Baoxiaodao

must read

Direct link: http://www.americanbanker.com/issues/177_58/wells-fargo-caps-loan-value-ratio-third-party-lenders-1047789-1.html A new report from Amherst Securities found that some megabanks are making 3.5 to 7 points of profit on HARP 2.0 loans, in part because they are charging higher than market rates for the loans. On industry advisor close to the issue, and who spoke under the condition his name not be used, said on a $200,000 loan (for example) some lenders have the ability to earn $10,000 in profit per loan. "They can earn up to 10 points," he said, but that profit margin only applies to loans that are already in their servicing portfolio. The advisor noted that Wells is not doing anything wrong – but simply sees a huge market opportunity to earn a ton of money.

Howard Marks is one worth listening to. Thanks!

Thanks J, that is a very good one.

I had to sell Jumbo due to account consolidation @.44. However, I am totally OK because I am pretty sure I will hold until today if I was not forced to sell. I also had to sell Delticom at 68, and it went up right after the sale. This year so far is a disaster. A managed account with almost totally different holdings has 26% YTD with negative leverage and no derivatives, on top of 20% gain last year. This account more or less represents the true performance. I did buy some EGD in my RRSP account... but only a few hundred shares... Bart, I am extremely conservative with with any investments I make. In SMT Scharf's case, I can see where it will go and why it will go there. Coal price is a factor, but regardless of it, SMT Scharf should do well in the long run. In EGD's case, I am not so sure. I am not used to that kind of dilution and this story requires tremendous growth down the road the make the ROIC acceptable. Maybe I am just an old guy and too nervous about risks. Well, on the other hand, I did buy into Russia, where people hate and distrust, through a Swedish equity called Vostok Nafta. It is so funny people are focusing on the short term politics and ignoring the change already in place. I would like to ask, 20 years ago, if so many people had went on street in Russia or China, what would happen? It is naive to believe democracy is always right and dictatorship is always wrong. I do not like Putin, but I think Putin will do a better job to grow the economy than the liberals from the West will. You know when China was run by engineers, its economy expanded 30 years almost nonstop; now that those freaking economists(I think they deserve this word) are trying to give out advice, I could not help but worrying about China's future.

Hey Bart, it surprised me that someone actually paid attention to my writing :P I was surprised that the CEO chose to leave at this moment, but the rational choice for him at this moment, is probably to move on to a better opportunity. Please note this is pure guessing. The CEO owns some shares which were sold to him at low price. However, he had no options and in the last few years, shares were distributed to all employees but him. So financially, with the current compensation structure, there is very limited upside if he stays on. This is an example where if options are used wisely, good people will be kept on board. As a shareholder, it is hard to say if this is a curse of blessing. At this moment, if he got a good offer with improved compensation, he will probably move on. Dr. Trautwein is still young and it would not surprise me he has the desire to pursue better life. I tried to check out this new CEO on Google but had no idea about him. I am always suspicious about entrepreneur type with a big smile. He sold his company in 2008 and stayed on for a while. Then he moved to SMT Scharf. The only speculation at the moment is that he might do a deal when the price is right. Ludowici Limited in AU got competing offers in the last few weeks. Although its business is nothing compared to SMT Scharf's, you can have an idea what a right price will be if there is an offer. I still think the growth prospect for SMT Scharf is good although I do keep an eye on coal price. This is a company offering right products at the right time and in the right places. When I stated I have a hurdle rate of 40% on this board, many of you guys think this is unrealistic. However, I think at today's price, with some luck, 40% annualized return for the next three years is still possible.

I thought I was the only one finding this. I stopped reading the Economist a few months ago. Could you guys elaborate with some specific examples? Are you sure that it's not your own positions that have changed over time? Liberty, I think I might exaggerate it. It is probably only me who found most publications are not worthwhile reading. With publications I meant newspapers, magazine, etc. I used to read Economist page by page, but nowadays it is getting harder to find something interesting. Maybe I read too much of it.

I thought I was the only one finding this. I stopped reading the Economist a few months ago.

An interesting side topic is the willingness of people to pay for good content. I picked up Financial Times every day last year from my school. And right after they cancelled the subscription, I missed it a lot. The subscription costs 350e or around 470 USD in Finland, but after thinking about it, I am going to subscribe. I paid 79/year for WSJ and got 20 Amazon gift card in rebate. However, even at this price, this is a totally or near totally waste of money. The newspaper, in my opinion, has failed in capturing what is happening around the world if you compare it to Financial Times.

If you just want to get educated, then all those things you mentioned above is OK in my opinion. But for successful investing, there is really no need to read any of them. Even today I regretted for paying 59/year for WSJ. One thing I recommend is the Financial Times. I can be easily absorbed into this paper for more than half an hour a day.

A few interesting comments on that article too. Man, I have to admit Chinese has a habit buying real estate regardless of price. You may even call this an addiction. Still, one has to punt into perspective that this is really an arbitrage for 3rd world rich people like Chinese. Even at today' price, you can buy a far better quality home in Canada than in China. That being said, it is now the marginal purchasing power that is supporting the sky-high price. This may go on for a while. Stay tuned.

I am so curious about people here talking about China like they do know China. No offense, but the situation there is probably so complicated that any conclusions are not more than educated guesses. China is a place I feel thoroughly mystified as I grow older and acquire more knowledge. Yes, I myself is a Chinese. Let's just wait and see.

Thanks! Have you looking into Finland? I would really like you to comment on this one!

I am totally in awe. I think I am gonna read this at least 5 times to understand it. Thanks for posting!!!

Hi UCC, I looked at YLO-D and to be honest I have no clue how to analyze this investment? Could you please elaborate so that I can get started? And just curious, why YOL-D instead of other series? I searched the board using yellow meida, but nothing turned up. That is why I ask here. Thanks in advance!

Thanks, that is what I was looking for. I bought SSW for 9 accounts and tendered those 99 shares in each account. I would definitely look at others and ask anything I do not understand.

Well, that is a hell of information. Thanks! Can you please talk about your common stock holdings? Can you also talk more about your strategy trading options? I would really like to learn from you. It took me 10 years to catch on with value investing, so I totally understand your feelings. Keep going!

I looked at the way UCC invested and was wondering why such a result worth any congratulations without further understanding of the risks. Things could go either way. A few good bets can make a certain year's return shiny, but inherently, this is a levered and risky strategy. I did not mean to criticize, but certainly we should not encourage amateurs replicate UCC's strategy. I am very curious as to how UCC yourself thinking about the strategy. How do you think of your return on a risk-adjusted(again I borrow from Howard marks) basis? How do you manage your risk? Many of your positions can go to zero. How do you handle the volatility mentally? Thanks in advance for the answers!

This is most likely to be true. Things could go either way. Staying humble is key to better investment return.

I wonder how a good newspaper like G&M can make such a bold statement...... But in the media business you need to grab the eyeballs......

Gary Hoover video, right? Retailing is certainly a tough business. That's why the smart thing to do is to optimize and maintain the Sears appliance/tools retail business, optimize the customer traffic for the Kmart locations as best as can be done for Kmart and then sell to others who can really utilize that traffic, more widely distribute the brands that SHLD has, and utilize the value in the real estate (owned and leased). I agree that Lampert needs to bring in real operators to counterbalance his financial wizardry. But he most certainly should not "quit this game," whatever that means. Txlaw, I realized I made the judgement too early. You never know what the ending is until the ending is there. I apologize. Even though I am a million miles behind Howard Marks, I am very proud that I am in the same 'I dunno" school as he is. Face the reality. Investing is all about resource allocation. Let's say Eddie sold Sears plus Kmart at the peak, he would have done much much better with his stock-picking skills. I think even you cannot deny it. He was kind of bound by this investment. I never put a dime in business like retailers(delti excluded) and juniors. I learned from Kuppy that 98% of Junior are suckers. I also learned that retailing is a very hard business from the presentation and the audio book about A&P. So I stayed away from them. I do believe to become rich you need to avoid trouble. In fact, I even do not want to hear it. This has served me well after my failure at FMD and Delta Financial(I almost lost my shirt on them). I think now it is not about fixing the business. Sears will have a confidence problem. It really does not matter how much cash it has. Retailing is a marginal business and the operating leverage is huge. Eddie was very successful for many years and he tried to use the same financial method to solve Sear's problem. To a man with a hammer, everything looks like a nail. How could you turn around a retailer by buying back stocks? This is the simple question. However, when things were going well. No one bothered to ask. In the end, I admit that I have no idea about Sears' financials. I wrote this after reading the WSJ article.

Retailing is a tough business. I once watched a video of a guy telling how the great fortune was made in retailing, like A&P and Walmart. But the question is, how much destruction those winners had brought? Eddie is a financier. It is still not too late to admit his mistake and quit this game.

I like ARGO, but have no means to trade in UK. My friend was not so comfortable with this for some reasons, so I chose to pass. Anyway, it can work out brilliantly. And in my opinion, EU is not cheap. I've looked at some companies. Considering the risks, valuations are not very good. I still think there is better value in AU.

can you give me detail in the process you look for them ? And how you value them? Hi King, I have been thinking about giving an example. Here it is. I own a company in AU called Jumbo Interactive. I bought it @ 30 cents. The annual report laid out everything very clearly. It is trading at 2.5x P/E before cash. JIN's business is to sell lotteries on the Internet, which is highly scalable. In the last five years, the business has grown just like other online businesses. In normal condition, this kind of business should garner 20x P/E. This is an outstanding business trading at ridiculous price. You see, magic formula wants good business trading at cheap prices. That is simply not enough for me. But the situation is not normal here. JIN's online business hangs on a contract with Tatts, which is expiring at the end of 2014, although the contract will be renegotiated a year earlier. Tatts is a monopoly in the lottery industry which owns the only nation-wide license given by the government. Recently, Tatts launched its own website to compete with JIN. Therefore, the probability that JIN will renew the contract seems low. I believe each of us has different opinion about risk/reward and you can make your own guess. Here is mine. Let's say JIN simply operates until the end of 2014 and then liquidate, the cash will cover more than the current market cap. This is third grade math so I would not give the details here. This is is the bottom line. I personally believe, after some thinking, that there is around 30% chance that the contract will be renewed as it is now. If it is renewed, I will hit a home run; if it is not, I would not lose much. There are also other complications, but I will keep things simple here. This is basically how I make my investment decisions. Hope this helps.

That makes sense--do you generally try to diversify on these small cap stocks (or said another way, not take large positions)? I've been keeping my portfolio at less than 10 stocks (I'm actually more like 4 at this point), but it seems like these smaller caps are much more prone to going under than the big ones and/or it would be harder to get as much details about them. I know Greenblatt talks about having 20 or so, but he doesn't bother to analyze, so that's probably not as relevant. As a side question, does anyone know if Greenblatt's system actually works? The numbers he puts in the book are pretty high and the backtesting data from other sources I read could not reproduce them--it seemed like he cherry picked the best back test for his returns. I know a lot of investors on this board really love concentrated investing, knowing everything about a company and then dividing investments into 10 or 20 holdings. I know Buffett and Munger have talked about this, some discussion recently about Pabari as well. The idea is that the 25th idea isn't as good as the 1st idea. This sounds good, and I'm sure there's some merit in it for the full time guys. The problem is as an external investor you are always at a disadvantage, no matter how much you know you're still an outsider. I know this is true for companies that I've worked in, I've read some of the most detailed industry analysis and research reports yet the information is lacking compared to what I knew working in the company, and lacking in a large way. Having that intimate knowledge is critical, I think this is what Wall Street misses the most. Obviously you can handicap that a lot and that's what most people do, but I just can't get comfortable myself with this approach. I take a bit of a different approach, I diversity because this isn't my full time job and I can't spend hours each day keeping pace with each investment. All I care about is that a business is cheap enough, and has a large enough margin of safety, if it meets these requirements I'll usually add it to the portfolio. Sometimes I'll add a small position and increase it over time as I learn more or as I'm looking and realize that the idea is a lot better than others out there. Sometimes the position will stay small because I find better ones. The advantage of the concentrated approach is that with five stocks if you get a five-bagger your portfolio rockets to the moon. I prefer to look for $.50 dollars. A lot of these can be chumpy companies and I've had a few go under, but I've also had a lot do really well, enough to more than compensate for the disasters. I recognize that holding a bunch of stocks (20 currently, not evenly distributed) could limit my gains, but I'm fine with that. I'm more concerned about my downside, if I have a large margin of safety the gains will take care of themselves. In addition if I can't check a company for a few weeks because of other obligations I'm not concerned that some development will wipe me out. Hope this helps! The besting investing method is the one you are the most comfortable with. Well said, Oddball.