AccentricInv
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Posts posted by AccentricInv
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It's nearing the end of the year, and time to think about taxes... curious, which tax lot methods members use / think are best?
Interactive gives the options of FIFO, LIFO, Highest Cost, Maximize LT Gain, Maximize LT Loss, Maximize ST Gain, Maximize ST Loss. Any thoughts on which you'd choose and why?
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Hmm seems like a one-stop shop for Sell-Side research, as opposed to logging into each bank's "research portal" individually? Interesting...
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Does anyone know of a service similar to Value Line (one-pagers) that cover the Chinese market? I don't believe Value Line has an Asian service, and I would love to be able to quickly flip through stocks listed on the Hong Kong, Shenzhen, and Shanghai exchanges.
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Small speculative position in CMG after watching foot traffic steadily rise of the last 6 weeks at 3 different locations in NYC. Seems like the brand is coming back and I expect Q3 results to improve materially.
Interestingly, I've noticed this also. Maybe not the 30min out-the-door, midtown lunch lines from two years ago, but there's actually a wait now during lunch.
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Any reasons to avoid doing so if managing a pooled investment vehicle (limited partnership)?
I think it's definitely worth considering if you are happy to be long a hard-to-borrow security.
Just thinking out loud, but if you are managing other people's money, one consideration is that if you are wrong, and the short thesis turns out to be correct, you may appear additionally foolish to your investors. Say you are long TSLA shares today, and you tell your investors that one of the reasons you are long is because there's a huge opportunity to lend out the shares and get double-digit returns on that investment solely from the securities lending...if TSLA plunges because the short-thesis gets validated by the market, then your investors might be more unhappy than if you had been involved in a security with fewer shorts involved.
Wow. Had no idea TSLA had such a high borrow, until you pointed it out. IBKR's indicating a 30.2% rate right now. Now I'm just imaging all those retail investors long TSLA, who don't know about lending out there shares. What a shame.
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AI,
Right. But i meant given you can't buy the VIX directly, and the VIX options are already pricing large volatility in the coming months (you're paying a large premium), and VXX isn't a good option as previous discussed, what would be the best option to express this view?Do you disagree with the future path of VIX as predicted by the VIX futures?
If yes, you can buy / sell at will.
If no, move along.
Because "VIX" is this thing that has a number associated with it, many smart folks get involved "how do I make money money off of it going up?"... but you can't. Simple. It doesn't exist.
It's like if I created an "index" of whether today was Thanksgiving or not. The index is 1 today. But futures for a specific date in late November suggest the index will be 2. How can I exploit the change from 1 to 2, I'll be zillionaire?
VIX is like this. You can't buy a synthetic thing, you can only buy cash settled futures / derivatives, and thus you only care about what those derivative markets are pricing; you can only profit from a divergent view. VIX rising is not divergent (of course, if you thought it was going to 25 tomorrow, that would be divergent).
If you believe vol is specifically cheap, you can buy options directly of course... but again, options (generally) are going to be pricing their vol off other derivative markets (not just today's vol) + the underlying...
VXX is an amazing ETF, despite mind-blowingly bad under performance in all markets over even fairly short periods of time, much worse than any concept of the underlying, it continues to attract big $$ which encourages added friction for the roll costs.
It's stunning. These volatility products should have never been approved by the SEC if they are intent on regulating these, these were obvious "do not pass" securities...
</rant>
Thanks for the response Ben. I've never had a good understanding of how the VIX was structured (nor cared to look), so this is perfect. I didn't know there was a VIX futures curve, so that definitely makes sense now.
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Right. But i meant given you can't buy the VIX directly, and the VIX options are already pricing large volatility in the coming months (you're paying a large premium), and VXX isn't a good option as previous discussed, what would be the best option to express this view?
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So if one did want to go long volatility, what do you think would be the best way to express this?
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I also know quite a few people that use LICCAR and like them. Heard they provide some cap intro benefits as well.
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There's nothing wrong with IB, I love using it. It's just we may need to change the LLC which the SMA's are currently under. There's no issue with moving the clients under the other LLC structure, but the side-effect of this is we lose all the historical performance data under the old name. Additionally, we may add some offshore SMAs not custodied at IB, so figure it's time to use some 3rd party software.
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For those of you that manage small funds, just curious if you have any suggestions for good 3rd party Performance Software? I currently manage SMA's via IBKR, and have historically just used IB's reporting software. However, I may be forced to switch soon and lose all my historical performance data (long story), and was just wondering if anyone has found some good / cheap alternatives.
Are there are programs that sync especially well with IB's data? Additionally, I'm assuming since these are SMA's instead of just one fund, compiling the aggregate performance may be more of headache? Thanks in advance!
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I have followed CRMT and NICK for some time. The passage below is from their last earnings release. I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders. Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically. In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control. That is one major point to consider with NICK and CRMT. Just my two cents. CRMT mgmt is very happy to talk with anyone who calls them. They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns. This year they slowed/stopped new store openings after this realization.
During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.
I feel like we're already starting to see the turn in the cycle. Santander is already pullling out of the deep subprime space, cost of ABS funding has gone up ~100bps over the last year (to ~3.5% today), many of the small lenders (many started by PE in the last 4 years to chase yield) are shutting down or slowing. Go Financial, Dealer Funding, and a few others have closed in the last month. Also channel checks with dealers are suggesting the same as well.
I'd highly suggest taking a look at CACC and their shareholder letters if you're interested in this space. I think they're well positioned to take share as this cycle turns.
AccentricInv,
Please elaborate your comments on SAN at a specific level [in this topic, or in the SAN topic in the investment ideas forum].
Thank you.
Santander has been retreating for a while now. I believe they first started in Q1 of 2015, but I don't have the exact commentary on hand right now. However, here are a couple quotes that illustrate the point just as well:
SC 2Q 2015 Earnings Call
"The biggest risk for us is more of an opportunity cost because what happens when things get really competitive in deeper subprime is what we find is that the people are willing to do things for margins and returns that we don't think are sustainable through cycles. So we just tend to pull back. And so we go through a period where we are not able to book as many loans as we would like to book. But we know that -- we sort of know how that story ends and we wait it out and it comes back to us."Recent American Banker Article: "What the Subprime Auto Pullback at Santander Consumer Means for All"
KMX 1Q 2017 Earnings Call
In the quarter though we did see one line in particular a pullback and it was Santander I mean you have seen them out in the public domain, talking about how they are pulling back in sub-prime auto, letting other business to other folks. So it’s not inconsistent with what they have been saying in the public domain. So as far as what they will do going forward, I could say we saw a couple of different things happened during the quarter. And I feel like it stabilized during the quarter. But looking forward, it’s their business, they are going to manage their portfolio as they see fit.Hope this helps. Let me know if you have any other questions.
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I have followed CRMT and NICK for some time. The passage below is from their last earnings release. I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders. Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically. In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control. That is one major point to consider with NICK and CRMT. Just my two cents. CRMT mgmt is very happy to talk with anyone who calls them. They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns. This year they slowed/stopped new store openings after this realization.
During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.
I feel like we're already starting to see the turn in the cycle. Santander is already pullling out of the deep subprime space, cost of ABS funding has gone up ~100bps over the last year (to ~3.5% today), many of the small lenders (many started by PE in the last 4 years to chase yield) are shutting down or slowing. Go Financial, Dealer Funding, and a few others have closed in the last month. Also channel checks with dealers are suggesting the same as well.
I'd highly suggest taking a look at CACC and their shareholder letters if you're interested in this space. I think they're well positioned to take share as this cycle turns.
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These are puts, which means when they expire he's likely to put up ANOTHER 2% to rollover the position.
Plus if he's right, those puts will be worth 10x, or contribute 20% of his net worth.
It's not inconsequential...
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That's a fair point that I didn't think about. In the holding company situation, investors would be double taxed, vs a pass thru in a partnership or SMA structure.
Any idea if it could be structured as a REIT or MLP-like structure, where "income" is "reinvested back into the business" by purchasing other securities or short-term bonds (in lieu of cash which would be taxed) so that you'd never show an income? That way, you won't be subject to the 90% return of income requirement, and if the biz does return cash, it won't be taxed at the corporate level. Just trying to brainstorm a few alternative methods to provide the best structure for clients...
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Has anyone every thought of purchasing a shell company to hold their public marketable investments, instead of a private fund structure (ie. Biglari or an early Berkshire)? I've been toying with the thought lately, and like the flexibility it would give to make private investments as well, and was wondering if anyone's done the research or know what costs might be associated with an OTC shell.
It seems like it would provide the flexibility of a private fund, while also having the liquidity of a listed mutual fund. Is it worth the headache?
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There's also the pension, endowments and other such funds route. Not too sure why AUM is important but it does sometimes allow for a wider breath of experience. As such AIMCo in Alberta has $80+ billion in AUM, so the OP might want to look west.
On that note, OTPP (Ontario Teacher's Pension Plan) is also a great example (based in Toronto too). They were one of my former clients, and they're certainly not your typical "sleepy" pension investors. They take activist positions, invest in complex vehicles / instruments, and aren't afraid to tell management what they really think. They're some of the smartest investors I know, and are on par with the best of hedge funds out there. These guys are killers despite the benign sounding name.
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I'd agree with what Palantir said. At my previous firms in IM, I've come across a couple UCLA MBA guys who worked at long-only or HF's. But note that given the relative ranking of the school (and finance is certainly pedigree oriented), they don't have the same recruiting power as say FT Booth. Additionally, UCLA recruiting tends to be regional, so almost all of them were at funds based out of LA or SF, so I'd be cognizant that there's a good chance you may stay in Cali after graduation.
For PT MBA's, I'd agree that unfortunately they don't get the same type of recruiting abilities as FT students (never fully understood why this is). I don't know about PT Booth in particular, but the general feeling I've gotten is that you need to work / network much much much harder coming from a PT program, as opposed FT. Given that and you're a career switcher, I'd personally take UCLA FT if those are your choices. Just my personal thoughts.
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It's a pain, but there's nothing better than starting with a blank Excel spreadsheet, and building your model from scratch. One 10Q at a time.
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I'm pretty sure you can have them sweep the excess cash into a money market fund, although this isn't the default setting (unlike other brokers). So you'll need to do change this setting yourself, and the interest is obviously negligible.
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You guys are right, I love the optionality of cash and the dry powder aspect. I'm currently in 30% cash for that reason, and have been raising it steadily since. However what I'm concerned about is the 70% exposure that I do have. These are names that I feel are high quality, defensive names that would decline less in a downturn. However they would still decline in a broad sell-off, and I'd rather not trim the exposure (including not taking a short-term tax impact).
Cardboard, that's a very interesting idea that I've never thought of. Vol is pretty cheap these days, so I think that'd be a very interesting strategy.
Ni-Co, I need to explore the futures route a bit more. That seems promising as well.
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I feel like the market may be on its last legs, and suspect that we don't have much time left in this 7 year bull market (IMHO). There's just too many issues around the world, combined with relatively expensive US valuations for me to feel comfortable.
As such, given this situation, my question is how is everyone else hedging their portfolios in this market? What do you think are the cheapest ways to hedge a portfolio (6mo / 12mo S&P Put vs. individual shorts vs. shorting some sort of FICC instrument)? The 6mo S&P put at the moment is going to cost 5% to break-even, which seems a little expensive... Any creative ideas out there? Or is this the best option?
Thanks in advance!
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Thanks wknecht. I figured it was a combination of those issues, but seems to be a little overdone in my opinion. If you look at the law firms that are representing the shareholders, they're definitely of the "ambulance chaser" types as you call them.
In terms of longer term trends, how much does it scare you that they're willing to underwrite down to their WACC? Usually when I hear mgmt start making those types of comments I dump, but given their history during the last downturn, I'm inclined to give them the benefit of the doubt. Also I'm a little worried about their rising % of portfolio purchases; I'm hoping this isn't an indication they've saturated their TAM of dealers, and need to find other ways to grow. Hopefully a bubble bust will let them go deeper into each dealer relationship if not wider.
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I added a little CACC.
I was actually going to ask you if you've bought more in this recent dip! Any idea what's causing the move? Is it just people (wrongly) reacting to how rising rates will impact their returns?
Has anyone else had it with IB?
in General Discussion
Posted
This is different than their proserve number? How'd you get the number?