JEast
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Posts posted by JEast
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watsa_is_a_randian,
It is strange that the Series J are still priced at 18% while the Series I are at roughly 12%. I have not followed BAC, so I do not know if they have suspended any payments.
Cheers
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Yes, this would appear to be good news and reason the market spiked. Previously the government blocked the attempt by ICICI Bank to separate out ICICI Securities (which included Prudential Life and Lombard) via an IPO over foreign investment concerns. If we can get a market price on ICICI Securities, this would/should unlock some hidden value on FFH's balance sheet for Lombard which is only on the books at around $120M.
http://www.thehindubusinessline.com/2009/05/18/stories/2009051851120400.htm
Cheers
James
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Attached is some sobering data and research from the Leuthold Group. Steven Leuthold is sometimes called the contrarian's contrarian. The facts are that Treasuries for both the 30, 10, 5, and 1 year time frames have outperformed the market by increasing margins. Very sobering indeed.
Cheers
JEast
(formally 653211)
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If anyone is attending this week, let me know and I will be sure to say hello.
On Wednesday, I will also be attending the Wesco meeting.
Cheers
JEast
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Not that we here trust the rating agencies much anymore, I just noticed that ICO was downgraded by Moody last month. I guess that assume that both steel and electricity production will be down for 12 months or more.
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=BSC%3AUS&sid=a8ZsGDXpymB0
International Coal Group Inc., the owner of 13 coal mines mostly in Appalachia, was downgraded yesterday by Moody’s Investors Service in view of “operational challenges” and the uncertain prices the company will receive for half its product in 2010.
The new corporate rating is Caa2 while the senior notes are now Caa3. Both are one grade lower.
Scott Depot, West Virginia-based ICG generated $1.1 billion revenue in 2008 from producing 17.9 million tons. The company is a combination of three coal producers purchased from Chapter 11 reorganizations by Wilbur Ross.
Anyone looking at the bonds ??
Cheers
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I would assume that I am the long bull for the board with this position based on my previous posts over on the old MSN board, but I am hoping that someone can destroy this idea.
Yes, CSAV is a concern, but as indicated they only have 4 ships due in total. Seaspan has already announced that they were delaying 3-6 ships this year out of the original 12 scheduled for 2009. One could make an educated guess that of these 3-6 delayed, CSAV makes the bulk of it. However, and on the other hand, the 4 ships with CSAV were of the shortest charter duration of 6 years vs. the normal 10-12 years. Hence, if these ships could be rechartered next year for longer terms, this may be a small bonus. In addition, if CSAV gets recapitalized as a looming possibility, then part of the deal may be to extend the charter length for a slight reduction in payments. Maybe a win-win. --- Slow down -- too optimistic, Always Invert, Always Invert :) Let us say that CSAV goes away which means this will hurt Seaspan. However, CSAV is not absolutely needed this year which will bust the business model of Seaspan in my view currently. What is of vital importance though is CSCL and COSCO.
As a side point that is relevant though is that CSAV's troubles are not with shipping in general but with the fuel hedges that they placed or did not place. If they had not put such a large fuel buy order in near the peak, this may have been all avoided, at least to a degree. Every other year or so, it seems that a company gets into trouble with their commodity purchases whether its is from copper to platinum purchases (i.e. Ford).
Cheers
JEast
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From a previous post on the talk given by Mark Sellers, he pointed out that mathematically a 2% position using the Kelly Formula is like saying 51% I win, 49% I loss. This is quite a different take on Mohnish's "Heads I win, Tails I don't lose that much." With 30 positions, one would appear to be approaching this banality of 51% propositions.
From the FFH annual meeting this year, Prem quoted Templeton as saying "All you need is two out of three" or to paraphase -- you need 70% I win, 30% I lose propositions.
Cheers
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Yes, ICO has some interesting characteristics and some nice assets. However, given the opportunity sets now available, it does not look as interesting as compared to others. In addition, this is a somewhat a growth play from my viewpoint. Given that they have placed the Tygart No. 1 mining complex on hold for two years until 2011, will you now have continued losses for this year and next? If so, that factors into 4 straight years of losses which does not bode well for the equity and maybe the reason for the precipitous fall. Irrespective, a true candidate on the radar screen though.
Cheers
(formally 653211)
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Thanks so much for the catch Phoenix01 as I guess they are remodeling the nostalgic right out :)
Instead of picking a plethora of other places, let's stick with the Hilton as its big and easy to locate. The other Bar inside the Hilton is the Tundra Bar which is fine.
I will still be wearing my Fairfax hat :)
Cheers
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As our pre-annual meeting dinner night at Joe's has always been enjoyable and the conversations educational, there still has been one nagging problem. That problem is we seem to always run out of time :)
For a few that arrive early, I invite you to join me for a pint to expand our conversational time. Location is the Barristers Bar located in the Hilton Hotel property on the corner of Richmond and University around 5:00pm. It is approximately 5-6 blocks from Joe Badali's Restaurant, so within easy walking distance if only a few pints are consumed.
Barristers has a casual atmosphere perfect to unwind after a long day with a pint or cocktail - a nostalgic location location as a long time favorite spot for Toronto's legal community.
I will be easy to spot as I will be wearing my Fairfax hat!
Cheers
Formally (653211)
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Check the news as the preferreds were suspended too.
http://phx.corporate-ir.net/phoenix.zhtml?c=118512&p=irol-irhome
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Very interesting times on the preferred front. Yes, FCH-C was (still is) an interesting play, but anytime you are required to do financing, the new financiers have the lead and can force suspension of dividends which they appear to have required in this case.
Cheap the ideas flowing :)
Cheers
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My intent here was not to focus specifically on HRP, but to get other board member's thoughts on the carnage in the REIT sector.
With respect to HRP-D though, the owner has a right to convert at any time prior to November 11, 2011 and also has a right to $25 if change of control (i.e. takeover). The debt is the responsibility of HRP the holding company so the potential IPO float of the Healthcare properties should not change any rights. However, I look at it as a positive (if it happens) as more cash surely helps and improves debt holders margin of safety.
Cheers
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From HRPT's 10-K, "Our series D preferred shares are convertible, at the holder's option, into our common shares at an initial conversion rate of 1.9231 common shares per series D preferred share, which is equivalent to an initial conversion price of $13.00 per common share". This is based on the original preferred that was floated at $25.
Given that the conversion now with HRP-D selling at roughly $9 would imply a synthetic call option at $4.68 not $13.00. Maybe HRP never trades above $5 again, but seems the D at least provides more wiggle room that does not cost any more than the B or C.
Cheers
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Junto,
Why the HRP-B and not the HRP-D as they pay nearly the same but the Ds give you, in essence, a free call feature of 30+ months if not called.
If we do get inflation or hyper-inflation several years out, then maybe this is one of the sectors in what the Seth Klarman(s) of the world mean by buying inflationary protection.
Cheers
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Anyone following this sector? Besides a few preferred items in the REIT sector that a few of use have mentioned, I have not heard from anyone. I understand as this is not the board's normal area of interest, but given the carnage one must go fishing where the values are located.
It would appear that after the Auction Market Preferred Shares and/or the Taxable Auctioned Preferred Shares that many funds are now redeeming to reduce their leverage is over, this sector should stabilize somewhat and produce some nice returns.
Cheers
(formally 653211)
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Yes and as expected, the new U.S. Government has gotten off to a bumpy start. However, let us admit that they have a full plate indeed unlike many other new administrations. However, when you come in firing all cannons at once, you do have a tendency to misfire on occasion and of course you will have those unintended consequences.
Only on the job for a few months, the speculation now grows as the new Treasury Secretary may be on the way out (though only speculation at this point).
http://www.businessinsider.com/henry-blodget-tim-geithner-deathwatch-2009-3
The point? Maybe this is good news that AIG will finally unwind and the good guys start writing good business.
Cheers
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Buffet spoke about the unintended consequences at municipalities at length in the Annual this year with respect to default rates and how they may be much higher than expected going forward. Not exactly with respect to default rates here, but the city of Vallejo in California has possibly set new grounds that others will surely follow if they can. That is voiding Union Contracts under a reorganization plan is is not allowed for private companies.
http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202429121561
Cheers
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The situation was that Dreman is/was a legendary value investor. However, he was also proud to be a contrary investor which in this case got him in trouble with his DCS closed end fund as it blew up as he went both contrary and with leverage.
The point about the Munger's mental model is that we should be very aware of both our previous successes or people that we admire previous successes (i.e. always remember the Napoleon and Hitler's mistake).
Yes, some were in denial by purchasing or holding onto DCS.
Cheers
(Formally 653211)
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I was wondering when this was going to happen.
A sad day, but a good reminder and lesson of Munger's "Influence from mere association" mental model.
Cheers
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FYI on the Hurricane front. I know Buffett indicated that BRK would be writing less this year, but is some of the reasoning behind it related to the data below? I would think so as a reversion to the mean should return.
http://www.coaps.fsu.edu/~maue/tropical/
Cheers
(Previously 653211)
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Before I get into this teaser, as many have changed their handle, it too decided to changed mine from "653211" to "JEast" for James East.
A LEAP that pays you? Well it would appear that there are such items out in the ether currently. From a previous post and recommended by another board member that I thought worthy of bringing up again is HRP's Preferred Convertible Debenture "D" which is convertible in November 2011 for 1.92 shares of HRP per debenture held.
What are the some the facts? 1) HRP reduced their current equity dividend (i.e. good for the preferred), 2) They are buying back equity (3M last two months) and debt (again good for the preferred), 3) Attempting to float a portion of their holdings into a Government only REIT (i.e. more funds to reduce debt or other), 4) No significant debt due until 2011, and 5) the Equity appears to be selling less than book given even dire real estate assumptions. So are you paid an estimated 18% yield to hold the call on a potential rebound of the common? I know many are interested in the WFC Preferred, and others, but do they have the call like kicker?
Any others looking a deeply depressed Preferred Convertibles?
Disclosure: I own the HRP-Ds.
Cheers
What Would It Mean If California Went Bankrupt?
in General Discussion
Posted
Yes, as Buffett hinted their will be a mess in the Municipal bankruptcy arena. Below is just a small taste of what is down the road.
Jefferson Cnty Ala Sewer Rev $3,811M
Greenville, SC Connector Toll Rd. $289M
Vallejo CA Various $279.8M
Edinburg TX Duke Energy $192M
South Bay FL Comm.Dev $98.7M
St. Louis MO Convention Center $98.0M
Santa Rosa FL Bay Bridge $95.0M
Cheers
JEast