Uccmal

You are correct. But I dont think you will be seeing any favours for this. Consider it a gift to be allowed to stay in business 3 years ago.

Does it strike anyone as odd that the S&P downgraded US treasuries, then there is a market rout, and a flight to safety.... In US treasuries.

American fear of taxes boggles my mind. In Canada we are paying the equivalent of 4.80 US a gallon for gas more or less. I was just in New England (greater Boston) and gas prices were at least $1.00 difference than at home. That dollar is tax. Based on the Us automobiles using 40 gallons/barrel * 15 million gallons of gas per day an additional tax of $1.00 per gallon would raise 200 B per year. My point is that there are plenty of ways to raise the money from a general Value Added Tax. Believe it or not the economy adjusts. Value added taxes as much as I hate them do less economic damage because they tax consumption rather than individuals. What the US needs is real political leadership, not game playing. Someone needs to stand up and say we are rasing taxes for the good of everyone.

This is totally perverse. Totally. If the US has had its rating lowered then you have to lower everyone elses ratings in tandem. Canada is totally reliant on the good credit of the US, as is China, the UK, Germany etc. Ludicrous and meaningless bullshit. A good wake up call none-the-less.

Eric, the advantage of the warrants is that you can buy twice as much for the same price. If it moves rapidly above the strike price in the next 2-3 years the warrants will trade in tandem. Example: BAC at $8.00 today BAC warrant at 3.75 Within two years so there is time value unhindered: BAC at $20 BAC warrant at 15.75 (say $15 for arguments sake to account for some time decay) 1000 shares of BAC at 8000 going to 20000 = 12000 2130 warrants at 3.75: 8000 going to 15*15 = 22500 = 14500 (excludes dividends which of course amplifies the effect) The only advantage in the warrants is in the leverage. The greater the gain the greater the advantage. Most of it hinges on the gain in BAC stock. BAC is taking its medicine. It has been my personal observation that well run companies who take their medicine (FFH for example) grow far stronger than they ever were before.

Margin calls I expect.

Seriously though... the Pres wants to get re-elected. Congress wont block him from "QEing all the way to the election", and more unconventional projects, lest they be accused of ruining the economy. I think it is just a matter of timing. They want to go into the election with as much in their favour as possible. The average returns coming in the last year to a pres. election have been 12%, with no down years ever... so I have read somwhere.

I dont know why your worried about this: Buffett says to "buy when others are fearful and sell when others are greedy" and Ben Graham says to buy when there's blood in the streets. Hee, hee.... ;)

Now switching and moving up the quality curve. sold some Merc, Safety Bulkers, fbk in the last couple of days - all at minor losses. Buying SSW, WFC Warrants, Sun Life, BAC Warrants, MFC (small amounts in RSPs). FFH is proving the perfect hedge in this environment. Each major down day sees FFH up.

rijk, What you are really proposing by shorting IRE is insurance on the stock going lower, or never rising. The most likely outcome is that the BKIR shares rise to the value of the ADR units. In that case there would be no gain with your proposal. Better to work out if one thinks the capitalization will be enough, and buy the BKIR shares and forget about the ADRs.

They dont break out individual investments unless it becomes part of the consolidated results.

You are correct rijk. I was trying to figure this out as well. I get a conversion number of around 0.60-0.70 US depending on the currency situation. It is however impossible to arbitrage. Very strange.

That summarizes it nicely. Maybe the price will go down a little.

You need to look at the breakdown of expenditures. There would be a hierarchy of those who get paid in decending order. I would think it would operate similar to when a private company runs low on cash and cannot borrow. I went through this with a company once. Stop paying bills to outside suppliers first - anyone notice that GE stock has taken a hit even with improved earnings. Then cut transfers to municipalities/states for repair and infra projects; somewhere in the middle would lie social security payments which is the big daddy, and interest on the debt, and at the very bottom lies military paychecks, and military operating supplies.

Well, Wilbur Ross was the aggregator of International Coal Group so I guess this makes #2. I find this IRE deal fascinating.

Too many frictional costs on direct currency transactions to make it worthwhile. I buy US stocks regardless of the currency relationship. In the long term the performance of a position will outweigh currency fluctuations. That being said, a Canadian owning BRK would have been hard pressed to make any money since after it rebounded from the lows of 1999-2000. I assume that once the Obama.Boenher circus is behind us the US dollar will return to its safe haven status. I still question the relevancy of any of this since the US is still the safest place to hold money regardless of the outcome. Outcomes: 1) most likely - a compromise of some sort is reached by Tuesday 2) less likely - default on payments starts next week or later - Obama has to step in and take over the entire situation and looks like a hero. 3) least likely - a default starts, continues. The ratings agencies downgrade US debt. Congress continues to meet and hammers out a situation and the President signs it. I dont see the Canadian dollar dropping below 1.02 regardless of the positive outcome. There might be some very short term currency arbitrage opportunities if there is a default but you need a spread of at least 3% to make any money.

Going to lunch has a strange effect on stocks posted on this board. I recall in 2006/07 when Sanj. went for lunch and came back to find FFH up around $20.00... it never went back down.

Then we, value investors, sell, and wait it out. Take a trip. Pay off the house. Buy a cheap vacation home. Develop a costly drug addiction - the answer to all your excess money problems. :-)

Sorry Rabbit, I meant that banking in total is a consistent business model, not necessarily I-banking. As you say, certain things need to be kept in check. Moynihan appears to be capable of keeping a lid on things, so far... He came out of retail banking.

I dont think banks are any more of a Black Box than anything else. They are fairly simple entities. They borrow money at one interest rate, loan it out at a hopefully higher rate, and charge their customers fees to borrow their customers money. Investment banking is a fee based business. The whole model when run semi-competently is pretty consistent and safe. Problems happen when you have a loose cannon like Ken Lewis bent on world domination. Moynihan is not that man. Good article on him in Fortune this week. What you have with BAC is essentially the largest retail banking operation in the US. They are number one or two across all major retail categories. They have an ongoing mortgage business. And then there is the runoff portion which is shrinking exactly, as runoff at that other black box I hold (FFH) shrank. I hold the warrants and have been buying at these levels. I have read the 10 k from last year and kept up with the story. I expect by 2015 they will reach Moynihan's goal of 20 B/year income without acquistions.

re: Japan, Would you really want to move there to support their old people. I know I wouldn't. Anyway, the position in the US is one where the government has deliberately set up the corporations to succeed. Recall Prem's 20%/80% formula of two years ago or so. The US government will continue to supply cheap money to companies as long as it is needed. The purpose ultimately is to reflate private sector spending. It will work eventually. If companies start to pay dividends there are tax benefits for the government, income for individuals etc. If they start to hire thats even better. I dont believe that a jobless recovery is a permanent state. The US is undergoing a massive deleveraging and are somewhat through the process. I expect the jobs rebound will be in full force by early 2012, just ahead of the election. You dont want it coming too soon if you are a Dem in office. There is likely to be overkill in the other direction, just in time for a new Republican spendathon in 2017.

Well, pulp prices are mostly unchanged as far as FBK is concerned. I dont imagine they are getting the FOEX listed price so I doubt that the slight price drop has affected their income at all. Should still be good. The currency is a concern, but likely only temporary (currency was similar last summer). We are hitting an extreme due to the Washington circus. So that leaves what: - FBK with less total debt (no debentures anymore) and positive cash flow - unchanged situation with US plants which dont worry about exchange rate. - pulp price somewhat higher in Q2 than Q1, than Q4 etc - stable at the moment. - debt dropping daily I bought 5000 shares today at a price way below what I paid last summer (1.00) in comparison to what I am getting today.

Carson block aside, If I were a Chinese Regulator in the Securities Market I would be getting very concerned that the baby is going to get thrown out with the bath water. If this persists it will kill legitimate foreign investment in China for years to come. It may become a value investors wet dream one day.

Your probably right Ragnar... Things are never that predicatable.

I guess if the US Triple A gets downgraded to AA+ or whatever, then AA+ becomes the new triple A. What is there that can possibly have better credit than the US government? Anyone who relies on the US for business, which by extension is everyone on Earth, will have to take a downgrade as well. There will be a monster rally once the agreement is reached whether it is by the deadline or later. Suppose the US peacekeeping and active military is sidelined without pay for a few days, or the US civil service. Talk about a miserable situation.