Rabbitisrich
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Posts posted by Rabbitisrich
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I think Eric is right that you need to either multiply the ORH goodwill by 5X to be consistent (and end up with a meaningless BV number) or remove all goodwill - although I think you should also adjust upward for the value of the investments held at equity.
Tangible book value is the relevent metric, but are we not just dancing around the idea that FFH is worth a premium to tangible book value?
Reading over this thread the next day, I think that there has been a lot of talking past each other. Ericopoly uses goodwill (in the sense of discounting it) as part of his valuation process, where I do not because I view it as a contribution to earnings power. The differing uses don't make a difference so long as there is an appropriate adjustment to expected ROA and similar ending ROE.
It's like people arguing over an asset with 33% of equity in good will. Some people say, the bad news is that we just lost 33% of equity. The good news is that ROE just increased by 50%. Other people will say...
I only consider their investment returns, underwriting profits, and growth in float to be valuable. That stuff matters -- but to me the goodwill will not help them achieve any of that because the goodwill doesn't "earn". It just sits. Much rather have 5% of BV in earning tangible investments than in 5% goodwill that does nothing for me.
It should come out to the same thing over time. Consider that FRFHF paid a bit over a billion to purchase ~27% of ORH, equivalent to about a billion in equity. If ORH earns 15% on book from June 30, then what difference does it make if FRFHF gets 16% on TBV or 15% on BV? ORH is a bad example because, as Nnejad pointed out, it only contributed about $100 M in intangibles.
If you discount the book without an accompanying increase in ROE, then you are stating that earnings power has been impaired by the acquisition. Earlier you made a comment about HWIC's contribution to ORH earnings, but I don't see the argument because the purchase price includes the benefit of the minority interest in HWIC's results.
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I think Eric is right that you need to either multiply the ORH goodwill by 5X to be consistent (and end up with a meaningless BV number) or remove all goodwill - although I think you should also adjust upward for the value of the investments held at equity.
Tangible book value is the relevent metric, but are we not just dancing around the idea that FFH is worth a premium to tangible book value?
Reading over this thread the next day, I think that there has been a lot of talking past each other. Ericopoly uses goodwill (in the sense of discounting it) as part of his valuation process, where I do not because I view it as a contribution to earnings power. The differing uses don't make a difference so long as there is an appropriate adjustment to expected ROA and similar ending ROE.
It's like people arguing over an asset with 33% of equity in good will. Some people say, the bad news is that we just lost 33% of equity. The good news is that ROE just increased by 50%. Other people will say...
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The WFC SPAC scenario assumes that it's the manager's business to compare potential returns on company investments to potential returns of specific investors on a specific trade (i.e. SPAC purchase of WFC versus distributing the cash). Unless the charter is so specific as to mandate WFC or bust, then the company should compare the investment to its universe of investments.
You are right that FRFHF shareholders would have been better off had they recieved $1 B in dividends and been told to purchase ORH shares trading at a low valuation. But the argument that goodwill should be written off in the valuation process argues that the company received an improper return on investment, in other words that ORH will underperform relative to the universe of companies with its risk profile.
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That difference only emphasizes the point that BV is an approximation of value, rather than a measure. Certain Fairfax subs probably warrant a bigger discount, though I wouldn't use tangible BV except as a mechanical rule for conservatism, but ORH always deserved a premium, at least from my perspective.
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Stated differently, the goodwill is a relic of what happened to them. Had they never IPO'd NB and ORH in the first place (in a parallel universe), then they never would have needed to buy them back above book value and thus there would be no goodwill. They would have a cash asset instead of the intangible asset.
I can't argue that the cash from that parallel world is worth as much as the goodwill from our real world. I think the cash is worth full value and the goodwill can be ignored. In that parallel world, the goodwill is implicitly there (in addition to the cash!) just as in today's world the previously consolidated majority positions have goodwill that is implicitly there (but not explicitly stated as a component of book value).
Aside from accounting consistency, what is the economic reason to only include tangible assets in your valuation? Writing off the goodwill is that same as stating that the ORH purchase was too dear, and that you need to reduce your entry price to reflect a higher expected return.
At $3.65 B implied for a profitable developer of $4.8 B in float with historical BV growth of 20%, losing ORH to Fairfax was not necessarily a wonderful point in time for ORH shareholders.
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I've seen conspiracy theorists use a Bill Gates quote in which he seems to argue for the need to control populations through vaccines. Of course, if you look at the actual quote, he is linking vaccinations to socioeconomic development to rising opportunity costs of birth.
Conspiracies do occur, but man...
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I have the designation. It can be very helpful at the start of your career, although nothing comes close to networking.
Even the mean-variance stuff can be useful in that knowing the parameters of a model helps you to understand unmodeled outcomes. And the derivatives content can improve the way you frame bets. My main criticism about the program is that it is simply too broad. You will have to do a lot of independent reading if you want to comprehend a topic.
I only used the CFA books for the first three exams... BIG mistake. I ended having to take the third level twice because of too much time devoted to memorizing GIPS rules. Stalla more than makes up the money in time saved.
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The alternative to SharperDingaan's scenario is that the growth of hedge fund derivatives merely promotes consensus movements. It would also be complicated to specify default since a hedge fund structure typically allows for massive external cash flows. A counterparty may find it cheaper to provide liquidity. Also, the proposed derivative isn't a direct reflection of the quality of the notional fund's portfolio, but rather a measure of the fund's ability to survive. How would the counterparties track the fund's partners to avoid a set up? Presumably, the hedge fund would need some incentive to volunteer the information, in addition to updating its portfolio, which raises another kettle of worms.
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Hi Prunes,
I also have a limited amount of experience, < 4 years, and reading sites that follow money managers, like market folly and gurufocus and dataroma, helped to narrow the field. I also like to check on money managers who own the same unpopular securities that I own. If the remainder of their portfolios look interesting, then you may have a good prospect.
It would also be a good idea to attend a popular investment conference to introduce yourself to the various money managers. There are plenty of hungry, intelligent managers with limited capital, who would love to increase AUM by even a million dollars.
Good luck!
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Did I miss that Pabrai owns 14.6M shares of FBK? Is this old news?
http://www.newswire.ca/en/releases/archive/April2011/18/c5142.html
It seems like his sort of stock given his track record.
My bid for half my shares back didnt get filled, I hate having to buy the pink shares, they dont trade much.
What was your bid and order size? I feel like it has been way easier to get an order filled compared to 2010.
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Clement Scholl (My most favorite SA contributor) also follow TTT and KHD
http://seekingalpha.com/article/252655-terra-nova-s-royalty-a-strong-income-stream
http://seekingalpha.com/article/244371-terra-nova-royalty-still-owns-3-of-khd-humboldt-wedag
Nice recommendation.
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Oh bother.
"And how do you determine N?"
"Simply divide M and L."
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Bill Ackman is developing a warranted reputation as a value adding activist. GGP, Target, Fortune, Sears Canada, and Wendy's shareholders benefited from his activism.
This is also a list of distressed debt investors: http://www.distressed-debt-investing.com/2010/12/distressed-debt-hedge-funds.html
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Taubes published a new NY Times article:
http://www.nytimes.com/2011/04/17/magazine/mag-17Sugar-t.html?_r=1&pagewanted=all
When Glinsmann and his F.D.A. co-authors decided no conclusive evidence demonstrated harm at the levels of sugar then being consumed, they estimated those levels at 40 pounds per person per year beyond what we might get naturally in fruits and vegetables — 40 pounds per person per year of “added sugars” as nutritionists now call them. This is 200 calories per day of sugar, which is less than the amount in a can and a half of Coca-Cola or two cups of apple juice. If that’s indeed all we consume, most nutritionists today would be delighted, including Lustig.
But 40 pounds per year happened to be 35 pounds less than what Department of Agriculture analysts said we were consuming at the time — 75 pounds per person per year — and the U.S.D.A. estimates are typically considered to be the most reliable.
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There is a real trend to rent in cities that only will be more pronounced with higher oil prices and increase in the number creative economy jobs. Prices will come down but without big real effects in the general economy (New York, Los Angeles are doing just fine, Seattle not so much but it was not a disaster)
Los Angeles has an 11.3% unemployment rate from 6.9% in '08, not seasonally adjusted. It's amazing to see some areas where restaurants can still charge $18 for a deep fried egg with some fish eggs, closely bordering run-down neighborhoods with blocks of commercial vacancies.
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I wonder whether inflation can improve the value of logistical and bargaining advantages. For example, MCD in China competes with delicious, dirt cheap food stalls because labor is cheap, and there are fewer health and realty code impediments to opening a small food stall. Land, labor, and food inflation plus gentrification may improve the power of economies of scale relative to idiosyncratic competitors.
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Coc, to be clear, Yo-yo dieting is your contribution, and otherwise unmentioned in the thread. Would you also infer that "move more" means attempt marathons and 3X bodyweight deadlifts daily? It's also worth noting that Taubes never argued against a relationship between caloric intake and obesity. He also never tried to prove a mechanical inefficacy of exercise in improving health; rather, he only demonstrated that exercise rates did not predict obesity trends (a very different topic).
http://jama.ama-assn.org/content/291/10/1193.full
USDA survey data for 1977-1996 suggest that factors contributing to the increase in energy intake in the United States include consumption of food away from home; increased energy consumption from salty snacks, soft drinks, and pizza; and increased portion sizes.
Eat less, move more, thoughtfully.
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It's incredible that there is controversy as to the owners of the surplus assets, and that the Canadian Association of Mutual companies supports the cash policy holders. Even if they were not informed of alternative policies, they accepted the terms of their policies with all the accompanying constraints.
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Eat less, move more.
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Biglari is incentivised to make money with his shareholders, but he is also removing disincentives to make money off of them. You have to consider your partners before joining any business undertaking, so when you see that management has imposed economic penalties on maintaining a voice in the business, you have to think about the partners who are willing to accept the deal. Why does management want them?
That being said, Biglari may still prove trustworthy and recent actions may prove little more than noise. You just have little recourse aside from selling shares if you are wrong.
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Munger, that was my reading as well. Although, you have to adjust post-recap pricing to account for the reduction of the A share value by the value of the B shares less the value of the voting rights disparity. It is a wash for the equity holder immediately following the recap, but the dynamic described by Parsad should occur thereafter.
If the B class accepts 10% of the vote for 20x the economic rights of the A class, then is there any protection against a change in the terms in the future? Or is it like finding a magic lamp where you can wish for more wishes?
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Distressed Debt Investing blog published his notes on the speech:
http://www.distressed-debt-investing.com/2011/04/michael-burry-notes-from-vanderbilt.html
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I thought that he presented a well-reasoned assessment of the situation, much like Charlie Sheen's discussions of professional responsibility.
I also agree that Buffett thoughtlessly gave away his money to one random person. I said so and therefore it is. Hey, it's just my opinion, which is as valid as anyone else's.
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So I guess that no employee of a company should be allowed to buy stock in "X" after such employee investigates a possible transaction with company "X". I wouldn't venture a guess as to the timeframe that this would apply to - could an employee buy a stock 2 months after investigating, 3 years, or never. But that is what I am hearing.
Appearance is reputation is money in this case. It's like an absentee father driving to recover a relationship with his child, only to find out along the way that the child has just won the lottery. One thing may or may not have anything to do with the other, but there is no reasonable test to distinguish an honest motivation from a self-serving one.
Erin Burnett Has a Brain, Possibly?
in General Discussion
Posted
I've never been particularly impressed with Burnett's poise or ability to think on her feet. By far the most impressive host by workload and capacity to integrate information is Melissa Lee.
Once in a while you see reporters who actually appear to be diligent, like Diana Olick, appear on screen for a few seconds before being shuffled behind a flurry of stock symbols and morning radio sound bytes.