ERICOPOLY

In one of my posts above I wrote "including dividends" in the $24 price. Later I may have forgotten to repeat those words. So if you want to plug in $3.50 for the accumulated dividends, then you have: $20.5 - $9.8 warrant strike = $10.70. So that's exactly the same $10.70 value of the warrant as in my prior computation. I feel that the warrant will most likely outperform the common, but I still feel like the breaking even point ought to be lower. Perhaps the warrant is just less liquid, and somebody really wants to own them, so they've fallen less sharply than the common as of late (the common fell more than the leveraged warrant the past couple of days). It could be partly that, or it could be rising volatility premium as well. A substantial price component in the warrant must be the time value, and the time value didn't change much in just two days of course.

At $24 in January 2019, the warrant is worth $10.70. That's a gain of 2.95x the $3.63 price paid for the warrant at today's close. My point is that $24 is roughly the price where the warrant and the common stock have an equal gain. Anything less than that and you have an opportunity cost versus the plain vanilla common. I'm just a little surprised that the break-even point between the two is so high.

Common is $8.17, warrant is $3.63. $24 - $13.30 = $10.70. $10.70 = 2.95 x $3.63 $8.17 * 2.95 = $24.10 $24 is roughly $24.10. So this is why I said what I said -- that the break-even point between the common and the warrant is $24. You need better than a 200% return from BAC by Jan 2019 or else you'd have been smarter to buy the common instead of going with the warrant. I own the warrants, but I paid $3.75 today. I have had some trouble (buyers remorse) understanding why the getting even point is so high. Paulson estimated about $27 per share value for BAC. If you grow that at 7% for the next 7.5 years, we get to $45. There are perhaps reasons why the market won't go that high though. I don't know. I have to admit I like warrant for the tax shelter on the dividend :D I'm committed to reducing my taxes.

$24 (including dividends) is the point where the BAC warrants outshine the common (based on today's closing prices for each -- $8.17 for the common and $3.63 for the warrant). Shouldn't the warrants be cheaper than this?

The small cap 3x bull fund trades under TNA.

I find that when the options settle I sometimes want to hold onto the shares. So if (instead of getting the calls) I buy puts to hedge vanilla shares, I can take a tax loss on the puts at expiry. Earlier this year I did buy some IWM $120 strike puts and then wrote the covered $80 strike put when it was at-the-money. Today I bought back that covered put for a tax loss and bought some shares in a few different companies. Hopefully the shares I bought today wind up beating the IWM $120 strike puts that I continue to hold. The gain thus far on the $120 strike puts far exceeds the loss I took purchasing the covered calls, and the tax loss is valuable given the gains I took on SSW earlier in the year. So I'm happy with how this worked out. Best thing to happen now is a huge sustained rally so that I can take a tax loss on the IWM puts I still hold.

http://money.cnn.com/quote/quote.html?symb=GE red, green, red, green, red, ...

I've been to Oregon, California and Nevada -- I bought one of the Sprinter van RV conversions that Roadtrek makes. The past two weeks on the road. I was active a lot on this board back in April/May/June when I couldn't walk following a foot&ankle surgery. Now I can get around much better, so I've been out doing other things. How do you like your Roadtrek? We've been thinking of one. It's basically what we expected, but quality could be higher. From day one the sensors in the fresh water tanks have not worked -- never reads full even when spilling over, and reads empty when still 2/3 full! Some of the stuff is poorly put together -- things have come unglued, one of the cabinets doesn't latch. Can't they build them better at that price? What the hell are they doing with glue?

I've been to Oregon, California and Nevada -- I bought one of the Sprinter van RV conversions that Roadtrek makes. The past two weeks on the road. I was active a lot on this board back in April/May/June when I couldn't walk following a foot&ankle surgery. Now I can get around much better, so I've been out doing other things.

I found it interesting to see that the financial sector in the S&P500 is less heavily shorted than the average for the index across all sectors. Does this suggest that the market agrees with you? Presumably they'd be heavily shorted if the sentiment was that financial sector is shaky.

Well, I've been fully invested. Missed this opportunity.

As Paul Tudor Jones once said, "The obvious trade is obviously wrong." I must be the only guy on this thread to make any money so far on MSFT ;D It could always go the other way, we'll see what happens. This seems like it might turn into one of those divergent problems in which the structure of the problem itself almost guarantees that most people will not be able to solve it correctly. As a friend of mine once pointed out, that's why certain problems, such as education, are very hard for democracies to solve, they are divergent problems by their very nature. Are you now the only one on the thread to be losing in MSFT? Just kidding.

That 6 years of overhang again assumes they all go back to apartments. As jobs come back (if they do), some of these people won't need to be in foreclosure in the first place or will be able to rent an SFH again. Family with two income earners can't afford the payments today with one laid off, but when he gets his job back in construction related industry they can once again suddenly afford it. Somebody has to build those 6 million apartments (and all the rest of the jobs that construction drags along with it). I don't see why again a person losing a house with a $2,500 monthly mortgage is assumed to not be able to rent it from the next owner for $1,250. You are tossing all of these people into the apartment pile. They have children, they have furniture, they believe they need more space and quite likely can afford more space if monthly payments cut in half.

I think this is where you come to the different conclusion from myself and Buffett. I don't see a reason why a strategic defaulter is going to want to move in with Mom/Dad, or go to an apartment. This is merely somebody who bought too high and doesn't want to pay off the mortgage. They haven't said "I hate all this space, I want to put all of my furniture filling this huge house into a cramped apartment". You're putting those words in their mouths and I can't see why. They can just rent a SFR and they achieve their goal of strategic defaulting. Same goes for people who bought at the top and cannot afford the mortgage -- rents on SFRs instead of their mortgage payments will likely cut their monthly cash outlay in half, so why this belief that they would prefer the cramped space of an apartment all of a sudden? Lastly, there aren't 8 or 9 million vacant apartments. This is an affordability issue in addition to a preference issue. The preference is for the larger space... if they can still afford it. These are people who once made the leap from an apartment to an SFR... presumably because of the benefits relative to an apartment. Why do you have the assumption in place that most of these 8 million can't even afford rent on an SFR? Do you have data on that? I think we can safely assume that SFR rents are significantly cheaper than their troubled mortgages from a current cash flow perspective... to argue that it won't provide enough relief we need data showing that.

Also... Every now and then an old house is torn down for various reasons. Perhaps the house was tiny and outdated and the buyer bought it for the large lot in a good location. Or a developer bought it for redevelopment.

1) They all still need a housing unit to live in. It sort of doesn't matter whether or not they are the owner. It's still a household. 2) Housing overhang figure is being magnified by the jobs environment. You are not making allowance for any jobs recovery. So I think you're just counting the wrong thing. Instead, I believe it just makes more sense to look at the housing formation growth of the last 10 years versus the amount of housing units built (less those destroyed). That's the only true overhang. This other stuff is noisy distortion coming from jobs picture and people who cannot afford their payments (but they can afford to rent, so they will still occupy a unit of housing stock). The pipeline of people who either are forced to sell or simply wish to default strategically -- this may push housing prices down, but that's completely irrelevant when it comes to how many households were formed in the past 10 years versus how many net housing units were built. A person who wishes to strategically default isn't planning on living in a tent.

300,000 homes destroyed per year in addition to 1.2m average new household creation (1.2m is what I read somewhere). So that would be 1.5m home demand versus just 300,000 currently being built per year. 1.2m per year deficit takes only 7 years to blow through "8 or 9 million home overhang", less that 1/2 of the estimated 16 to 18 years. Where did the number "8 or 9 million" come from? During the housing bubble there were never that many homes built in excess of demand. Is this based on a forecast that jobs never come back and/or get worse?

Regarding the CDS, I presume a lot of it was underwritten before 2009, even 2008. Should they kick the can down the road another 3 years, a lot of those contracts will be expired, therefore reducing a good deal of risk to systemically important institutions (underwriters of the CDS). I can't see why facing the "inevitable" default today is more desirable than waiting a few years; with all the unknowns from the CDS why take the hit today, when in a couple more years of CDS runoff the risk should be reduced?

Rents will climb as well (taxes are ultimately passed on to renters), so it may not be as steep as that.

You'd want to put her in charge of an extremely highly leveraged fund.

DELL has $2.20 per share non-GAAP forward earnings if the latest quarterly numbers are to be maintained. That's I think where DELL is much cheaper than MSFT and CSCO. Time will tell.

Their performance vs S&P 500: 15 year +2.2% 10 year +2.25% 5 year -1.01% 3 year -2.31% 1 year -2.42%

I always thought they could have done something like just sell the rest of NB or ORH.

Way to channel your inner crotchety old man! Why settle on Pocket Computer? I think Miniature Mainframe, or Smarter Dumb Terminal, or even Super-Advanced Difference Engine would be just as accurate. Mine is a streaming media server (iPhone streaming iTunes via bluetooth to my Pioneer Elite receiver). I probably did get the "pocket computer" name from the days when we were impressed by a "pocket" calculator. Ericopoly Why stream with bluetooth? Why not get an airport express and a toslink cable? This is my area, it will sound a lot better. Heck, you can even get an apple TV, hook up HDMI or Optical and with the touch of a button stream to the pioneer without having to turn on the TV, but get the free option of using apple TVs services as well. DW Bluetooth is already there, and it sounds "good". My hearing isn't the best in the world though, and I'd have to hear it side by side with the other to see if I can really tell the difference. Perhaps I'd have to upgrade my amplifier and speakers to really know the difference. Thanks for the suggestions. Will now have to go and read about airport express and toslink.

Way to channel your inner crotchety old man! Why settle on Pocket Computer? I think Miniature Mainframe, or Smarter Dumb Terminal, or even Super-Advanced Difference Engine would be just as accurate. Mine is a streaming media server (iPhone streaming iTunes via bluetooth to my Pioneer Elite receiver). I probably did get the "pocket computer" name from the days when we were impressed by a "pocket" calculator.