Rabbitisrich
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Posts posted by Rabbitisrich
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Has anyone confirmed that the purchase adds to Tier 1 capital? Hempton responded to a question about qualifying non-common instruments by providing the Citi TARP preferreds as an example. But I thought that the TARP instruments received special dispensation to count as Tier 1 capital despite cumulative proceeds and a step-up coupon provision.
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It's my understanding that cumulative trust preferred stock (TRUPS) will not count toward Tier I capital after January 1, 2013.
A traditional preferred (not a TRUPS) would continue to count as Tier 1 Capital before and after January 1, 2013.
I'm not sure. It depends on the specific provisions of Berkshire's preferreds. Cumulative preferreds can't be used as Tier 1 capital, now, unless they meet certain standards, like the ability to defer payments for some period. But Basel III phases in some new test to determine how preferreds are counted as capital. It also takes away some of the seniority benefits.
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Aren't these cumulative preferred's? If they don't count as Tier 1 capital in 2013, then the media is misreporting this investment as a capitalization, when it should really be regarded as a reputation buy.
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BTW I am a believer of the MMT and believe the United states can never go bankrupt unless people do not believe in using the dollar. Some members want to know where am I getting the info well check this post out.
http://pragcap.com/mechanics-qe-transaction
If money supply keeps increasing at a faster rate than GDP growth, eventually we would have to choose between issuing yet more money to service debt payments and just defaulting. Some MMT proponents, or perhaps misrepresentatives, seem to ignore the possibility of a Weimar Republic cycle.
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Looks to me that market participants are pricing in eventual dilution of equity due to Dodd-Frank provisions on TRUPS. BAC has about 20 billion in TRUPs that need to be redeemed or replaced by 2013. (TRUPS lose their Tier 1 status at the end of 2013.) Check out this briefing.
http://www.skadden.com/newsletters/Compendium_2011_011011_web.pdf
To me, the way to play BAC is to invest in TRUPs yielding over 10% and wait for their redemption or replacement, collecting the yield. There are a lot of them past their redemption date inherited from all the acquisitions. Until this particular issue is resolved, BAC equity might continue to bleed, IMHO.
Management considered the effect of Dodd-Frank on TRUPs when they forecasted Basel III compliance targets. The last earnings call and presentation covers their strategy to reduce risk weighted assets going forward, and they focus upon Tier 1 common which excludes TRUPs and treats hybrids as if they were converted to preferreds. Moynihan target 6.75-7% Tier 1 common ratio by the end of 2012 (if the world still exists...) using 2019 Basel III standards. By comparison, the required minimum ratio is 3.5%.
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Ragnarisapirate, I read your blog entry about CBRL, and I think that you said something similar in an old CBRL thread. Management may be justified in blending the segments for competitive or communication purposes, but they should also share their logic about why the blended model makes sense. For example, if the retail offerings affect restaurant preferences or vice versa, then we might expect to see more restaurant sales, or EBIT, per square foot compared to a competitor. Or we might see more sales per customer, or correlation between restaurant and retail spend per customer.
Just going by the financials, management seems capable and the concept showed good performance through a restaurant downturn, but I empathize with Biglari's larger point that investors are not adequately educated. Perhaps he is wrong to focus on segment delineation, but more information is better.
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The 3Q report will show more detail on restructured debt, which will offer more clarity on the bear argument that commercial RE lines benefit from extend and pretend. Even without the new disclosures, which we should have always had, BAC shows criticized portfolios and dollar amounts returned to performing status. So investors get a sense of magnitude and problematic areas.
The current bear sentiment takes a reasonable argument that bank financials don't offer full information and perverts it into the argument that no information, or insufficient information, is presented. The information is there for anyone who looks (maybe not in investment banking).
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Cracker Barrel's response to Biglari:
It's been a few months since I looked at the company, but I don't recall seeing anything particularly unique about their blended margins. Has management communicated any metric that might help to explain the benefit of a blended store vs. more square footage devoted to the restaurant space?
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It's amazing how it's gone from BAC needs to raise capital immediately to BAC is going bankrupt.
I'd like to hear the thesis on why BAC is going to have to file for BK.
Look at the stock price. I think I've made my point.
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I don't know whether segment disclosure will change anything, but there must be some reason for the presentation. Unique business models are always interesting.
I didn't have the same read on the letter to management. He doesn't attack performance so much as he attacks governance. The implication is that he finds it unbelievable that management tracks performance through blended results.
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I'm really curious about the deliberate opaqueness of the retail/restaurant segments. Management ran a restaurant only concept in the past, so I'm guessing that there is a rationale behind it. Perhaps gross margins are obscene in retail?
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Munger has been getting far too much attention given the quality of his analysis. If anyone is new to the board check out the "Bank Capital" thread to appreciate what he is offering. The smart short thesis isn't tracking stock movements. Someone like Chanos is going to challenge you on redefault rates, loss severities, home prices, extend n' pretend, yield curve flattening, counterparty risk, derivative covenants, etc...
Tearing apart the Mungers of the world is a self-indulgence. If your brain isn't burning calories to answer the opposing thesis, it's wiser to seek out a better "opponent".
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Then how are they going to network?
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Here's my two cents. I think bank stocks are down because their margins are starting to contract. BAC, as one of the more troubled large banks, has suffered the most.
That's some of it; if you chart WFC's 1-year performance against the 2 year, 10 year constant maturity spread, you can see the correlation. In addition, NIMs are coming down for all the big banks, partly due to runoffs and partly due to the yield curve. That said, market pricing seems to excessively penalize certain forms of non-interest expense like legal, foreclosure and REO mititgation, and excess capacity. The market also distrusts loan loss reserves despite developments in delinquent inflow/outflow numbers since 3Q10.
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Is anyone buying now, or waiting until Jackson Hole? I sold out of FRFHF and 1/3 of my hedges to build up some cash, buy more HHC and WFC, and to open a full position in BRK/B. I still have 7% in cash. Perhaps another opportunity will arise if friday is a disappointment.
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I purchased a couple of Touchpads for $99 through an Amazon reseller called OnSale, but the listing used the factory number and did not use the phrase HP Touchpad.
Fingers crossed!
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All of those guys, and any smart people should just be appreciated for their talents. For example, Buffett never did turnaround Berkshire Hathaway's primary operations, whereas Biglari really got SNS out of a hairy situation.
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Does anyone know of an influential European economist who typifies the thinking of EU leadership? Is there a philosophical or political foundation for Merkozy's actions?
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I have a Debt / Equity (asset) ratio of approximately 0.38. I know it's rather high but I am a 30 year old who used a lot of leverage when I first started investing about 5 years ago and then doubled my leverage during Feb / March 09' crash to juice my returns!
My goal is to reach zero leverage (In 3-4 years) as well but I honestly cannot help myself during these sell-offs! ;D
Thanks,
S
I'm 29, but was never attracted by leverage. I also don't short or use options. Guess it's a "keep it simple" thing.
It makes sense in this market. If you owned Wells Fargo or Microsoft two years ago, the core businesses have done everything you expected, but the multiples keep compressing and the expectations stay low. You would have taken a loss on otherwise smart bets rolling over options or servicing debt.
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I couldn't land the $99 version, but I did pay up at Office Deopt. $129.99, $141 after taxes, for a product that may cost $318 to produce.
Man, go back and have them price match Walmart. Local walmarts are selling the 16gb version for $99. I just picked up a whole bunch.
Thanks, but this is why some people (me) shouldn't be traders.
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I couldn't land the $99 version, but I did pay up at Office Deopt. $129.99, $141 after taxes, for a product that may cost $318 to produce.
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Hey cool, bad news for myself and other readers but great to hear about your success. Are they similar in style to your own methods, or are you finding the need for adjusting to their culture and techniques?
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My local Staples ran out of the 16GB tablet within minutes of the Saturday $300 special, but at closing still held a large inventory of the 32GB.
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Yeah, but on the other hand, Buffett's interview with Charlie Rose gave me a little indigestion whenever he qualified his optimism by saying "until last month."
BYD to Slash Salesforce By 70%!
in General Discussion
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No kidding. That article was 37% ago! If anyone has a good method for predicting March 2009 moves, please pm me.