dcollon

Not really "macro", but Jason Zweig comments on Markets and Memory Banks Markets_and_Memory_Banks_-_Total_Return_-_WSJ.pdf

Interesting situation here... Fitch: Fannie's Earnings, Dividend to Complicate GSE Reform Friday, May 10, 2013 02:30:00 PM (GMT) Fannie Mae's strong first quarter financial results and its planned $59.4 billion dividend payment to the U.S. Treasury will likely complicate efforts to pursue far-reaching GSE reform, according to Fitch Ratings. Better operating trends at both Fannie Mae and Freddie Mac, driven by continued healing in the housing market and the growing role of recent-vintage mortgages, will likely further reduce pressure on Congress to overhaul the U.S. housing finance system. The political motivation to overhaul the GSEs and the broader mortgage market remains limited. With the point where taxpayers are effectively made whole on their investment in GSEs now in sight, we believe broad reform will become more challenging to achieve. The Federal Housing Finance Agency has recently undertaken some initiatives to reduce Fannie and Freddie's dominance in the housing market. However, GSEs have been operating under conservatorship for close to five years and continue to dominate the market. A one-time accounting adjustment, the reversal of a $50.6 billion deferred tax asset (DTA) allowance, drove the bulk of Fannie Mae's first quarter net income of $58.7 billion. The increase in net worth to $62.4 billion requires Fannie to pay a significantly higher dividend to the Treasury under the terms of the amended support agreement. The GSE plans to fund the payment with proceeds from debt issuance. We think this incremental debt is manageable within the context of Fannie's balance sheet and the debt limit set out in the senior preferred-stock purchase agreement. Fannie's debt was $144 billion below the limit on March 31. Fannie will make a cash dividend payment of $59.4 billion to the Treasury by June 30. After that payment, total dividends paid by Fannie will represent 81% of its cumulative draw from the Treasury. We believe the cumulative dividends paid by Fannie could exceed the $117 billion in senior preferred stock owned by the Treasury by late this year or early 2014, based on the current earnings run-rate. Freddie Mac continues to evaluate its DTA allowance, but Fitch believes it will likely follow suit and reverse its $30 billion reserve in the coming quarters, as its financial performance has also improved significantly over the past year. As a result, it would also pay a substantially higher dividend to Treasury. The dividends do not technically reduce the $187 billion injected into the GSEs by the Treasury. However, both entities will have paid cumulative dividends representing over 80% of the Treasury's investment, once Freddie Mac reverses its DTA allowance. Excluding the impact of the large DTA reversal, Fannie's pretax earnings for the first quarter were strong at $8.1 billion. Results were supported by an increase in net interest income and continued improvement in credit quality. As a result of the Bank of America settlement completed in the first quarter, Fannie recorded a one-time benefit to net interest income. Excluding this benefit, Fannie's core earnings results for the first quarter were largely consistent with fourth-quarter 2012 results. As asset quality improved, Fannie reduced its total loss reserves by $2.4 billion during the quarter. The serious delinquency rate dropped to 3.02% at March 31, compared with 3.29% at year-end 2012. Net sales prices for REO also rose as the housing market recovery continued in the quarter. We do not expect the reversals in the DTA allowance for Fannie Mae -- or the potential reversal for Freddie Mac -- to have an impact on ratings for either entity. The ratings are directly linked to the U.S. sovereign rating based on the U.S. government's direct financial support. For a detailed review of the outlook for the GSEs and reform options, see "U.S. Housing Finance GSEs" Where to From Here?," dated Feb. 28, 2013, at www.fitchratings.com.

From Marketfolly http://www.marketfolly.com/2013/05/notes-from-ira-sohn-conference-2013.html

DaVita enters standstill agreement with Berkshire Hathaway (BRK.B) -- 8K Tuesday, May 07, 2013 08:35:55 PM (GMT) Pursuant to the agreement, BRK.B agreed, subject to certain exceptions and to the termination provisions specified in the Standstill agreement, not to acquire beneficial ownership of the company exceeding 25% of the company’s then-outstanding common stock, and to certain other provisions respecting stockholders meetings, mergers and other matters specified therein. Berkshire currently holds 14.2% of the outstanding shares of DVA according to a Form 4 filed on 4-Mar

Bloomberg Update http://www.bloomberg.com/video/paulson-still-believes-in-gold-despite-losses-KC4OMgX1QAeT~vWKmjxDkw.html

This is just one analysts view, but I thought I would share it with you all. BANK M&A update to our M&A piece. There has been 3 deals since May (ex FDIC) totaling $67mm in deal value. This is on pace with prior months but still remains tame when compared to the chatter we heard at our Boston conf in February (everyone interested in buying…). Adding WIBC to ‘BUYERS’ list. Buyers list now includes BBT, CMA, FITB, MTB and USB. Sellers List- AF, BBNK, BPFH, BSRR, EFSC, FFIC, FFKT, FFKY, FHN, FXCB, HAFC, LNBB, MCBI, OABC, ORIT, PBIB, SNV, STBZ, STEL, STL, TCBI, UCBI, YAVY. Despite the low volume of deals our Seller's list continues to outperform currently +11.9& YTD vs the KRX's 7.3% + our Buyer's list +6.1%.

That is so great. Gosh I wish there were more of them. Thanks very much for posting it.

gio, The conference was a lot of fun. There are always great speakers with thoughtful presentations. I don't want to criticize any of the presenters, but I found the best ones to be Niall Ferguson, Jeff Gundlach, David Rosenberg, Charles Gave and Kyle Bass. I had a chance to spend some time with Kyle Bass and would tell you that he is a really funny and humble (though high conviction) guy. The biggest take away is that almost everyone there is short the yen and thinks Japan is on the brink of disaster (nothing new to the board members here). They flip side is that some of them were playing the Japanese equity markets on the long side. Kyle obviously thinks that's a bad idea. There were also a few people who continue to view 30 year treasuries as compelling. Gundlach, spent time talking about other credit as being interesting. One suggestion was to own 30 year zero's, since if Japan "defaults/restructures" US treasuries will likely go much lower and again in Kyle's view for "not the right reason". Rosenberg has been a treasury bull for a long time and he came out and said he is no longer a bull on treasuries. He spent his presentation arguing why he thinks yields will not go down anymore and most likely go up. He obviously on his own with this view. Overall, much of what was said has been posted in speeches and commentary on this board. It was fun being able to have some individual discussions with them and it was great to spend some time in Southern California. The weather was fantastic. I went from 82 degrees and sunshine, with a very pessimistic group to 40 degrees and sleet/rain with a very happy group (Omaha). Kind of funny if I think about it.

I completely agree wellmont. Great discussion.

Txlaw, Thank you for posting these. I have enjoyed them so far and now know what I will be doing for the next few days. :) Any chance their is a transcript so I can read them and get toward my 500-1000 pages per day. ;) Just kidding (from this discussion if you don't get the joke http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/interviews-with-combs-and-weschler-in-omaha-world-herald-published-book/)

Thanks for the article. It would be so nice to be able to read all day.

I'm about half way through the book and have enjoyed it so far. There are some interesting parts on education and "teaching birds to fly", which I enjoyed. I also like reading about Taleb's reading habits and how he grew up reading differently than many people do today.

BH own's roughly 4.7mm shrs of CBRL.

Gio, Thanks for posting the letter. I enjoyed the brief comments on SHLD, but actually liked the MLP discussion even more. As someone that has benefited from the "bubble?" in MLP's, it sure makes me think about where they stand today. Thanks again

SoGen's Albert Edwards (attached) SoGen_Ablert_Edwards.pdf

Aside from Steve Forbes being a terrible interviewer, it’s worth watching the interview with Steve Romick of FPA

I think that's right bmichaud. It will be interesting to see what kind of ROC banks can generate going forward. Take care, David

bmichaud, Good question and I wish I had the foresight to reinvest the dividends in JNJ over time. However, I didn't. Fortunately, though I have not taken any capital out of this account over that same time frame i.e. I have reinvested the dividends in other stocks over time. My total return with dividends reinvested in JNJ would have been close to 2600% or roughly 14% a year. In reality it has been closer to 2000% or roughly 13% a year. Fortunately Bloomberg allows me to figure these things out pretty quickly.

When to sell is always something I struggle with as well. If I paid a good price, I have found that it's sometimes best to never sell, which a few of you have mentioned. However, when I'm investing in an arbitrage situation, obviously there is a time to sell. Regardless, it's something I think most investors struggle with over time. To help me remember what can happen over time, I have one of my first investments typed up in a word document. I bought JNJ close to 25 years ago. I would love to say I knew what I was doing then and bought it based on incredible research, but I didn't. I have continued to hold it through all these years (even added a little during certain periods of weakness) and with the current dividend of $2.44 I am receiving a 12.5% yield on my original (and largest) part of my JNJ investment. When I go back and read my notes, it reminds me that I need to think twice before selling.

Attached is the "line of business" letter in case any of you want to read that as well. JPMC_2012_AR_letter-businesses.pdf.pdf

http://files.shareholder.com/downloads/ONE/2251178239x0x652198/c54d05da-1acb-4cca-ab7a-9b80f9465199/JPMC_2012_AR_CEOletter.pdf

Here is the video. His comments regarding bank counter-party are at 52:45 http://media.chicagobooth.edu/mediasite/Viewer/?peid=f15d95d054e8442ab0cc1c60321383101d

Thanks jberkshire.

Another Kyle Bass Interview

gio, I enjoyed both of those. I have always enjoyed Crestmont's research. I'm looking forward to attending Mauldin's conference in a few weeks since many of the people we mention on this thread will be presenting. Take care, David