bargainman

Oh man.. not again! sigh.. Since the days I owned MFCAF (if that was in fact the original ticker I think i was mass financial back then), they bought then spun off KHD, then spun off blue earth refineries, then some australian reit, then merged back blue earth, then listed on the Vienna exchange, and now are splitting khd.. Is all this splitting and restructuring really the best idea they can think of to 'enhance share holder value'? Makes figuring out the tax implications one sordid affair... sigh.

Just because the bottom fell out of the market in March and the price of SHLD dropped like a rock doesn't make his initial purchases necessarily a bad decision. The question to answer is 'what was the intrinsic value of the shares vs the market price at the time? Also, what were other potentially better uses of capital at the time?'. We can't be applying hindsight bias here. Bruce B. went to every local district to figure out the price of the Real estate back when SHLD was trading in the 120+ range. He said that *conservatively.. conservatively* they estimated the value of the real estate to be about $95-100/ share. Then he asked.. what do you pay for the brands (Die hard, Ken more, Craftsman, Lands End)? What do you pay for the largest appliance servicer in the US? What do you pay for the sears.com website? Just because subsequent to that there was a huge liquidity crisis that caused all sorts of forced selling, doesn't make the buyback decision a bad decision. I'm not saying Lampert is a saint and has done no wrong, and he has admitted that he obviously wishes he hadn't bought back shares at those higher prices. But I'm not sure we can say with the benefit of hindsight that it was a bad decision... BRK suffered a 50% plus drop back in the day too if I remember my history..

Doesn't Klarman always say that he looks at forced selling situations? As someone who may want to be acquiring BRK this is actually an opportunity! Buffet also always says that as long as your retirement is about 10 years+ away you actually want shares to go down in price so you can get them cheaper. Thank you Mr. Gates for creating artificial downward pressure on the shares! Now regarding retired folks who are living off of the BRK shares.. they should probably be living off bonds or something else. In the short term any equity's price can be irrational. That's not to say I'm not sympathetic, but this type of forced selling is exactly what we should be looking for and going after as value investors no?

http://icarra.com they claim to do dividend tracking. I haven't used them extensively though. If you do use them please do report back and let me know if they are as good as they claim to be.

Apparently they are a spin off of NLY: http://www.fool.com/investing/small-cap/2009/12/03/3-stocks-ready-to-roar.aspx "Annaly Capital Management (NYSE: NLY) is doing the same thing with Chimera Investment, which it spun off to invest in the many distressed real-estate assets and mortgages that proliferate today." Also looks like insiders were buying at $2.8-3.8 earlier this year. Reasonably significant amounts as well: http://finance.yahoo.com/q/it?s=CIM

Know anyone who got a raise this year? Know anyone who got a paycut? Know anyone willing to go into more debt after their home equity went upside down? Oh, and that computer and cell phone.. how much would they have cost 5 years ago? How much do they cost now for double the speed? Deflation is all around :-) So is inflation.. Just depends where you look...

I'm loving the name! ;D http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=ACBJ&data-ipsquote-timestamp=20091214&id=10886538

Don't get too excited: "Still, just a paltry 4% of all homeowners in need of workouts are receiving them." I still hear that banks are very unlikely to do a loan modification.

Too funny. Bruce B admitted to being a bookie for a few years too! He actually dropped out of high school to do it! Then he went back. Funny (or sad) thing is that apparently it took him 10+ years to get back to the same level of income after he got educated :-)

I agree. This will be more about relationships. I learned a very long time ago that in doing business, your customers are a lot more than just those you sell products to. A company’s customers are also it’s suppliers, employees, shareholders, etc. A top class company will do a great job of balancing out all these customer relationships. The more one looks into AMZN --- there are some very obvious pitfalls. AMZN’s approach is ‘their way or the highway’ ... but publishers have started to stand up to AMZN: http://m.usatoday.com/Money/1148806/full/;jsessionid=EA918CCBBE0E13874E96C104343D36DB.wap2 AMZN might just have some viable competition when it comes to digital books. Shortcovers understands the importance of relationships and also supports all mobile device formats. Shortcovers would seem to be establishing a key leading role in working out issues with the publishing industry as to how digital content delivery evolves: http://www.blip.tv/file/2798840 A rebranding of Shortcovers is supposedly underway to something called: KOBO(More details are due out tomorrow). Heather Reisman has put together one heck of a team – they have done a lot in a very short period of time. UCP / DD This kind of reminds me of Apple. After Apple overpowered the digital download industry and took away all their pricing power, they had a much harder time getting into Video.. Apple TV anyone? None of the video studios wanted to deal with them.

Zorro, where do you see a Fairholme purchase? I though Fairholme was limited to 5%. I remember Bruce saying there was a limit on how many shares a single external entity could own, and that was 5%, otherwise he would buy more...

Forget about prosper, go for lendingclub.com. They actually screen their applicants! No one with a credit score under ~670 gets in to request a loan. They claim that the 'average' lender gets 9% a year. They have some interesting presentations on their websites. Supposedly the lowest defaults on loans are on credit refinances (makes sense..) and get this... on weddings and vacations! If someone stops paying, they get the collections people on them after a certain amount of time, plus all payments are reported to the credit score agencies, so people who default or don't pay will get their credit score whacked. https://www.lendingclub.com/info/about-us.action https://www.lendingclub.com/info/statistics.action Average Interest Rate 12.97% Annualized Default Rate 2.97% Average Net Annualized Return 9.67% Here's a guy who's invested with them a lot: http://www.peerlendingwealth.com If someone actually wants to open an account let me know.. They have a special offer where new lenders get $60 of 'free money' to lend: http://blog.lendingclub.com/2009/12/10/get-a-piece-of-the-bank’s-action-give-away-6462-this-holiday-season/ I put it in my "junk bond" asset allocation. Haven't had it for over a year yet, had a few defaults. Haven't drawn any hard conclusions yet, but it's definitely better than prosper! Worth some entertainment money...

You're saying it like it's a done deal. The bill hasn't passed the Senate yet, and apparently that's where this measure has failed to pass before... From the link: "The tax on fund managers' pay faces opposition from some Democrats in the Senate, which could stall that measure."

Interesting. Do you just buy the ETF TIP or do you actually buy TIPS directly? I'll have to look into how to do this through IB. But don't you end up paying any margin interest? I guess you would only do so if the value of the TIP and the value of the underlying stock went down right?

a few questions. 1. why only an IRA? why not do this in a taxable account? Is it just because of the taxable events associated with TIPS? 2. I don't quite understand how low risk this is.. How far in the money would you go? The further you go, the larger the spreads, so there's slippage, plus the higher the likelihood that you get assigned the shares.. which comes to my next point.. 3. Say there's another crash and your stocks drop 50%. You're on the hook for 50K worth of stocks right? So what you're saying is that in that case you'd either use margin or sell half your TIPS and buy the stock? Is that right? 4. What about your comment regarding beating the S&P? I'm trying to wrap my head around that. How would this beat the S&P? Maybe my brain just isn't working right, but can you walk me through it... Thanks.

Man, I wouldn't be making those kind of assertions on here. :-) I heard Canadians hate being referred to as the 51st State. Only when the speaker is somebody who lives in the 11th province. I've always found this very amusing.. The funny thing is that when an American says "Canada is like the 51st State" they are basically giving Canadians the biggest compliment they could possibly give anyone. They mean it like "hey you're one of us! you're our brothers and sisters!". But saying "Canada's the 51st state" is about the one thing Canadian's hate to hear! I've seen so many Americans say this to Canadians who are then angered by what was meant to be a compliment :-) It's really pretty amusing to see this over and over again :-)

Amazing considering his monopolistic deeds a decade and a half ago. Nobel invented smokeless gunpowder enabling the death of many. Here's a write up I found: http://www3.telus.net/st_simons/cr9802.htm "When Alfred’s older brother Ludwig died, one newspaper accidentally printed Alfred’s obituary instead. The obituary described Alfred as a man who became rich by enabling people to kill each other in unprecedented numbers. Deeply shaken by this assessment, Alfred Nobel resolved, from then on, to use his fortune in awarding accomplishments that benefited humanity. In his will, Alfred designated five annual awards to benefit leaders in physics, chemistry,medicine, literature, and peace. The Nobel Peace award was for ‘the person who shall have done the most or the best work to promote fraternity between nations, for the abolition of standing armies and for the holding and promotion of peace congresses...’"

Just FYI, you don't actually have to pay for the quotes. You can choose not to and just get your quotes elsewhere. There will be a $10 minimum commission per month still. IB is a mixed bag. Customer service is so so. The minimum monthly commission is a bit annoying, as is the charge for quotes, and the charge for canceling an order. But you can't beat their costs. I mean free assignment and exercise are very sweet.

This is an interesting point. That said he wasn't always loved, especially by the firms where he took an active role. There were entire towns that loathed him at times in his life, something he found very hard to deal with. I think of Bill Gates and where he falls in this equation. And of Mr Nobel. Remember, 10-15 years ago everyone in software loathed Gates and everything Microsoft stood for. He destroyed software companies left and right using monopolistic power to crush anyone in his way. Now he's taken that cash, which some would argue was gotten through 'evil' means, and turned it around, trying to do good things for the world. History will likely remember him more for his humanitarian doings, even though they rest on many questionable acts. This is the story of the Nobel prize as well.

What makes you think Kindle will be obsolete? 2-5 years from now they'll incorporate newer technology. Today's Kindle will be obsolete, but tomorrow's won't be. I agree though that the moat is tough to determine. This may sound crazy, but I think that amazon's low margins may actually be an advantage to the company. I've worked at a company that has 40%+ margins and it's really tough for them to grow. The expectations from shareholders are so high that they keep their margins up. But the problem is that it's tough to expand into another business since there are no other businesses with such high margins. Amazon's margins are so low that they can keep growing while making minimal profits without raising the ire of shareholders... I know it sounds crazy but it's a thought after seeing the opposite side of the equation... :-)

I was thinking about this fund but the expense ratio of 1.4% for a bond fund kind of turned me off. Isn't that high for a bond fund?

You see this is where I'm confused. In the same article I linked to it says: "That was in 2007. Since then there’s every indication things have gotten worse. In fact, for people taking out mortgages today it’s estimated the average amount of equity they have is just 6%. The leaves 94% of the house value as debt. And while reliable statistics on this are hard to find, my banker buddies tell me that virtually every new loan they write these days is for 5% down, with a 35-year mortgage. After all, if you’re buying in Vancouver. Calgary or Toronto, that’s the only way banks can swing the deal." I know for sure one thing.. Vancouver housing is as expensive or more so than that in the SF Bay area. Thing is, in the bay area I know many techies who make 100K+. When I lived in Vancouver I knew no one who made that much... On top of that mortgage interesting in Canada is not tax deductible. The other thing that confuses me is this: You say "There were no subsidies by governments like mortgage interest deduction or "teaser" rates by the lender." But in Canada every loan is an ARM or close to an ARM. There are no 30 year fixed rate mortgages. They are either 5 year, or 10 year max fixed rate, after which there is another reset. Or at least that's what my friend who's held several positions as personal and commercial loan manager for bank branches in BC. So to recap: CMHC is backing loans with ~6% equity at no extra risk premium. Canadian loans are pretty much ARMs Vancouver's housing market is supported by thin ice not income. I was also told that CMHC's insurance premiums are tiny so the leverage is greater than what AIG had at the peak of the bubble (But I haven't confirmed that) "They insure something like $425 billion in assets, and have $8 billion in equity. So, they're more leveraged than the investment banks, Fannie and Freddie, and all the others were at the height of the bubble." This can't be a good thing for Canadian banks.. What if it does blow up? Vancouver real estate did blow up in the past. One source had the following to say: 1979-1981 - prices increase by 119% 1985, they're back to 1979 levels - ie loss of ~50-60% 1986-1990 - prices increase by 69% 1991 - decline 16% in one year. So if the CMHC doesn't have enough equity, what will the government do? Raise taxes to pay for the bad loans? Or monetize them by printing money? Will the Canadian public be disgusted as the US public was? But then what will happen to housing demand, will there be a downward spiral like there was in the US? Or because the government will still support the banks, will lending standards not tighten dramatically allowing for a slow deflation instead of a sudden drop? Sorry for rambling.. I just want to get a better feel for the canadian banking industry.. Thanks!

In a recent post someone (I think it was Dazel) stated that the Canadian banking system was one of the strongest in the world. Is this really the case? I was a bit surprised when I read that. I've been doing some research into Canadian real estate (Vancouver for example), and my feeling is that it's very much hanging by a thread, propped up by the Olympics, a constant, but not guaranteed, influx of immigrants, and the CMHC funding sketchy loans. I was also looking at the Canadian banking system a bit and found articles like this: http://www.greaterfool.ca/2009/10/16/ottawas-bubble/ and this: http://www.demographia.com/dhi-ix2005q3.pdf Which talk about CMHC, and how it's basically acting like the AIG of Canada selling insurance against first time buyers and making the risk premiums for those buyers incredibly small. It sounds like a disaster waiting to happen. On the other hand there is this sentence: "The answer’s simple: the banks don’t take any risk. It’s all on the taxpayers, thanks to CMHC. And these days, Canada Mortgage and Housing Corporation is turning into a financial behemoth, as Ottawa uses it to fuel a housing boom that’s clearly turned into an asset bubble. Last year alone, CHMC did 919,780 deals worth a staggering $148 billion, or about twice what it had planned. To accommodate that, the feds have raised its allowable insured mortgage limit to $600 billion, or about double what it was two years ago. Here’s how CMHC and the federal government are inflating the real estate bubble: CMHC provides insurance to the lender (the bank) for the entire amount of any mortgage it makes when the purchaser has less than 20% to put down. These days, that’s virtually every new deal. If the homeowner defaults, the bank gets 100% of its money. The taxpayer’s on the hook for the loss. This insurance means the banks face no risk lending money to people with little or no credit rating and virtually no equity, so they charge no rate premium." etc. So I'm wondering.. this says the bank takes no risk.. but what happens to the price of real estate when prices collapse? Don't the banks end up having to mark down assets when this happens? Is there a risk for the banks that could trigger something like what happened in the US if the Canadian real estate bubble deflates? Any thoughts? Thanks Bargainman

What are the details behind ARM resets? My understanding was that they would reset to something close to the market rate at the time. Since the market rate is about as low as it was 5 years ago, won't they just reset at the same rate, thereby not increasing payments? The loans I'd be more concerned about were the option ARM(?) ones where people had the option to only pay the interest payment for 5 years and now must pay down principal. Or are those the ones that are really resetting? Thanks

Ok.. let's back up a wee bit here... It was humor. The rest of what you said is true, I agree with all of that. I guess you didn't catch my sarcasm. The funny thing (to me anyway) is the line about the big bad bank bully who wants to take advantage of me by offering me super low rates with no money down. Doh! :-) Well hopefully the articles I linked were at least partially informative. I didn't know before reading them what the history of the non-recourse laws was. Well 'Big bank bully' might have been a mischaracterization back then, but certainly not now that banks aren't letting people refinance or modify loans, in that respect they are being 'bullies' to some degree. Back then though you could argue in the case of Wamu and Countrywide, who specifically trained their agents to push ARMs that were likely to cause defaults, and to conceal the changing rates etc, that in that case they were bullies? Or maybe not.. They knew they were pushing ponzi lending and they were training agents to do just that (At least from the articles I read). Maybe they just got caught up in all the new Wallstreet products and securitization? Regardless, sorry if I missed the sarcasm, certainly didn't mean to offend :-)