constructive
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Posts posted by constructive
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I'm not an expert but Google tells me it's probably MEI Pharma (MEIP).
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this one is relatively straight forward with this type of problems. I just spent an evening and more to solve a similar but much more complicated problem:
2 numbers a and b, a >=b, both integers between 2 and 99. Mr. P knows the sum S=a+b, and Mr. Q knows the product M=a*b. Here is the conversation:
Q: I don't know what are a and b.
P: I know you don't know, and I don't know either.
Q: I know now.
P: I also know now.
What are a and b?
Does this statement mean P knows that Q doesn't know based on what Q has just said, or independently? If he knows because Q said it 2 seconds ago that is kind of a useless comment.
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Here is my armchair analysis of some famous investors.
INTJ: Buffett, Einhorn
ISTJ: Munger, Klarman
ISTP: Graham, Marks
INTP: Soros
ENTJ: Loeb, Icahn
ENFJ: Ackman
ENTP: Tepper
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I'm ISTJ but right on the edge of INTJ.
I wonder if there is any correlation between INTJ/growth and ISTJ/value. To me "intuitive" implies more growth orientation. Of course since this forum is generally value oriented it may not provide a broad enough data set.
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What are the differences between this and a margin loan?
Well... a margin loan is callable. So if your investments decline significantly and you can't meet the margin call then you'll be force to sell your securities. This loan is too. But there's a duration on when it's callable. So it's more predictable, and the interest rate is tied to Libor. I think my brokerage is asking like 8-10% interest on a margin account.
I'm not expert on this. That's what I got from the short 10 minute speech.
I wouldn't compare it to the margin rate at a typical retail broker. Using margin at any retail brokerage except for Interactive Brokers is clearly a terrible idea.
For low balances, IB margin is about 1.62% while Schwab PAL is about 3.67% (varying based on the benchmark and the amount). Margin is cheaper because they have easier access to your collateral to protect the value of their loan.
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I think fundooprofessor is missing the point. He shows evidence of companies that Buffett bought because they had great management despite not being in a great industry. But he has also bought many other companies in great industries that could survive lower quality management.
Compare US Air, USG, McLane (bad industry, so the investment depended on good management) to AXP, ABC/Capital Cities/DIS, Gillette/PG (good industry, could have survived bad management). The returns on the latter group have probably been higher.
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I am more comfortable on the investment side than the operating business / large acquisition side. Ted and Todd have exhibited very good decision making so far, and that is reflected in their performance being stronger than Buffett's since they joined. One of their advantages is that they don't have the $200B CEO mentality. So far they are targeting much smaller midcap companies than Buffett. I think in his 80s he has constrained himself to ultra large companies a little more than necessary.
Not knowing who will be the CEO, what their investment background is, and what the decision making split will be on large wholly owned acquisitions in terms of the CEO vs the CIOs, that is where I see more risk.
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Stock picking and the choice of a proper discount rate for a particular stream of cash flows go hand in hand. You can't pick stocks without first picking a discount rate.
Sure. But assuming your investment analysis is accurate, the optimal investments at an 11% discount rate are the same as the optimal investments at an 8% discount rate. You have more options to choose from at an 8% discount rate, but they are suboptimal.
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Choosing a discount rate to use in a valuation is one of the most difficult things I've encountered so far in value investing.
I find this statement pretty funny. I don't think anyone is enough of a genius at stock selection that choosing a discount rate is at all difficult compared to that.
Pick a random number between 8 and 15%. It is not going to have that big an effect on your returns, as long as you are willing to put in a lot of work to find investments that exceed your hurdle rate.
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You do something out of the ordinary and it works out you get a pat on the back and an attaboy.
Actually, if you read the story of Mike Burry, you make hugely outsized returns for your investors and they still fire you. IIRC, most of his clients complained hugely when they got locked out during 2007-09 crash and left immediately when he removed the lock even though the results were extraordinary.
In their defense, they hired him thinking he was going to run a long-short value fund and he style drifted into global macro credit. Just because CDS and sidecars were in the fund prospectus doesn't mean partners actually expected them to be used.
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And talking about Berkshire, or any specific large cap equity, if an advisor suggested someone invest 100% in it, it is questionable that would meet either the suitability standard or the fiduciary standard, but if they invested 10% there would be no problem with either standard.
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It sounds like a nice thought, but the proposal is totally vague and unenforceable. How do you measure what's in the best interest of the client?
Well it's currently vague because the laws and regulations are not written yet, but I disagree that the end result will be vague and unenforceable. 401K sponsors already have to adhere to a fiduciary standard. Most fee-based advisors voluntarily adhere to a fiduciary standard. The fiduciary standard actually gives them a lot clearer legal line, specifically on conflicts of interest, than non-fiduciary advisors have.
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About 500 in an Excel spreadsheet. They are organized by industry, and within that ranked by value. I would like to find a better web based tool. Looking forward to other people's comments.
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If the budget estimate is accurate, by my math the government will make about 17% annualized on the senior preferred. (Although, maybe $0 on the 80% of common warrants they own.) That is higher than I had assumed.
It may or may not be a valid legal argument, but you can make a financial argument against the 2012 Amendment for increasing the senior preferred return from 10% to ~17% without a valid reason.
At the same time, the estimate is probably less than what a lot of bulls would hope for (since they assume 15% reduction in assets per year).
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From the 2008 Agreement:
"3.3. Increases of Senior Preferred Stock Liquidation Preference as a Result of Funding under
the Commitment. The aggregate liquidation preference of the outstanding shares of Senior
Preferred Stock shall be automatically increased by an amount equal to the amount of each draw
on the Commitment pursuant to Article 2 that is funded by Purchaser to Seller, such increase to
occur simultaneously with such funding and ratably with respect to each share of Senior Preferred
Stock. "
Fannie drew $117B (table 1 pg 2):
http://www.fhfa.gov/DataTools/Downloads/Documents/Market-Data/TSYSupport10012014.pdf
with $130B paid back to Treasury (table 2 page 3)
Does the liquidation preference decline byt he amount of the dividends paid back to Treasury or does the Liq Pref remain on the amount drawn of $117B and not decline?
Clearly a material item that I don't have a clear answer to...
No, the liquidation preference does not decline as a result of the net worth sweep dividend. You can confirm that by reading FNMA and FMCC financial statements, or by reading FHFA's reports.
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Pull up charts of FEYE, ZU, P, N, WDAY, YELP
This is just cherrypicking. There are a lot more than 6 stocks in the social media / cloud / SaaS space, the average decline last year was minimal, and the average valuation continues to be extremely high.
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I talked to a VC about a year ago about selling a tech company. He said that valuations had fallen through the floor and I could only expect 10x sales compared to 20-30x sales a year earlier.
To stodgy old value investors 10x sales is probably considered high. But when valuations fall 60% or more I'd say that's significant.
IPO valuations may or may not have fallen 60%. Public market valuations definitely did not fall 60% and are at the highest levels ever, second only to the tech bubble.
Most likely the VC just saw a patch of weaker quality IPOs that didn't deserve ultrahigh valuations.
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This is the S. European game of chicken. S. Marchionne has done this to a tee at Fiat and the Greeks are doing it to the troika.
Packer
If Watsa's thesis depends on hard-left Greek politicians being extremely adept at financial negotiations like Marchionne, I am afraid that seems hopeless.
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Looks like they know what they're doing...
TORONTO — Fairfax Financial Holdings, which bet on the success of a Greek turnaround last year, on Monday reiterated confidence in the country’s prospects and those of one of its largest lenders Eurobank.
“I’m very confident that this current Greek government will successfully negotiate a deal with the troika,” said Watsa, a well known contrarian investor.
“We feel certain that by moving forward with the reform program and by remaining in the Eurozone, Greece will very soon achieve significant economic growth that will in turn drive new investment,” said Watsa, adding that Fairfax would be open to the idea of investing further in Greece once the reform program gets going and the conditions allow for it.
Why do you say that? You like his confidence, or you think what he's saying makes sense? Because I don't think it does. Greece is refusing to negotiate with the troika.
http://www.reuters.com/article/2015/01/31/us-greece-politics-idUSKBN0L31TB20150131
Varoufakis said Greece had no intention of cooperating with a mission from the lending "troika" of the European Union, European Central Bank and International Monetary Fund, which had been due to return to Athens. He said Greece would not seek an extension to a Feb. 28 deadline with euro zone lenders.There is not much time. If they don't find a lender by this summer, they will default.
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Also it seems silly to compare results with dividends reinvested.
I think it would be silly not to. Would you calculate bond returns without including the yield?
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it seems to me ROE and ROIC will be better in emerging economies? There is less competition, demand outstrips supply more, less regulation and often the tax situation is better. And all those companies in their early stages have less bureacracy. Finally when looking at some of those emerging market companies, they often do business in other asian countries as well. And if there is only a small difference in ROE or ROIC, but your paying less then half, it takes a long time to catch up for the higher return company.
Historically emerging economies have had lower ROE than developed economies. That is why there has been a slight negative correlation between GDP growth and stock market returns.
Also you suggest that they have a tax advantage but tax rate is included in ROE.
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Also note that some of this return is due to multiple expansion (id say about 0.5-1%). And buybacks would jack up return without dividends reinvested as well.
I guess I should take into account though that if real GDP grows like 1%, you still get a several % boost by reinvesting earnings.
Yep, and looking at countries over time, those per share effects overwhelm GDP, and make GDP growth uncorrelated with stock market returns.
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To break it down, ~4% of GDP growth came from debt growth, 1% productivity growth, and about 1.5% from population growth. This is nominal GDP growth, and an index roughly tracks nominal growth?
This is just common sense thinking, but I think market growth looks like the following:
GDP growth + inflation + productivity gains = market return
The market cannot grow faster than those things.
You cannot expect to forever realize a 12% annual increase - much less 22% - in the valuation of American business if its profitability is growing only at 5%. The inescapable fact is that the value of an asset, whatever its character, cannot over the long term grow faster than its earnings do.Inker's paper clearly explains why these comments are wrong.
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Ben Inker's paper covers the (non)relationship between GDP and market returns very clearly. http://www.thereformedbroker.com/wp-content/uploads/2012/08/Explaining_Equity_Returns_GMO.pdf
I would also recommend Philosophical Economics.
What are you buying today?
in General Discussion
Posted
Why do you like Zynga?
It seems like they're a one hit wonder and don't have a competitive advantage or a clear strategy. R&D costs are enormous, and seem very ineffective so far.