SharperDingaan

In simple terms you are looking at a note explaining the deferred tax on the BS, which is the cumulative income difference since day-1 between the P&L and the tax book, times the tax rate. The firm pays people to ensure that the tax rate, and taxable income is as low as possible, & the consequent deferred tax as high as possible. A good result is a tax bill lower than that of a secretary. The balance itself is an interest free loan from the taxman. It does have to be repaid, but in the meantime the deferred liability is recorded as the asset that it actually is. In most cases if the firm BKs tomorrow, the loan comes due immediately, & the tax bill will rank ahead of most trade payables. It is a good place to go shopping ... but if you don't know IFRS & tax accounting, you will hurt yourself far more than you will benefit. Manipulation of timing differences & transfer pricing is everyday fare. SD

ALS!

IFRS-US GAAP conversion is voluntary as of Jan 01 2015. Voluntary has different meaning in different sectors. BIS capital requirements drive off IFRS, not US GAAP, so that everyone speaks the same financial language. BIS itself sets the global rules for banks, but has no force of law - each sovereign takes the BIS requirements & codifies it into its own legal structure. If you claim to be a global bank you have to be using IFRS, or suffer wanna-be ridicule. Hence, every major global US bank will cut over Jan 01; because if they don't convert - & their competitors do, they will have just proved that they actually are a wanna-be - & 2nd rate at best. IFRS is more stringent on valuation. Many US GAAP asset valuation practices do not qualify under IFRS, & the valuation differences (write-offs) will be transitioned over 5-10 years (10-20% write-off/yr) for regulatory capital determination purposes. If you have more of this junk than your peers (BAC), or there is an expectation that you will be slower to convert than your peers, you will be penalized. SD

This is a very broad area, & the accounting in some sectors (banks, o/g, mining) is unique & extremely specific. IFRS - not US GAAP, is the global standard; & has been in place in many countries for many years. Reviewing US GAAP case studies is also not very useful as US GAAP switches over to IFRS next year - you would be making decisions based on obsolete understanding. Focus on just your sector of interest. SD

Systematically spend some time outside the gilded gate. Once/month in a soup-kitchen, secret-santa, etc. Once every few years; a few weeks in a 3rd world country, touring around in the back of a truck. Laugh at yourself, & often. Nothing cures arrogance faster than friends in low places, or darwinism; but you have to expose yourself. Be an a-hole & you will get spat in the face - because you should know better. Throw your weight around when it isn't warranted, & you WILL sleep a little earlier than intended. You are being taught humanity, & by experts in the subject. You cannot fully appreciate what you have untill you see what disease, maiming, & poverty can do; smell it, hear it, & see it first hand. Then in all of that, some kid will come running past you, completely content! Suddenly - you're not so special. Notice how that colourfull 5% always seem to have a wicked sense of humour? Of course, the trick is to not be in that 2-3% where the crazy's are - Larry, Curly, & Moe! Not for everyone, but hard to ignore. SD

Usdtor: You might want to look at this a different way. LT economics dictate that you upgrade on-site. The plants to do it are incredibly expensive to build, but once built .. inflation, increased throughput, & technology upgrades consistently give them year-over-year cost & market advantages. They are core utilities, provincially backstopped, allow development that could not otherwise take place, & should be viewed as utilities. There are not many, & they are well known. Dilbit. Takes up a lot of space & exists solely to transport heavy crude via pipeline - so long as the pipelines have spare capacity. Restrict pipeline space, or significantly raise the price of dilbit - & dilbit use gets priced out of the stream; shutting in those heavy crude producers reliant upon it. Costs are materially reduced if you can recycle that dilbit. A simple google search will tell you who the vulnerable are. Rail. Outbound dilbit goes by pipeline, inbound dilbit arrives by railcar, outbound railcars return full of crude. Returning railcars substitute for the space that dilbit occupies in the pipeline. Rail carriers are a very short list. Lots of ways to invest. Good luck. SD

This is a long term game, & this is not the right company. SD

To us - it looks like they are just shifting portfolio allocation from Bank of Ireland, to NBG, for no net change. Higher potential return, lower net risk, & a bump in the Sharp Ratio. Were they adding/removing $ from the table, we would have a different view. They are also buying NBG for just .30 Euro/share. At todays price, NBG would have to fall 90%+ in a mother of all collapses - & even HW is not that pessimistic SD

"This is what puzzles me - and sorry I am not as up to date on all the stuff Prem has said -- on the one hand he sees deflation in europe, china, and a recession for 10 years....... and on the other hand he pumps in $500M into a Greek Bank & also a few years ago in Bank of Ireland.... " Look a little closer. We would put it to you that they have a repo on part of their Bank of Ireland position, which has released some of their gain as cash, & raised their cost base. That cash gain is what is being reinvested in NBG, & hence their original $ investment remains largely the same as it was. They are doing a bar-bell with Bank of Ireland & NBG; & lowering the cost base of their NBG. Most would anticipate that NBG will fall further in the coming weeks as the extent of the dilution becomes fully recognized, & they take write-downs reducing their capital ratio. We would also expect a systemic quarterly recapitalization to maintain the capital ratio, via a SAN type cash/scrip dividend, starting sometime later in the year. NBG is never going to be a Royal Bank (comparable capital ratios), but it is a lot cheaper, not as risky as it was .... & not in NA. Hard to knock from a diversification POV. SD

It will take you about a year to decide on what you are comfortable with. Bring your ideas .... & don't be afraid of looking stupid. Everybody puts their pants on, one leg at a time. Good luck! SD

Just keep in mind that the World Cup is over July 13, & the build-up has been a big stabilizer in Brazil. When it is over, a temporary slowdown is pretty much a given; & when Brazil is one of the major BRICs there will knock-on effects. Add in Ukraine/European Gas supply instability, & amplification would seem to be on the cards as well. http://www.telegraph.co.uk/finance/alex/?cartoon=10753488&cc=10735525 Most would argue that it is pretty hard to see how Q4 will be better than Q2. SD

Keep in mind that you don't have to borrow shares to short. You could just sell some of your existing long position & buy it back later; hedging is just shorting with another name & technique. SD

The message to take from this is that you first need a hedge, your debts paid; & then the balls to do your own thing. Accounting, Audit, Finance are just hedges; temporary jobs until you get back on your feet again. Preferably contract, & using outsourcing as a part of your business model. You are with XYZ coy only because it is more rewarding than what you can currently do on your own. For most folks maybe 2-3 years, & then it is just a part to some other plan. As with anything, hedges have a cost. Time, tuition, & the experience necessary to get the sheepskin; but thereafter that is pretty much it (baring P&I on any school debt). As long as corporates expand/contract, or screw-up, fairly regularly; there will always be a temporary opportunity for you. You might even get some travel out of it as well. Long-term, you really need to own the business that you work in, and you need to work with partners/associates to spread the various business specific risks. With todays corporate structures, & government funding available to start-ups/small business, there is little to lose. Value investing just adds another few arrows to your sheath. Once you know how to value something, & exploit public company seasonal & cyclical changes, you are well on your way. You also become very valuable to the corporates that you are trying to escape, improving the return on your hedge ;) Good luck to you. SD

You might want to go the accounting route, & include a CIA. You cannot grab the world by the cohones, & squeeze, unless you have something to fall back on. You are not always going to avoid getting kicked; so when it happens, & it will - you need to be sure you can land on your feet, & anywhere. Cost accounting is one of the most valuable courses you will have been taught, you just do not realize it. If you ever go into business for yourself, you will be doing it in your head as naturally as breathing, & it will be that ability that lands you the next bid. Talk to any controller/finance manager, who is not in Financial Services. You will also see the value of those 'flake' courses you had to take, & kick yourself for not doing more of them; as many an engineer discovers 10yrs into their career. Accounting & finance are not exclusive, & lots of accountants go on to do a MBA in finance. If you wish to own/run any kind of significant business; you will have to as well. Squeeze, & squeeze hard! SD

It is legalized front-running, it exists only because of methodology differences, & it is very simple for an exchange to shut down. Simply use the computer to track & break down every trade, irrespective of size, into the base round-lot; & have all the round-lots hit the electronic floor simultaneously. My 2500 share transaction trades as 25, 100 share round-lots, & I pay $X per successful fill. 25 x $X is either less than, or equal to what I pay today, or I go to somebody else. Joe Sixpack is, in fact, getting screwed; through the shares his PP or mutual fund owns on his behalf. But unlike Joe, those FIs have a fiduciary duty to Joe to oppose the practice, failing which they could be sued. The end result is that the exchange either stops the practice or they take their deal-flow elsewhere, subject to regulatory approval, strangling the exchange. Regulatory approval because as compensation, most FIs would short the exchange ahead of their demands; before making them public. Capital markets solution, to a capital markets problem, but it has to be allowed to occur. SD

Sure ... its just dead boring, otherwise! No Porsche (to pick her up), no nice restaurant every week (gotta eat), no tickets to plays (have to go somewhere), no nice home (have to sleep somewhere), nice clothes, everyday cooking .... & you have you have to wash every now & again ;D SD

Ah ... but when we drink that wine it will only cost us 375 (US) cash/bottle (the value side), & that isn't bad for one of the top 10 in the world. No way we would pay 1000 for a bottle as an individual, but were a company buying it - we wouldn't hesitate. If it is to celebrate a major deal, there is going to be a chef prepared meal to go with it, & the government is going to pick up 40% of the bill. That 1000 bottle becomes 600 after tax - & cheap at the price ;) SD

Used to have the same approach .... & it took years to shake. Comes down to money as servant. Investing is just a technique by which to make it, & hopefully you become pretty good at it. But if you do not put the end result to good use (house, travel, education, entertainment, etc) there is little point. Takes a while to get comfortable with the concept, but it is well worth the effort. Back in the early nineties, some university friends & I, split up on international placements to get global experience. Along with business, & wife shopping, we also did some physical goods trading, ultimately culminating in a few hundred tickets to one of the premier all night millennial balls in Vienna. Mozart, ball gowns, tux, the whole nine yards ... A truly unique, once-in-a-lifetime experience... & we ended up flipping the tickets to Benz, for 1000 marks/pop - simply because we were too cheap. Years later we made a point of buying futures on 10 dozen (112) bottles of Chateau Lafite 1st Cru for delivery 10 years forward, to coincide with when our nephews reach their 20's. The first payment was over 18K (US), & the last one will be 24K (US). But we knew we had conquered cheapness when we did not even bat an eye over the price. Hopefully it will continue when we drink it, & these things are $1,000/bottle. Vienna all over again ..... but this time wiser. SD

World over, whatever system, we end up doing what we are at good at. Ideally it is legal. We find out what we are good at by trail & error. Not what we are best at. Then it is up to us to do it - drive, motivation, etc. Value investors are good at managing cash; that is all. Money is our servant, we know how to make it work, & it accumulates wealth for us (most of the time). But .... we suck at spending it productively; the same as everybody else. Some folks simply collect wealth, then give it away when they croak. Accumulate the most possible & get a nice headstone. Other folks collect wealth, but give it away while still living. Accumulate less, but do more; Gates foundation, etc. Others just want to smell the armpits of the world! Secret Santa a few times/year, & in all the wrong places. All very different - but you have to have the wealth to give away first .... Ordinary mortals have to be more pragmatic ..... Teach the kids/nephews to fish, & master money (within the law). 5 Secret Santa versus 1. Use your business decisions to create employment, reduce pollution, better product, etc. Change attitudes over time. Crowd source innovation. Venture capitalism the old fashioned way. If you make your little part of the world a better place, most days of the week, you are probably doing fine. Even most of those on the wrong side of the law! SD

Just to stir the pot .. If you just buy/sell paper you contribute squat. You may win or lose, but it is a zero sum game. If you buy new paper/stock you do something useful. Your $ got spent generating some economic activity. If you used wealth to build something you did something useful. That new mine in what was a cow pasture. But if you work on Wall Street, 90% of you add zero value :D .... except to maybe some fine clothes sellers. If you have the brains to be a top analyst or quant, you also have the brains to set up/run companies or design new & better products. So why did you settle for being a waiter, & reliance on a bonus (tip). Needless to say .. not a terribly popular view! SD

Leasing is primarily a sales tool. It is used to move metal, & as a sales channel it does not have to be profitable. Cost of funds & tax deferral is key; you get it by deliberately mismatching term, buying the assets in poor areas, & releasing them into richer ones where they will actually be used. There has to be no question that you can roll over your ST debt at will, & you have to be able to forecast run-off fairly well Dead simple in theory, but difficult to execute as the salesforce & administration level. You cant just give someone a laptop with your model on it, & then expect them to sell the most profitable lease for the application; the minimum is constant training & oversight by large numbers of folks who know what they are doing. Its a small pool, & most often you will have to acquire another leasing coy to get those people. Lots of very specialized niches, & it can be very profitable, especially if spread over many lessees. Eg: Brewing equipment. It is usually stainless steel, not prone to obsolescence, & very long lived. Costly to buy so there is a preference for lease vs buy, but some of the lessees are not going to make it. When the equipment comes back it is simply re-leased to a new brewer at a reduced rate as some of the Capex has already been recovered. And when the same equipment can cycle for 40+ years .... SD

Maybe one or two newsprint companies should be making him an offer. Welcome to BOOK .... SD

Its easiest to think of education as a pyramid; reading/writing, foundation knowledge, factual recall, application. World over, reading/writing is widely recognized as the basic minimum. Foundation knowledge is the high school math, sciences, arts foundation required for university/college entrance. Problem is - it has been taught the same way for 50+ years, there is a culture not to allow failure, & there is zero recognition for maturity. If you come from somewhere not first world you actually have an advantage (life is harsher), but it is handicapped by local condition (cant learn if you're hungry or supporting your family). 50 years ago was the 1960's - & the start of the various social revolutions. Bachelor degrees are still taught the same way; factual recall of theory from textbooks, & make believe attempts to mimic real world by case study. Cheating, & plagiarism, is endemic - & the universal institutional response is criminalization, versus actually hearing the message. Gaming, cheating, copying, facts lookup, etc. is simply life imposing itself - the skill is in applying what you learnt, & we teach you to game the system. Not a bad thing, but not really the intent either. When you graduate, you are magically supposed to be able to apply what you learnt. But just how, exactly, if you were never taught how to do it? But we did teach you - it was how to game the system!; a lesson the financial types of 2003 through 2008 appear to have learnt very well!! Unintended consequences. Different cultures do the application differently, & there in lies their comparative advantages. And you can change those comparative advantages by simply putting someone on a plane & sending them elsewhere for an extended period (ie: to get a university degree in a foreign country). SD

Couple of things we've learnt over the years, which may be of interest. For us it has always been about having fun owning & running a business; subject to the business having comparative advantage in our chosen market sector, & not being a public entity. We invest to raise the funds to buy into those businesses, & along the way - we learn how to control risks & get ourselves out of trouble. Money is our servant, & we never want to get to the point where the business becomes too big - & starts controlling us; if we want big, we could simply buy/sell equities. It means we are constantly reinventing, there is no time-limit to our business life, & there is enhanced anti-fragility. It also means that you are always working with partners; sometimes good, sometimes not so much, but everyday a new experience. Marry the creativity of reinvention, with mastery of finance, & good things are almost a given. Case in point: While some way from retirement I have chosen to learn the beer business by becoming a Master Brewer in my spare time. Takes 5 years to become a Master Brewer, & along the way it will be necessary to spend some time in a brew house, time learning beer sales, time doing a thesis in beer, & time investing in a brewery or two; not the most simple things to do, but not impossible either. The end result will most likely be the part-time teaching of brewing, & the business of brewing, at a brew-school; partnership interests in various local brew-pubs &/or craft breweries, & investment interests in bigger breweries via time limited Brew Master, or MD contracts. No retirement in any of it, & the fun in business pretty much assured .... Different strokes, but think outside the box. SD

It just requires a different way of thinking ... The UK used to tax its top earnings at 98% on every $ of incremental earnings. So .. everybody changed the coy car to a Porsche, & the coy flat to a nice little place in Knightsbridge. When the tax rules eventually changed; everybody bought the flats & the cars for their own account at fire sale prices as the fleet & flats were sold off. London's girls got quite a boost. SD