schin

My friend and I both worked at Celera Genomics back in the day. We sequenced the human genome -- but, it didn't give us the retirement we wanted. I eventually did it the old fashion way through value investing and letting time compound good purchases. I was always intrigued about quant trading and programmatic trading strategies like Renaissance Tech and DE Shaw. My friend is a 10x programmer and now he's interested building something in Alpaca Trading as an experiment. We're never going to scale like Renaissance Tech, but if we can learn to tease out some signals and data mine, it'll make us happy. But, does anyone have any suggestions on models or datasets that might have some trading correlations?

Would it provide any insight on why Warren purchased a group of Japanese trading companies? I've read books about Deutsche Bank and its influences in Germany. Is it written like books related to US banks - Banks America, Goldman Sachs history, etc?

Is this a buy-and-hold for 18-20 years question? Based on your list above, do you think it'll outperform the S&P 500/ETF by a lot -- it's fairly diversified within? I'm thinking put into a S&P fund might be the easiest way. Are you going to rebalance or actively switch holding during this 20 year period?

I read it and sold it... wow, I didn't know it would get this expensive. Essentially, my take away was B. Arnault bought a bank and used its capital/leverage to take over all these luxury assets.

For the longest time, Warren Buffett was against buybacks because it was like stealing from current owners -- even though it was accretive in general. He changed his tune over the last few years... Did anyone else catch that change of heart? Also, he doesn't talk too much about 3G or Heinz -- it's a footnote.. if anything.

All, I am doing research on stock options (LEAPs) relative to the equity price per day. I was not evaluate how premiums expand and contract through 1-2 year period. Does anyone know where I can find that daily and historical data (preferably free, to begin with)? I'll pay more for historical data when I want to fully back test. I'm mostly interested in LEAPs prices at the money. I am fine with starting from today's data and building historical data going forward. My challenge is I want to get LEAP pricing for a broad range of stocks. I don't want to manually do it for 20 stocks... I want to canvas at least 200 stocks and their at the money LEAP prices. Thoughts? I will share my findings when it's done for those who help. BTW, I have Interactive Brokers, if there is some API I can leverage. Again, I'm a former programmer.. but, it's been a while since I hacked anything together.

Yup, GE, Harley Davidson, GS, etc.... that's his thing.

You cannot compare the US banks and their leverage ratio to the EU banks now. The EU banks are like 2-3 years behind, but trending up because the ECB/EU are forcing them to get healthy to support the EU economy. The leverage ratio discrepancy is reflected in their relative market caps. JPM, BAC, WFC, C's market cap is 3x-10x as much as the EU banks. I am saying that differential is too high between EU/US banks. BB&T or SunTrust should not be roughly the same market cap as SocGen, Barclays, etc.

I have been investing in banks for a while and management does matter. For MetroBank, they were trading at some insane multiple of book value (2-3x BV). Most banks should be trading at 1x BV... Even great banks/franchises like JPM and GS are trading at 1x BV or at best, 1.5x BV.... again, you are getting best in breed talent in Jamie Dimon and L. Blankfein (back then) and still only pay 1-1.25x BV. I would say Berkshire as an insurance company adheres to that law. He is looking at buybacks not at 2x book, but 1.1x BV.... So, for BRK, JPM, GS trading at 1x... Metro at 2x BV should be an indicator that scares one off. I tell my friends Mercedes and Lexuses are great cars, but you can overpay for them. For banks, FMV is generally 1x BV -- less, you are getting a margin of safety. More, you're getting priced to perfection. Of course, CET1 is important and if you can't calculate RWA or being overly aggressive with that, then all bet are off.... But, I cringe when I hear "growth story" and banks in the same sentence. It's a 300+ year old industry and it's a mature industry with sprinkles of technology here and there... But, it is fairly stable. Community banks can pop up or credit unions can be started, but they cannot scale... so, new banks in general should not be able to scale rapidly. They can scale through acquisition like BB&T and Suntrust, but growing branch networks organically and scaled big is not something you see often. It's against the laws of physics. Full disclosure - I am invested in several European banks which are trading at below TBV... and of course, I wish I could ask them to run off and distribute their TBV.. that would be ideal, But, BNP, HSBC, Commerzbank, SocGen, DB are very interesting buys... all below TBV right now.... I am not talking about BV... Actually, below TBV... Within the US, I don't see any banks trading below BV... even mini-community banks.... You can get large, G-SIB in Europe below that. This is a once in a lifetime opportunity. Much like the GFC, where subprime doesn't look right. The valuations on European banks don't look right on the upside. I cannot imagine a world 5 years from now where BNP, HSBC, Commerzbank (merged or not merged), SocGen doesn't service the EU community.

Much like the US would not certain companies (IT and banks) to Chinese companies... there is an aspect of protectionism going on. So, I doubt an US bank can take over DB or Barclay. I do find it interesting that Barclays purchased most of Lehman Brothers during the GFC. That said, I don't think merging DB with Commerzbank would the worst idea out there. I don't think merging UBS with DB would be bad either. If you look at ECB/EU literature, they do admit to be overbanked and consolidation is happening, but slowly. I think their consolidate in EU banks will happen quicker once their IT systems are updated. They were way under-invested in... so, once you have a modernized system with true risk management, merging is a matter of moving assets... and firing people. Now, it's a moving target of firing people, figuring out which IT system is the best (all of which are Window 95, Cobol based systems... so, they is a huge investment that they need to make).. but, if you take the baseline IT out of the way, it is literally moving bits and bytes. I will accept that some of their balance sheet has subpar assets, but if you look at all EU banks.. they are all making decent profits holding these crappy assets.. because they marked it down in prior quarters.. so, whatever the case may be, they are marked to market or already sold. Much like BAC and C, they sold off all their non-core (subprime, small market) assets. That alone takes risk off the table and reduces management effort on "shiny things". As for your EU existential risk, it is non-zero.. but, gain, when the USSR broke up.... there is a disruption and markets are created and adjusted. I would be surprised that 20 years later, the EU is so unscalable that they need to build walls. The EU reduced trade and travel restrictions.... adding them back would add needless friction. We will see with Brexit. We might rally once that is over with. From asset size, BB&T should never be able to buy a SocGen or Unicredit.. but, based upon market cap, it can.. that's is how crazy this world is.... It would be like a dolphin eating a whale.. but, do you know what.. If BB&T just made a SocGen a wholly owned entity and not try to integrate it into one system, it would be a great investment.... one bank buying another at 50% below TBV... that's a great acquisition... BNP actually owns Bank of Hawaii... It is almost like DB owning DB of Mexico... or DB of Poland (Which they are divesting).... but, any bank buying another bank at 50% below TBV is not a bad thing.. DB, Commerzbank, BNP can generate 5-10% ROIC as a going entity is not the worst thing one can do.

Along with the NPL report from the ECB... you can see the the CDS on BNP, Deutsche Bank, Commerzbank and other EU banks are decreasing.... https://www.boursorama.com/cours/cds/3xDB/ https://www.boursorama.com/cours/cds/3xBNP/ https://www.boursorama.com/cours/cds/3xCMZB/ So, the dumpster fire seems to be simmering down....

Yes, all those EU banks do have large balance sheets. They are too big to fail and why they have G-SIB designation. The IMF and every country knows we're all tied together and connected like dominoes. What is your definition of a dumpster fire - but it's contained? A bank does not fight a dumpster fire alone... You use the Fed/ECB to help you with it.... WFC, JPM, and BAC would never have made those investments in Bear Stearn, Wachovia, Washington Mutual without some Fed support to control the "dumpster fire". https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018DC0766R(01) If you look at the latest report above, NPLs are getting resolved. Italy and Spain are still problems, but much like BAC and C -- you just need time for banks/countries to let the bad loans get replaced with good loans. Have private equity take toxic assets and put them into servicing (i.e. play the mob to recover as much as possible) That's just how it goes.. Let the bad loans season out after you take the lost, then, you get good credit quality loans on their balance sheet. US did it, just taking EU banks longer... that's just how the banking cycle goes... it blows up every decade and you find religion and the beat goes on. If you look at the statistics, the asset quality is getting better. The taxpayers there are paying for it... in time, they will forget.... and banks will start trading at book value.. just how it goes. If you look at Italy and Greece, they don't like austerity, but the EU/ECB has forced them to balance their budgets. Not popular amongst retirees, but they are being fiscally responsible. You can read the BAC and C threads, all the doubt and balance sheet concerns and argument are all there. History doesn't repeat itself, but it sure rhymes. In terms on consolidation for SunTrust... it's probably a dumb move and the synergies are probably overestimated, but it's kingdom build.. Let's call it for what it is. I would say they would have gotten more value by buying EU banks at 50% below tangible book and let it season out. Versus paying above TBV for an US bank. Economies do not like monopolies and duopolies, but they also hate too much competition.... so, they're just normalizing into an oligopoly situation like airlines and railroads.... too little is bad, too much is bad.... But, in terms of Europe, there is definitely too much banking. US probably is probably too little banking competition.

I actually like what Christian Sewing (DB CEO) has been doing. The parallels between him and Brian Moyihan and the hands they were dealt with are uncannily similar. He promised cost reductions and he has delivered. The market does not like the reduction in top line growth (revenue), but it generated a small profit last year. At stable revenues of $24-$25B, he had costs of $23B. It's roughly a $1B profit. Not great, but at least not a loss. This year (2019), they will reduce costs by another $1B.. so, if he can keep stable at $24B Revenue and $22B in cost, he's at a $2B profit.. They have announced that their cost steady state is $21.6B in 2020. He would book a $3B profit there. Again, this is counting no growth or limited growth. The bear case is the revenue comes down further than cost reductions. As I see it, they are going back to being a retail/wholesale bank and getting out of IB. Essentially, they are morphing into a credit union or S&L... which is generally a safer profile and business model. Boring... boring.. boring.. they are not investing in anything like cryptocurrency or IB or opening new markets. They're just trying to get lean and efficient.... which is what a bank should do. This is the blueprint and it's essentially what US banks did. https://www.bain.com/insights/battle-of-the-banks-the-fight-for-profitable-business-models-in-europe/ Again, this is all without a takeover. This is as a stand-alone entity. Maybe, a recession happens, but I always like companies trying to be disciplined in their costs. Also, it doesn't take a rocket scientist to know that this cost discipline doesn't work if revenues come down. Everyone at DB is looking at maintain or stopping revenue from going below $23B. DB is a G-SIB at $18B... I mean... just having that namesake of being a bulge bracket bank with a long 100+ year history is worth it... It's a great pedigree to have, if you can buy into it (Chinese bank or US bank) But, it's probably too political.... but, at this price, it's as steal...If you look at the number above, that would be a great private equity play... if you wanted to do a LBO.... nothing flashy, just doing a revenue minus cost and of course, they get the cheapest permanent capital in the world from ECB.. for too big to fail.

https://www.the-american-interest.com/2019/02/25/bigger-fewer-riskier-the-evolution-of-u-s-banking-since-1950/ Reference suggested by someone who knows nothing and who also feels that the biggest financial innovation is the ATM because i don't mind the heat. Interesting article. In the US, there is probably too much consolidation and power is too centralized. We're probably blessed to have Jamie Dimon and Brian Moyihan at the helm of these JPM and BAC. They're the right people for the time and prudent about risk. Under less cautious CEOs driving the car with this much "horsepower", we could run the economy off the road quick. Case in point, the GoldenWest, BearStearns, LehmanBros, AIG CEOs, etc. In terms of Europe, they are overbanked.... they need consolidation... Too overbooked and really needs their own Jaime Dimon over there... Possibly, Jes Staley that comes from a JPM pedigree.... I really like the UBS CEO and Chairman pair... and I like Christian Sewing. He has the Brian Moyahan feel to DB. http://thecorner.eu/world-economy/overbanking-too-much-banking-or-too-many-banks/70189/

Last week, BB&T purchased SunTrust Bank for $24.28B. The new combined entity would have a $66B market cap and eventually make it the sixth largest bank in the US at $442 B in assets, $301 billion in loans, and $324 billion in deposits. At $24B, it's the price you have to pay to keep up with the JP Morgans ($354.5B market cap), Bank of America ($285B), Wells Fargos ($228B) and Citigroup ($154B) of the world in terms of IT, marketing, and balance sheet clout. That said, I think it's the right thing to do. But, hypothetically, what could they really buy with $24B? * BB&T could purchase Deutsche Bank ($18B) and still have change left over for a partial takeover of Commerzbank ($9B). In essence, allowing BB&T to own the whole Germany market and making it one of the largest banks in Europe and World. * BB&T could purchase Society Generale at $23B. * BB&T could purchase Standard Chartered PLC at $20B. * BB&T could purchase Unicredit SPA at $25B. (what is an extra billion among friends?) With $24B, you can see the presence/influence BB&T could have purchased in Germany, France, UK and Italy, respectively. The list could go on, but, $24B still goes a long way. The political climate probably would not lend itself to transatlantic mergers. But, there is precedent with Barclays buying the core of Lehman Brothers. Let's look at BB&T and SunTrust's post-merger market cap of $66B. * BB&T and SunTrust would be twice the market cap of Credit Suisse ($30B). * BB&T and SunTrust would be twice the market cap of The Royal Bank of Scotland Group PLC ($31B). * BB&T and SunTrust would be slightly under twice the market cap of Barclays ($35B). * BB&T and SunTrust would be larger than BNP Paribas SA, the largest bank in France at $61B. * BB&T and SunTrust would be 2/3 larger than UBS Group AG ($46B). Outside of Greece, Italy, and Spain, most EU banks are getting better. In time, the ECB will raise rates, but in the meantime, there are great bargains to be had in European. You can get a top-tier bank below tangible book value. That is unheard of most times in history. I present this to show the relative valuations of European banks and how many are overlooking them. For the JP Morgan and Bank of America's out there, it would just a 10% of their market cap. Or US Bank or other regional banks can become a "Super Regionals" -- e.g. global bank, if they really wanted to.

I have to admit... it was a really good book. He wrote something that was Ben Graham meets Howard Marks letters and meets David Dreman next... But, with Howard Marks stuff out now, his topics and concepts are covered very well.

That does help... Could you give me ballparks for how much an editor and cover designer cost? All in all, would these 3 books allow you to leave your day job? Or the residuals allow you to get a nice dinner each month. If you don't want to disclose it in a large forum, would you private message me? I'm just fascinated about the concept.

Now, that seems to be getting closing to the 'Billions' episode where they are using satelite images to detect inventory at car dealer lots... pretty interesting concept you wrote above.

Has anyone published a book on Amazon? Thoughts? Pros/Cons? Might want to put publishing a book on my bucket list.... just wanted to know people's thoughts.

I was listening to this Malcolm Gladwell podcast and one tidbit peaked my interest.... The PGA database they were talking about and how if you overlay it with hours on the golf course relative to CEOs of companies -- More hours on the links might be a predictor of bad stock/business performance. Makes sense, but never would have crossed reference this because I am not a golf. Is this some correlation that Renaissance HF would leverage? Is there value in create a system to actually do this? I have friends who creates government enterprise systems - they might be able to create these systems for us. Are there any finance guys that want custom apps create for them? Maybe, parse SEC data accordingly. I know there are a lot of website for insider trading and 13/F holding docs... are there other needs that can generate alpha? If so, I can pair you up with the right techie. http://revisionisthistory.com/episodes/11-a-good-walk-spoiled

Can you talk more about the tax implications other than income from the borrower?Does it force you to keep those shares in short term status even if hold it longer than a year? ?

If you guys are near Reston, VA -- I might be able to give him a summer internship doing some IT work. PM me, if you're interested.

Congrats, stanleyp! Get as much sleep as you can.. I'm 2 kids in and time and sleep for a premium. I have two thoughts -- is your house on a steep hill or possibly, accident prone? I would get an umbrella policy and get referrals from neighbors. If the mower does mowings in the neighborhood, they get economies of scale and two, don't want to have one customer affect 3-4 with bad customer service or a frivolous law suit.

Yes, you're right over the long run -- it'll go out of business and the customers by definition gravitate to the better restaurants. I guess I was trying to figure out, if there is a way to profit off of it without a large investment in building a comparable business. For example, a lot of people have shorted Sears, that doesn't mean I should go out there and try to build a better retail experience. I just know in this case, I want the "opposite" of the beat. I'm not trying to be John Bury and short the whole restaurant market, but if I could make a bet on one restaurant... The owner of the business is by definition "long" on his product and service. Can one take the "short" position that it will not succeed, without making your life mission to build a better version of it. A local, financial derivative.

Good answer. I'll Glengarry Ross them.... I know you're going to fail and let's admit it, your business sucks... denial is not only a river in egypt.... commercial/tax services is not my background.. sadly. I just see a lot of business that make me say.. how do they make money when nobody comes in.. it's like Chipotle on a local scale. My local Chipotle is not full, but I cannot canvas all the West Coast Chipotles to see if they have similar empty lines. Bruce B. does for Sears.. but, I just want to beat the one mom-and-pop burger place that only has 2 customers as all of them are going to an Five Guys and McDonalds just down the street. Again.... maybe, it doesn't exist.. but, just wondering... I wish there were CDS on the lease.