JEast
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Posts posted by JEast
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At times during the day we/I sometimes get busy and type too fast meaning that there are some sharp cats on the board to point it out.
As 'benhacker' points out, yes, mortgage is by definition non-recourse meaning that the collateral is the backing. However, that does not mean that the bank or mortgage lender does not have some recourse. From where I sit in my house, if the bank forecloses and kicks me out - well, I have just been recoursed out of my house and are now on the street.
List of Non-Recourse Mortgage States and Anti-Deficiency Statutes
http://www.helocbasics.com/list-of-non-recourse-mortgage-states-and-anti-deficiency-statutes/
txlaw,
You are spot on and I am with you on that the global governments have done what they could to prevent another potential depression. The following is the direct steps circa 1935 from Fisher on debt-deflation.
Assuming a state of over-indebtedness exists (meaning corporate and private), this will lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences 1) Debt liquidation leads to distress selling, 2) Contraction of deposit currency, as bank loans are paid off which leads to the slowing of the velocity of money which precipitates more selling, 3) A fall in the level of prices, causing, 4) A still greater fall in net worth of businesses, precipitating bankruptcies, 5) A like fall in profits, curtails employment and production, 6) A reduction in output, trade, and employment, lead to, 7) Pessimism and loss of confidence, which in turn leads to, #8) Hoarding and more slowing down the velocity of circulation, and the above eight cause, 9) Complicated disturbances in the rates of interest, or the fall in money rates and the rise in the real, or commodity, rates of interest.
Does any of the above sound familiar?
Irrespective of non-recourse, recourse, inflation, or deflation - good comments by all.
Cheers
JEast
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US mortgages are non-recourse
Thanks for the rebuttal, but mortgages are surely recourse debt meaning the the creditor has recourse to repossess your house or your car. Non-recourse debt is similar to an option where the seller has no recourse to take it back, unless they buy it back.
so why would you expect that the new world to exactly follow the rules of the old ?I don't and wouldn't expect it to be the same. However, I am looking at the world thru my own prism and what I see and experience is no one has any pricing power and the banks are not lending. True this may all change, but it is hard for me to see it changing this year or next with the middle class saving more and unemployment to stay at elevated levels.
Like your counter point though as you are more optimistic than I.
Cheers
JEast
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Sorry board members, but I am posting about debt deflation again because I am of the belief it is important.
In the link below, an interesting research paper from McKinsey on “Debt and De-leveraging”. If true, where is the growth going to come from? As some of us discussed recently, the grocery store industry is in slow death spiral. From memory, the CEO of Supervalu recently stated that pricing/discounting was the most stiff he has seen in nearly 30 years. In my own specific case, in over 20 years I have never seen the private chain of Publix promote their self advertised coupons. Anyway, enjoy.
Originally sent to McKinsey by the nice website of The Pragmatic Capitalist:
http://pragcap.com/must-read-debt-and-deleveraging
Cheers
JEast
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As some have read in my past posts, I am in the camp of ‘Debt Deflation’ as explained by Irving Fisher nearly four score ago. Also, from the Hoisington commentary they are also in the Fisher camp. So, let’s say that at least inflation is several years down the road. If this were indeed in the cards, would not Utilities provide some protection? This is since they at least have some pricing power unlike most industries over the next few years and they also have a hint of growth in the 1-3% range.
Also see the recent commentary from the Hussman Funds on, or absent, inflation.
http://hussmanfunds.com/wmc/wmc100119.htm
In addition, some interesting charts from David Rosenberg -- 'Look Around, Nobody Has Any Pricing Power'
GDF Suez??
Cheers
JEast
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Yes, the show Pawn Stars has been both entertaining and educational. However, I would not call it value investing as part of the business is more like deeply distressed or panic investing of what we witnessed back in early '09. The other half of the business is just the sub-sub-prime loan arena. Irrespective though, the model does work for most proprietors as they do use the margin of safety as their guideline.
Cheers
JEast
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A few of my favorites read in 2009:
Complexity: A Guided Tour (Similar to Deep Simplicity)
The Age of Aging: How Demographics are Changing the Global Economy and Our World
Speculative Contagion: An Antidote for Speculative Epidemics
Explaining Social Behavior: More Nuts and Bolts for the Social Sciences
Mr. Market Miscalculates: The Bubble Years and Beyond
Predictably Irrational: The Hidden Forces That Shape Our Decisions
Outliers: The Story of Success
The 10,000 Year Explosion: How Civilization Accelerated Human Evolution
Cheers
JEast
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WINN
From someone who has shopped at Winn Dixie stores throughout the southeast for over twenty years, a few consumer points.
1) They usually have the lowest prices in town and why I shop there when I am allowed too :) <positive>
2) Their stores are usually located in the poorer sections of towns <negative>
3) Their stores are usually the most unclean of any other branded chain <negative>
4) Their stores are usually so under staffed, boxes are always out on the floor <negative>
5) And locally for me, I could not get my wife to go there even if someone actually paid her to go <big demographic negative>
I have looked at these guys for sometime, but passed as they are so behind the curve for remodeling, I can not see that they have enough capital to make the turnaround. With competitors such as Ruddick, Food Lion, Publix, Kroger, Albertson, and the plethora of new Latino chains in place, the road to success looks bleak for WINN. <<Side note: the remodels I have seen look nice and management says they have the capital to continue the remodel plan>>
That was then, this is now as the price sometimes removes several negatives. Anyone else have any comments.
Cheers
JEast
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First, take a look at the new exceptional Seaspan website with GPS tracking.
Second, do not forget about the incentives of management. As lessthaniv points out, a worst case proposition would still potentially have an opportunity to distribute $1.90 in the future. Management is heavily incentivized when the dividend moves above the $1.94 mark.
Cheers
JEast
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Maybe many of the dissenters are correct and I am out to lunch so to speak, but I see Seaspan presently in the same light as Fairfax was back in the 2000-2003 period. That is they are currently in the middle of a storm with sharks circling in almost all aspects of the business and the institutions have moved elsewhere.
As for the business model, if one looks at it seriously, management has done a wonderful job over the past 18 months. From managing the balance sheet to managing the crisis with the shipyards, the banks, and charters. They are coming out of a pre-crisis equity capital raising requirement of nearly $600-900M and now that requirement is under $200M and will possibly be zero with a few more delayed deliveries as cashflow has been building. This all the while when turmoil was very abundant, sound familiar?
I could go on about the reward and risk scenarios, but the company is still undervalued and with a brighter future ahead, but not as much undervalued back when it was in the $4-$6 area. I would not be selling unless of course one finds an even more value proposition.
Cheers
JEast
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Looks like the H&R transaction actually closed on Dec 29th and will be in the 4th quarter results.
http://www.newswire.ca/en/releases/archive/December2009/30/c5899.html
Cheers
JEast
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If I read and interpret this correctly,
Contemporaneously with the issue of these Debentures, Fairfax will be granted warrants to purchase28,571,428 stapled units at an exercise price of $7.00 per stapled unit (or net proceeds of approximately
$200 million if exercised in full) which are exercisable for a period of 5 years from the date of grant.
this would imply that FFH has made $185M on the warrents, plus they still have the $200M earning 11.5%. That's roughly a capital gain of $8 to book after taxes.
Cheers
JEast
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Interesting sign from Zimbabwe (attached below) that their dollars can not even be used for toilet paper!!
The cumulative devaluation of the Zimbabwe dollar was such that a stack of 100,000,000,000,000,000,000,000,000 (26 zeros) two dollar bills (if they were printed) in the peak hyperinflation would have be needed to equal in value what a single original Zimbabwe two-dollar bill of 1978 had been worth. Such a pile of bills literally would be light years high, stretching from the Earth to the Andromeda Galaxy.
Cheers
JEast
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Yes it somewhat surprising that Fairfax is down for the given the progress and especially that more and more revenue is non-US currency. But then again, Mr. Market has been very bi-polar with respect to Fairfax over the last 6-7 years.
Too bad we can not buy any LEAPs or sell PUTs now at these prices.
Cheers
JEast
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All good points from the board -- as usual.
As a MM they have traditionally skimmed the nickels and dimes in the options market and the 1/2 pennies in the currency market. However, the spreads are getting tighter and tighter with the high speed trading outfits.
It also appears to me as they push further into the retail market, their DARTs will start to fall which would potentially place tremendous pressure on the equity for some time.
In addition with the retail push, their customer service is near the bottom rung of the retail ladder which may backfire with all the new retail accounts coming in.
However and with that said, IBKR has been on my radar screen since the original IPO.
Cheers
JEast
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I spoke with a CBOE representative yesterday before the bulletin release, and yes, all previous options will be set to "closing" which means that you can still trade your open positions but will not be able to open new positions.
As the bulletin states, some MMs will be able to open positions to accommodate the closing of some positions.
So those that still have open positions, we should be able to either execute them as desired, close them, or let them expire depending on what you have based on the pink sheet listing FRFHF.
Cheers
JEast
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Yes, I should have said "opportunity" instead of option as these are indeed convertibles.
Also, I should have said "6%+" as a preferred has tax incentive implications for corporations.
Cheers
JEast
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Nice find and thanks!
It just keeps getting better as we deploy more capital at 6% with an option.
Cheers
JEast
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Wow, I thought the scare factor was gone.
Rates on issues maturing in early January and February slid as low as -0.03%, traders said.
http://online.wsj.com/article/SB10001424052748704204304574545820987908700.html?mod=rss_markets_main
Boy, things are surely getting interesting again just when we thought the bumpy road had smoothed somewhat. Stock pickers get ready :)
Cheers
JEast
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Over some meaningful period of time, there is no deflation and there won't be going forward.
Per the "Monetary History of the United States" by Milton Friedman and Anna Schwartz, from 1875-1900 (i.e. 25 years) consumer prices fell by more than 1% a year.
Cheers
JEast
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I think there is no debate - we will not see deflation in our lifetimes.
I was unaware that we had board members from Zimbabwe.
Kidding aside, outside of only a few years - I have personally only seen deflation in my lifetime. This from sources such as lower transportation costs, communication costs, food costs, etc ... But then again, I won the ovarian lottery and have not lived in either Zimbabwe, Argentina, or Venezuela.
Cheers
JEast
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Read Jim's latest book.
http://www.amazon.com/Mr-Market-Miscalculates-Bubble-Beyond/dp/1604190086/ref=cm_cr-mr-title
If you like what you read, then subscribe as it is a collection of past articles over the last 10 years. I myself have been an on and off again subscriber over the last 10 years. My 0.02 is to subscribe.
Cheers
JEast
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Things are really getting interesting. Gold is on a run, but so are bonds which normally would be considered a contradiction. So what is going on? The debate of deflation and inflation continues.
Based on the most recent data of fuel distillate inventories, we are at record high levels since the last big recession in the early '80s. With such high inventories, will oil make its run? Seems unlikely but one just doesn't know. Also read that Saudi Aramco will drop WTI as a pricing mechanism and switch to an index of sour crudes in 2010. The sour crudes usually sell at a discount to WTI which should lower the top news headline price.
http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WDISTUS1&f=W
What are others seeing?
Cheers
James
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Many on this board are surely aware of what really goes on behind closed doors with International Diplomacy & Money, but thought this item really sheds some light on the subject.
A few months ago, remember the International incident about two U.S. reporters entering North Korean territory. However, after it came to light they were quickly released. Why??
One could easily conjecture the following:
1) The two (2) reporters worked for Current TV
2) Current TV was attempting an IPO not too long ago
3) The co-founder of Current TV is Al Gore
4) Al Gore calls his friend William Clinton to transfer some promises either monetary or other
http://www.breitbart.com/article.php?id=CNG.d353e4dc67c0377ef5c85b689bf5e81d.4e1&show_article=1
Cheers
JEast
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Less risk -- that is nearly always implied on this forum.
So I would agree, less risk is preferred. Therefore, if one looks at the tangible balance sheet without CDOs, MBSs, and etc several small mid-western and west coast banks appear to have little risk. In addition, some are paying dividends will you wait. Of course, DD is required but if you believe in management and that the assets (i.e. loans) are worth at least something greater than 25¢ on the dollar, you should do fine.
Again, nice idea, but just curious from a Graham perspective.
Cheers
JEast
Expansion of Panama Canal
in General Discussion
Posted
Though the expansion of the Panama Canal has been on the books and in the works for sometime, this is anecdotal evidence and is one (of several) reasons I have been posting about shipping container companies. In a few years, China Cosco Holdings will be the largest charterer of Seaspan around the time that the big ships can sail thru and bypassing Long Beach.
Cheers
JEast