs at these levels. I am also long Gazprom though. Valuation is just insane.
http://en.wikipedia.org/wiki/Russia_in_the_European_energy_sector#Natural_gas_deliveries
Management aside, that is a moat.
Tough to lose on this in my opinion.
VISA
in General Discussion
Posted
How?
Step 1) Apple Pay, Google Wallet, etc.: Partner with merchants to accept it, use Visa/MA to offer credit transactions. Credit supplied by banks to V/MA.
Step 2) Rapidly expand network and get people used to transacting with phone (Or other). Offer digital wallet (float) and/or partner with the large banks to offer direct debit transactions and cut out V/MA for debit. Merchants happy to cut down transaction fee - check. Customers happy with convenient new tech - check.
Step 3) Cut V/MA out of the credit transaction since they aren't adding any value anymore, and are just a highly paid middleman between the credit supplier and the transaction.
We are currently halfway through Step 2.
Why for Apple/Google?
User tie-in effect. Profit. 10 bps/transaction + float.
Why for banks? Eating at least some of the transaction fees that go to V/MA today.
Obivously a hand-wavy explanation but I think at least some variant of the above gets transactions done without the need for V/MA.