oec2000

where do you find information on the preferreds for example what price and when can they be called? Can the dividend be cut for the preferreds or is it a liablity of the company to pay predefined preferred div unless they go bankrupt. For info on US preferreds: quantumonline.com is good and free. Provides detailed terms and conditions as well as links to propectuses. epreferreds.com is a subscription site ($300-400 p.a.). I just signed up yesterday. Provides some research (my initial impression - not that great), some analytics (yield, etc), and a search capability. I'm still evaluating the site but starting to feel that it may not be worth the cost (hey, can't help it if I'm a value investor!). For Cdn pfds: prefblog.com is THE SITE to go to. Operated by James Hymas, who is regarded as the high priest of Cdn preferred share investing, site has lots of interesting commentaries and links to articles as well as link to prefinfo.com, which is where you can get terms of selected pfd issues. globeinvestor.com is useful if you just want to find out what preferreds have been issued by a particular company (click the Price Reports link once you have gone to the quote page of the issuer) and the indicative yield on the preferreds. Same info for US pfds also available here. As to whether pfd dividends can be cut, the answer is yes but only if the dividend on common stock is suspended also. They are not like interest obligations on bonds. Pfd shareholders have no recourse if dividends are stopped. You have to differentiate between cumulative and non-cumulative preferreds though. Non-cum pfd dividends that are skipped are foregone forever; cum pfd dividends that have been skipped have to be made good before common stock dividends can be resumed.

Stubble, Agree with you that it's a no-brainer. However, until very recently, volumes have been too low to make repurchases meaningful. If I am not mistaken, there are restrictions on banks buying back their own preferreds. Not sure whether ORH is subject to similar constraints - I can't find anything in the prospectus that precludes them from repurchasing though. Anyone familiar with these rules?

Any clue why WeB used the 70-80% mark? Am I wrong to assume Warren's doin' a bit of Technical Analysis? How do you get the 70-80% number range? Is this including low interest rates and above average ROE(12%+)? How can this translate into a valuation for American Inc? No, WB is not doing technical analysis; more like macroeconomic analysis. What I think he does is applying a multiple (based on normalised long term interest rates) to normalised corporate earnings (expressed as a percentage of GNP). http://www.nytimes.com/imagepages/2006/08/28/business/28wages_chart.html Using the above chart of corporate pretax profits to GDP as a guide, one could take a stab at normalised listed company earnings at about 6% of GDP. (WB would probably use FCF as a percentage of GNP but let's just for argument's sake assume that both percentages are about the same.) Applying a 12x multiple (equivalent to an 8.3% FCF yield) to this 6% gives us a fair value for market cap/GNP of 72%. My numbers are very rough guestimates but I believe it provides a fair approximation/explanation for why 70% is the magic number.

oec2000 (aka oec10210 on the old board) signing in. Been away and busy and just getting up to speed with all the developments. Sanjeev, thanks for getting this set up so quickly at such a busy time for you. Fantastic. Ever thought of running for political office? ;) Govt could use a few tips about getting things done on time and on budget!