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beerbaron

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Posts posted by beerbaron

    Hoisington Q3 Letter

    in General Discussion

    Posted

    Look at the province and muni's balance sheet in Canada and that statement should not surprise you. Federal government plowed the deficit problem to the provinces who then plowed it to the muni's. I have been waiting for 5 years some comments about the cumulative deficit in Canada that has been growing big times. Nobody seems to care, commodities are high, and we as Canadians look like geniuses with our "well" capitalized banks and our low federal deficits.

     

    BeerBaron

    Baby boomers

    in General Discussion

    Posted

    Francis Zhou discusses this topic on the Ben Graham School video archive. I think he's referring to Buffett in it's speech. I'm not sure I agree with any of them (they say baby boomer's will increase the need for equities as they will need to reach for yield).

     

    I kinda see is as a big balloon where air keeps being added (money), as air goes in the volume increases as well. But what happens if I start taking money out of the balloon? It seems pretty clear that the balloon has to deflate.

     

    What I have not been able to model in the system is the impact of transition from producer to consumers of the baby boomer's. They will need money to live but where is this money going to come from if the younger generations don't produce enough for the boomers + themselves. Maybe some other on board have a better idea.

     

    BeerBaron

    Leverage ratio of your portfolio

    in General Discussion

    Posted

    I'm not the one that wrote the theory! I believe it's some kind of quantz that won the Nobel price (don't remember, Samuelson maybe?). Of course taxes are a modifier and the fact that it's non-recourse add some kind of extra shield to the stockholder.

     

    But I was trying to asses is the leverage ratio of people's portfolio in terms of their holding, not in terms of their brokerage account. A portfolio based on highly leveraged stocks is pretty much the same as leveraging your brokerage account. You are indirectly adding bankruptcy risk or having a zero. Yet people totally forget both are somewhat linked.

     

    Taleb has said during it's last interview that banks did not make any money in the last 30 years, which I somewhat agree. But the leverage ratio has something to do with it. ROE of banks are impressive in good time but so bad in bad times.

     

    BeerBaron

    Buy a house and get a visa

    in General Discussion

    Posted

    Really I think only regulation can prevent those kinds of risks.  AIG was allowed to write loads of CDS without reserving for potential losses.  That's something that can be regulated, just like the rest of the insurance that they write.  Down payments for houses can be regulated -- a law stating that 20% must be saved for down payment would eliminate any future housing bubble.  The housing bubble is really what caused this whole mess -- too much dicey collateral.

     

    20% collateral would help avoid huge credit bubbles but I think it's dangerous to overlook the cash flow as well. A loan has to be evaluated on both aspects or else you get the effect of leverage over leverage over leverage, etc... That's exactly what happened in Japan, banks were relying on collateral with not enough focus on cash flow. We all know the end of the story...

     

    BeerBaron

    Leverage ratio of your portfolio

    in General Discussion

    Posted

    I did an unorthodox calculations today on my portfolio based on the logic that the balance sheet structure of a company makes no difference.

     

    For example two companies A & B, have the same sales and ROA. A has 100% debt to equity and B has 0%. We would expect A to have double the ROE but it should not trade at a premium because the investor buying B could use margins at 2x1 and get the equivalent return then A.

     

    (Assuming no taxes and equivalent financing costs)

     

    So I wanted to know what's my leverage ratio based on the weighted Debt/Equity (leverage) of all companies I earn. I believe it would give a good estimate of the bankruptcy risk of my portfolio. In the end I ended up with an indirect leverage of 1.4 to 1 which I consider really low given that a fair amount of my stocks (30%) are financial.

     

    Did anybody else use this kind of calculation to evaluate the bankruptcy risk of your portfolio?

     

    BeerBaron

    Plan For Leveraging Euro Bailout Plan Taking Shape

    in General Discussion

    Posted

    I have got a question. It seems EFSF treats the whole Europe current problems as a confidence problem that will fade out over the years. It seems like an odd logic to restore confidence today with bonds warranties; but what about restoring confidence in one of the two following scenarios:

     

    - 3 years from now, the economies will have more debt and a similar GPD. Not pretty good for confidence.

    - 3 Years from now, the economies will have less debt but shrinking GDP. Really not good for confidence.

     

    I believe it's not a confidence problem, it's a deficit problem.

     

    BeerBaron

    Bank reserves and housing inventory

    in General Discussion

    Posted

    It's not relevant in the sense that it is already fully shown on the banks balance sheets. There is no black box on in terms of house inventories. No surprises there.

     

    People seem to be putting a black box on all activities of banks. The black box factor is only in the derivatives portion in my opinion. The rest is pretty much fully disclosed.

     

    BeerBaron

    Bank reserves and housing inventory

    in General Discussion

    Posted

    I've been hearing about shadow inventories since 2007 but it does not strike me as relevant.

     

    I don't understand how banks can make dissapear a 90 days overdue loan? Call is as you like but if you did not receive payments it needs to show up in Non-Accrual Loans. Not a lot of smoke and mirrors there...

     

    BeerBaron

    What do you use to track your portfolio and watchlist?

    in General Discussion

    Posted

    I'm looking for something that can show your annual returns as a %, including dividends, and compare it to different indexes. Can Google Finance do that? I use Google Finance for quotes and as my main 'watch list', but haven't ever tried entering in actual transaction info.

     

    I like how Mint.com imports your info automatically (in theory), but it seems to have issues..doesn't import purchase price..only seems to let you add one purchase price per stock, doesn't look like it takes into account dividends, etc..

     

    I wish my brokerage (scottrade) would just show this info, but they are always about a decade behind on technology. What brokers have great reporting info?

     

    The only way to get the annuanized returns is to use the xIRR function in excel. You need to have the cash flows included in the calculation.

     

    BeerBaron

     

     

    What a Lovely Frickin' Day!

    in General Discussion

    Posted

    For those canadian fellows, anybody looked at Rona? It's starting to look deecent for a canadian equity.

     

    BeerBaron

     

    I had a quick look (very quick look) and what I saw was: small profit margins, fairly stable revenue over the past 5 years, not much cash on the balance sheet, and declining operating cashflow. That sector is pretty competitive without much competitive advantage for any store (they mostly compete on price), and at a PE of 14, it doesn't seem particularly cheap.

     

    Am I missing something? Why this when there are such great bargains right now? Is there a hidden asset that I'm overlooking?

     

    It,s all about the moat, they compete on pricing but nobody could build mega warehouses anymore in their area. It's pretty close to a grocery type of business, there should be 2-3 players  in the market with no new entrants since the land is already taken. It's still a little bit overpriced for me but it's on my watch list. Totally agree, US business are much better buys right now.

     

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