PlanMaestro

Moore, how much inflation is hyperinflation? When will it happen? What odds are you giving?

http://microfundy.com/2012/10/05/znga-long-thesis/

This is a problem. You use metrics like EBITDA/cash from operations and managers abuse CAPEX. You use EBIT or a similar metric (like stock price) and they would not take a risk or even reinvest for the life of them. There is no perfect metric, it all depends on the situation and what you want to achieve. Then you put the incentives. Structure follows Strategy. Form follows Function.

Economic Possibilities for our Grandchildren John Maynard Keynes, 1930 http://gutenberg.ca/ebooks/keynes-essaysinpersuasion/keynes-essaysinpersuasion-00-h.html The Golden Age John Quiggin, 2012 http://www.aeonmagazine.com/living-together/john-quiggin-keynesian-utopiav1/ The prevailing world depression, the enormous anomaly of unemployment in a world full of wants, the disastrous mistakes we have made, blind us to what is going on under the surface to the true interpretation. of the trend of things. For I predict that both of the two opposed errors of pessimism which now make so much noise in the world will be proved wrong in our own time-the pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries who consider the balance of our economic and social life so precarious that we must risk no experiments. My purpose in this essay, however, is not to examine the present or the near future, but to disembarrass myself of short views and take wings into the future. What can we reasonably expect the level of our economic life to be a hundred years hence? What are the economic possibilities for our grandchildren?

Harkin Report. Includes good briefs on several FPE companies discussed in this board: ESI, COCO, BPI, http://www.help.senate.gov/imo/media/for_profit_report/Contents.pdf

Barron's: Built To Win http://online.barrons.com/article/SB50001424053111904414004578018594042856164.html?mod=TWM_pastedition_1 The bear case on Goldman, and by extension all firms operating by the traditional rules of Wall Street economics, is that regulation, lower financial leverage, reputational damage and a long-lasting ebb in capital-market volume will prevent the firm from earning an acceptable rate of return on shareholders' capital, even as it continues to overpay teams of trading cowboys to take undue risks. Each point can be countered, at least enough to suggest that Goldman's share price currently discounts them. TO BE SURE, LOWER LEVERAGE will dampen absolute levels of profitability: The bank is expected to net $6.5 billion, or $12.55 a share, in 2013, below its precrisis peak of $11.4 billion. But not all the profits of the precrisis period owed to leverage. What's more, in this year's first quarter, in a modestly better environment for client risk-taking and deal-making, Goldman notched a 12% return on equity, respectable enough to keep book value and the stock price rising nicely if it becomes the new norm. Plus, Goldman's valuation reflects barely, if at all, the value of Goldman Sachs Asset Management, one of the world's top 10 investment firms, whose performance recently has revived, and which provides steadier revenue and earnings than the market-sensitive businesses. As for regulation, no one knows what its precise impact will be. But the Volcker Rule prohibiting proprietary trading has mostly been implemented at the firm level. And, contrary to the popular view, pure "prop" trading was never a major source of profit at Goldman and other firms. Goldman has been resolute in assuming it still will be able to post its own capital in the service of client needs for liquidity, hedging, and market positioning, which in truth has been the basis for its dominant fixed-income, currencies, and commodities business for decades. Trading and deal volumes have been undeniably soft. Global wholesale market-related revenue across the industry, encompassing investment banking, equities, credit trading, foreign exchange, commodities, and interest-rate trading, was down 21% last year from 2006 levels, according to consultants Oliver Wyman. Discussion at many a post-close Wall Street happy hour revolves around how much of this reduced trading and deal flow is cyclical, and how much is a long-lived response to the financial crisis and an impaired financial industry. Likely, it's a bit of both. But the long-term backdrop continues to suggest that global capital flows will quicken again. McKinsey & Co. says that global financial assets totaled $219 trillion last year, with 22% overseen by professional asset managers. Capital will continue to move around in search of good returns. And emerging-market economies will produce plenty of capital-raising and conglomerate-building activity, and the long-tenured Western banks will remain in the middle of the action. All this bodes well for Goldman, among the first firms to bet on emerging-markets growth. With professionals on the ground in developing nations and financial capitals, it could see an outsized portion of the global underwriting and investing business, especially with the Swiss universal banks retrenching and Britain shortening the leash on its largest

I guess it's about time to have an official Dell thread in the investment ideas section ... does anyone feel confident enough to right a short investment thesis? (txlaw?)

When I lived in the USA, one of the things that striked me was how strange was the Republican party. It was so different and, please I am not trying to insult anyone, crazy compared to any other Conservative movement I've seen previously in Latin America or Europe. With crazy I mean revolutionary. Where were the moderate Gattopardos, that thought that "everything must change so that everything can stay the same". Looks like I have no other option but to buy these fringe books to understand why. Who Remembers Clinton Rossiter? http://crookedtimber.org/2012/09/29/who-remembers-clinton-rossiter/ When I was in Texas I met Carl T. Bogus, law prof. and author of Buckley: William F. Buckley Jr. and the Rise of American Conservatism [amazon]. He and I turned out to have something in common: affection for Clinton Rossiter’s forgotten Conservatism in America: The Thankless Persuasion [amazon]. I was trying to baffle someone else at the conference, saying ‘Look, the thing you think conservatism should be is the thing the conservatives made a point of writing off in the 1950’s. You’re a neo-Rossiterian.’ Carl’s ears pricked up. We hit it right off. When I got home I bought and read Bogus’s Buckley book. I liked it, and it filled in some blanks for me, history-wise. Going back and reading the reviews, I see TNR’s reviewer thought Bogus didn’t much improve on John Judis’ earlier Buckley book. I can’t say. Haven’t read it. (But Judis is a good writer so probably his book is good.) But the reviewer does grant that one area in which Bogus really distinguishes himself is in handling the dead and forgotten ‘new conservatives’ - Rossiter, Viereck and Nisbet, in particular. (Kirk was another, but not one who has been forgotten.) The most interesting passages in Buckley: William F. Buckley Jr. and the Rise of American Conservatism chronicle the new conservatives of the 1950s—Russell Kirk, Clinton Rossitter, Peter Viereck, and Robert Nisbet — when they might still have become the leading voices of twentieth-century American conservatism. Theirs was a conservatism of high culture, moderation, and communal aspiration, skeptical of the market and anchored in the writings of Edmund Burke. In 2009, when Sam Tanenhaus declared American conservatism dead, in the pages of this magazine and then in his book The Death of Conservatism, it was the death of Burkean conservatism he had in mind, and George W. Bush was the killer. For Bogus, this death occurred much earlier, with Buckley the eager undertaker, pushing some new conservatives away from National Review. Others, such as Russell Kirk, he labored to co-opt and thereby to neutralize. “Today the new conservatism is forgotten,” Bogus writes. “Even most of the intellectuals in the conservative movement itself are unaware that this struggle [between Buckley and the new conservatives] took place.” Yep, nobody remembers Rossiter. Except then David Brooks goes and writes a column, just two days ago, recollecting how when he was a lad at National Review, in 1984, what Bogus calls ‘new conservatism’ was still half the story.

I don't think that was me ...just a never posted draft and tweets. Maybe Tariq's Street Capitalist.

A couple of related threads http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/hig-warrants/ http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/paulson-files-13d-on-hig/

Individual Life numbers 2011 2010 2009 Net income 133 229 15 DAC Amortization 221 119 314 FCF est 354 348 329 Individual Life Insurance In-force Variable universal life insurance $ 69,716 $ 74,044 $ 78,671 Universal life, interest sensitive whole life, modified guaranteed life insurance 64,006 58,789 56,030 Term life 81,494 75,797 69,968 Total life insurance in-force $ 215,216 $ 208,630 $ 204,669 Segment Goodwill in Goodwill Corporate Total Individual Life 224 118 342

Alain de Botton: A kinder, gentler philosophy of success Many of the greatest economic evils of our time are the fruits of risk, uncertainty, and ignorance. It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance, and also because for the same reason big business is often a lottery, that great inequalities of wealth come about; and these same factors are also the cause of the Unemployment of Labour, or the disappointment of reasonable business expectations, and of the impairment of efficiency and production. Yet the cure lies outside the operations of individuals; it may even be to the interest of individuals to aggravate the disease. I believe that the cure for these things is partly to be sought in the deliberate control of the currency and of credit by a central institution, and partly in the collection and dissemination on a great scale of data relating to the business situation, including the full publicity, by law if necessary, of all business facts which it is useful to know. These measures would involve Society in exercising directive intelligence through some appropriate organ of action over many of the inner intricacies of private business, yet it would leave private initiative and enterprise unhindered. Even if these measures prove insufficient, nevertheless they will furnish us with better knowledge than we have now for taking the next step. John Maynard Keynes, 'The End of Laissez-Faire', 1926

Bank of America? Citi is OK and re-bought a few speculative A warrants. Santander is the best large retail bank in the world and it is VERY cheap. But no TARP warrants and things in Spain keep getting worse (while the US keeps getting better.) Also, I don't know of any fixed currency that has survived 20%+ unemployment even in a dictatorship ... that Spain is not (the last I heard is that the Generalissimo is still dead.)

Well .... not many public banks until tomorrow. Santander prices Mexican IPO in middle http://www.ft.com/intl/cms/s/0/4cc083ca-075f-11e2-b148-00144feabdc0.html#axzz27Wfd5hhn In the first half, Santander Mexico’s net income rose 18 per cent to $720m from $615m a year ago. That performance helped to swell Santander Mexico’s contribution to global profits during the first half of this year to 12 per cent – even though it represents only 4 per cent of its assets. El Citi pobre http://www.breakingviews.com/santander-can-teach-citi-the-art-of-breaking-up/21040212.article Next up is a 24.9 percent stake in its Mexican business. At the top of the indicated price range, the unit will be valued at $17.2 billion, or just over two times book value, or assets minus liabilities. The offering could bring in $4 billion of capital for the Spanish parent’s coffers. It would also join listed foreign subsidiaries including Brazil, Chile, Argentina and Poland, as well as its Spanish retail network Banesto. Listings of the company’s UK bank and U.S. consumer finance arm are also on the horizon. The lesson for Citi and other global banks is how this approach in effect sets a floor under Santander’s overall market worth. Combine the Spanish bank’s stakes in just its three largest Latin American units - Mexico at the top of the IPO range, Brazil and Chile - and the total valuation comes to some $49 billion. That’s 67 percent of the parent’s $73 billion capitalization accounted for by unarguable public market prices. Apply the concept to Citi. For starters, take the New York-based bank’s Mexican operations. At the same multiple Santander Mexico would fetch at the top of the IPO range, Citi’s Banamex arm would be worth over $20 billion - though the unit’s lower return on equity probably warrants something less. Still, that’s more than a fifth of Citi’s $94 billion market cap. And it’s by no means Citi’s only valuable foreign operation. Credit Suisse estimates that Citi’s Asian businesses are worth almost $40 billion on a standalone basis. There are other ways Citi could showcase its assets. While Santander has chosen to list geographic entities, Citi could opt for a combination of regional and global listed subsidiaries. Citi’s transaction services division, known as GTS - a world-leading financial plumbing business - will generate $4 billion of net income next year, Nomura estimates. At 12 times earnings, around where Bank of New York Mellon trades, GTS would be worth some $48 billion. At Citi’s current valuation, that would imply that its institutional securities and wholesale banking arm plus the global consumer banking empire is only worth just over three times earnings.

Some people blame bad campaign managers for Romney’s underperforming campaign, but the problem is deeper. Conservatism has lost the balance between economic and traditional conservatism. The Republican Party has abandoned half of its intellectual ammunition. It appeals to people as potential business owners, but not as parents, neighbors and citizens. David Brooks The Conservative Mind http://www.nytimes.com/2012/09/25/opinion/brooks-the-conservative-mind.html?_r=1 But there was another sort of conservative, who would be less familiar now. This was the traditional conservative, intellectual heir to Edmund Burke, Russell Kirk, Clinton Rossiter and Catholic social teaching. This sort of conservative didn’t see society as a battleground between government and the private sector. Instead, the traditionalist wanted to preserve a society that functioned as a harmonious ecosystem, in which the different layers were nestled upon each other: individual, family, company, neighborhood, religion, city government and national government. Because they were conservative, they tended to believe that power should be devolved down to the lower levels of this chain. They believed that people should lead disciplined, orderly lives, but doubted that individuals have the ability to do this alone, unaided by social custom and by God. So they were intensely interested in creating the sort of social, economic and political order that would encourage people to work hard, finish school and postpone childbearing until marriage. Recently the blogger Rod Dreher linked to Kirk’s essay, “Ten Conservative Principles,” which gives the flavor of this brand of traditional conservatism. This kind of conservative cherishes custom, believing that the individual is foolish but the species is wise. It is usually best to be guided by precedent. This conservative believes in prudence on the grounds that society is complicated and it’s generally best to reform it steadily but cautiously. Providence moves slowly but the devil hurries. The two conservative tendencies lived in tension. But together they embodied a truth that was put into words by the child psychologist John Bowlby, that life is best organized as a series of daring ventures from a secure base. The economic conservatives were in charge of the daring ventures that produced economic growth. The traditionalists were in charge of establishing the secure base — a society in which families are intact, self-discipline is the rule, children are secure and government provides a subtle hand.

You are probably correct on that point AAOI, Dickens and Chesterton probably would not even imagine the modern welfare state. They could also not imagine the level of wealth that we currently have. What was important was the system and the balance. Also, if you follow that conservative lineage to more modern times you will find people like Eisenhower, Rockefeller and George Romney that were concerned with the Goldwater revolution and Nixon's southern strategy ... and were always "good sports". Also, is not to say we have not increased the scope of Liberty over the last 150 years and the State has played a key role in it. Why we should not increase also the scope of equality, fraternity, security, and even happiness with the level of wealth that we have ?... well that is a decision that the republican framework has been answering over time. And it is a great framework. There are reasons why we have these fences: like social security, the Fed, and financial regulation. And we saw what happened when we took one of those down without asking why it was there in the first place. And there other sectors where there is substantial evidence that the government does a better job than a privatized system ... like health insurance that is bound to become more important. You know that I would love to throw some Keynes and data to the mix (smile) . But since were are at the level of literature and philosophy, and I have not packed for an early flight, I will leave it at that. "The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected."

From that core of conservative thinking ... G.K. Chesterton: Now the really odd thing about England in the nineteenth century is this -- that there was one Englishman who happened to keep his head. The men who lost their heads lost highly scientific and philosophical heads; they were great cosmic systematisers like Spencer, great social philosophers like Bentham, great practical politicians like Bright, great political economists like Mill. The man who kept his head kept a head full of fantastic nonsense; he was a writer of rowdy farces, a demagogue of fiction, a man without education in any serious sense whatever, a man whose whole business was to turn ordinary cockneys into extraordinary caricatures. Yet when all these other children of the revolution went wrong he, by a mystical something in his bones, went right. He knew nothing of the Revolution; yet he struck the note of it. He returned to the original sentimental commonplace upon which it is forever founded, as the Church is founded on a rock. In an England gone mad about a minor theory he reasserted the original idea -- the idea that no one in the State must be too weak to influence the State. This man was Dickens. He did this work much more genuinely than it was done by Carlyle or Ruskin; for they were simply Tories making out a romantic case for the return of Toryism. But Dickens was a real Liberal demanding the return of real Liberalism. Dickens was there to remind people that England had rubbed out two words of the revolutionary motto, had left only Liberty and destroyed Equality and Fraternity. In this book, Hard Times, he specially champions equality. In all his books he champions fraternity. The atmosphere of this book and what it stands for can be very adequately conveyed in the note on the book by Lord Macaulay, who may stand as a very good example of the spirit of England in those years of eager emancipation and expanding wealth -- the years in which Liberalism was turned from an omnipotent truth to a weak scientific system. Macaulay's private comment on Hard Times runs, "One or two passages of exquisite pathos and the rest sullen Socialism." That is not an unfair and certainly not a specially hostile criticism, but it exactly shows how the book struck those people who were mad on political liberty and dead about everything else. Macaulay mistook for a new formula called Socialism what was, in truth, only the old formula called political democracy. He and his Whigs had so thoroughly mauled and modified the original idea of Rousseau or Jefferson that when they saw it again they positively thought that it was something quite new and eccentric. But the truth was that Dickens was not a Socialist, but an unspoilt Liberal; he was not sullen; nay, rather, he had remained strangely hopeful. They called him a sullen Socialist only to disguise their astonishment at finding still loose about the London streets a happy Republican.

Since we are in the realm of literature: Surely there never was such fragile china-ware as that of which the millers of Coketown were made. Handle them never so lightly, and they fell to pieces with such ease that you might suspect them of having been flawed before. They were ruined, when they were required to send labouring children to school; they were ruined when inspectors were appointed to look into their works; they were ruined, when such inspectors considered it doubtful whether they were quite justified in chopping people up with their machinery; they were utterly undone, when it was hinted that perhaps they need not always make quite so much smoke. ... Whenever a Coketowner felt he was ill-used - that is to say, whenever he was not left entirely alone, and it was proposed to hold him accountable for the consequences of any of his acts - he was sure to come out with the awful menace, that he would 'sooner pitch his property into the Atlantic.' This had terrified the Home Secretary within an inch of his life, on several occasions. However, the Coketowners were so patriotic after all, that they never had pitched their property into the Atlantic yet, but, on the contrary, had been kind enough to take mighty good care of it. So there it was, in the haze yonder; and it increased and multiplied. Hard Times - Dickens

What is the use of data when we have ideology?

What is super inflation? When is imminently? What odds are you giving?

Bank of America Ramps Up Job Cuts http://online.wsj.com/article/SB10000872396390443816804578004640193683614.html?mod=googlenews_wsj "The proposed year-end total of 260,000 would be the lowest count since 2008 and likely give Bank of America a smaller workforce than J.P. Morgan Chase & Co., Citigroup Inc. or Wells Fargo & Co. The final year-end number could still fluctuate depending on business volumes, said a person familiar with the plans. Bank of America is the second-biggest bank by assets after being surpassed by J.P. Morgan last year." "Hitting the new staffing target would fulfill a year early Mr. Moynihan's pledge to slash the bank's workforce by approximately 30,000." "Through the end of the second quarter, Bank of America had reduced the ranks of junior investment bankers by 23% since September 2011, according to the document." "On the retail side, the planned cuts include 5,300 consumer-banking jobs and 3,200 in the unit that oversees new mortgages, according to a person familiar with the document. The number of employees in global wealth and investment management will remain relatively flat, this person said." "Bank of America is planning to close 200 branches this year on top of 178 it closed in 2011, according to a person familiar with the document provided to management." "When the bank announced in September 2011 the first phase of the cost-pruning campaign, the goal was to get the head count down to 274,000 by the end of the second quarter, according to the document provided to management. The bank came close to hitting that number at 276,000." "Some of the numbers may change depending on volumes in the businesses expected to receive the largest cuts, but the final workforce total at year's end is still expected to be near 260,000, said another person familiar with the 2012 target."

And now for something completely different: I’m a bit puzzled by the tone of this FT report on how QE3 is doing so far, US inflation fears rise after QE3, which seems to imply that a rise in breakeven rates — the difference between the interest rate on ordinary bonds and inflation-protected bonds — is a danger sign. (Breakeven rates are a simple gauge of expected inflation). On the contrary, it’s the whole point of the exercise. For almost fifteen years, some of us have argued that central banks can gain traction even in a liquidity trap if they can create expectations that money will remain loose after the economy recovers, generating modestly higher inflation. And that’s what the Fed’s new tack is supposed to achieve. The right headline on that FT article should have been “QE3 working so far”. http://krugman.blogs.nytimes.com/2012/09/18/inflation-expectations-a-feature-not-a-bug/ I was missing all the macro and politics threads of the last few weeks that suddenly vanish ;) ... too much time in my hands with a concentrated portfolio.

Credit Conditions Survey http://www.bankofengland.co.uk/publications/Documents/other/monetary/ccs/creditconditionssurvey120628.pdf Housing http://www.jrf.org.uk/sites/files/jrf/housing-markets-volatility-full.pdf Why is their recovery better than ours? (Even though neither is good enough) Adam Posen http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech560.pdf Is the British economy supply constrained II? A renewed critique of productivity pessimism Centre for Business Research, University of Cambridge http://www.cbr.cam.ac.uk/pdf/BM_Report3.pdf

With 70% loan to deposits all banks are taking loan growth anywhere they can find it. The problem is lack of good prospects, particularly mortgaged consumers ... and those refinancings are going to help a lot. That is why interest rates are low: lack of lending prospects. This is no financial repression, it is growth repression.

Well many of them can borrow... but GROWTH/EMPLOYMENT is what they want. And these policies are about growth. So they are big winners. And that mysterious poor saver that is not getting his payments from social security, annuities, 401Ks, equities, bonds and other standard investment vehicles and instead just invests in short term treasuries and CDs ... well that mysterious saver is screwed anyway. The only solution for low interest rates is growth. First time that I hear the argument that monetary policy fleeces the poor. Even in the great depression the rentier was not poor and inflation was their boogieman, the poor had/have a mortgage.