tooskinneejs

benchmark said: "On the other hand, what if the rate jumps to 10% in 7 years...." What are the terms of the 7/1 ARM you are looking at? Most have a maximum lifetime adjustment of 5%. If that's the case, the 3% ARM could never carry a rate higher than 8%. Also, you could refi again after the 7 years is up and switch over to a 30 year loan or maybe even a 15 year loan. And if your principal balance is $100k less than it otherwise would be in 7 years, the payments on the refi'd loan might be pretty good even with a higher rate. A_Hamilton said: "I say forget the 7/1 and use PenFed's 5/5 Program" I've used PenFed in the past. Their rates are good and the fees are very low. But Benchmark is saying he can get 7 years at 3% rather than only 5 years at 3% currently being offered by PenFed. As long as the fees aren't that different, it's definitely better to get those extra two years.

Alright, I'll go against the grain and give the argument for taking that lower, but variable, rate. Using Karl's mortgage calculator at http://www.drcalculator.com/mortgage/ : Assume a $400,000 mortgage with a 30 year loan at 4.25%: Monthly payment = $1,968 Principal balance in May 2019 (7 years from now) = $345,454 Next, assume a $400,000 mortgage with a 7/1 ARM with an initial rate of 3.00%: Monthly payment (first 7 years) = $1,686 ($281 less) Principal balance in May 2019 = $335,082 ($10,372 less) The difference in the principal balances 7 years from now isn't that great. However, let's assume you pay on the 7/1 ARM using the $1,968 payment you would have had to make on the 30 year fixed. $400,000 mortgage with a 7/1 ARM at 3.00%: Monthly payment (first 7 years) = $1,968 ($1,686 required plus $281 additional each month) Principal balance in May 2019 = $308,755 ($36,699 less) Now we're talking real money. Then the question you face is what is the risk that rates jump a lot and stay high for the remaining 23 years of the loan. Most ARM's limit the rate change to +5%, so the max rate would be 8%. If it jumped that high and stayed there, your payment would be $2,451/month. Could you handle that increase 7 years from now? Even with the maximum rate jump to 8%, it would take approximately 6 more years (i.e., year 13 of the loan) before your total cumulative payments would exceed those under the 4.25% 30 year fixed. Most people don't stay in a house for 13 years. Maybe you won't. Hope this helps. You should definitely double check my numbers (or better yet, run this scenario using your actual principal balance). Good luck.

Arlington, Virginia, United States.

Thanks so much for posting the link to the article. It was very interesting. I posted about Wayfair on this board back in 2010 (when they were still CSN Stores) as a retailer to watch. For as big as they are and as fast as they are growing, most people still haven't heard about them. Here was my post from 2010.... Re: Overstock Declares War on Online Retail « Reply #21 on: November 02, 2010, 10:09:18 AM » If I were to pick an online retailer to watch out for, it would be csnstores.com. I believe it is privately held. I recently built a new house and ended up making many online purchases for the house (fireplace, ceiling fans, plumbing fixtures, porch swing, etc.). I had never heard of CSN before, but stumbled upon their website as I searched for things. They have a very broad selection of products and their prices were consistently lower than most other retailers (traditional or online only, including overstock). I also found that they had excellent customer service.

In all seriousness, yes. But computer viruses can be a real headache too!

I was hoping that they found a cure for all computer viruses. Oh well!

There is even an 'official website': http://www.nationalmortgagesettlement.com/

"how many shares are we talking?" They have indicated that yet, so there is no way to tell how expensive this will be relative to earnings. It won't be anywhere near cheap, that's for sure.

First glance at financials... Year Ended December 31, 2007 2008 2009 2010 2011 (in millions, except per share data) Consolidated Statements of Operations Data: Revenue $ 153 $ 272 $ 777 $ 1,974 $ 3,711 Cost of revenue 41 124 223 493 860 Total costs and expenses 277 327 515 942 1,955 Income (loss) from operations (124 ) (55 ) 262 1,032 1,756 Net income (loss) attributable to Class A and Class B common stockholders$ (138 ) $ (56 ) $ 122 $ 372 $ 668 http://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm#toc287954_8

Hester said: "Maybe Comparing RIMM now to Apple ten years ago doesn't work because the two company's CEO's are different. 10 years ago Apple had some blockhead named Steve Jobs at the helm." The world's view of Steve Jobs now is much different than it was when everyone thought Apple was doomed to fade away or remain only a niche player and, as a result, the stock was barely trading for more the company's net cash per share. History is most useful when not revised.

Stubblejumper said: "What you have in that case is a reprise of WordPerfect..." Eight to ten years ago, people probably made that same analogy when discussing Apple's stock.

If she earned upwards of $500,000 as suggested by that pundit, it seems unlikely that she'd be buying a very modest $144,000 house to retire to.

As a consumer, I welcome this kind of change. I've always thought that the traditional M.O. of department stores (namely, making the consumer work to get a good deal by watching for sales and bringing in coupons such as "20% off plus an extra 10% off") ran counter to serving the best interests of customers. What kind of relationship do you foster with your customers when you make them jump through hoops to get a good price? I haven't been into a JC Penney store in probably 10 years. But this type of change might actually get me to go in and at least take a look. I also like the idea of rounding off the pricing to the nearest dollar. It's a little thing, but I think it helps lessen the cheap feel of the shopping experience.

Tim said: "In addition he has to...completely ignore the corporate level taxes that are paid on his investments." I'd like to better understand your argument for why corporate taxes shouldn't be ignored. After all, taxation of an entity affects its net income and cash flow. Net income and cash flows available for distribution to the owners of the entity affects the purchase price the owners are willing to pay for the entity. Reducing net income and cash flow due to taxation therefore reduces the purchase price you would otherwise have to pay to own the entity (or a partial interest therein). Which leads me to these questions: Given the above, doesn't the lower purchase price offset the effect of 'double taxation' and still provide the investor with the same earnings yield as had the entity not been taxed directly? And wouldn't the return on investment from dividends from an equity security remain unchanged whether the entity paying those dividends was taxed prior to payment or not?

"He has to use a non-representative example of the rich. His 17% rate is much lower than the average 27% effective rate those with incomes over $10 million pay." So then are you ok with having those who fit into your "non-representative example" category (i.e., those who pay much less than a 27% effective rate) pay higher rates? "In addition he has to attribute both the employee and employer share of payroll taxes to the employee" Are the employee's share of payroll taxes not taxes? And as long as he counts the employee's share for both himself and his secretary, isn't the comparison fair? With regard to the employer's share of payroll taxes, are they also not taxes? Isn't that an added cost of employing someone for the employer that, if not paid in taxes, might be able to be paid as compensation to the employee (and is there any difference in substance between the employer paying the 'employer share' of taxes or paying the employee that amount as additional compensation and then withholding that same additional amount as additional 'employee share' of payroll taxes?)? "There are good reasons why dividends and capital gains are treated differently than income. They have already been, or will be, taxed at a 35% rate." Is that true of carried interest?

Sanjeev said: "what if two more lenders do the same?" Today's WSJ article indicates that this is a real possibility... "Several lenders who finance small suppliers to Sears and Kmart say they are pushing for more timely financial information and faster payment terms as they grow worried about the struggling retailer's future."

peter_burke_ceo said: "I can see somebody throwing a few hundred thousand of $$ "good money after bad". but would a smart person do that with $150M?" http://www.cbsnews.com/8301-505123_162-57356776/twinkies-maker-hostess-inc-files-for-bankruptcy/ "Hostess Brands Inc., the maker of Wonder Bread and Twinkies, re-filed for Chapter 11 bankruptcy protection Wednesday, just two years after emerging." "Hostess' private-equity owner, Ripplewood Holdings, put $40 million into Hostess last year, and hedge funds including Monarch Alternative Capital and Silver Point Capital loaned the company $20 million late in 2011." It happens all the time.

frankhkii said: "This is obviously not good news but something Eddie doesn't seem too concerned about and he has more information/perspective than all of us." With regard to Lampert's continued investment, it could mean he has inside info that we don't have and that things are going to take a drastic turn for the better. But that would be trading on inside information right? His continued investment could also be a number of other things such as: -putting on a confidence game to reassure other investors or suppliers -throwing good money after bad -continuing to misread the prospects for the company (one could argue that spending $5 billion to repurchase shares now worth 70% less shows that he has seriously misread the prospects up until this point) Please take this constructively, but I literally cringe when I hear people make statements to the effect that "he must know something we don't" or "he must have a better perspective than me." I don't profess to be god's gift to investing wisdom, but if there is one thing I have learned over my time investing, it is to not blindly trust in management nor believe or assume that they must know something (positive) that you don't know. Even if they continue to say everything is going to be fine. Even if they go out and buy some stock. Don't rely on them! Rely on your own good judgment based on the current facts about the business itself when viewed as objectively as possible.

Could this eventually be a Canadian version of the very successful Buckle (NYSE: BKE)? http://www.buckle.com/

"We've seen funny things happen. In crisis, the vendors can demand upfront cash, causing severe liquidity issues." This happened with Circuit City back in 2008. Circuit City was experiencing declining sales but still looked healthy from a balance sheet perspective. As of August 31, 2008, it had shareholders' equity of over $1 billion, positive working capital (current assets less current liabilities) of $481 million, and a debt to equity ratio of only 0.26. Yet two months later, in November 2008, the company filed for bankruptcy protection. Why? Because suppliers got nervous, cut off credit, and demanded cash up front for shipments. http://en.wikipedia.org/wiki/Circuit_City_Stores#Bankruptcy_and_liquidation I'm not saying that this will happen with Sears, but as vish_ram said, it is a possibility. The black swan event.

"What are these 140 to 170 m$: the proceed from inventory liquidation, or the profit from inventory liquidation? Or the net proceed from inventory liquidation (inventory less payables and debt from the stores). Does someone have an idea?" I assume its the cash proceeds from the sale of the inventory net of any payables to suppliers.

A few observations: 1. Based on today's press release, shareholders' equity will be cut by $2.2 to $2.4 billion in the 4th quarter due to asset impairments (deferred tax assets and goodwill). This means approximately 32% of shareholders' equity has vaporized. 2. In addition, it appears the Company expects a large 4th quarter operating and net loss even before these asset impairments. So equity will shrink even further. 3. The company says its plan is as follows: "We intend to accentuate our focus and resources to our better performing stores with the goal of converting their customer experience into a world-class integrated retail experience." Does anyone really think they can transform their stores into a world-class retail experience? While not investing in them? Or even if they did invest billions into them? I'd give this only slightly better odds than Montgomery Wards making a comeback. 4. I have no horse in this race. But one mistake I think many are making is relying on an 'authority's' perceived investment/management accumen. I keep reading statements like "Eddie must know something," or "Lampert wouldn't still be invested in this if he didn't have a good plan." The fact is, even the experts make mistakes. Running a retail operation is extremely difficult. Reviving a dying one is next to impossible. Being a good investor doesn't make one a good merchant. 5. From fiscal year 2006 through October 29, 2011, the company has spent $5,365,000,000 of shareholders' money buying shares at an average cost of $101.60 per share. Today's price is approximately $35 per share. That's a 65% loss on over $5 billion of investors' money. An awful lot of things are going to have to go very right just to make up for this loss, let alone the ongoing operating losses and periodic asset impairments. Maybe the price is right now, but I'm skeptical. To me, this looks like a classic 'value' trap.

"Some of these stores have flat rents for the next 40 years @$2-4psf which leaves a lot of room for profitability..." With such low occupancy costs, one should reasonably expect the company to be gushing operating income, right? Instead, operating margins were 1% for fiscal 2010 and -3% for the 39 weeks ended October 29, 2011. So despite (supposedly) having very favorable occupancy costs, the company can't even generate decent income from operations? Is that a sign of a good business? And what is long term direction of the company's retail profitability when you have six years of continually declining sales and major under-investment in store maintenance? "It makes more sense that Eddie is holding the real estate/leases because of its underlying value." I heard this five years ago. Everyone was hyped on Lampert 'unlocking' some kind of secret value in the real estate/leases. Nothing has happened since and I still haven't heard anything that indicates what might happen and when. "I believe that Sears would be able to shrewdly negotiate its way out of leases on most unprofitable stores if they wanted to." Why wouldn't they want to get rid of their most unprofitable stores? And if they do want to get rid of them and can do so easily, why haven't they?

Welcome textual. "He is not looking to bankrupt SHLD and make it go into the history books as his Waterloo. He actually intends to make this a transformation." A transformation to what? What is the end game? What will this company look like and be in 5 or 10 years? Thanks.

"Inventory (at cost) net of accounts payable is higher than the market cap. At retail price, owned inventory is significantly higher than the market cap." What about the $4 billion or so of net debt that would need to be paid off to own the business (or its assets) free and clear? "Too many stores are losing money, yet they stay open, even though it would seem the company could make a lot of money if the lagging stores were closed." Outstanding lease obligations. Maybe they believe its better to cover part of your lease costs rather than none of it.