txlaw

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice? JNJ pre-tax income gets reduced by corporate tax rate. Dividends to insurance sub get taxed, though not at full 35% rate. Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income. Or am I wrong here?

Interesting. The more I see HWIC invest, the more I am tempted to buy FFH shares even though I'm pretty sure I can do better than simply holding FFH, and the more I even think I would like to work with folks like HWIC someday. Don't you guys like the fact that HWIC is trying to expand their circle of competence into technology, given that WEB and Munger have explicitly said that if they were younger, that's a sector they would like to better understand? I think HWIC is starting to come into their own as a distressed investor, though they have had some missteps in the past. They appear to be quite enamored with Wilbur Ross, who is someone I would certainly try to emulate.

Ben Graham, I don't generally like to disclose such information -- not just publicly, but to anyone. I feel that doing so invites push back from people in way that pollutes my own thoughts about IV, particularly because I tend to think of IV within a range of values based on certain key variables and my own assessment of the risks associated with ownership. Also, for me, IV is a moving target that changes when I get new information, so it doesn't make sense for me to say it out loud and face the risk of anchoring myself to my declared IV.

I have not read or listened to the JCP investor presentations yet, so I may be commenting too early. However, I can't help but notice that Target just put a call out to its suppliers to provide them with unique offerings that cannot be found online or to provide them with items that will be priced competitively with similar/identical online goods. They want to combat the showroom effect. Perhaps that is what JCP is going to be doing as well? Hence the Sephora and Martha Stewart store within stores?

I don't own any FFH at the moment. RIMM is my smallest position. Hopefully, it starts going down again to a price substantially below my current cost basis. Then I may add more.

I bought a small amount of RIMM yesterday for the first time ever. I think that with Mr. Watsa on the board, there is much less risk now that the assets that RIMM has and the cash it generates gets destroyed by management. If these guys somehow turnaround the company, there will be very nice upside, but I'm not counting on that. I'm counting on the downside risk being fairly low. Probably trades somewhere close to (if not below) runoff/breakup value at this point.

Wow, amazing quarter. Those YoY unit changes are pretty astounding too.

Thanks for posting, dcollon.

So it's safe to say that Obama will point out the contrast between a certain GOP candidate's effective tax rate and the effective tax rate for WEB's secretary. It will be interesting to see the reaction from the crowd on that one.

I agree, most people (aka the market) want them to build capital. I was just writing about people on the board and this thread. Let me rephrase that. I actually don't think most people on the board want BAC to pay dividends and buyback shares just yet, especially given the reluctance to do so on the part of the other banks. I can only recall a couple of posts expressing that opinion.

I actually don't get the sense that most people want BAC to pay dividends and buyback shares just yet. But you're exactly right -- lifting the clouds of doubt by continuing to generate capital will definitely get BAC back up to IV way faster. I would say that the only big banks right now that should be buying back stock or paying out dividends are WFC or USB. Maybe PNC, but that's debatable given the lack of clarity regarding their recent M&A activity.

It does appear that there is a competition to get capital levels up quickly, no doubt caused in large part by the unwillingness to look undercapitalized relative to one's peers in the face of a European crisis. My favorite CC exchange so far was this one: Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division Okay. So you would expect -- no, that's fine. Let me go to the capital question. Where are you leaning right now? Are you leaning toward having higher capital levels for a perception of greater stability of Goldman Sachs, or are you leaning toward, hey, let's buy back a lot more stocks because we're trading below book value? David A. Viniar You and I have talked a little bit about this before, Mike. It's a very hard question, and it's not a science. We sit here with our stock price where it is. And as I said to you, I am relatively certain that at some point in the future, we're going to wish we bought back a lot more stock at this price. Yet the flip side is it's a very tough environment, and in a tough environment, we tend to be very conservative and want to hoard cash and hoard capital. And so we make the -- those 2 things you mentioned are offsetting thoughts that we have, and we just try and make the best decision we can in the environment. Michael Mayo - Credit Agricole Securities (USA) Inc., Research Division Well, if you feel a teeny bit better about Europe, would that mean you'd lean a little bit more toward buybacks? David A. Viniar I should emphasize teeny in how much better I feel. I also liked this exchange on the WFC CC: Nancy A. Bush - NAB Research, LLC, Research Division John, I'd like to get your perspective on one other thing as well. Jamie Dimon said a few days ago that given the stringency of this stress test, the CCAR, the 13% unemployment, et cetera, et cetera. He expected after you get the results of that and he implied that he does not think there will be capital raising needed on the part of major American banks as a result. Do you hope that, that would be the definitive word on capital? Do you expect that -- do you have that same expectation? John G. Stumpf Well, I don't know other banks as well as he knows other banks. So I know this company. And we surely believe we're in a good spot. But I would make a general comment. What we've been through the last 3 years in the U.S., there's been a lot of capital grown, organically and just through earnings and a lot of capital was raised. The industry is far stronger than it's been in the past. And it takes strong banks and a strong financial system to support a growing economy. This country is in a much better position than a lot of our European counterparts because of the strength of the banks. So I don't know what the stress test is going to show for each institution. I don't have a vision of that. But I know in our case, I don't worry a lot about our capital to support growth in this for us.

I have seen nothing but good news since I have actually become a LVLT shareholder. In fact, I've made out like a bandit on my LVLT exposure, in large part because I have timed my purchases and sales pretty darn well. It all depends on the price you pay for your ownership stake versus what you believe the IV is, and I have a pretty conservative estimate of what IV is for LVLT. Long LVLT.

And they continue to reduce wholesale funding. I like that. http://www.marketwatch.com/story/bank-of-america-announces-commencement-of-cash-tender-offer-for-certain-subordinated-notes-2012-01-19

;D

This is my biggest worry with the US nat gas industry. I hope that the fears about water contamination and earthquakes are overblown, but I wonder whether the industry is simply sitting on (or ignoring) information about the negative effects of fracking, similar to how the tobacco industry acted when people first started to realize that cigarettes caused lung cancer. Having said the above, I don't see how we can ignore this resource that we must use as a bridge to get to a cleaner energy future, and that will change world geopolitics for the better. There will need to be more involvement from the federal government -- perhaps there should be stricter rules on collecting data on these problems, and there ought to be a federal insurance fund that all nat gas producers pay into that can be tapped when environmental problems occur. Nat gas is a long term play -- one has to be able to outlast the short term pain that could very well continue for a while. Wouldn't make it a large port of my portfolio yet.

Interesting insider filings made today: http://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0001310067

I don't disagree that nat gas prices could go lower and remain there for a while. And nat gas producers seem to trade in concert with nat gas prices. So I'm trying to concentrate on companies that could be M&A targets or who can pick up attractive assets from overleveraged companies. CHK is a special case because of all the JVs and financial engineering they're doing. I also plan on holding much of my US bank exposure for the long run, particularly those warrants that adjust downwards for distributions. US financials remain a large part of my portfolio.

Are you looking at CHK, ECA? Personally, I'm selling some 25 to 50% positions that ran up to purchase a full position in CHK and hopefully MA if it comes 5-10% lower. I'm looking into a number of companies, including CHK. Nat gas producers and midstream. Also nat gas-levered utilities. Will have to take a look at ECA.

I'm still fully invested, so no going defensive for me. I did, however, take some gains in financials and redeploy into nat gas-related companies.

I take it you sold out?

As of September 30, 2011: Top 10 Holdings percentage of assets Overstock.com 12.0% UTStarcom Holdings 7.4% MBIA Inc. 5.5% Aeropostale Inc. 5.5% Office Depot 5.0% Berkshire Hathaway-A 4.8% The Gap Inc. 4.8% AbitibiBowater Inc. 4.7% Citigroup Inc. 4.5% Sears Holdings Corp. 4.5% 58.7%

Interesting. I know that Kmarts are often located in less than stellar areas. Perhaps the Kmarts being rundown are part and parcel of the area in which they are located being rundown, rather than the Kmarts themselves causing the devaluation in the real estate. I'm just skeptical that it's the Kmart itself that is causing the devaluation in real estate. You may be right though that the underlying real estate value has decreased over the last couple of years. You're also right that there are often Targets and Walmarts within 5-10 minute drives of Kmart. But I also know that whether a store within the same area makes sense depends on the density and traffic of the area. Where I live, there are definitely multiple Targets within less than 10 minutes drive of each other. That's because there's more than enough traffic for two stores within such short distances of each other. And what about other retailers? Costco? Or Kohl's? Surely some big box retailers who think they have a shot at starting a successful store would jump at the chance to take over leases at below market prices? Grocery stores maybe? The point being is that the low cost space can be sold or leased to someone else who can optimize the space. I use Walmart and Target as the natural purchasers because they are the closest competitors to Kmart.

That's kind of what I think SHLD should do as well. As I've said before, I hate the Kmart business. They should maximize the traffic to stores and then sell them off to Walmart or Target for conversion to better big box retailers. Sears should stick to a showroom like experience where you can buy merchandise on hand with no shipping cost or order online to be shipped ASAP to your front door or to the store (at no cost). I'm assuming they will really convert to more of a Hometown format, where they aren't selling clothes, bedding, etc. and where the space utilized is much smaller. In terms of surviving in the near future, Sears has much more liquidity than people think. They can utilize their existing credit lines, encumber more real estate assets if they need to, and sell those IP-backed ABS's that they are currently holding in the Bermuda subsidiary.

The flip side, though, is that you will invest money to preserve market share or to maintain revenue and never get a good economic return on that money. Some would argue that a number of retailers have been doing this very thing for the last couple of years in the face of a shift in consumer shopping behavior, particularly as the percentage of the population becomes more Internet savvy. You don't put cash generated by a textile factory back into the textile factory when there is a fundamental shift going on in the industry that makes it such that the ultimate return from that cash can be greater through investing in a different business. Similarly, you don't put money generated by a dying retailer back into the retailer when there is very little probability of saving it. I don't think we should assume that had Lampert put money into Sears and Kmart, people would continue to shop there. In fact, the future of Sears is probably not as we think of it. They're trying to "transform" the business.