ERICOPOLY

In late 2009 he claimed to have 5 gigs of data from a BofA executive -- said he has the hard drive.

That's pretty much what Jeremy Grantham said -- he just feels like Graham's ideas are a "Duh" (his word). You could summarize The Intelligent Investor as -- "Buy low and sell high". Obviously, that's a "Duh". Graham emphasizes that you must appraise the value of the business in order to have an informed opinion of "high" and "low" -- once gain, "Duh". I know an interesting story from a value investor who once had a ten bagger buying a stock that Ben Graham himself trashed, in his own nice way, in the 1973 edition of The Intelligent Investor. If anyone can guess the name of the stock, I'll tell the story. :) That was the year I was born. Around that time, Graham was telling Davis to buy GEICO -- Graham giving a stock tip! That was a terrible time to recommend GEICO!!!! Right before it collapsed.

I think my taxable accounts are enough to carry me the next 20 years (Plan A). SEPP is my "Plan B", to be tapped as a last resort. It's a good idea if you run out of taxable funds.

That's pretty much what Jeremy Grantham said -- he just feels like Graham's ideas are a "Duh" (his word). You could summarize The Intelligent Investor as -- "Buy low and sell high". Obviously, that's a "Duh". Graham emphasizes that you must appraise the value of the business in order to have an informed opinion of "high" and "low" -- once gain, "Duh".

Isn't it a taxable event to switch from common to TR swaps?

It would wipe 3 months of Citicorp's earnings, and would slow the ongoing de-leveraging perhaps enormously as it would be more painful to move more assets to HFS. People have been focusing on QE2 in terms of how much wealth effect it generates and how much GDP it will translate to. But I don't think that's what QE2 is for -- if you look at what the banks need to sell in order to deleverage (top dollar for low quality bonds) then QE2 begins to make sense -- get the banks deleveraged as fast as possible and we've got a fighting chance (I think that's Ben's mentality). Unless of course one believes it doesn't matter when banks have their capital tied up in illiquid assets. Otherwise, I'm at a loss to understand what the real strategy is.

I was looking at the Citigroup "Special Asset Pool" -- this is where they put their junkiest non-core assets that they are selling and running off. The size of the pool is down to $94.8b in Q3 2010, vs $162.5b in Q3 2009. 38% of the pool is marked-to-market (including the "available for sale"). What's interesting is that tje available for sale assets are marked at 90% of face value, but their held-to-maturity assets are marked at 69% of face value. You are saying that available for sale is marked-to-market -- it just surprises me that market is 90% of face value I guess, whereas the hold-to-maturity is marked much lower. Sort of counterintuitive to me. page 9: http://www.citigroup.com/citi/fin/data/p101022a.pdf?ieNocache=309

We have laws that cleanse the borrower's record after seven years if they default on their loan. Perhaps an exception can be made for strategic defaulters. I would rather start with this before handing out money.

I can't understand why it would make sense for a bank to be required (as some people advocate) to mark their loans to market -- wouldn't that implicitly provide a loss reserve (embedded in the market price). So theoretically wouldn't the bank then be justified to operate without a loss reserve? Just a passing thought. Sometimes these thoughts don't amount to much -- but every now and then I see somebody advocate a mark-to-market model for banks and it makes me think of this double counting of anticipated loss in the loan portfolio.

Microsoft has already "allocated" $100b to non-technology related businesses -- it was the return of capital to shareholders. Berkshire would have decided on your behalf where those funds are best deployed -- Microsoft doesn't make that decision for you, you are on your own. But then Microsoft isn't an investment holding company so it's not their role to be your investment fund manager. Microsoft isn't Berkshire -- just like BNSF isn't Berkshire. BNSF's managers don't allocate capital outside of railroads, and Microsoft's managers don't allocate capital outside of technology. In both cases, they return the excess earnings to the owners and the owners can decide where to invest those earnings. In BNSF's case that owner is Berkshire. I think this is why Gates hasn't directed Microsoft to reinvest earnings outside of technology. Microsoft isn't a holding company, Berkshire is. The whole point of Berkshire is to have Buffett allocate the capital rather than pay it out to shareholders. If you are a Microsoft shareholder, you have your choice of managers to allocate your earnings -- you can reinvest directly in Sanjeev's fund, or in Fairholme, whatever you choose.

Buyback or dividend -- either way there is a smaller amount of net assets. That just leaves the "larger stake" part -- so sell enough of it to bring your ownership level back to where it was before the buyback. Your treasurer doesn't get it.

Bronco, a wise man would just stay out of the shower. (overvalued stock == shower) A court might suggest that you consented.

I'm sort of swinging back to the buybacks are no worse than dividends mentality. If buybacks at a high price increase your ownership by 10%, then just sell an offsetting amount of shares to manufacture a dividend for yourself -- given that dividend and capital gains taxes have been identical, you at least save on taxes through the buyback route as you don't pay tax on your cost basis. So you wind up with more money post-tax via the buyback. And who is complaining anyhow about an overvalued stock -- only people who don't own it. Owners would have sold and become non-owners if they thought the valuations were stupid -- and if they did... they were happy to have a ready buyer.

Looks like Hussman is not buying the inflation talk: "Likewise, we clipped our precious metals holdings to only about 1% of assets on price strength."

I have to say, as a Citigroup shareholder, I appreciate the liquidity -- speeds up the runoff. I don't think that brings any jobs back, but it should increase my future earnings.

From the best I can tell, if one insists on using a printing press analogy, this printing press is using "disappearing ink". The money injected will be removed once the bonds mature. I think they are buying 5 year bonds right? Given that they are Treasury bonds, there is a guarantee that these dollars will indeed make it back to the Fed on schedule. How come it isn't this simple? I can see an argument that if they buy muni bonds or mortgage bonds that these bonds might not be repaid, and to the extent that they suffer losses then that's ink that doesn't disappear. But when buying Treasury bonds, it looks very much like disappearing ink.

Mr. T is a better source of information on gold: http://video.forbes.com/fvn/business/mrt-on-gold

I saw that at Citi in the recent quarterly release -- however, despite a multi-billion dollar loan loss reserve release their reserving as a percentage of total assets actually increased. They reduced Citi Holdings by $40b, which is largely responsible for the math. So you could say their reserves actually increased, relative to their remaining asset size.

Additionally some people on this board hold cash as a percentage of their portfolio. To beat the S&P500 all you had to do was go long SPY with a percentage of your portfolio and hold a reserve of cash with some other percentage -- the more cash you held, the greater your outperformance. There may be less people beating the market during a period where the S&P500 outperforms cash. However I think the majority of people made their money from their picks -- and the S&P500 outperformance was large in most cases... too large to be explained by just cash (my guess).

A lot of my outperformance was due to Fairfax. I give them the credit because they chose the underlying investments (largely the CDS) that went up and delivered gains while the markets tanked. It's a bit like if I'd put a large percentage of my net worth in Paulson's fund -- yes, it would have taken some degree of aptitude to select him, and some nerve to hold on, but can I count the performance as my own? At some point it's the fund manager that really generated the results.

He is right sometimes, but for whatever it's worth he gets it very wrong too. Here is a quote I pulled from The Davis Dynasty -- the book is describing a Barron's Roundtable from 1988 with Jim Rogers making his forecast: "Most stock markets around the world," echoed TV commentator and motorcycle buff Jim Rogers, "are going to go up dramatically ... but no longer than six months, at which point we are going to have a real bear market. I am talking about a bear market that is just going to wipe out most people in the financial community, most investors around the world. And in fact there are many markets I would short but which I will not be short, because I think they will probably close them down." I only bring it up because he gets a lot of mention as a guru, but nowhere in the media do I see them going back to see how full of BS some of his ideas and forecasts turned out to be.

Most of you probably don't have guns and don't think about them much... but I found this out recently and find it rather interesting... in most places right now you can't buy ammo for popular handgun calibers like 38 special and 357 magnum. And it's been that way ever since Obama was elected (I asked at a couple of local places that sell ammo). You can go online and try Cabelas.com and it actually takes months to get 357 magnum -- it's a long backorder. Now, there are a lot of companies producing ammo out there for the retail market, yet they can't keep up with the flow of business. People are hoarding -- for real. There are a lot of flipped out rednecks I suppose, but nonetheless it is interesting to observe this aspect of the people that live around us. I don't know if they are just panicked that society is going to collapse, or rather they simply worry about Obama taking away their right to bear arms. You would be making a lot of money though if you were an ammo manufacturer -- these boxes of ammo (50 rounds) of 357 sell for $26 at Walmart nearby locally, and that's basic target rounds (the cheap stuff). They were sold out so I asked the guy at the sporting goods counter when they were getting their next shipment -- he said he sells 3 to 5 boxes a week (this is for the entire store!). That's only 150 to 250 rounds of target ammo for the entire Kitsap Peninsula here in Washington state (Poulsbo Walmart location). So he said he was expecting to get 2 more boxes that evening -- so I said "2 cases you mean?". "No" he said, "two boxes". Okay, let me get this straight -- this giant Walmart store is only able to procure 2 boxes of ammo -- that's it? That's only 100 rounds. One person can blow through that in 40 minutes of casual shooting at the range. THis is because, even Walmart can't get ammo in sufficient supply -- they are rationing it out to their stores from their warehouse. Anyways, I started target shooting this summer which is how I know this -- because I couldn't find ammo, I started loading my own (buying the shell cases, bullets, primers, and powder separately). So even the unloaded components (the shell cases) are sold out and backordered practically everywhere (takes a couple of months to get them). It might be Obama, it might be the global financial crisis, but something is driving people to hoard ammo right now.

If I'm not mistaken, Citi has 50% of it's business in emerging markets. This leaves room for solid organic growth versus the US centric banks. So Citi is trading below tangible book and perhaps has the best growth prospects. Now, just to throw an example out there, if you pay 2x book and make 20% ROE, your return is actually only 10% (despite the high ROE) if there are no reinvestment prospects for retained earnings (no means of growing the business). That 20% ROE is just going to wind up as a 10% dividend and you'll earn 10% economic return given that you've paid 2x book. So Citi is going to be able to shelter it's earnings for a long time here going forward due to their tax losses that they can carry forward, and they're priced under tangible book with room to grow their overseas business (I believe only 25% of their business is based in the US). These restrictions on the acquisitive dealings of US banks going forward if they approach 10% deposit share -- isn't that a concern, especially if you view organic growth as challenging? So do Citi's other advantages here (growth and taxation) help to favor it more than just looking at these other metrics such as the cost of the deposits? Personally, I own a lot of Citi (since late January) and own it for these reasons that I'm alluding to here. Just interested in how others see it. I like WFC's balanced earnings stream (50% from fees) -- helps cushion it from problems in the loan book. However I wonder how they will grow and such. I own some WFC too -- but I don't own BAC. Clearly because C's stock performance has been so much better than WFC and BAC right now (past 1 month, 3 month, 6 month, and 10 month) I'm starting to get interested in shifting some money -- but I still don't see why Citi doesn't look the best at this point. You've got the international growth, the tax free status for quite some time, and the best valuation based on price to tangible book. So some of the internal metrics aren't quite as good... but once again you've got the after-tax metrics which will be the driver of tangible book, and the organic growth opportunities -- plus I believe they can make acquisitions in foreign markets without it raising the hackles of US regulators who want to limit deposit share to 10% (was that the number?). I suppose nothing stops WFC or BAC from going more international, I just rather thought that the Citi name is already embedded overseas in many markets so growth seems more realistically attainable. Thoughts on Citi's 75% international, 25% domestic footprint? The pessimism I see on the US growth prospects that I've seen in other threads isn't in this one -- these banks have been discussed as if Citi's global footprint (and thereby growth) is of no consequence to the discussion. WFC I suppose does have room to grow by more cross-selling to it's Wachovia customers. Another reason I own it, but I'd rather there also be a big tailwind from fast deposit growth as well.

The IPAD sucks when you are trying to read in the full sun. That's where the Kindle really shines (sorry for the pun).

I've had a kindle for more than two years now and it's great. However I tend to leave it behind these days -- I ditched the Blackberry this summer and bought an IPhone 4. The phone goes with me everywhere so I installed the Kindle app on the phone and that's where I do most of my reading now.