beerbaron

Watsa too.

Look at how they changed the duration of their bond portfolio. It seems they are moving with to a shorter maturity. Also, corporate and preferred are down. Parsad it seems your friends in Toronto are still very cautious, even more then 3 months ago.

I really don't understand the voluntary haircut?? Unless it's voluntary that banks take the writedown in one shot (maybe they could amortize the writedown... Really not clear. BeerBaron

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

It does not look well for China. Parsad and Chanos might be right... who knew they would be in the same camp one day ;) BeerBaron

BeerBaron says: "What a lovely frickin day....to chill out"

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

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

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

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

It would be 0% if I could always find great companies at a great price. But often you need to settle for good companies at a great price. BeerBaron

I've got a better idea. How about making a big pile of money and burning it it the middle of the street. BeerBaron

Only investment bankers can polish poop! BeerBaron

It is the prelude to the X-Files returns... sooo much complaining. Just buy banks stocks you hyppie. BeerBaron

17M per month Parsad said.

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

No true, Graham did hold a big chunk of Geiko for 25 years! BeerBaron

Too bad IRG is such a crappy business. Nice terms though! BeerBaron

Stanley you are my new role model. BeerBaron

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

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

I tough this cartoon would be appropriate for this thread... BeerBaron

http://www.newswire.ca/en/story/859259/imvescor-restaurant-group-announces-refinancing-and-recapitalization-transactions

He's probably around 1B in non BRK by now. If I remember correctly in 2008 he was about 500M in cash. BeerBaron

It seems like a good way to kill yourself. Borrow short term at low rate and lend long term for a tiny spread but a huge risk of loss of capital. Unmatched lending/borrowing terms is the oldest trick in the book and is a good way to lose everything. BeerBaron