John Hjorth
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Posts posted by John Hjorth
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To me, it's a wonderful write-up on the four large US banks, Joel,
Thank you very much for sharing that, too!
Somehow this essay is materially different to you former essays, so far. It is not as theoretical as your former essays, more practical oriented, and in a very compressed form [to me, not too compressed though] stating your stance on these banks. Like you, I also like the proposition the market is giving us right now on these investments, considering the risks involved.
To me, we get paid pretty dearly right now for assuming the risks involved.
To me personally, the most important thing, that you are mentioning in the essay is actually to try to understand the strengths right now of these four banks, where they are right now individually. Their true earnings power has been burried & disguised for so many years in all kinds of legacy issues, regulation and I don't even know what. I had to reread Mr. Dimons 2017 Shareholder Letter today to refresh it. It's well described there.
Looked at as a whole, they now posses an earnings power and thereto related abibilty to generate cash to the shareholders hovering almost in the USD 100 B area. That's actually a lot, compared to their market capitalization. Reported pre tax earnings [also before preferred dividends and minority interests] for 2017 are USD 115.147 B for them as a whole.
To phrase it another way: They now almost generate as much cash in one year that Berkshire holds on its balance sheet right now.
And then I start thinking about all the institutional capital there is allocated to these banks, after which I start to think about what those people managing this capital may actually be thinking right now about these banks, and then I get really confused!
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I'm copying and quoting Spekulatius from the BAC topic here, because it's absolutely worth it, to me. I coulden't in any way phrase it better myself, with regard to the nuances in investing in European banks:
I think one must distinguish between the impact of the Great Recession and reforms on banks vs individuals. It is now clear that the ECB didn’t get the banking system reformed correctly, causing a dwelling crisis. Depending on location and country, the impact was quite felt different.
In Germany, the global financial crisis was felt as a swift decline followed by a quick recovery. As early as 2009, the Recession was over, wealth effect was negligible, because most Germans don’t own stock and real estate didn’t go down much at all. That is why so many Germans have difficulty to understand why other have a problem. There is very little symphaty for people, institutions or countries who borrow and then get into problems. Whether than is a correct viewpoint is an entirely different matter. It also doesn’t matter to the average German , if Deutsche Bank goes to the crapper - deposits are insured and the banking systems backbone Sparkassen and Volksbanken (owned by local government or mutual organization).
This is very different from individuals who love in Ireland, Spain, Italy or worst of all Greece, who live now through a decade of economic stagnation (Spain is actually recovering nicely). I feel the ECB with their politic keeps the banking System afloat, but also keeps it from mending itself, which makes it a difficult sector to invest in. I do think that a selloff because of Italy will probably be a buying opportunity (except for Italian banks), since I think foreign banks have abstained from buying Italian treasuries after the first crisis a couple of years ago. So, maybe there is an opportunity to Maske a nice trade in the near term future.
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The Investor,
[Me whispering here]: If this does not satisfy your hunger, please look up Austin Value Capital on Twitter. I guarantee, that you'll leave the buffet with a full stomach! [ ; - D ]
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It's a good read, I recommend it too.
+1
I liked the part about the irony of 40,000 contrarians at Berkshire AGM :D
karthikpm,
Being contrarian + independently thinking + having a God [creating urge to go to OMekka each year to hear the God] = Berkaholism. [ ; - ) ] Mr. Housel's tweets are in general very good, too, containing lots of one liners and good humor.
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Link.
To me, a fairly quick [25 pages] read & piece. I like Mr. Housel's writing style and thinking. I have never read anything by him before. [pdf-file available for download on the page.]
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At least partly related to this topic:
Financial Times : UniCredit seeks merger with SocGen.
Personally, I have never looked at any of those two banks. Just posting it to share. It's actually the first time I have read that material bank consolidation cross border in Europe has been under consideration recently. Barclays - ref. the content of this topic so far - is also mentioned in the article.
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Somehow, the discussion in the BAC topic recently made me google "Bank Investing 101" today. I came up with this: The Motley Fool: John A. Howard [February 23rd 2007: Bank Investing 101 - Tips for the novice bank investor.
I admit, that the section headline in the article a bit down : "Earnings growth: your "get out of jail free" card" caught my attention.
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Then, a bit later today, I found a much more efficient explanation, that will explain it all - only by the use of a fraction of your time: The gif in this tweet.
In short:
1. You buy,
2. You find out, that you've got it [perhaps totally] wrong [i sure hope not],
3. Then you start sliding, like on black ice, desperately fighting to keep your legs beneath you,
4. Finally, and eventually, your legs disappear beneath you, and you end up sitting on your genitales. The sliding just continues downhill, and the only thing you end up thinking about is how rough is the terrain your're entering on your downhill slide.
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gifs don't contain sound, but just think of it like "Ouch - ouch - ouch!".
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The face expression of this poor dog in the end of the gif is like mine just after the surprise directed capital raise in SAN in the autumn 2014, diluting a lot of investors, who did not get the opportunity to participate.
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Thanks gents!,
At some - by now - unspecified time in future, I hope to understand your posts!
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I ordered this book today. As always, I'm looking forward to the read, based on comments here on CoBF. [scott mentioned it recently to me in a book discussion topic.] Pure FOGDOUB. [<- Fear Of Going Down On Unread Books!]
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I ordered this book today. [On saxo.com.] As always, based on comments about books here on CoBF, I'm looking forward to the read.
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Based on these comments from Vinod and Jurgis in the topic about the book "Value Averaging" [topic: here]:
I think reading "The Four Pillars of Investing" which is mostly about Indexing would be a lot more helpful.
Partially OT: I just looked at Kindle excerpt of "The Four Pillars of Investing". The author in chapter 1 makes the same point about survival bias and hindsight bias that I made about Buffett's claim this year that it was "obvious" to everyone that US will win the WWII and therefore investing in US markets in 1942 was a gimme. Author has some good examples. 8) Even if one thinks that this lesson does not apply to US now, it might be a good one to keep in mind when proclaiming bright future for countries X, Y, Z and terrible future for countries W, T, U. These are not as knowable as they seem in hindsight.
I [also] received this book from saxo.com today. I'll elaborate later in this topic about the book, when it's a in progress read for me.
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I received the book from saxo.com today this morning.
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It's just not time for concentrated reading now during day hours. I'm using time on my roses and dividing hostas. May 2018 has set record ever here in Denmark [since measurements started] with regard to hours with sunshine!
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WSJ [May 31st 2018]: Google Emerges as Early Winner From Europe's New Data Privacy Law.
You can read the full article by accessing it via this tweet.
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A German gets pulled over by the police in France.
Police officer: “Name?”
German: “Gunther Heinrichs.”
Police officer: “Age?”
German: “35.”
Police officer: “Occupation?”
German: “No, no, just visiting.”
You cracked me up, writser! [Please remember, I'm a Dane. [i'm actually concieved in Germany.]]
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Here is a tweet by Andreas Steno Larsen of today. He's a senior global FX/FI strategist at Nordea Markets. Today he has obviously developed a pet theory based on technical analysis, that there is an important support-level just south of Naples.
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... Long Tequila, insurance and steel pipes.
*thumb up* [ ; - ) ]
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Berkshire and Eurobank today. Liberty Global last week. Love BRK at $470 Billion. 10% of that is Apple alone
I agree. Awesome price offered [around 190, or a bit below] for this company by the market on an eventful day. Intrinsic value in the area of 250, or above.
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Thank you for sharing your thoughts on this particular topic, Scott! I'll order "You Can Be A Stock Market Genius". [i've never read it - nothing is ever too late.]
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Personally, I think I'm in serious need of some serious trash talking from fellow board members about Mr. Klarman's book - on twitter, etc. - basically everywhere - the more Biglari, Sears & Valeant-style here on CoBF - the better!, writser! [in short, I'm just such a cheap-skate!]
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Back to topic.
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Thanks, KJP,
*Sigh*
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DR: Theme : Money laundering in Danske Bank.
Please feel free to read - all over.
What do you read?:
Is recent management at risk?
What do you think will happen going forward?
I read some German articles about the case. Looks like a systemic breakdown of anti money laundry systems caused by a management that seem to discourage to destination bad news upstream.
Given this, I am surprised that thet the shares have held up as well as they do, If they had business in the US, they would be in massive trouble and look at hundred millions and probably billion $ in fines. I think the ECB does not wield these huge fines, but there still are going to be consequence. The danish regulators can’t let this slide either, even if they wanted to, because the world and the danish populace is watching apparently.
That's to me an accurate analysis, Spekulatius. I think the most important thing is that this is actually now contained, in the menaing those particular activities are long time ago shut totally down. A fair assessment of the whole story boils down to what ShaperDingaan has told us many times here on CoBF: Bankers are a weird combination of hethens and prostitutes.
Personally, I think the competence to fine Danske Bank is at the Danish regulators [called Finanstilsynet], not ECB, however, I'm not sure of that. The fines for non-compliance are ridiculous here, compared to what has been going on in the US.
An enormous dent in the reputation of the bank, and I'm quite sure, that Finanstilsynet really feels the public pressure here, too.
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I'm not trying to derail the topic here, there is just one more thing that comes to mind here:
Nordea is now in exact the same situation. It blew up in the face of Nordea CEO Casper von Koskull Wednesday or Thursday evening last week on DR. The bank has delivered about DKK 1 B to approx. 10 [i think it actually was 11 or 13] forex shops in Copenhagen in EUR 500 notes, where people has delivered DKK notes in exchange for those EUR notes. The forex shops are all located nearby Pusherstreet in the alternative society called Christiania in Copenhagen, from where a major part of pot in Denmark is traded and distributed. A few of those forex shop owners are already behind bars for non-compliance with AML-regulations.
- "Risk free" forex trading commisions!! [ ; - ) ]
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KJP, and other fellow board members,
How does one get a legal specimen of Margin of Safety up under ones nails? I have been looking at Ebay for years now.
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DR: Theme : Money laundering in Danske Bank.
Please feel free to read - all over.
What do you read?:
Is recent management at risk?
What do you think will happen going forward?
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I'm sorry for double posting here,
To get to the point, Spekulatius, you should move this topic to the General Discussion forum, and we could then take it from there.
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Spekulatius,
I just noted, that this topic is developing in the investment ideas forum. To me, it's just not the right place, as I see things. We already have topics in the investment ideas forum for Lloyds and Barclays, to discuss these investments, separately. At least to me, they are both worth time and effort to study and to discuss from an investment perspective & angle.
I have no position in any of them as of right now, but I'm actually absolutely hell bent to study them, going forward, short term, to learn something. [said: Untill I [again!] get distracted by the next European gem trading at a P/E at 30 [or perhaps above!], that I study [please read: LVMH], instead of just moving on!].
I have no position on Danske Bank A/S - but I happen to have an opinion on that, from an investment angle. I'm just not the right guy to open the topic here on CoBF, because I'm bearish [to some extreme extent] to the bank's exposure to Danish farming.
With regard to Svenska Handelsbanken AB, I would feel inclined to open a separate topic about it, if you want, in the investment ideas forum. Actually, right now I hold it three ways:
1. Directly, long term,
2. Indirectly, via holding a position in Industrivärden AB, long term, [about 21 percent of Industrivärden AB equity is this stock].
3. Indirectly, via holding L. E. Lundbergföretagen AB long term, [about 5.8% of L.E. Lundberg equity is this stock, and at the same time L. E. Lundbergföretagen AB is holding 18.9 percent of Industrivärden AB].
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I hold Svenska Handelsbanken AB [directly] primarily in tax deferred accounts. The Swedish dividend withholding tax that I'm subject to, is 15 percent, not 30. [in Danish tax deferred accounts, I get credit for 15 percent dividend taxes paid abroad in Danish PAL-tax, based on marked to market evaluation on each separate account, at the moment at 15.3 percent.]
New Essay: A Few Thoughts on Banks
in General Discussion
Posted
Just posting some anecdotal stuff here related to these four banks, from a Scandinavian angle and perspective. I'm using Nordnet Bank AB, Danish branch - a beehive for Scandinavian DYI investors [sweden, Denmark Finland & Norway]. The bank runs an investment board for its customers, called Shareville.
Total NN active customers E2018Q1 : 698,500.
Total accounts NN E2018Q1 : 923,300.
Total accounts at NN connected to Shareville today: 193,474.
Total accounts today holding BAC : 187.
Total accounts today holding C : 110.
Total accounts today holding JPM : 130.
Total accounts today holding WFC : 469.
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These four banks are overlooked in Scandinavia.