vinod1

I see industry reports as a way to get up to speed in a new industry or just to update myself on an industry that is already within my circle of competence as I sometimes pick up a data point or an industry nuance. If I know the industry, it would be a quick review so not that much time is involved. Learning about a new industry just broadens my understanding of how different businesses work. I cannot get such a quick overview by reading a couple of annual reports of a few companies in that industry. Agree completely that you do not need to be an expert on all the low level details of an industry. Vinod

Wow! Great find. Thanks for sharing. Vinod

Welcome to my mind! Vinod

I would think a dis-orderly breakup of Eurozone would reduce GDP of Europe as a whole by anything from 5%-20%. I see several transmission mechanisms 1. Direct export of goods to Europe would be severely impacted for American companies with european exposure. 2. European operations of American companies would likewise be severely impacted reducing their subsidiary profits which would trigger some job losses in US as companies try to stabilize profits. 3. A break up of the most viable alternative to USD would cause Dollar to appreciate probably quite significantly as the obvious safe haven further reducing US exports and US company profits. 4. Large US banks with CDS, Swaps and Futures exposure would have quite a mess on their hands. Trade finance would freeze up. This in turn would impact emerging markets in which European banks are big players. US insurance companies with european bonds, etc in their investment portfolios would be severely stressed as well. Main point here being there are too many unknown unknowns and too many ways in which this could impact banking and availability of credit. All in all, I do not think a Euro break up would only have a temporary effect on Asset values. This is something that would fundamentally alter the earnings power of many of the large US companies. I have significant investments in equities but the above is why I am not all in even though I know many companies are at very attractive valuations. Vinod

Vinod, have you seen any report on this? Nothing that directly addresses the question of causes behind low NIM. But a good paper that goes into the issues is by IMF www.imf.org/external/pubs/ft/wp/2000/wp0007.pdf Vinod

I think there are several differences 1. Net Interest Margin is less than 2% all through the 1980's, way before the ZIRP. Lots of reasons, and not related to deflation. 2. Low ROA of Japanese banks is due to several reasons. Among them, due to cross holdings Japanese banks are holding more than 150% of the common equity in stocks of other companies. All these equity investments are less than 5% each so they are exposed to stock market declines but these are not marked to market and they had to write them down over a period of several years. Their loan losses and NPL are also much much higher. A consequence of their total RE value being priced at 5x their GDP and banks using this overvalued RE as collateral. You can look at corporate governance, shareholding patterns, Govt response. Low ROA is not primarily due to low NIM. And none of this is even remotely close to what we have in US. Vinod

Very well put. Hair cut. For 6 years I ended up driving 120 miles round trip to get a haircut from a person who knows how to cut my hair just the way I like. Vinod

6 months rule of thumb is more applicable to people who are at the accumulation stage of their life and 3 year rule of thumb is for those who are closer to retirement. 6 months expenses is for getting through to the next job if you lose the current one. 3 year expenses is to ensure that in retirement you are not liquidating your investments when they are down. I personally prefer to squirrel away a few years expenses in inflation protected securities (I-Bonds accumulated at a time when they are offering 3.6%, 3% and 2% real returns - around 6-7% nominal currently - and limits are $60k per annum per family member). I learned to live with these returns and not be too greedy for part of my portfolio. Vinod

How do you calculate the net rental yield? Is this the yield after paying the mortgage? Thanks Vinod I'm figuring if he had no mortgage -- he has my rent checks and he has to pay for property tax and other things. The remainder of cash he has left at the end of the year after expenses, I'm guessing is about 3%. That's 3% of what I think the property is worth, but my valuation estimate is about 77% of the tax assessed value appraisal. If the tax assessor is more accurate then it's only a 2.8% yield. I am scratching my head on how this could be an attractive investment or is there is a non economic reason for this investment? Vinod Owner bought the house in 2007 for 2.2m, sunk "about a million" into upgrades/renovations, and is holding onto it until he can get his money back out. He moved into a lower cost home after having some health deterioration and needing a care giver. You should see some of the homes for rent in Montecito, it's hysterical. www.realtor.com Thanks. I misunderstood. I thought you bought the house and renting it someone else, I did not realize it is the other way around. Vinod

How do you calculate the net rental yield? Is this the yield after paying the mortgage? Thanks Vinod I'm figuring if he had no mortgage -- he has my rent checks and he has to pay for property tax and other things. The remainder of cash he has left at the end of the year after expenses, I'm guessing is about 3%. That's 3% of what I think the property is worth, but my valuation estimate is about 77% of the tax assessed value appraisal. If the tax assessor is more accurate then it's only a 2.8% yield. I am scratching my head on how this could be an attractive investment or is there is a non economic reason for this investment? Vinod

I understand why my cap rate is lower. What I am trying to think through if a cap rate of 4% could still be attractive when one can borrow at under 4% pre-tax and around 3% after tax deduction of interest. I am sure this would not be enough of a margin of safety for investment, but for making a rent vs buy decision it seems buying would be slightly cheaper. Vinod

How do you calculate the net rental yield? Is this the yield after paying the mortgage? Thanks Vinod

Did you include estimated annual maintenance expenses in your cap rate? If so, could you please share that rate? I am currently evaluating buy/rent decision and kind of conflicted on this one. I currently pay $3000 monthly rent on a house that the owner would be willing to sell around $575K. It is a 10 year old house, property taxes of $6K. Assuming home owners insurance and other costs that I am not paying to be about $2k, I get a cap rate of about 5%. Assuming about 1% in annual maintenance costs, I get a cap rate of 4%. Vinod

"It's very rare that you can be as unqualifiedly bullish as you can now" - Alan Greenspan on Jan 7, 1973 in NYT interview. He also worried about running out of Treasuries due to Govt surpluses in 2000. If there is a Bid Laden life time achievement award for creating the greatest destruction on the United States, Greenspan would be my nominee for that. Vinod

I share with you much of the same frustration. Along similar lines 1. Selling something at 50% of IV to buy something at 30% of IV is something I find very very hard to do. I get it but find it very very hard to actually do. This is my main mistake I made during the 2008-2009 crisis, I did not sell off BRK to buy others that are much cheaper. 2. I am still ambivalent towards setting a too firm line in the sand for purchase price. I had been burned on both sides of this issue so I am approaching it on a more gradual basis buying a little bit above my target price. Vinod

It looks like the letter is nothing more than a way to secure a book deal. http://finance.yahoo.com/news/former-goldman-exec-smith-lands-181530727.html;_ylt=AnpX44Xv_WNguDX5_Lu.sHOiuYdG;_ylu=X3oDMTNycmJuNmQzBG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDZjNjNjBkNDQtZTYxZS0zMDY3LTgxM2UtMzc5YTg5M2U2OTcyBHBvcwMxBHNlYwN0b3Bfc3RvcnkEdmVyAzZiYjllOTQwLTdhOTQtMTFlMS1iZWFlLTIxM2NlYTBiNjI0ZA--;_ylg=X3oDMTFvdnRqYzJoBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3 Vinod

Northern Virginia. Vinod

Like both of them a lot and nearly equally. Vinod

I listened to several of her speeches. If I remember correctly what she said is that, Warren got what would be considered insider info nowadays but was not considered insider information at that time. This is basically nothing more than taking directly with managers, etc. Her point regarding being a mere mortal is that he works so incredibly hard, even the gathering of "insider" information, going to insurance commission's office and looking up old records, and all that kind of leg work that very few people did at that time and that is the key to his performance. Her point being it is not like Buffett spends a few hours and just by genius of his insights makes all the money. She wants to highlight the fact that others do not really appreciate the amount of effort he puts in. She goes on to say that seeing how much effort Buffett puts into his investments, she was discouraged in trying to invest her own money that way, nothing that she cannot compete with someone like this. She might have some "MAlice" towards Buffett but I still think she thinks of his as one of the greatest investors of all time. Vinod

I don't think I am being clear: To me, Bernanke's legacy will not be determined by the inflation vs deflation academic arguments that economists and us finance-types like to discuss. It is going to be determined by the Main Street belief that Bernanke saved Wall Street (which he did and that's not really debatable.) Now, the nuanced position is that, by saving Wall Street, Bernanke saved Main Street whether Main Street understands that or not. I think this argument is largely correct myself but I do put some blame on Bernanke (more on Paulson/Geithner though) for doing it in such as way as to allow bankers to take as much as they could without restraint (e.g., AIG had negotiated with Goldman for a partial payout of the CDS's. Geithner came in and literally pushed AIG negotiations aside and chose to pay 100% face value unilaterally.) But Main Street doesn't really believe this nuanced position that Wall Street had get trillions for Main Street to survive and I don't blame them. Whether us technocrats believe Bernanke a hero is irrelevant. I think Main Street will write history on this one. Paying the counter parties whole and not allowing bond holders to take cuts are the two things that can genuinely be argued. I felt it was wrong at that time but have since revised my view once I realized that the number 1 goal they had in mind is to make all the big financial institutions as strong as possible and using all the tools they can. If you hear Neil Kashkari in his FCIC testimony and read Paulson's book you can sympathize with this view. Vinod

Bernanke had been wrong in his views, spectacularly wrong in things like "great moderation" in setting up monetary policy. I do not think there is much of an argument on this. During and after the Crisis however, his performance is spectacular. He is probably the pre-eminent expert on the Great Depression and has authored several papers on that topic (See the book "Essays on Great Depression") and many people agree that the current environment has many parallels with GD. You might disagree with his views, but he has done exactly, I cannot emphasize this enough, exactly as he said a central banker ought to do during a similar crisis. He did not have great political support for all this but he did what he thought needed to be done. What more can you ask? Vinod

We should differentiate his performance pre-2008 financial crisis from the post-2008 financial crisis. I agree with most of the criticism of his performance prior to the 2008 crisis. But during and after the financial crisis, I cannot think of a single person who is more suited, more qualified to do the job and what an outstanding job he did. It is lucky we have him as the Fed chairman. Unlike Greenspan who is more of a politician, Bernanke is willing to do what he really believes in and is willing to take unpopular actions. Vinod

EIA report on impact of export of LNG on NG prices in US. http://www.eia.gov/analysis/requests/fe/pdf/fe_lng.pdf Vinod

I think he is pissed off at something or some promotion that he did not get and this is his way of getting back and covering himself up in glory. I think the culture at all IB was always "buyer beware". I would not put too much faith in someone who has worked for 12 years at an IB and suddenly realizes that the IB is not putting the clients first. I sold my GS calls yesterday at close so I do not have any stake now. Vinod

I agree with the feedback above. I learned the academic theory of options as part of the CFA program but I did not find it of any practical use. Reading Ericopoly comments and then spending time to think through helped me immensely in understanding options in practice. I remember copying some of Ericopoly's comments into an email so I can revisit them and think through in more detail later on. Vinod