claphands22

How do you get derivatives like these? My knowledge of derivatives equates my knowledge of plumbing. I take it this isn't just a two year call option.

It's in the annual letter on fairfax.ca Thanks Liberty

Hey Omagh, Do you have the source link? Want to read the whole article but can't seem to find it on google. Thanks!

Lots of interesting information. More color on the derivatives contracts and a refresher on how he values Berkshire. "..., I can estimate that the normal earning power of the assets we currently own is about $17 billion pre-tax and $12 billion after-tax, excluding any capital gains or losses."

2010 Annual Letter is released http://www.berkshirehathaway.com/letters/2010ltr.pdf

Yeah, I have been chatting with Yu. I am starting to think buying CDS on the banks is too speculative, although reasonably speculative. I've been investigating Westpac, and what I've noticed, with the help of spin, is that most of the loans have a very low LVR with an average LVR of 44%. The loans with LVR of 80% or above are insured. Although, I am worried about how they are insured; the loss of bank capital is probably less than what we think if Australia has a bubble pop. pg 48 of the Investor Presentation explains the LVR dynamics. http://www.westpac.com.au/docs/pdf/aw/ic/2010_FY10_IDP1.pdf Are options on Australian stocks not available on Interactive Brokers? I didn't know SEC doesn't allow options on foreign exchanges. Also, I called up DB in Singapore to investigate buying CDS. They weren't interested in working with me since I'm not an institutional buyer. Also from what I understand, you'll need at least 5M to even buy these.

Hey Eric, I'm definitely not arguing with you about the bubble. I think we are on the same page. Right now, I'm focused on what instrument I should use for this idea. The banks might be better capitalized than I originally thought, so they might not be best thing to short. CDS are interesting, but I think buying them would be a pain. From what I understand buying one requires a lot of capital and if I do decide to this is the best option, then I'll have to pool my capital with a few partners. Also, even though I believe the CDS will widen during a crisis - I'd rather have better fundamental analysis so I know when to sell the CDS. Also, CDS depend on a "credit event" - which, I'm not even sure what that means. So, there is lots of me to figure out and analyze before I even come close to making a decision. I'd think Munger would suggest me to put this in the too complicated pile and move forward, but I find this idea extremely interesting.

Ericopoly, Interesting, didn't know Florida had full recourse loans as well. Yes, the recourse structure on loans doesn't prohibit someone from doing something stupid - but it is more likely they would continue paying the mortgage even if the value of the home is greater than the mortgage price.

Yes, I was wrong. They are selling for a slightly higher, if not negligible premium. Interesting point about National Australia & and about how australian loans are full recourse. I'd imagine there will be much less defaulters in Australia if there is a crash because it's full recourse. Have you purchased any CDS so far? I'm currently thinking about how to go about buying a CDS position but I am not sure how to go about it.

We had short e-mail conversation. He said with a Bloomberg it's easy to find the CDS prices; he hasn't seen any cracks in residential but he is watching Kellyville which he calls ground zero. I asked him why, and he said Kellyville = inland empire. Wish I had access to a Bloomberg.

Excellent Spin! Just eyeballing some of the CDS prices it seems the Australian banks CDS are already selling for a premium. I am going to try to dig into the MBS today and see what I can find. I wonder where to find the CDS pricing for individual CDOs.

Thanks Ben. I'll see if I can get a hold of John Hempton. Also, if anyone here has a strong point of view on Westpac/Commonwealth/Aussie Home Loans - I'd love to have a discussion with you. If you don't feel like responding via the thread please send me an e-mail at wallis(dot)joshua[at]gmail(dot)com

Anyone know how to find what the current CDS rates on Australian banks are going for? Especially, Westpac & Commonwealth? I also would like to dig into some of the RMBS that have been coming out of westpac/commonwealth/aussie home loans, yet I don't know how to go about find the prospectus. Any help would be appreciated.

Parsad, thanks for digging up the interview.

Tim seems like a great guy, definitely someone you want to have a beer with. Does anyone have the old interview Parsad did with McElvaine? It was on the old MSN brk/board.

Great post, thanks for sharing.

Michael Lewis visited Stephen Colbert last Tuesday to promote the paperback version of The Big Short. (http://www.colbertnation.com/the-colbert-report-videos/372964/february-01-2011/michael-lewis) At 4:15, Michael Lewis gave out investment advice: the nickel. Michael Lewis said one of the characters of The Big Short did the math and found out the metal content of a nickel is worth 7 cents. Then this investor called up his local bank to buy twenty million nickels. Michael Lewis didn't name the person but, I'd bet a farm with water rights, it was Michael Burry. The whole thing made me grin. It is an interesting idea. It's the world's cheapest inflation hedge - if not the most immediately profitable. So far all the gold bugs out there - sell your gold and buy nickels! =P -- Three quick things. 1.) Here is a web site about the current melt value of coins. http://www.coinflation.com/ 2.) It's illegal melt nickels and sell the metal content. 3.) For all the Michael Lewis lovers out there. He recently wrote a great article on Vanity Fair about economic crisis in Ireland. Which probably has the best quote ever by a Prime Minister “Lehman’s was a world investment bank. They had testicles everywhere.” - Berti Ahern http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all Enjoy! EDIT: I was wrong, I read the introduction to Boomberang and Michael Lewis was referring to Kyle Bass. I owe someone a watery farm.

Happy New Year Zippy =) Yeah, bugging wives is the leading cause of bubble apartment buying, haha. The adjusted rate mortgages are interesting, once this rate goes up there will be a great deal of suffering among mortgage holders. It will be really interesting to see what happens going forward. Do you have real estate shops opening up left and right in Hsinchu? In Taipei they are popping up like mushrooms. There are 5 real estate shops, five minutes away from my door.

This is all really nutty stuff. Taiwan has an obvious real estate bubble as well. Lots modern apartments are being built up but are incredibly empty. It's even more maddening because the country has a birth rate of less than one child per woman. Who, demographically, is going to be living there in the future? For example, I am currently in my girlfriend's sister's house in the Taichung countryside for Chinese New Year. The building is 10 years old, in the middle no where, and rice fields are on three sides of the housing community. They bought the house a year ago for 4,000,000NT they could have rent out the building for 120,000NT Which gives you a price to rent ratio of 33.3 . Of course the rent doesn't deduct any future repairs or loss of income due to inoccupancy. The kicker is, this place is on the cheap side compared to Taipei!

Video of Herb Greenberg from CNBC and David Gentry from RedChip discussing chinese RTO companies. RedChip is a company specializing in providing IR services for chinese RTO companies. I enjoyed the debate. http://www.cnbc.com/id/41024808

Seven page article about RTO chinese small caps, the alleged frauds and the people who shorted them http://www.businessweek.com/magazine/content/11_04/b4212058566865.htm very enjoyable

WINN won't be worth much if they had to liquidate. They lease almost all their stores and severance packages would be expensive. A run off wouldn't be a bad idea, but they are kind of doing that now. They've recently closed 30 under performing stores and have cut people from the headquarters, so they are whittling down. I don't want to defend the idea too much, since the more I defend it the more trouble I have selling it but I welcome any ideas that are short winn dixie (already read the two on VIC.)

WinnDixie was put out of business in 2006 when they went bankrupt. They closed down half their stores and changed management. Since 2006 they've remodeled about half their store base. Each remodeled has cost them around 1-2 million a piece (although they've recently have done mega-remodels costing around 5.) So the remodeled Winn Dixies should feel like a quality supermarket. Publix is an amazing competitor. Their customer service is bar none. In fact when I was researching these two stores, WinnDixie had all the same complaints: poor customer service, disgusting bathrooms, and bad lighting. While the complaints about Publix were almost nowhere to be found. I eventually found one complaint about Publix which was a story about a manager yelling at his employee because the employee did not give quality customer service...jeeez. WINN is not about picking the best supermarket, it's about picking a probable miss-priced horse. But yeah, WINN could be a dead horse.

supermarkets might be a cheap sector. SVU/WINN might be a good place to look. I have some money in WINN. WINN has an EV/EBITA of 2.4, no debt, plenty of cash, selling at half of book and plenty of NOLs carryforwards. There are plenty of problems though, it's a turn around that has been hit hard during the past year, has great competitors (walmart & publix), and recently 2 main executives resigned and their general counsel will be a head of the retail operations.

Yeap, investor 4 is Guy Spier. This is like playing value investor jeopardy.