SharperDingaan

Nice sleuthing. That 500M+ is effectively the amount of 2009 easing - & it is the boost to the money supply that was needed to offset the velocity decline. If all the other participants simply cut back their purchases by a collective 10%, the ease would have to increase by at least 200M (40-50%), & the money supply would immediately inflate (all other factors equal) Not that long ago (15-20yrs) Canada 'hit the wall' & a Federal Cdn treasury auction essentially went 'no bid'. The BOC had to do a similar emergency type purchase, & within 12-18 months Cdn mortgage rates went to 20%+ (from memory) - & at a time when there was very little 'crowding out'. Today everybody needs money, & to get it they will have to competitively increase yield. Rapid rate hikes. The alternate is a synchronized global devaluation, via a global easing big enough to retire the total global easing to date. ie: The entire G8 prints 10% more currency to devalue 10%, & uses the new paper to retire the debt - but there's no internal trade impact on them as they've all devalued proportionately. If you're not G8 you either move with them & risk hyper inflation, or you revalue. We live in interesting times. SD

Keep in mind that if you're going to roll it's highly unlikely that you'll go with anything longer than 180 days; simply because global future rates are expected to be higher than they are today. The bubble gets bigger, the duration shortens, & volatility rises; hence a market distortion is largely enevitable. That 2.5T is also understated. An individual US state that can't roll its debt can effectively refinance with short-term debt backed with a federal guarantee - & some big states are in deep sh1t. We've allready seen sovereigns increase rates (Australia) to dampen inflation, & its highly likely that others will follow within 6-9 months (Canada). Hence the US either raises real rates to mantain the roll-overs, or it prints $ to immediately inflate & devalue the USD (& promote trade). Each has ugly consequences. The cheap money is coming to an end. SD

LNR-T You wouldn't want to touch it untill after their Q4 results have been published (write-downs), but after that you may want to hold it for 3-5 years or so. They are better known as a Cdn auto sector supplier, that is closing plants & getting hammered by the high $C. Lots of resultant negativity. But they also make the very large 2nd generation windpower generators, they have material technological advantages over their competitors, they are the 1st name in this market, & the size of these generators makes it uneconomic to ship from Germany or Asia. Green energy sells at a premium & these things are substantially cheaper on a delivered MW basis, as they can continue to operate in a wider variety of conditions. Eventually the auto-sector side of LNR's business will return, & you'll essentially have this windpower business for free; ideally as a spun-off company. Merry Xmas SD

In the spirit of the Xmas season. Keep in mind that options, futures, index instruments were invented for use by portfolio managers because they typically cannot hold any significant cash (I dont pay a PM to hold cash), and cannot buy/sell the underlying instrument without moving the market. As a retail client you do not have these restrictions. Because you could be wrong, the 'true' hedge is to sell 1/2 the existing position. If you're wrong the additional cost to repurchase is your hedge cost, & you largely control it as its your decision as to when to repurchase. If you're right you'll have a cash gain & a lower cost base. The optimal hedge against loss is to sell the entire existing position & write out of the money puts that you want to get exercized. If successfull you'll have a short gain AND get paid for your liquidity, but its a directional hedge - so if you're wrong you'll have a loss. Know why & what you're really hedging. As options, futures, etc. have embedded leverage (ie: risk), why is that important to you for hedging purposes ? There is nothing wrong with options or futures use as 'entertainment', but know it before you try it. Merry Xmas SD

Keep in mind that this is not a traditional buy & hold business case. SFK must exit their trust structure prior to 2011, the interest rate on their debt significantly increases on July 01, 2010, & they have 30MM+ (from memory) of debt maturing in 2010. They are well run, in a rising commodity cycle, have at most a one-year time horizon under the existing structure, & their investment case has always contemplated an eventual consolidation with some other entity. As soon as they can show a positive quarterly earning, & a fat EBITDA; the current price discount will effectively disappear. A wise man would also expect a merger premium in anticipation of a trust sector consolidation. As soon as they evidence a debt roll-over and/or repayment, pricing should essentially change to some % of BV. As if the bank was not confident that it would be fully repaid under the new structure, it would not roll; therefore SFK must have a solvent future. While SFK has many re-engineering options, whatever is chosen has to be in the interests of their (knowledgeable) investors, it will require at least a 2/3 majority, & it must be completed by Dec-31-2010; nobody is going to be stealing it. Possible extension (REIT), or further FX erosion aside; a fairly straightforward case. SD

Nice touch. There is a variant of this for use on concentrated holdings, where the coy's themselves have significant FX exposure that you don't want. ie: For SFK.UN you'd work out the end-of-quarter nominal USD BS exposure, & the next quarters estimated USD sales; put it into exposure/share terms, & multiply by the size of your holding to get to your share of their USD exposure for the next quarter. Then hedge it as you've described. Although typically restricted to just the corporate playbook (need a big holding) it does have application at times. SD

Keep in mind that when its O/G you really need to know your partners, & that the real money is in the future deals that you do together (their expertise & your $). This is a relatively low risk way by which to get their feet wet. SD

Very counter-intuitive, but simply take $ off the table. Buy some other kind of income generating asset in a risk-sharing partnership, or pay off the margin/mortgage. Money should be the servant, not the master. SD

"The most dangerous time for a country with 5 yr fixed rates must be when rates are near all time lows and prices have already risen to account for it. Significantly higher interest rates... can people afford the rate reset?" These are amortizing mortgages, & the rate was set 5 years ago when the 5 year rate was much higher than it is today. As the outstanding is also lower, the significantly higher reset simply results in something close to what you're allready paying. The major risk reduction is from floating rate mortgages suddenly converting into 5yr fixed rate. The home owners additional cash requirement from higher rates doesn't occurr, & surplus cash goes into fixed rate investments (GIC's) earning the home-owner a spread (GIC - mortgage rate). Refinancing volatility safely comes out of the housing market. SD

Stevie is going to have to get used to a gaggle of gutter press in his face every where he goes. The cost of the probable pay-offs is rising, & the strategies 'guarded secrets' appear to be apparently criminal or BJ wouldn't be pursuing it. The emperor would seem to be loosing his clothes, & trying to burn Rome to stop the barbarians from getting to him?

Like Uccmal we wouldn't have done much different. We had the basics right, in reasonable quantities, and at about the right time. We learned that portfolio size is seductive. Walk into a casino with $100, turn it into $1000, feel like a hero, then lose; you lost $100. The wise man who took 1/2 the stash off the table; walked away up $400. Money is the servant, not the master. We learned to change with the times. Trading the FFH BV multiple has been very rewarding, but all good things come to an end. SD

Granted there's nothing to prevent Canfor from taking a shot at it, & in many ways its actually desirable, but it will not be a steal - & given the players, the currency will be CFX stock. I want more because stock is riskier than cash, and because the entire cost will show up as new equity in our new BS, reducing our debt/equity ratio - and significantly improving our financial muscle. Yes we're financially better off together, than alone, but I still need an incentive beyond a tax free roll-over to change. You can afford to, & want to pay more. As a new CFX shareholder I'm going to get stuck with a % of the consequence, there will plant consolidation savings, & new shareholders aren't going to be splitting their investment $ over 2 companies. More demand for the shares, & higher prices. Geographic & market diversification, higher concentration of deep pockets, etc. are additionals. Given that a compromise is probably enevitable, 80-90% of BV seems reasonable. SD

What about .... way south. Rio or Cape Town ? Pepetual summer, cheap currency, completely different, & a choice of oceans to surf upon!

Nodnub Go to a couple of Italian, Greek, & S.American community functions. Give the folks an opportunity to know you, & discreetly let your interest out. It will not be long before you're introduced to the local folks in that community who actually do what you're thinking of. Ethnic communities are notable in that you, vs your money, counts for far more; so a down-to-earth approach will go a long way. The cuisine & entertainment along the way is usually pretty good as well. SD

Because there are so many friends/family the core legal entity should be a Cdn Trust, where everyone owns 'units' that they can buy/sell. The Cdn Trust contracting for services (Admin/Acctg, Ppty Mgmt, etc.) & your admin/acctg involvement is via a seperate LLC of your own..... But frankly, the better option is simply a direct investment in the various public REITs (liquidity, diversification, admin, etc). Next best is a small group buying an entire apartment block/commercial warehouse for retirement income, in some urban centre. A common practice amongst the major ethnic communities, & most will welcome new people who want to learn the nuts & bolts. Best of luck to you SD

Eric. Agreed on the housing, but different logic. Boomer demographics are increasingly moving into the downsizing stage; increasing demand for the more upscale, urban, one-floor bungalow/apartment - & the supply of suburban McMansion. And the suburban McMansions are allready oversupplied, as they were a prime benificary of the credit bubble. Net result is an inventory overhang of obsolete McMansions, & a dearth of one-floors. Limited new-builds and a raft of 're-branded' developments. SD

Vinod Keep in mind that 'bubble' is relative to where you measure from, & the sanity check is whether there is an obvious sustainable economic basis for what's going on. Choosing different measuring points changes the label, but not the sanity check. Most folks recognize that without the one-time stimulus we would not have been at 1000, & that the stimilus (takes 4-6 months to work) was introduced well before the S&P was < 666 (Mar-09). The sanity check would suggest a pretty clear bubble. SD

For most folks it's sell 50% of the vulnerable positions (synthethic short). If you're right you have the cash to buy it back, make a realized gain on the 50% short, & an unrealized loss on the 50% long. If you're wrong there's a realized loss on the 50% short, & an unrealized gain on the 50% long. Buy back the short at no more than your sell price & the cost of the 'hedge' is two commissions - a lot less than a put premium. Most effective if the portfolio is also leveraged. The cash reduces the leverage through the uncertain period & the potential loss that you might otherwise have had. Simple, but very unsexy. SD

Keep in mind that riding a bubble up is momentum investing - as you're confident that there's a bigger fool than you out there. Yes you can do very well if you can catch it early, but you had better know your psychology! An entirely different mind-set from value investing. We actually all know that we're in a massive financial bubble - as we speak. We can 'see' the globes Q4 & Q1 stimulus spending has now hit main street, we've heard the 'pull back' talk, .... and no-one wants to recognize that they can't 'see' what's taking up the slack as the stimilus wears off. Don't jinx it! Value investing is not 'formula' investing, it's critical thinking - & the confidence to back your decisions with ongoing common sense. And it is because it's common sense, that it works in both bubbles & crashes. SD

The reality is that by itself, the move will not do much for immediate valuation ... but going forward an upward bias is probably realistic. How much? is anyone's guess. We know that FFH is not run with a short-term bias. So why the insistance on seeing the benefits from the voluntary delisting in strictly 'now' terms? It's highly likely that we don't have all the facts. SD

Look at the recent debt downgrade. Then ask why are you so sure that you are NOT going to see some unexpected charges at year-end ? SD

Keep in mind that Cdn regulation is a lot more 'hands on' than the US, & principles based. If you're writing too many mortgages in Vancouver you will be made to sell some, & bring your exposure into line with your peers. All 5 banks (versus one) get over-exposed to Vancouver, to the extent that OSFI lets them, & they all get stress tested twice/yr. No surprizes. CMHC insured mortgages generally amortize, & require substantially more CF the lower the DP. They are designed to force the mortgagee to reduce risk buy putting up more equity (amortization & new saving), & reward conservatism (lower premium). The target is 1st time buyers who really want a home.The additional financing cost, & the bank officers moral suasion, tends to keep speculation to the minimum. Within Canada, debt speculation is not treated 'equally' as it is in the US. By & large the riskier end is never allowed to get off the ground, as you can't shop the oligopoly. The 'rejected' see it as 'uncompetitiveness', everyone else sees it as saving their collective arse! SD

Keep in mind that there's an element of affronted pride here...... as a 'Big Board' listing is essentially what capitalists are supposed to 'aspire to'. The voluntary delisting underlines that the NYSE is just the servant, not the master. Were FFH delisting from a 'lessor' exchange (ie: Frankfurt) - there wouldn't even be a discussion. SD

The delisting shifts both share (TSX) & option (MSE) trading onto Canadian exchanges. Higher trading volumes, more liquidity, better enforcement, less hedge fund influence, easier accounting (IFRS vs GAAP), no more SoX costs, bigger fish in a small pond, etc. Daily operational advantages. Investors can buy in either USD or CAD, but see the reporting in USD. To a foreign investor the 15% increase in BV is not going to look like a 5% loss simply because the USD devalued 20%. To the US investor, the 20% USD devaluation will make it look like a 35% return - & they'll be able to over-weight as their portfolios foreign allocation increases. Higher demand. Simplification. 1 company (FFH, NB, ORH, C&F), 2 exchanges (TSX, MSX), principles based regulation, etc. Far easier to expand float, split shares, do private placements - should they wish to. SD

Think along 2 tracks Where's the new money coming from? To buy the foreclosure to rent to others somebody had to put in new equity. Either an investor has to allocate more from their portfolio, a consumer has to have saved it, or a government injects it - & a banker allowed a higher debt/equity ratio. Its going to take a while. Where are the losses accumulating? That walkaway loss is a direct write-off to the banks equity, reducing how much the bank can lend. Fewer loans and/or repayment demands that trigger foreclosures & a new round of write-offs. A death spiral. With so much risk, investors are not going to be allocating much of their portfolio anytime soon. SD