ubuy2wron
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Posts posted by ubuy2wron
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I sold my stock and then legged into a bull spread with the Feb 2010 60 and 65 options with a cost of 2.00 net.
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A short article on seeking alpha re El Nino the article in itself is of little interest but the links it provides gives some interesting data.
http://seekingalpha.com/article/160298-chart-of-the-week-peak-hurricane-season-is-here
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I don't think that there was any leak. The share price of Odyssey Re was actually down on Friday on lower trading volume than normal. ORH had been going up since early July in a very similar fashion as FFH with FFH gaining more in percentage. The charts of both stocks are near identical since mid February.
Despite many signs that Fairfax was preparing a take-over, I was actually quite surprised to see so little action in ORH.
A big difference with the NB take-over is that they don't have the cash in hand to do the deal. Well, they don't want to use their existing cash to do it. BofA Merrill Lynch may have had something to do with the timing for the announcement. When you have a lot of people involved then the risk for a leak increases materially.
Also, please note in the press release how much emphasis is placed on premium to market and above valuation of peers. If Odyssey Re kept on climbing then $60 would have looked even less attractive. Then with the hurricane season turning into a non event and better capital markets, it is quite likely that this peer group undervaluation could have disappeared. RE, PRE, RNR and MRH all have strong climbing share price as of late.
Finally, we never saw 4th quarter financial results for Northbridge despite the shareholder vote and transaction occuring after year end. They probably have even less interest in this case to show us and to the bankers preparing the formal valuation these 3rd quarter results ending on September 30. If anyone knows the SEC rules for preparing financial statements, this may also help understand the timing.
Cardboard
cardboard within 15 minutes of the debt deal for Fairfax being announced their was a print of 1500 contracts of the ORH 60 options it was a bull spread. I used that print to figure out that something was up and bought some ORH stock and and options myself. That trade was unusual ,also this board was full of take-over talk. The posters here just used their powers of deduction the parties taking on that option trade, me thinks perhaps were relying on more than a hunch. Traders will give anecdotal evidence that volume increases and unusual option activity often preceeds the announcement of a takeover. I mean its understandible right ,I-Bankers and wall street lawyers are sooooo poorly compensated a little a little larceny is the only way they can make ends meet.
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This is an interesting problem with practical applications. If you use the investment banks as a proxy for the doors then you would clearly improve your returns by selling one investment bank and purchasing another after the goat Lehman Bros or Bear Sterns is revealed. Also it is humorous to consider that as value managers we actively select invest in the doors that have had goats revealed frequently behind because we understand that the true odds of a goat being revealed on subsequent openings is dependent on the total number of goats in game. Unless of course there is some sort of contigent probablility at work. In the real world it does seem that a door that has revealed a goat in the past does seem to have higher chance of revealing a goat in the future.
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My advice is spend at least 48 hours investigating the intracacies of any etf commodity play particularly the levered etf,s. The smart hedgies just short both sides of the the bull and bear commodity etf's and eat the speculators capital, the contango which is very steep right now is another factor which can quickly eat up your returns these things generaly are poison to the ill informed. That said I am also very interested in gas plays and I am interested in anyones ideas out there. T. Boone is right ,Nat gas should be a major transportation fuel in N.A. It makes way more sense than gasohol. Just mandating truckers convert to Nat Gas would do wonders for balance of trade.Gas-t
Does GAS-t accurately track the price of the gas index over long periods of time? I seem to recall that some other ETFs have suffered substantially from volatility and have failed to track their index.
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A few of you scare me with all that cash. No one knows when and by how much, but we are certain to have above average inflation. The purchasing power of your cash holdings will effectively be taxed by an amount equal to the difference between the interest rate on cash and the inflation rate.
You are correct to worry about elevated inflation Mpauls, but I don't think most of them will hold cash for any prolonged period where the value of their dollar will erode significantly. They are mostly just biding their time waiting for the next fat pitch. Cheers!
My personal asset allocation approx. 40% cash its gone up in the last 6 weeks
10% FFH 5% RSI.un
15% a little of this and that
10% ORH
15% YLO.un
5% VLN
The only thing that is appreciating right now are commodities and securities in the real world stuff is getting cheaper so the return on cash is not as bleak as one may think and yes I am waiting for some more fat pitches.
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Cardboard, Ericopoly, et al:
While we're talking ORH share counts and conspiracy theories, does anyone have any more insight regarding the big block trade(s) that happened on June 26th, when volume was >2.5M shares? In quarter ending June 30th, it doesn't look like any specific institutional investors added (max +173K) or reduced (min -678K) their positions near enough to account individually for the activity.
http://www.nasdaq.com/asp/holdings.asp?symbol=ORH&selected=ORH&FormType=Institutional
The short position took a dramatic drop at the same time ,I suspect that was short covering. Very good timing on the part of the shorts if I am in fact correct.
I think if you gobble up 2.5M shares on a nibble by nibble basis, and then sell it in one big block, it shows you having zero net activity in this report.
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It will close in 2010 but it will be anounced this month. ORH traded $1.00 higher in the after mkt on friday and 2500 of the 2010 bull spreads 60 65 were put on Thursday and Friday.Of course this is just speculation on my part :)
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I sold some long term 350 leaps today against a long term deep in the money call position. I also purchased some ORH with the proceeds of the sale. I feel particularly smart today which usualy means I am about to lose some money.
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Sorry I should have indicated this was for ORH. Someone just bet 67,500 that ORH would be trading north of $60.00 by November.Someone just put on a large bull spread for 1500 contracts NOV expiry 60-65. Some one knows sumpin or thinks they know sumpin.
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Someone just put on a large bull spread for 1500 contracts NOV expiry 60-65. Some one knows sumpin or thinks they know sumpin.
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Warren is converting a's to B's and then donating the B's to the Gates foundation which then sells them. I have not thought this through but at some time control of Berkshire has to come into play
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I agree on every point except it is not an isurance company and a mutual find it is an insurance company and a hedge fund without the 2/20 vig. I look at anything less than BV with this co. as a giftI couldn't agree more. Even if float has a cost . .. maybe a few percent per year over time . .. it is a huge advantage for a long term investor like Hamblin Watsa. That being said, I think some of us are focused too much on the last few years and not enough on the next few. In the spirit of Ericopoly's post, I posit the following points. If I am wrong on any of these, you would be doing me a great service to point that out. Thanks:
1) To roughly paraphrase Prem, reserves are in the best shape they have been in for years. I think the company is certainly overreserved at this point, which is both tax efficient and provides a hidden asset. This will improve the CR as excess reserves roll off
2) I think FFH has a higher combined ratio than some competitors right now because of their expense ratio not their loss ratio. I believe that they are writing good business, they just have an organization that is sized to write more business. I think this is an asset and that when the market hardens, we will benefit both from lower loss ratios and lower expense ratios (because the expenses will be spread over more business) at the same time.
3) After a couple of years of FFH holding safe low-yielding investments, we are now seeing what happens when they can finally reach (safely) for some yield. $10 per share, per quarter, in passive interest and dividend income is a beautiful thing.
4) While we are starting to enjoy "success mode" on the investment side (I don't mean capital gains, but the type of repeatable passive income that insurance company analysts look for in valuing a company), we still haven't seen "success mode" on the insurance side. We all patiently waited for FFH to deploy their treasuries into better investments, I don't understand why everyone is so impatient with the insurance operations. I think this is a huge asset that they will deploy (write more business) at the right time. When the market turns we will be in a position to write more business than ever, and likely at some of the best CR's in the industry.
5) The possible affect of writing more business at a 95% (or better) CR at the same time as earning an after tax 5% return (or better) on the FI portfolio is likely event at some point in the next few years. Over a float/asset base of $16B this would lead to 33% book value growth from operating income alone.
This isn't a hedge fund and this isn't "success mode" . . . FFH has made a lot of progress and I believe they have built the right vehicle, but they aren't at the finish line yet. I think FFH's insurance operations (and the income associated with the float) can add 10-20% to BV per year over the next few years.
As I have said before (and I still don't think anyone has agreed with me on this) I think FFH is a mutual fund (equities) plus an insurance company (float and associated FI assets). If the insurance company adds 10% to the mutual fund's performance each year, and the mutual fund is well managed and will probably beat the S&P 500 on its own . . . then the question is, what should you pay to buy this mutual fund.
I think 10% from the insurance side will be an easy bogey to hit over the next few years. If the expected return of the stock market is less than 10% over the next few years (which is likely in my opinion) then I think you could say the insurance portion is worth as much as the mutual fund (tangible book) portion. This suggests to me that the company is worth 2X book value.
I am not suggesting anyone pay 2X book, but I am suggesting:
1) for this company to not trade at some meaninful premium to tangible book (adjusting both the goodwill and ICICI position - which basically cancel out) is very very silly
2) FFH is a slumbering giant in insurance right now. The current combined ratios should be critisized no more than the 3% yields they were getting on ten year treasuries. Safety and prepartion for a big opportunity is worth far more than a few percent per year.
I welcome (and even request) any and all criticism of the above
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I do not own this name however the Harlequin business stand alone value is probably greater than the whole company mkt cap now which means Mr Mkt. is putting a negative value on their newpaper assets right now. The newspapaer business is brutal , a cyclical down turn on top of a secular downtrend not a pretty place to be. I suspect that FP will disappear this will help some. I wonder when some large city daillies make the decision to stop publishing a paper edition and go entirely electronic.
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Some one with very thick fingers was trading FFH options this morning I was legging into a bull spread on a leap and sold some calls this AM 15.00 above where they should have been filled, once in a while the trading muses smile upon you. Its possible this all some sophisticated attempt at capturing some preceived option mis-pricing but from what I can see it looks like a bunch of bear spreads were put on. I still think however that the law suit against the hedgies could be a very valuable wild card. If it is a big conspiracy as suspected by some then one participant could cave but buy a bunch of options before doing so and screw all the other players and perhaps escape prosecution and liability.
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From a quick look of the airline financial statements a while back, only Southwest and WestJet were interesting. I've read a lot about Southwest's culture, at least what was written in Fortune (maybe 10 years ago). WestJet has the commercials about their workers being owners. That's a pretty good message.
The culture matters. I have flown West Jet recently and it is now my first choice I actually would pay more (not much more) to fly them in the future if you put a gun to my head and said you have to buy an airline my first response would be pull the trigger however if you said I will shoot your dog I would probably pick West Jet thinking long term I will loose less. I actually think Aeroplan which is the affinity program spun off from Air Canada an interesting proposition I think of it in the same bucket as Warrens investment in the Savings stamps company if Air Canada remains solvent it is worth owning but I am not sure of Air Canadas solvency.
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The US economy is about to get decidedly better for the simple fact that the two most important parts of the economy housing and the auto industry are not going to get worse. The production of new autos and new homes are currently at post WW2 lows if consummers are not purchasing homes and cars the US has no economy as pretty much everything else other than agricuture is imported. I am in the Bernanke camp in that depressions are caused by policy errors (central governments stepping on the brakes instead of the gas in periods economic contraction) while the debt levels the US treasury is incurring take your breath away they are no larger than those incurred in WW2 which eventualy ended the great depression. I see the history books labeling this as the great recession and yes it will sear itself on peoples psyche and change behaviour but it should result in investment opportunities that are frankly perfect for Buffet followers.
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The potential damages on this action may be substantialy larger than anyone can imagine. American juries have a reputation of making VERY large awards if they feel one parties actions have been particularly egregious. If the rats start turning on each other it could get interesting you could even see a situation were one hedgie starts aggressively buying FFH and then offering to cut a deal . I will sing like a canary in exchange for immunity.
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Parsad, the Main and Hastings area of Vancouver has been in decline a little longer than 20 to 30 years. More like 50 plus years that being said it is a travesty that conditions like that exist in the midst of such ample plenty. As Patrick so aptly described the "War on Drugs" was lost before it was started. Drug addiction is the source of a huge portion of petty crime in our fair city some estimates put it as high as 70-80%. Drug addicts are breaking into houses shopping, lifting etc.Their suppliers are shooting each other and innocent bystanders in market controll struggles and the funds eventualy find themselves back into the prime heroin sources which is Afghanistan and Pakistan and fund the terrorist activities which send Canadian boys home in body bags. Heroin and other illegal drugs would cost as much as aspirin if they were legally available with a prescription. It has also been said that most of the the hetero sexual aids transmission is occuring because of prostitution being the favorite means of employment for female addicts. It seems to me by legalizing drugs and strictly controlling there access we 1 reduce crime by a huge margin 2 stop the most important source of funding for terrorists 3 dramatically reduce the incidence Aids in the population, I certainly could come up with a much more extensive list. The downside is that a small additional percentage of individuals MAY become addicted if the stigma of illegality were removed. Given that the majority of negative consequences for the addicted evolve form its illegality as opposed to the addiction itself I for one would support the trade off.
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Ok then who has been swimming naked! AIG clearly forgot their bathing suit when it came to underwriting the risks on CDS's they had a reputation however for being pretty sensible to their traditional underwriting.
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By any chance, does anyone know what the general rental yields are in major Canadian cities or suburbs?
rough ball park ...Cash on cash, net returns in Vancouver are very low think 3 percent, they are higher think mid to high single digit in the rest of the country with higher returns available in Winnipeg and markets which have had very little or modest appreciation. Investors in Canada take on a huge interest rate risk if using a mortgage in Canada as 5 year term mortgages are about the longest term you can lock in interest rates at reasonable rates for the residential market. The returns available in markets like Arizona(Phoenix are MUCH MUCH higher plus you can get a 30 year fixed rate mortgage. I can not understand how you can have homelessnes in the US when perfectly sound housing is available for a mortgage payment of 350 per month. You can make that much collecting bottles !!!!!
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\\Ben some of the Cdn. banks are lending with pretty close to zero down however I am unclear as to how much of the risk they are retaining. Genworth just did an IPO yesterday in Canada it was priced at the bottom of their indicated range and it was almost entirely a secondary offering. Genworth is the private mortgage insurer in Canada. I have not looked into this, the greensheet indicated that Genworth had zero finanical leverage however I am unsure how many dollars of mortgages they are guaranteeing and what would happen to their equity if we had a serious real estate set back. The one difference on mortgages in Canada is you can not just walk away you have to declare bancruptcy in Canada before you can walk away from the liability on an upside down mortgage.In local lenders in the Vancouver market that are doing anything particularly stupid that we should be looking at for potential short ideas?
There has to be an opportunity here, and there is zero media coverage of this.
Ben
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Crip and Sharper, you both have hit the nail squarely on the head. His only chance at redeeming his soul is to sing like a canary however his life expectancy in jail will be very short if he does.
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Captured regulators and SEC investigations. Does anyone doubt that a segement of the hedge fund industry were playing a very profitable little game. Take on a largish short position and then turn over a file of concocted evidence to the SEC re their targets. Jim Chanos appears to have an almost god like reputation amongst some because of his call on Enron which he then fed to Bethany Maclean which made her reputation. The smart guys figured out however that you did not have to be right on your thesis, in the post Enron era you just had to call out the hounds and you made a bunch of dough. I think this is really what should be investigated. In the end fear is a much more powerfull emotion than greed and it is more likely to generate a knee jerk reaction in the mkt place which a manipulative trader can profit from.
Westaim
in General Discussion
Posted
Goodwood are pretty credible value guys from all I have seen.