jawn619
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Posts posted by jawn619
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You seem to be blurring the distinction between QE and national debt. In QE the Fed is buying assets (mortgages and bonds) and "borrowing" to do so. There is huge liabilities but also correspondingly huge assets. It is largely a wash except that the purchases are assumed to eventually result in a modest loss. Secondly, correct if me if I am wrong here, but the Fed is creating money at zero cost such that the liability side has a zero cost of funds and the asset side is earning something. Thus theoretically the Fed is generating a profit for the US at the same time it is stimulating the economy.
The national debt is obviously different - the cumulative effect of borrowing to support current spending. While a serious problem, it is not growing as rapidly in the last few years.
I would be careful in using the analogy of a person living beyond their means. There are important differences, for example a person cannot raise their income while the US can by raising taxes.
Thanks for the clarification. Can someone else explain to me the national deficit? preferably with some concrete numbers?
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I was discussing this with a couple of friends and i was thinking about something that almost everyone believes but might not necessarily be true. One was the concept that the U.S. treasury bonds/bills are RISK FREE
I have a questions about the nations balance sheet.
So basically with all of this quantitative easing, The US balance sheet is loaded with huge liabilities. So the US is basically like someone who is living way above their means and has a huge amount of debt compared to it's assets? Does anyone have any links or data showing what the governments balance sheet looks like? Or any ways of thinking that can enlighten me?
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i've been doing it for a little less than half a year now.
http://www.amazon.com/10-Happier-Self-Help-Actually-Works-A/dp/0062265423
check this book out. I think it's a good way to describe how effective meditation is. 10% happier is a good ROI, and i think it compounds every year.
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Conn's did not look exactly cheap at 10x earnings (or more depending if you bought it above 30$).
I bought it just under 30 and that i also followed David Einhorn into it.
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I saw an opportunity to buy a stock that warren buffet has 12% of his portfolio in at a price lower than his.
IBM is probably the hardest for me to understand if i'm making a mistake well. It might not be a value trap at all but if i had a spectrum of
Value Trap--------------------Overpaying i think IBM would be closer to the value trap side of it. I don't know what the market view on it except that it's seen declining revenues for a while now.
What was your reason for buying it?
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My thoughts on why all of my previous stated investments were "value traps"
Conn's was trading at fairly cheap multiples considering they were growing at 20% a year. I knew they did a lot of businesses by lending to subprime customers but I was willing to overlook how bad that business model is because i was so enamored with the numbers.
PBR was a value trap because when i got in the P/B was low, P/E low, and great dividend yield
My mistake was that I didn't look at the cash flows. PBR has negative free cash flows and has a HUGE amount of debt that they used to pay the dividends.
IBM is probably the hardest for me to understand if i'm making a mistake well. It might not be a value trap at all but if i had a spectrum of
Value Trap--------------------Overpaying i think IBM would be closer to the value trap side of it. I don't know what the market view on it except that it's seen declining revenues for a while now.
I guess i've learned from my mistakes, I just wish I hadn't learned them firsthand through my wallet. =/
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I give up, How? I'm curious to know
Does the bear case for an investment make sense to you? Bear case - IBM is not growing anymore because their customers are transitioning away from mainframes. IBM is beginning to offer cloud solutions at lower margins. Can they curb the secular decline in their mainframe business? I don't know so I'm not going to invest.
Jawn, here is a riddle for you:
IBM's mainframe business grew 72% YoY in Q4 2010. How did a nearly 50 year old technology grow 72% YoY?
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Thanks everyone for the tips. I've already read all the books suggested (intelligent investor, security analysis, margin of safety, poor charlies almanac etc) but i am only now understanding that a wonderful business at a fair price is better than a fair business at a wonderful price. As for buying BRK, i can't get myself to pull the trigger on buying BRK at 1.5x book value. Even though it's a great business at a slightly expensive price.
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As a beginner investor, It seems like i am gravitating towards these value traps. Does anyone have any tips to avoid making these mistakes? Or a mental model for thinking to avoid these bad situations?
Examples
I followed Einhorn into CONN,
Bought PBR on the basis of a low P/E ratio-but sold out before the big bloodshed.
And am currently in IBM
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i typically spend some time at the end of the year looking at stocks that have gotten smoked over the last year and have a share holder base where a bunch of the top holders are relatively new to the name and thus incentivized to take the tax hit at the short term rate.
i haven't come up with much all that interesting yet, although i think RYAM might fit the bill. recent spin and basically everyone who has bought it all year is underwater... more importantly i'm sure alot of those people did it without doing much work b/c the headline spin dynamics were so attractive (spun out of a reit so reit dedicated guys have to sell, CEO went with the spin-co etc etc).
i'm aware that people have started to question the company's staying power in the face of increased competition and capacity etc etc. i really don't have a great handle on that, but i imagine that the very smart folks at Fairfax and Abrams Capital do have a great handle on that.
seems like this is a stock that will get killed into year end b/c just about everyone that owns it is incentivized to sell for non-economic reasons, but stocks like this can pop quite a bit in the early part of the new year.
any other names on your radar that are worth looking at b/c of non-economic tax motivated selling?
PWE is one. A lot of other oil/gas.
XCO as well.
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Maybe I'm a schmuck, but I like the guy and enjoy his books, presentations, etc...
Me too. have followed him into a couple things too.
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Modeling 10 years out seems like a joke to me. There is just way too much randomness to account for. Go back to the year 2000, The US was projected to have paid off all of it's debt within the next decade, look what really happened. At the same time, who was talking about Apple? Now the company is the most valuable in the world (by market cap). How many people had heard of Google in the year 2000? I'd love to see the cash flow projections of retailers going back a decade.
agreed. 10 years is an insane amount of uncertainty to put any type of precision into. But i don't think you have to be precise, just right. Better to be roughly right than to be precisely wrong.
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I read this and i didn't think he told me anything i didn't know. Index funds are good, fees are bad.
One thing i did get from it was that Ray Dalio thinks portfolios should be risk weighted. meaning most people should have a lot more in bonds.
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While most if not all here are fully aware of the large and sharp decline in oil recently, it seems that copper is also on the way to weakness as well trading below $3 a pound. Coal was the first to go down and now it seems that gold and silver are catching a solid bid. What all this means?
Back in 2008/2009, all commodities went down due to global demand weakness. Gold and silver also went down since they were considered as a "source" of cash or liquidity for players facing cash needs or margin calls.
I am just wondering if this whole commodity debacle is not a sign of things to come in 2015, namely a global recession. Japan is already in recession, China is slowing down and who knows what the real GDP number is, Europe is neutral at best and some U.S. numbers are weak lately, although I think it will muddle through. We can also remember from 2008/2009 how global things are now so inter-connected and correlated.
While I am a value investor and that is why I got trapped into some kind of value trap with my oil stocks :'( and generally avoid macro calls, I am thinking that gold and silver this time around could be a pretty good hedge against insanity or for what could be a terrible year in 2015. The reason being that this solid bid that we are seeing is in the face of rapidly declining commodities.
After a brutal sell-off, precious metals are not going down anymore, but heading up. I am thinking that investors now feel what will be the response to a global recession and it will be money printing or QE on a massive scale. This was unknown in 2008/2009, but now with interest rates still near zero and with the previous crisis response, what else to expect? Could they still be a source of liquidity and head down at first or with the recent bear, are most institutions and hedge funds out of it, so they would not apply selling pressure this time around?
Apple stock is another one that worries me. It is huge and looks like it is correcting. The FXI is also something else that I am watching. Finally, this oil correction has been so sharp, dramatic and unexpected that I am worried that the next financial crisis will also come as a surprise and be shocking. Should we prepare?
Cardboard
I also got value trapped in some smaller oil names. =(
This is definitely an interesting way to think about it. I have no idea what's going on macro but i feel like we've been up from 2009 from easing and everyone's talking about how the market is overvalued and how a correction is due. The drop in oil prices might be the catalyst that starts the global recession.
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History would suggest that getting creative is unnecessary, and that buying XOM has always worked.
PROFOUND
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Thought id share something that i thought funny. I recently received this email and decided to reply back
Hello,
My name is Jordan Ring and I am with JDR Capital, a healthcare advisory firm. We are working with an emerging biotech company, Vycor Medical (OTC: VYCO), that I thought may be of interest to you.
Vycor is a commercial-stage medical device Company addressing large unmet needs in brain surgery and neurological disease, with minimally-invasive, FDA-cleared products.
Vycor has grown sales at a 5-year compounded rate of 52%, with margins averaging 85%. We believe the Company may reach profitability in 2015 and consequently see a sharp uptick in valuation.
Large device companies are increasingly interested in acquiring high margin, high growth products that can help offset the effect of Obama's medical excise tax on their low margin businesses. Vycor operates in segments with few to no competitors and continues to see unabated growth and adoption.
Vycor's growth has been driven by organic adoption, new domestic and global distributor networks and may be further buoyed by product expansion and new product launches anticipated before year-end 2014.
I would like to schedule a short phone call with you to go over the VYCO investment proposition in a bit more detail, and Company management is also available upon request. Which date and time works best for you?
Best,
Jordan
Hey Jordan,
VYCO gross margins indeed seem very impressive and their products revolutionary! I had a couple questions that I thought you might help clear up.
1. On the 10qs it seems like there are huge general and administrative expenses. More than 10x the cost of goods sold and r&d combined! I understand though since medical devices companies usually have huge general administrative expenses. Paper and pencils don't come cheap anymore. Maybe the recent decline in oil will decrease costs?
2. It doesn't seem like VYCO generates any cash. But seems OK since VYCO is able to obtain 5 million of capital from issuing common stock. I relish an opportunity to be a shareholder in a company that does not hesitate to dilute its stock. The more the better I always say.
3. Is this the pump or the dump portion of the scheme? It looks like VYCO Just recently doubled in price! While I do like strong stocks and people have told me that the trend is my friend, I don't want to chase a stock up 100%! So let me know which phase we're in because I have lots of other investment opportunities I have to weigh this against (a Nigerian prince needs help moving his wealth and I just won a foreign lottery!)
All joking aside, I've spent a lot of my time looking at 10-Qs and most of them look pretty pedestrian or not enough Margin of Safeties for me to make an investment. It's refreshing to see some that have some obvious big red flags.
10-Q
http://www.sec.gov/Archives/edgar/data/1424768/000114544314001322/d31746.htm
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Hello y'all,
I'm interested in learning about the wealth management industry. It seems like the best thing to do so is to find a mentor. The question is, how would you go about finding a mentor?
There are some wealth management firms located in my area. I was thinking about contacting someone there to see if they'll provide mentoring. In return, I would be willing to work for free. I don't have any education or experience in securities analysis aside from investing as a hobby. I'm 25 and work for the state as an analyst auditing hospitals. I have a bachelors in civil engineering and minor in communications. I do have fairly good programming, web design, graphics, and excel skills.
The main things I want to learn are how to raise capital, market to clients, and address the concerns of clients during market volatility.
Would it be best to be direct and offer to work for free so I can gain exposure to the industry? I never had a mentor before so I'm not sure how this whole thing works. Any suggestions and feedback is greatly appreciated. Thanks. :)
Most "wealth management" opportunities/jobs are actually sales jobs. I would say that the duties of a financial adviser the first 2-5 years of his career is 90% finding new clients and 10% of the other duties you described. Also a lot of firms(even the prestigious ones like Merrill Lynch will take anyone with a pulse and 15% of new recruits will be there after 2 years). Be careful you know what you're getting yourself into.
FED's balance sheet
in General Discussion
Posted
Federal. I just want a rough idea of what the Fed's balance sheet looks like.