constructive

Actually, in my opinion an IPO can happen under the current terms. But it would have to be a new corporate platform, not the existing. Revising the preferred terms to be more generous to public shareholders is also possible. But in that case it wouldn't be an IPO event (they already have plenty of shares outstanding). The government can just sell off all their preferred and warrants. I don't think there is really that much political desire to accelerate the government's cash return (it's already coming in really fast), or to return Fannie and Freddie to private market viability (political opponents will try to tie this decision to banks and hedge funds).

http://www.scribd.com/doc/140147658/Gottfried-ValueInvestingCongress-050713 Guy Gottfried lays out a persuasive case for WPX, a low cost natural gas driller in the Piceance, Bakken and Marcellus.

I don't know... draw a straight line through that chart, and you actually get a "fair value" for the S&P 500 today around 1,000. (Assuming that you're modeling fair value by assuming a constant growth rate over the past ~140 years.) See attached. True, but this is acceleration is explained by the fact that the dividend payout ratio has declined and buyback yield has increased. Companies are reinvesting more these days instead of paying out dividends as in past decades. http://www.prospercuity.com/images/PayoutRatio.png http://investorplace.com/wp-content/uploads/2012/12/buybacks.jpg

http://fhfaoig.gov/Content/Files/WPR-2013-002_2.pdf - Page 8 "Thus, Treasury has liquidation preferences ahead of other stockholders to receive $189.5 billion if the Enterprises are liquidated." So if they raised "only" $182B in an IPO, other equity holders would receive $0. If they raised $250B in an IPO, the government preferred would receive $190B, then the junior preferred would receive $33B, then the government common shares would receive $21.6B and the other commons shares $5.4B. I'm not saying it's impossible, but it's impossible in the way described by Barron's. And pulling off the biggest IPO in history at a decent valuation is incredibly unlikely.

And converting to common and selling those into the IPO is just impossible and doesn't make any sense. I don't understand. Please explain, thanks. One, if the government sold common shares into an IPO they would be jumping the preferred in the capital structure. And two, they would be jumping the other common shares in the same share class (which wouldn't get the chance to sell into an IPO and would be worth much less).

This is wrong. The preferred aren't convertible to common, they have warrants for common in addition to the preferred. And converting to common and selling those into the IPO is just impossible and doesn't make any sense. It's quite possible that they will IPO new corporate platforms. But the proceeds would go to the company (and then the Treasury), not the public shareholders.

I was disappointed, by Chanos' remarks because he did not provide meat. I almost have a feeling he was just winding up DE, who owns(ed) both. The following gives a good sense of what it was about. The meat is in the comments below the short blurp http://seekingalpha.com/currents/post/1014321 I'm usually disappointed by Chanos. From what I've read, neither his returns nor his analysis matches up against Einhorn's.

http://finance.yahoo.com/news/wd-sandisk-team-create-innovative-130000609.html WD® And SanDisk Team Up To Create Innovative Solid State Hybrid Drives SanDisk Brings Fast Flash Memory Technology to the World's Thinnest 2.5-inch Solid State Hybrid Drives from WD Seagate's hybrid drives are fairly popular and seems to offer good value for money. http://www.amazon.com/gp/bestsellers/electronics/1254762011/ref=pd_zg_hrsr_e_1_4_last At only 5mm thick, this product can not only take market share in higher end laptops, but also possibly in tablets.

Demutualized banks are common targets, although that is such conventional wisdom now that it's probably not very useful.

So what banks are positioned for rolling up small banks? SNV comes to mind. And what banks are positioned for being rolled up? For best results, there should be a fairly significant valuation gap between the acquirer and the targets - that way acquisitions create market value through instant rerating.

And also, you have to make more reinvestment decisions with income generating assets (even if it's just reinvesting dividends in the same security). Limiting the number of investment decisions seems better to me.

From a tax perspective, having control of when you take gains (either for liquidity or investment reasons) is a lot more efficient than being forced to take gains regularly. Probably over 90% of income investors don't understand the significance of this issue.

I read that Johnson actually had negative pay from working at JCP. If I remember correctly, when he joined he paid a large amount of cash for warrants, which ended up expiring worthless.

http://www.amazon.com/The-Essays-Warren-Buffett-Corporate/dp/0966446127/ref=sr_1_8?ie=UTF8&qid=1367340658&sr=8-8&keywords=warren+buffett My favorite investment book. More convenient than reading every annual essay (although that's good too) - it organizes his thoughts over the years and minimizes repetition.

I've read just enough history to realize that our morals sucked pretty bad, pre-capitalism.

Thanks racemize. Check out page 110 - horrifying! Could we be starting another 25 year underwriting loss streak?

I don't understand. If you only hold it for a few days it wouldn't be a qualified dividend. So you wouldn't get any improvement in tax rate. Is that incorrect?

Interesting, thanks king888. Following up on my comment about ROE and valuation, here's a range of what SYA might look like 4 years from now (currently earning 6% ROE and trading at 0.45x book). ROE P/B Annualized Return Conservative 6% 0.6 13.9% Base 8% 0.8 23.6% Aggressive 10% 1.0 31.9% And GNW, currently earning 2% ROE and trading at 0.3x book. ROE P/B Annualized Return Conservative 4% 0.4 10.7% Base 6% 0.6 23.7% Aggressive 8% 0.8 34.2% At these prices they don't have to have great results to be great trades.

Clearly that depends on the prospective ROE. http://media.ycharts.com/charts/9838d563ec1d82b62a2523a027948862.png http://media.ycharts.com/charts/2e0e408a358bd5bd9dd32c81cba00f07.png

I agree that many life insurance products are highly commoditized. But many P&C products are too. Look at GEICO - one of the best insurers on the planet despite offering commodity products. Their moat is marketing, underwriting, customer service and technology. Variable annuities are doing fine: http://eba.benefitnews.com/news/prudential-touts-profitability-of-variable-annuity-business-bloomberg-2731410-1.html Rumors of the life insurance industry's demise are much exaggerated. I think it's a major opportunity since the average US life insurer trades around 0.6x tangible book value.

No different from P&C insurers, policy holders have the most senior claims. Some types of life products are subject to redemption, but some aren't. Not true. http://www.brkdirect.com/ Berkshire Hathaway Life Insurance Company of Nebraska and First Berkshire Hathaway Life Insurance Company http://www.reuters.com/article/2012/11/30/us-caixbank-berkshire-idUSBRE8AT0S220121130 http://articles.marketwatch.com/2007-12-28/news/30782590_1_bond-insurer-triple-a-credit-ratings-ing-shares General Re "U.S.-based Berkshire Hathaway maintains an active business reinsuring life and health risks internationally through its subsidiary General Re, which accounts for about 15 percent of the conglomerate's total insurance premiums." http://investors.symetra.com/phoenix.zhtml?c=213723&p=irol-faq#41246 Symetra Financial "Berkshire Hathaway controlled entities continue to hold the original investment of 17,400,000 shares of Symetra common stock and warrants exercisable for the purchase of an additional 9,487,872 shares."

Analysis of the 2012 Amendments to the Senior Preferred Stock Purchase Agreements http://fhfaoig.gov/Content/Files/WPR-2013-002_2.pdf Key discussion In the end, in 2012, Treasury settled on the “positive net worth” model, in which Treasury would simply take, as dividends, the entire positive net worth of each Enterprise each quarter. Treasury is phasing in this change by establishing a net worth “buffer” such that net worth above the level of the buffer will be paid to Treasury. The buffer was set at $3 billion for each Enterprise initially, to be incrementally reduced to zero over five years. ... The PSPAs also prohibited the Enterprises, without the consent of Treasury, from making any changes to their capital structures, issuing capital stock, increasing their debt significantly, paying any dividends (other than those to Treasury), engaging in certain transactions with affiliates, or disposing of any assets unless they are for “fair market value” in “the ordinary course of business.” ... Thus, Treasury has liquidation preferences ahead of other stockholders to receive $189.5 billion if the Enterprises are liquidated. This liquidation preference does not decrease by the amount of dividends paid. ... Absent express consent from Treasury and FHFA, an Enterprise cannot redeem the senior preferred stock until the termination of Treasury’s funding commitment. Treasury’s funding commitment to an Enterprise will terminate if: (i) the Enterprise’s assets are completely liquidated; (ii) the Enterprise pays its liabilities and obligations (including MBS) in full; or (iii) the Enterprise reaches the funding cap. ... The PSPAs originally required that each Enterprise reduce its mortgage assets by 10% per year down to $250 billion. The 2012 Amendments accelerate the reduction to 15% per year. ... The 2012 Amendments make it impossible for the Enterprises to build up any capital because their net worths, except for the temporary buffer amount, will be zero after they make each quarterly dividend payment to Treasury. Treasury’s press release announcing the amendments stated that with this change, the Enterprises “will not be allowed to retain profits, rebuild capital, and return to the market in their prior form.”

As part of the backdrop to issuing the Strategic Plan, there seems to be broad consensus that Fannie Mae and Freddie Mac will not return to their previous corporate forms. The Administration has made clear that their preferred course of action is to wind down the Enterprises. Of the various legislative proposals that have been introduced in Congress, none of them envision the Enterprises exiting conservatorship in their current corporate form. In addition, the recent changes to the PSPAs, replacing the 10 percent dividend with a net income sweep, reinforces that the Enterprises will not be building capital as a potential step to regaining their former corporate status.

FHFA’s Conservatorship Priorities for 2013 http://www.fhfa.gov/webfiles/25024/EJDNABESpeech.pdf

After 16 pages, has anyone pointed out that this is not likely to pass the House and not really worth worrying about?