enoch01
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Posts posted by enoch01
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Interesting read:
Despite the risk of someone claiming the jackpot, when the game was poised for a rolldown Cash WinFall became a game in which the odds and prospective payouts combined to make each ticket’s potential value slightly more than its $2 price. People around the state – and as far away as Michigan – took advantage of this feature and found ways to profit from it.The OIG interviewed the principals of four betting groups that collectively were responsible for wagering more than $40 million on Cash WinFall tickets – and generating $16 million in Lottery revenue. The core of their strategies was essentially to purchase a large enough number of tickets so that the overall results could be counted on to approximate the game’s probabilities.
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Just started, but I can already tell it has potential. Mostly debunking delusions and cognitive biases that affect business people. A lot of it I'm sure I know about, but as I always say, it's a good idea to review the obvious once in a while. No need to get too esoteric...
I highly recommend it. Very good to read if you are preparing for any kind of strategic planning within your organization.
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Interesting to see these articles after the financial crisis, and after banks have seriously scrubbed and improved their balance sheets:
http://www.reuters.com/article/2012/07/25/us-banks-earnings-roundup-idUSBRE86O06R20120725
Revenue from lending, trading and advising corporate clients on mergers is still weak, and low interest rates continue to squeeze profits on loans and other investments. Banks and their already depressed stocks appear headed for a long, grim future.Nancy Bush, who has been a bank analyst and investor for three decades, said she is ready to throw in the towel on banks of all sizes.
"What's left at this point, barring a really significant improvement to the economy and a miraculous ramp-up in lending?" Bush asked. "Why invest in these companies? Somebody, give me a reason to believe."
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GIVING UP
Analysts, however, say their top institutional clients are increasingly reluctant to invest in any bank stocks. Last week prominent hedge fund manager Bill Ackman said his firm sold its big position in Citigroup, despite his general admiration for the bank's management, because the banking system has become too risky.
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A and B warrants plus options - I have lots of exposure.
Capital ratios are high, Merrill Lynch is making money, favorable rulings in the courts, housing market is recovering, nasty loans are further through the system, NIM won't stay like this forever.
Edit: oh yeah, and Brian Moynihan is CEO.
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...a high IQ may very well be a necessary but not sufficient attribute for certain tasks (like getting insanely rich, by the looks of it).
I think this is basically correct, and much of the confusion regarding the IQ requirement could be cleared up if it was discussed this way.
Sort of OT: For more on the nature of the "necessary-sufficient" relationship:
http://plato.stanford.edu/entries/necessary-sufficient/
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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well. One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska. Up to the day of his death he was talking about how the US was going bankrupt.
Ever since the 1940s people have been worried about this, so I'm not sure this time is any different. In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.
...and just continue to use up that virtue Charlie Munger was talking about. Then one day, there isn't enough virtue left.
Maybe I'm just dense but what the heck does that even mean?
Inflating away debt is theft by another name, and theft is not virtuous. The trust that a society commands in the market is a function of its overall virtue. Creditors will tolerate an erosion of that virtue for only so long.
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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well. One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska. Up to the day of his death he was talking about how the US was going bankrupt.
Ever since the 1940s people have been worried about this, so I'm not sure this time is any different. In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.
...and just continue to use up that virtue Charlie Munger was talking about. Then one day, there isn't enough virtue left.
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Various financials (via warrants), and natural gas.
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The premise of the balance sheet recession and sustained low rates strikes me as fairly sound at the moment. I would be disinclined to short any bonds for the reason that nothing may happen at all for years.
An alternative is to buy shares of companies who can issue long bonds at close to the 10 or 30 year rates, turn around and make buckets of money off it. JPM did this last summer. I recall MSFT and GE doing this as well. I am sure there were others. Of course JPM squandered the advantage.
Long leap pos: GE, JPm
+1
I expect BRK and BNSF to issue debt any day now...
I mean good grief, Buffett could issue $10 Billion at hardly any cost, and turn around buy a huge slug of AIG at 1/2 IV.
Long leap pos AIG
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Mr. Weinstein was a pioneer in complex credit derivatives, latching onto them early in his tenure at Deutsche Bank, before they became the financial weapons of mass destruction that worsened the financial crisis. He was a profit machine at the bank, notching earnings in 10 of his 11 years trading there. At 27, he became one of the youngest managing directors in the bank’s history. Before his book blew up, Mr. Weinstein was reportedly pulling down about $40 million a year. He exploited price discrepancies and piled leverage into his trades.
Then his team at Deutsche Bank lost $1.8 billion during the 2008 financial crisis. The trading losses ruined bonuses throughout the bank, and ruffled more than a few feathers.
Hilarious.
So today he's again the hot hand at the table, and will no doubt take in more money as a result. And he's sharp as a tack, I'm sure. But what's the over/under on the amount of time it takes for him to blow up again? Would you trust him with your money?
You know, Boaz Weinstein didnt really blow up. He lost lesss than 2 billion which was only an 18% drawdown in 2008 - that really is not bad.
No, that isn't too bad. But I was quoting the story, which I guess was the problem.
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Mr. Weinstein was a pioneer in complex credit derivatives, latching onto them early in his tenure at Deutsche Bank, before they became the financial weapons of mass destruction that worsened the financial crisis. He was a profit machine at the bank, notching earnings in 10 of his 11 years trading there. At 27, he became one of the youngest managing directors in the bank’s history. Before his book blew up, Mr. Weinstein was reportedly pulling down about $40 million a year. He exploited price discrepancies and piled leverage into his trades.
Then his team at Deutsche Bank lost $1.8 billion during the 2008 financial crisis. The trading losses ruined bonuses throughout the bank, and ruffled more than a few feathers.
Hilarious.
So today he's again the hot hand at the table, and will no doubt take in more money as a result. And he's sharp as a tack, I'm sure. But what's the over/under on the amount of time it takes for him to blow up again? Would you trust him with your money?
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I think for most professionals on the board assets limit them to large caps. And maybe individuals feel more comfortable with large caps? Maybe people just keep their best ideas to themselves.
Sometimes (most times?) mispricings are a function of the security's obscurity. Sometimes they are due to complexity. And sometimes mispricings are due to irrational fears of market participants. I'm sure there are other reasons. I don't care - I just want to be on the lookout for mispricings. About 18 months ago I owned a lot of off-the-beaten path small caps. Now I don't.
Don't want to make it sound like I'm bashing the thread - I enjoy your contributions.
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Thanks for posting!
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Hester, I'm sorry to see you go.
:(
You've made helpful contributions and I hope you reconsider.
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I would join a religion, maybe, if they would strip out all the superstition. It's a tall order, I'll admit.
What is "superstition"?
An example would be a spirit impregnating a virgin. Tough to sell me on that.
I'm not sure I understand. What do you think is sufficient to label something a "superstition"? It has to be more than just something that is "tough to sell you on", right? There's lots of things that are at first tough to sell people on, but later we might think are true (e.g. a round earth, the incompleteness theorems, theory of general relativity). Are you saying it's only a matter of perspective, or an objective quality?
No worries if you don't want to answer (this is an investment board after all). I've had similar conversations before with people who use the term, and am just curious.
Thanks.
This is how I view it.
A father has a daughter. He promises her to another man in marriage -- he represents her to this man as a virgin. She gets pregnant before the wedding.
A spirit did it! She is still a virgin. The story protects the good family name.
It's tough to sell me on this kind of a story. I am more prone to believe that she had sex out of wedlock, and that's how she got pregnant. Others will fall (due to supernatural beliefs) for the line that a spirit did it.
I'm not sure what you mean by "supernatural beliefs", or what you assume they could cause, but suppose the story is true (we are a curious, impartial, and tolerant bunch on this board). I at least wonder what the daughter would believe, and what you would call her belief?
What do you think is sufficient to label something a "superstition"? It has to be more than just something that is "tough to sell you on", right?
The role that a "spirit" plays in making a woman pregnant makes it a superstition from where I stand.
But of course ultimately it really doesn't matter where anybody stands, right? It only matters whether something is true or not.
Here is how Encyclopedia Britannica defines superstition -- I'm going to put the parts in bold that I find relevant:
belief, half-belief, or practice for which there appears to be no rational substance. Those who use the term imply that they have certain knowledge or superior evidence for their own scientific, philosophical, or religious convictions. An ambiguous word, it probably cannot be used except subjectively. With this qualification in mind, superstitions may be classified roughly as religious, cultural, and personal
Well we both agree that it would be strange to believe something if it isn't rational (ie, have "rational substance"). But just in the example you gave, there's probably at least one party who would have some pretty damn good rational substance for believing what they believe, even if some hacks on a message board debate about it 2,000 years later. So "superstition" I think just depends on what evidence people have explored, and really isn't anything innate to a belief.
I'll heed Parsad's advice and drop it now...
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I would join a religion, maybe, if they would strip out all the superstition. It's a tall order, I'll admit.
What is "superstition"?
An example would be a spirit impregnating a virgin. Tough to sell me on that.
I'm not sure I understand. What do you think is sufficient to label something a "superstition"? It has to be more than just something that is "tough to sell you on", right? There's lots of things that are at first tough to sell people on, but later we might think are true (e.g. a round earth, the incompleteness theorems, theory of general relativity). Are you saying it's only a matter of perspective, or an objective quality?
No worries if you don't want to answer (this is an investment board after all). I've had similar conversations before with people who use the term, and am just curious.
Thanks.
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I would join a religion, maybe, if they would strip out all the superstition. It's a tall order, I'll admit.
What is "superstition"?
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I'm actually getting excited about AIG as well. More CDO sales coming, fast and furious:
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It is difficult to keep a republic, as Ben Franklin observed. Today in the U.S. we have increasing concentrations of political power, a cultural melting pot, and a distracted populace that is losing it's ability to think critically. It is a situation ripe for demagogues on both sides.
It is why education is still the key to reduce inequality, increase tolerance and to allow prosperity in a society.Really I think wisdom and virtue are the keys to such things:
"In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you." Warren Buffett
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"Doing business differently from others invites criticism, to which we are supremely insensitive." - Sardar Biglari, 2011 shareholder's letter
True in so many ways.
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Here's a good article about pension funds shunning stocks in favor of...bonds!
http://blogs.reuters.com/unstructuredfinance/2012/04/04/whither-the-yale-model/
For the first time in over a decade, more of the $1.246 trillion assets represented by the 100 largest U.S. corporate pension funds is now in bonds instead of equities, according to pension consulting firm Milliman…“There will definitely be less demand for equities from corporate pensions if you look out the next several years,” said Aaron Meder, head of U.S. pension solutions for Legal and General Investment Management America. Corporations are “tired of the volatility in the stock market, so they want to de-risk their pensions,” he added.
...mm-hmm...
This risk aversion among institutional investors is trickling down to the retail level, too. Mom-and-pop investors withdrew $4.43 billion from equity funds last week, the largest amount since the start of the year, data from the Investment Company Institute showed today. These investors are also showing a preference for fixed income: bond funds saw with $6.12 billion in inflows that same week, for a total of over $26 billion in the previous three weeks.:o
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Thanks for any thoughts on the matter.
-Mike
Opportunities arise when lots of holders sell en masse, which is an act of capitulation. Owners feel it after giving up on all reasons to hold.
I try to invert this process, and think about purchases in terms of capitulation: what am I compelled to buy, after giving up on all reasons for not holding? This dramatically shrinks the universe of worthwhile purchase opportunities, which it seems to me, is the way it ought to be.
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From New England, currently in Florida.
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(Channeling Jack Nicholson from A Few Good Men):
"You want capital?! You can't handle the capital!!"
Multi-Family Residential investment case study
in General Discussion
Posted
Thank you Ragnar for the series, and thank you Rabbit for posting. Good stuff!