fareastwarriors

http://dealbook.nytimes.com/2013/03/07/feds-stress-tests-point-to-banks-improving-health/?ref=business Banks Pass Fed’s Tests; Critics Say It Was Easy

Lower your limit price or do a smaller all-or-nothing block...? And Just hang tight.

http://www.businessweek.com/articles/2013-03-07/federal-reserves-stress-testing-is-politics-not-math

.BREAKING NEWSFed Stress Tests Show 17 of 18 Banks Weathering Severe Recession Fed Stress Tests Show 17 of 18 Banks Weathering Severe Recession By Craig Torres & Joshua Zumbrun - Mar 7, 2013 1:30 PM PT ..Facebook Share LinkedIn Google +1 0 Comments Print QUEUEQ..The Federal Reserve said 17 of the 18 largest U.S. banks could withstand a deep recession and maintain capital above a regulatory minimum. Only Ally Financial Inc. (ALLY), the auto lender majority-owned by U.S. taxpayers, fell below a 5 percent Tier 1 common ratio, a regulatory minimum and measure of financial strength, according to data released today by the central bank in Washington. Morgan Stanley (MS) showed a minimum Tier 1 common ratio of 5.7 percent in the test, and Goldman Sachs Group Inc. (GS) showed a ratio of 5.8 percent. “The stress tests are a tool to gauge the resiliency of the financial sector,” Fed Governor Daniel Tarullo said in a statement. “Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty.” Since the 2008-2009 financial crisis, U.S. regulators have tried to minimize the odds of another taxpayer rescue, compelling U.S. banks to retain some earnings and reinforce their buffers against possible losses. With the economy in the fourth year of expansion, banks are benefitting from a housing market rebound, falling mortgage delinquencies and record-low short-term interest rates that boost earnings. Projected losses for the 18 banks under a scenario of deep recession and peak unemployment of 12.1 percent would total $462 billion over nine quarters, the Fed said. The aggregate Tier 1 common capital ratio would fall from an actual 11.1 percent in the third quarter of 2012 to 7.7 percent in the fourth quarter of 2014. The firms represent about 70 percent of the assets in the U.S. banking system. Not Forecasts The Fed said in a release that the “projections should not be interpreted as expected or likely outcomes for these firms, but rather as possible results under hypothetical, severely adverse conditions.” A Fed official said on a conference call with reporters that the severely adverse scenario represents a financial calamity of greater magnitude than any two-year period in the last 100 years except for the Great Depression. The biggest sources of losses are those “on the accrual loan portfolios and trading and counterparty losses from the global market shock,” the Fed said in its release. “Together, these two account for nearly 90 percent of the projected losses” for the 18 banks under the severely adverse scenario. “We are entering this year with a stronger capital base and we are further through the credit cycle,” so fewer loans are going bad, said R. Scott Siefers, a managing director at Sandler O’Neill & Partners in New York. “Even though banks are paying out more of their earnings than a couple of years ago, there has still been an increase in retained earnings,” which bolsters capital. Second Test The Fed on March 14 will release results of a second stress test that focuses on the lenders’ capital plans, assessing how dividend or share-buyback increases would affect them. The central bank that day will inform banks whether they can increase payouts. Today’s test results don’t forecast results for next week’s test, the Fed official said on the conference call, because the Dodd-Frank stress test doesn’t include forward-looking management decisions. The KBW Bank Index (KBX), which tracks shares of 24 large U.S. banks such as JPMorgan Chase & Co. (JPM), State Street Corp. (STT) and Capital One Financial Corp. (COF), has risen 9.7 percent this year, compared with the 8.3 percent gain of the Standard & Poor’s 500 Index. Capital Doubled The Fed said in November the largest banking groups had nearly doubled their Tier 1 common capital to $803 billion in the second quarter of last year from $420 billion in the first quarter of 2009. The Fed derived the results today by following stress test guidelines in the Dodd-Frank Act, with bank dividends held constant and share buybacks or issuance not considered. The test is aimed at providing a standardized comparison of how bank capital fares during a deep recession. “There needs to be much more market discipline over capital requirements,” said Hal Scott, a Harvard Law School professor and director of the Committee on Capital Markets Regulation, a research group of academics and industry leaders. “What the stress test disclosure does is give markets much more information than they have had about the possibility of banks dealing with situations on a comparative basis,” Scott said. Bloomberg LP Chief Executive Officer Daniel Doctoroff is a member of the committee. Severely Adverse The Fed’s March 14 Comprehensive Capital Analysis and Review will be a more detailed test that incorporates forward- looking capital decisions of bank managers and requires financial institutions to meet specific criteria to pass. Both tests apply the same so-called severely adverse scenario, which subjects the loan and securities portfolios of banks with the shocks of a recession and soaring unemployment. The Tier 1 common ratio measures a bank’s core equity, made up of common shares and retained earnings, divided by its total assets adjusted for risk using global banking guidelines. The ratio grew especially important during the financial crisis as investors applied extreme mark-downs on bank portfolios to see whether firms had enough core equity to absorb additional losses or the potential for balance sheet growth. Test Variables The Fed for the test gave banks 26 variables -- ranging from interest rates to stock and home-price indexes -- and showed how they would change through a baseline, adverse and severely adverse scenario. Under the most adverse scenario, U.S. gross domestic product doesn’t grow or contracts for six consecutive quarters. Unemployment peaks at 12.1 percent, and real disposable income falls for five consecutive quarters. Stock prices tumble 52 percent, and house prices fall 21 percent. This year’s CCAR for the first time provides banks with an early look at how they performed under the analysis, giving them a chance to revise their capital plans. If their capital can withstand those conditions without pushing ratios below regulatory levels, and if their analysis is rigorous enough, the Fed signs off. The Fed conducted its first stress test in 2009, aimed at restoring confidence in banks by showing worst-case losses. In 2011, the central bank adopted a new approach to the tests that focused on banks’ plans for capital. “The point is to bar capital distributions from under- capitalized or risk-prone bank holding companies, which happened a lot, with full Federal Reserve Board approval, even as the crisis was clearly revving up,” said Karen Shaw Petrou, co- founder of Federal Financial Analytics, a Washington firm that specializes in financial regulation analysis. The 19 largest banks in 2007 paid out more than $43 billion in dividends as housing prices continued their fall, and an additional $39 billion in 2008 as the crisis began to accelerate, Patrick Parkinson, the former head of the Fed Board’s supervision and regulation division said in 2011. He is now a managing director at Promontory Financial Group LLC. To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Joshua Zumbrun in Washington at jzumbrun@bloomberg.net.

2007 -- FFH gains 2008 -- FFH gains (a lot of them because I was levered in the calls the day of the short selling ban) 2009 -- FFH gains, WFC gains (some), and ORH gains (account went up 50% the day of the buyout offer -- thanks to Cardboard) 2010 -- FUR gains, C gains, not sure I remember what else 2011 -- lost 35% in RothIRA 2012 -- Up 300% from BAC (it doesn't show in the numbers given because it excludes January 2012 which was epic month) Probably this is what Buffet and Munger mean to be very patient and swing hard at ideas with high conviction. I doubt if they would have done this concentrated and this levered but who cares,Some times luck favours the brave! Thess are unbelivable results! that's amazing. congrats.

the average American is pretty naive and ignorant. but somehow we make it work...

BNSF Railway Co., one of the country's biggest consumers of diesel fuel, plans this year to test using natural gas to power its locomotives instead. If successful, the experiment could weaken oil's dominance as a transportation fuel and provide a new outlet for the glut of cheap natural gas in North America. The surplus, spurred by new technologies that unlock the fuel from underground rock formations, has sent natural-gas prices plummeting. That has prompted industries from electric utilities to tugboat operators to switch to gas. If freight rail joins the parade, it would usher in one of the most sweeping changes to the railroad industry in decades. "This could be a transformational event for our railroad," BNSF Chief Executive Matt Rose said of the plan, which hasn't been publicly announced. Shifting to natural gas would "rank right up there" with the industry's historic transition away from steam engines last century, he said. Freight railroads overwhelmingly are powered by diesel fuel refined from crude oil. BNSF, the largest railroad in the U.S., estimates it is the second-biggest user of diesel in the country, after the U.S. Navy. A potential shift to gas faces many hurdles, however, including getting approval from federal regulators on fuel-tank safety. Introducing gas also will require different fuel depots, special tanker cars to carry the fuel and training for depot workers. That won't come cheaply. Just retrofitting a diesel locomotive and adding the tanker car could add 50% to a locomotive's roughly $2 million price tag, though that increase would diminish as economies of scale take hold. Mr. Rose said his company nevertheless would quickly move to a "retrofit of existing road locomotives" if the pilot locomotives prove reliable. The pilot trains are expected to get rolling this fall in the hopes retrofitting could begin about a year later. BNSF, a subsidiary of Berkshire Hathaway Inc., BRKB +0.70% considered using gas-powered locomotives in the late 1980s, but shelved the plans when natural-gas prices rose. This time may well be different. A gallon of diesel fuel cost an average of $3.97 last year, according to federal statistics. The equivalent amount of energy in natural gas cost 48 cents at industrial prices. That gap doesn't accurately reflect the potential savings since the railroad will have to pay to cool natural gas into a dense, energy-packed liquid. BNSF also faces sizable upfront costs, which it declined to disclose, to retrofit even a portion of its roughly 6,900 existing locomotives. Still, experts believe that natural gas has the potential to be significantly less expensive than diesel for years to come. BNSF is working with manufacturers to develop a locomotive that can run on diesel and gas, which Mr. Rose said could lower fuel costs and help meet federal air-pollution standards that take effect in two years. The new locomotives, which use liquefied natural gas, are being developed by units of General Electric Co. GE +1.38% and Caterpillar Inc. CAT +0.51% Mr. Rose said preliminary tests indicated that LNG-powered trains could go farther before refueling than diesel trains and have comparable towing power. The BNSF move is the latest step by companies and industries to use more natural gas, a fuel that is efficient, domestically produced and cleaner than alternatives. There growing supply of natural gas in North America has made it significantly less expensive than crude oil for each unit of energy delivered. Electric utilities, which years ago essentially abandoned burning oil in favor of coal, have started shifting to gas-fired power plants. Chemical, steel and fertilizer makers are planning new facilities in the U.S. to take advantage of low gas prices. Companies and government agencies increasingly are looking at using gas to power fleet vehicles, such as garbage trucks. And gas is making inroads in marine vessels. Wärtsilä WRT1V.HE +1.24% Oyj last year signed contracts to send China the world's first tugboats operating on diesel-LNG engines. Last December the Finnish company was selected to provide a similar engine for a ferry across the St. Lawrence River in Quebec. Like municipal bus fleets, which have converted to engines running on compressed natural gas in Los Angeles and other U.S. cities, trains are easier to fuel than other modes of transportation because they repeatedly travel on fixed routes. That makes it less cumbersome to build enough fueling depots. Compressed natural gas is similar to LNG, but requires a different fuel tank and engine. Natural gas faces higher obstacles to penetrate the nation's biggest diesel-fuel market: long-distance trucks. They are by far the largest consumers of diesel in the U.S. and there has been considerable interest in converting them to run on natural gas. But truck routes can vary and finding enough refueling stations has been a problem. Royal Dutch Shell RDSB.LN +0.96% PLC on Monday said it was completing plans to produce liquefied natural gas in Louisiana and Ontario and supply it to as many as 200 truck stops in the U.S., adding to a small, but growing, network of natural-gas fueling stations. A Shell executive said he believed more LNG production facilities will be built in North America as demand grows Some experts say switching railroads to natural gas could take time. Canadian National Railway Co. CNR.T -1.33% in September retrofitted two locomotives to run on a mixture of 90% LNG and 10% diesel. A spokesman for the company, the largest railroad in Canada, said there would be "mechanical and fuel logistics challenges" with widespread conversion and that it was too early to determine if the pilot program was successful. The dual-fuel technology "is not a slam dunk," said Lorenzo Simonelli, the president of GE's transportation business. But "we are working with BNSF as well as other [large railroads] to provide them the pilots and then start working towards a full production of locomotives and retrofits." Change historically has come slowly to the railroad industry. But there are compelling reasons for railroads to ponder the switch, including new Environmental Protection Agency air-pollution standards for railroads that will likely require railroads to add expensive emissions-control equipment to new diesel locomotives in 2015. "The overriding incentive is the low price of the fuel," said Raj Sekar, manager of engines and emissions research at Argonne National Laboratory. He said it would likely take at least five years for gas-powered locomotives to be a significance presence on the rails. While railroads consume only 6% of diesel burned in the U.S., according to the federal government, some experts believe BNSF's decision to try using gas could have a large psychological impact on energy markets. "This is the kind of change that gets people thinking," said Kevin Book, an energy-industry consultant. "It will answer the question that everyone is wondering: Is there= a future for LNG transportation for freight hauling?" Berkshire's BNSF Railway to Test Switch to Natural Gas http://online.wsj.com/article/SB10001424127887324539404578342540494619344.html?mod=WSJ_hp_LEFTWhatsNewsCollection

must be nice

http://www.bloomberg.com/news/2013-03-04/weschler-to-leave-wsfs-board-as-duties-expand-with-berkshire.html Ted Weschler is stepping down from the board of WSFS Financial Corp. (WSFS) as he takes on a larger role helping Warren Buffett manage funds at Berkshire Hathaway Inc. (BRK/A) Weschler, 51, isn’t running for re-election at the bank’s 2013 annual meeting, according to a regulatory filing today from Wilmington, Delaware-based WSFS. Buffett has been expanding the amount of funds overseen by Weschler and Todd Combs, 42, former hedge fund managers who joined Omaha, Nebraska-based Berkshire in the past three years. Each will oversee about $6 billion by the end of this month, more twice as much as in May, Buffett, 82, told CNBC today. The investment managers “have proved to be smart, models of integrity, helpful to Berkshire in many ways beyond portfolio management,” Buffett said in a March 1 letter to shareholders. Weschler was a director of the bank from 1992 to 2007 and rejoined in 2009, according to a regulatory filing from the company. His hedge fund invested in the bank before he joined Buffett at Berkshire. Court records show Weschler was involved in Berkshire’s bid for a loan portfolio from bankrupt lender Residential Capital LLC last year. He also helped Buffett on a deal to buy most of Media General Inc.’s newspapers for about $140 million in June.

just search buffett and sort by video on the cnbc.com site. there are plenty of segments.

yup, Thanks!

waiting...

Investors Line Up for Buffett Clues http://www.cnbc.com/id/100509850

http://www.bloomberg.com/news/2013-03-01/druckenmiller-sees-storm-worse-than-08-as-seniors-bankrupt-kids.html video: http://www.bloomberg.com/video/entitlement-transfers-worry-stan-druckenmiller-Gs1SCdzaTBykyGWRiI4iGg.html

can't wait!

Gas Boom Projected to Grow for Decades . U.S. natural-gas production will accelerate over the next three decades, new research indicates, providing the strongest evidence yet that the energy boom remaking America will last for a generation. The most exhaustive study to date of a key natural-gas field in Texas, combined with related research under way elsewhere, shows that U.S. shale-rock formations will provide a growing source of moderately priced natural gas through 2040, and decline only slowly after that. A report on the Texas field, to be released Thursday, was reviewed by The Wall Street Journal. The research provides substantial evidence that there are large quantities of gas available that can be drilled profitably at a market price of $4 per million British thermal units, a relatively small increase from the current price of about $3.43. The study, funded by the nonpartisan Alfred P. Sloan Foundation and performed by the University of Texas, examined 15,000 wells drilled in the Barnett Shale formation in northern Texas, mostly over the past decade. It is among the first to study the geology and economics of shale drilling, a relatively recent development made possible by hydraulic fracturing, or fracking, in which a mixture of water, sand and chemicals is pumped at high pressure into rocks to release gas. Looking at data from actual wells rather than relying on estimates and extrapolations, the study broadly confirms conclusions by the energy industry and the U.S. government, which in December forecast rising gas production. "We are looking at multi, multi decades of growth," said Scott Tinker, director of the Bureau of Economic Geology at the university and a leader of the study. The shale-gas boom has led to a reorientation of the U.S. energy economy. This has led to a steep decline in coal consumption for electric generation and prompted companies to announce or consider multibillion-dollar investments to export gas and build chemical, steel and fertilizer plants that will consume enormous quantities of gas. If these investments go forward, but gas production were to slip, higher prices for the fuel—which now accounts for 30% of electricity production and heats half of U.S. homes—are likely. Art Berman, a petroleum geologist and consultant who has been a leading critic of what he says are overly optimistic projections of shale-gas production, said the research "is probably the most comprehensive study of the Barnett shale that will ever be done." But he said it bolsters his view that only a quarter of Barnett wells generate an economic return. The question for the industry, he said, is, "why didn't they identify the sweet spots initially, before spending $40 billion on land and wells?" The study does show that many of the wells drilled in the Barnett have been poor performers. And while the gas-bearing rock covers 8,000 square miles in and around Fort Worth, Texas, the study suggests it can be economically developed in an area only half that size. Some of the energy companies that spent enormous sums to lease thousands of acres in far-flung parts of the Barnett may be sitting on acreage of little value. Mr. Tinker agrees that the study shows the Barnett is highly variable, with some areas producing enough gas to make the wells profitable and other areas generating duds. Even so, the study concludes that 44 trillion cubic feet of natural gas will be recovered from the Barnett—more than three times what has been produced so far and about two years' worth of U.S. consumption at current rates. The university also is examining shale formations in Pennsylvania, Louisiana and Arkansas, work that has led investigators to conclude that U.S. natural gas production won't plateau until 2040. Reports on these formations are expected to be released next year. One reason there has been a dispute over projections of shale-gas production is that much of the research, even inside universities, has been funded by groups with either pro- or anti- energy-development agendas. Many of the latter have strong views about the environmental impact of fracking on the air and groundwater. The Sloan Foundation said it looked into whether the researchers who performed the new study were unduly influenced by outside ties and was satisfied that "potential conflicts of interest or sources of bias have not influenced the research." The co-lead investigator of the study, Mr. Tinker, is paid to serve on the technical advisory boards of BP BP.LN -0.31%PLC and two smaller energy companies. He also receives speaking fees a few times a year for appearances before industry groups and private companies. The Bureau of Economic Geology receives research funding from government, industry and the University of Texas. The other lead investigator, Svetlana Ikonnikova, didn't disclose any potential conflicts to the university. Scott Anderson, who researches shale development for the Environmental Defense Fund, which is working on lowering the environmental impact of gas drilling, reviewed some of the study's preliminary results. He praised the report as "robust" and "sophisticated." The U.S. energy industry welcomed the conclusion that a large number of successful gas wells remain to be drilled. The American Petroleum Institute, the lobbying arm of large U.S. oil and gas companies, said in a statement that the study "underscores the fact that the U.S. has substantial and growing natural gas resources that will be able to supply future domestic markets and provide exports as well." To get at all this gas will require tens of thousands of new wells, spread throughout rural and some urban parts of the country. Even in the Barnett formation, which has been drilled intensively for a decade, there still may be room for 13,000 more wells, said Mr. Tinker. He said that existing wells "aren't draining giant areas, but they are draining pretty efficiently from areas around them."This means that even in densely drilled areas, he said, "there is a reasonable amount of good quality drilling still to be done." The giant Marcellus Shale in Pennsylvania and neighboring states likely contains enough gas to support the drilling of tens of thousands more wells. This could heighten growing concerns about fracking, and calls for increased government oversight of the practice. "There are health risks that we don't have our arms around and that's a problem, " said Paul Gallay, president of Riverkeeper, a New York state environmental group critical of fracking. "We're out ahead of our science and we need to be concerned about that." http://professional.wsj.com/article/SB10001424127887323293704578330700203397128.html?mod=WSJPRO_hpp_LEFTTopStories

Do you believe security markets are efficient? Being a value investor, you likely do not. Then why would labor markets, with far more restrictions, behavioral biases, transaction costs, asymmetrical information, and minimal feedback mechanisms be efficient? I am biased in the other direction as I see people with little or no innate talent constantly get jobs based on solid resumes which further burnish their credentials. Employers want experienced candidates who can operate quickly with minimal oversight. Talent in my opinion is of little importance in getting a job, but it can help you excel there. You can call me disgruntled, but my opinion stands. I have had interviews with good investment firms and they are all like, "I like the way you think...but uh you don't really have much experience doing this". O well. I completely agree with you. It's nearly impossible to get into the industry without experience, the "right" background, and incredible connections. I understand your frustration. My post relates to deepValue's comments about analysts coming out of the investment banks due to layoffs. Most of the time, these employees are from the "right" school and have some experience so if they are really are actually good then they are more likely able to find a comparable job on the buyside...

There is an overabundance of "talent" in the hedge fund world. The supply of capable analysts is only going to get larger as ibanks continue to shed employees. The only way to get a job is through connections or luck. Then they are not really that "talented." Why? Lots of analysts are good (maybe good enough) but very few are actually great at what they do. I just think if they are as good as they think they are then they shouldn't have a problem finding a job. Companies are always looking for good people even in tough times. If the company can Trade up and probably pay a lower wage than before, why wouldn't the company do it? all my opinion of course. but i observed some of this happening at my company during the crisis. im at a large mutual fund company.

There is an overabundance of "talent" in the hedge fund world. The supply of capable analysts is only going to get larger as ibanks continue to shed employees. The only way to get a job is through connections or luck. Then they are not really that "talented."

Thoughts on XPO or Barry?

Gas Producers Accept Their Fate Natural-gas producers pray for a price rebound, but their god isn't listening. Last spring, near-month gas futures hit a 10-year low of less than $2 per million British thermal units. They are about $3.30 now, but that still isn't much help. As 2012 results have rolled in, companies have been cutting gas reserves that are no longer economic to drill. Companies such as EOG Resources and Penn Virginia saw gas reserves drop by more than a third. Some of those reserves will come back when prices rise. But Jon Wolff of ISI Group says another factor at play is companies simply taking some gas projects (and their associated reserves) out of their development line altogether. Another sign of E&P companies accepting that gas prices are low and staying that way is hedging activity. On Thursday, self-described "champion of natural gas" Chesapeake Energy said it had hedged half of its projected 2013 gas output at a price of $3.62. This time last year, it hadn't hedged any—and paid a heavy price as cash flow was crushed. Devon Energy, another big gas producer, has hedged 60% of its expected output at $3.87. This time last year, it had hedged only a third, at $4.73. Matt Portillo, a director at Tudor, Pickering, Holt & Co., sees a structural trend for E&P companies in terms of a "step down in the price they're willing to accept" for gas. This partly reflects lower costs from more-efficient drilling. But in trading some potential gains for the certainty of cash flow, it is also a tacit admission that gas prices look set to stay low for a while. E&P investors might gnash their teeth. But consumers, at least, will say "amen" to that.

Palantir, You might already know this place: http://www.biggerpockets.com/forums lots of RE folks of all strips post there.

a new memo is out. "High Yield Bonds Today" http://www.oaktreecapital.com/MemoTree/High%20Yield%20Bonds%20Today%20Revision%201.pdf

http://www.bloomberg.com/news/2013-02-21/buffett-track-record-boosts-brooks-with-sneakers-surging.html ... Brooks has doubled revenue in three years and is poised to exceed $500 million in sales this year. The sneaker maker also has scooped market share from Adidas’s Reebok brand and New Balance Athletic Shoe Inc. by targeting avid runners. ...

10% is not enough to cause me to do anything.