PlanMaestro

http://www.ft.com/cms/s/0/8f2f7fae-e531-11e1-8ac0-00144feab49a.html#ixzz23UrZamb9 Food prices have risen for three main reasons. Demand for meat from the expanding middle class in developing countries (especially China) absorbed corn and soya – one pound of beef carcass requires 30 pounds of grain and one pound of pork requires 12 pounds of soya. Chinese soya demand, growing at 10 per cent a year, has transformed the agriculture of the western hemisphere, which now has more acreage with the crop than with wheat. Second, the global population has continued to increase at a rapid pace. Third, the weather has become more hostile to farming, with a substantial increase in severe droughts, floods and heatwaves. (...) In the end, market prices may change this behaviour, but they will at first send rich countries too faint a signal for them to react, while pushing the poorest out of the market. A symbol of our current indifference is that filling up a single tankful of a sport utility vehicle with corn-based ethanol displaces enough calories to feed one Egyptian farmer for a whole year.

LAMPERT HAS TAKEN CARE TO separate Sears into "guarantor" and "non-guarantor" subsidiaries, with the former securing the company's $1.2 billion in senior notes due 2018. Importantly, KCD and a unit housing 125 properties leased to Sears aren't guarantors. The division signals where most of the value resides in the company. Cliff Orr, an analyst at Privet Fund, a hedge fund in Atlanta focusing on special situations, notes that loan documents indicate that KCD and other non-guarantor subs generate more than $600 million in free cash flow annually. Using conservative industry multiples to value their profit stream would suggest they are worth more than Sears Holdings' current value. Has anyone seen these loan documents or any other evidence of this FCF? It is tricky considering how these brands are intertwined with Sears with little 3rd party sales.

Hartford Mulls Client Buyouts To Cut Risk Buffett Called Ungodly http://www.bloomberg.com/news/2012-08-10/hartford-mulls-client-buyouts-to-cut-risk-buffett-called-ungodly.html Life insurers are paying the price for guarantees made to clients before 2008, when stock markets were in the midst of a five-year rally and the yield on the 10-year Treasury was more than 4 percent. The industry took on what billionaire Warren Buffett has called an “ungodly” amount of risk and accumulated liabilities as Treasury yields dropped below 2 percent, making it harder to generate returns to cover the obligations. The deal to sell the origination unit to Forethought Financial Group Inc. excludes the contracts previously issued by Hartford, and McGee’s firm had a $3 billion variable annuity reserve at the end of the second quarter. The U.S. annuity business was unprofitable in two of the past four quarters, with a combined loss of $27 million in the 12 months ended June 30. The insurer is studying whether it can reach agreements with other firms to take on liabilities and assets not covered in the Forethought deal, McGee said Aug. 2. Hartford, based in the Connecticut city of the same name, is weighing client payouts even as consumers may opt to stick with their contracts, McGee said, without disclosing the size of potential incentives. “We are aggressively looking at that,” he said in response to a question about lump-sum payments from Christopher Giovanni, an analyst at Goldman Sachs Group Inc. “That is one of many work streams that we’re considering with great urgency and diligence, because we’re determined to reduce the book as quickly as we can.”

Holy cow Mohnish! Now I understand his enthusiasm in the most recent letter of going back to a 10x10. With these picks who wouldn't. I am not so keen with Goldman but put AIG instead .... Regarding the manager he mentioned, I would love to think is Moynihan but most probable is Watsa as our host suggests. There is always the Aubrey option and his incredible track record ... let's hope not.

Gu Kailai declared ‘main perpetrator’ Chinese prosecutors have accused Gu Kailai, wife of fallen politician Bo Xilai, of being the “main perpetrator” in the alleged murder of UK businessman Neil Heywood, signalling that China’s most anticipated trial in decades will produce a guilty verdict, the FT reports. Separately, Bloomberg reports that Gu failed to contest the charges that she poisoned Heywood. http://www.bloomberg.com/news/2012-08-09/bo-s-wife-didn-t-contest-murder-charges-court-official-says.html?ftcamp=crm/email/2012810/nbe/beyondbricsLondon/product

Derek Pilecki (Gator Capital) is a good manager to follow. Specialized in financials. I like his letters too. This presentation? http://www.scribd.com/doc/57456508/Akanthos-Capital-Management-A-Treasure-Chest-Beneath-a-House-of-Cards-2011-05-4?secret_password=r7q7w3htk0v4wuivarm

Check this thread. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/millstein's-plan-for-fannie-and-freddie/msg78285/#msg78285 I think the common will most likely get wiped-out, and the preferreds already have great upside at 10c on the dollar.

Check the preferreds. The US government will probably ask for a substantial equity cushion to even consider the private option. http://variantperceptions.wordpress.com/2009/09/07/market-madness-freddie-mac-edition/

I found in Twitter this presentation about The Hartford. I wish they've dug deeper into guarantees and equity exposure but I think they are very right about the strength of the P&C divisions. Also misses an analysis of the investment portfolio, leverage, interlocking subs, and risk-based capital. http://www.boothlaird.com/wp-content/uploads/2012/07/Booth-Laird-Investment-Partnerhip-2012-Annual-Meeting-Presentation.pdf

Exactly and in a key infrastructure sector. Visa and Mastercard are another two to start worrying about.

Here we go again, now it's the turn of squeaky clean Standard Chartered. http://ftalphaville.ft.com/blog/2012/08/07/1109481/a-regulator-gone-rogue-maybe-maybe-not/ At pixel time, shares in Standard Chartered were down 31 per cent from the point at which this was published — an “Order Pursuant to Banking Law No 39,” issued by the New York State Department of Financial Services. In lurid detail, this sets out the claim that the London-based EM bank willfully evaded US sanctions against Iran over the course of a decade. Now, quite a few people (including this correspondent) are owning up to not having heard of the New York State DFS previously. Jonathan Guthrie, in a lucid Lombard note, reckons this might partly explain the grandstanding tone of the order: the department was only created last year (by New York governor Andrew Cuomo) and needs to make a name for itself… ... StanChart, for its part, is acting all shocked and hurt. A hastily drafted statement, issued at about 1am London time, protests that what the DFS calls “wire-stripping” — changing docket details to disguise the parties involved — was actually accepted practice under the so-called “U-turn” arrangements that allowed Iran to sort of trade normally, internationally, in the years up until 2008. In November that year (just as Wall Street was melting) the U-turn arrangements were revoked and sanctions against Iran were tightened up considerably. Over this period, StanChart appears to accept that it made some transgressions. These were being investigated and the matter has been under discussion with a whole battery of US regulators. But going on the bank’s figures, the suspect trades are in the region of $14m, rather than the $250bn flashed around by the DFS. The clear implication is that the real story here is about a regulator gone rogue. ... Yet the StanChart share price is not saying this is about pots and kettles. The markets are actually pricing in the possibility that this bank might lose its New York banking license, along with its ability to clear US dollar transactions – something that would effectively cripple an institution whose business is largely based on international trade finance. Why so? Sandy Chen of Cenkos sums it up nicely. It’s about trust. Investors feel they have been kept in the dark…

New TARP warrant addition to Fairholme Fund. What can I say ... smart guy.

Minuscule transaction, but the business did not have scale and actually I think I read they were losing money. Since it is a business that doesn't need much capital I suppose it was easy to show a profit selling a little above book. AIG can plug and play this with a lower overhead. AIG Buying Hartford Financial Group Brokerage Unit http://online.wsj.com/article/SB10000872396390444130304577561483301911626.html AIG will pay up to $90 million for Woodbury Financial Services, an independent broker-dealer based in Minnesota with some 1,400 financial advisers. The acquisition is the first since the financial crisis for AIG's domestic life and retirement services division, currently known as SunAmerica Financial Group. Hartford will also receive a $25 million dividend from the Woodbury unit, bringing its proceeds to as much as $115 million when the deal closes later this year, said Hartford Chief Executive Liam McGee. The transaction is one of several planned transactions announced in March by Hartford as part of a decision to focus on its property-casualty insurance, group-benefits and mutual-funds businesses. The sale of Woodbury is expected to generate a modest gain for Hartford and won't have a material impact on its 2013 earnings, Hartford said. Mr. McGee said the sales process for the company's life-insurance and retirement-plans businesses are proceeding as expected.

30-40% of GDP and government debt to GDP of around 70%. That is more than OK. Plus you can nationalize the banks, take some profits and privatize them later to soften the blow. Spain's problem is not fiscal, that is just a symptom. And please, if you nationalize the Cajas could you make those German bondholders suffer converting their stakes to equity? I have heard that Bankia was sold retail in Spain but not the others I think. Fuerza España.

Well, this is a bigger deal for HIG than AIG so that is why I put it here. "Modest gain" means close to book value? AIG to Acquire Woodbury Financial Services from The Hartford http://finance.yahoo.com/news/aig-acquire-woodbury-financial-services-210500139.html The transaction is expected to generate a modest gain for The Hartford and have no material impact to The Hartford’s 2013 earnings. The agreement is expected to close by the end of 2012, subject to regulatory approval and other customary closing conditions. Woodbury Financial seen as cheap addition to AIG's broker/dealer biz http://www.snl.com/InteractiveX/Article.aspx?cdid=A-15377121-12850 That the insurer is involved in the bidding for Woodbury Financial comes as a bit of a surprise. While SunAmerica President and CEO Jay Wintrob said in March that the company might look at the businesses that The Hartford put up for sale, he referred specifically to the company's individual life and variable annuity operations, not its broker/dealer. "I guess The Hartford now has put up for sale or announced their individual life, variable annuity businesses," he said at a conference, according to a transcript. "There is no reason we can't look at that." But Woodbury Financial would nevertheless fit easily with its existing operations, analysts said. AIG could bring the firm under the umbrella of AIG Advisor Group Inc., which already houses three other broker/dealers. There, it would add substantially to the group's assets under management and its headcount and overall capabilities. Woodbury Financial had approximately $1.6 billion in assets under management at the end of 2011, according to its most recent filing. AIG Advisor Group's three broker/dealers — SagePoint Financial Inc., FSC Securities Corp. and Royal Alliance Associates Inc. — had about $7.67 billion of combined AUM as of Dec. 31, 2011. "They would presumably be able to roll the proprietary products that are sold today, which are Hartford products, over to SunAmerica products," Sanford C. Bernstein analyst Josh Stirling told SNL. "There's also some combination of the two platforms, technology and back office, which naturally leads to greater scale and cost savings. I think it sounds like a logical, tactical sort of thing to do." Adding those resources through Woodbury Financial would likely come cheap, he added. The Hartford committed to selling the broker/dealer in March as part of its companywide restructuring. It set a six-month timetable, giving it until September to settle on a buyer. That type of a public auction, combined with the urgency of a tight deadline, means that The Hartford will likely have to settle for selling the business at a lower-than-normal price. "I wouldn't call it a fire sale," Drexel Hamilton LLC analyst Gloria Vogel told SNL. "Having said that, I would think that the speed with which they would want to do a transaction would dictate that they would need to keep it attractively priced." She declined to put a value on Woodbury Financial, but Credit Suisse analyst Thomas Gallagher estimated in a March note that the firm might fetch $250 million to $300 million. Woodbury Financial in 2011 generated $253.7 million in product revenues but ended the year at a net loss of $18,378. Although growing SunAmerica lags far behind AIG's main priorities of escaping government control and improving unit Chartis Inc., some suggested that acquiring another broker/dealer could be aimed at repositioning the company as a larger player in the annuities market over the long term. AIG and SunAmerica did not suffer from the sector's downturn in the same way that others did during the financial crisis, Stirling said, and there is an opportunity now to grab market share just as companies such as The Hartford are shrinking their presence. Although the annuity business' prospects are dim, investing shrewdly now could end up paying off down the line. "I think their preference would be to buy back stock from the Treasury to reduce the overhang," Vogel said. "But if they thought there was the potential to get some accretion from some kind of transaction, I think they would pursue it."

You have to balance the balance sheet with the profit effect. Anyway, real estate is not the main problem in Spain as we in Latin America very well know. Krugman recognizes mistake: http://krugman.blogs.nytimes.com/2010/04/14/the-secret-of-the-banks-success/

Ups, disappeared. Anyway, not that he needs them ... but kudos to Mohnish. The old –now new– strategy was always fine.

Aberhound, why 25 pages of macro tourism are relevant? On page 22 he hints about talking individual securities and then .... just stops.

With all due respect and just trying to understand more ... Is Seth Klarman a good stock picker? Targacept, Novagold, RHI Entertainment, on the top of my mind. I also read his 90s letters and did not improve my impression of his picks. He has an outstanding reputation in distressed debt, and his strong cash position getting into 2008 was fantastic. But every time I check one of his stock picks I have doubts, especially about quality and potential upside. Really, I am trying to learn. Any opinions on this? NovaGold plummets after Barrick raises doubts about gold deposit NovaGold (NG) is retreating after Barrick Gold (ABX) indicated that it may not invest significant amounts of money in a gold deposit in which the two companies each have a 50% ownership stake. Barrick said that the Alaska-based Donlin gold deposit doesn't currently meet its investment criteria, primarily because of the large initial capital investment required to launch it. However, Barrick did add that Donlin represents a "valuable long-term opportunity," partly due to its long life mineral resources. Moreover, Barrick added that it would advance permitting activities at the site at reasonable costs, giving it the option to undertake construction there in the future. In early trading, however, NovaGold tumbled $1.67, or 31.04%, to $3.71. Barrick, meanwhile, sank $2.47, or 7.31%, to $31.32. :theflyonthewall.com

My understanding is that the US prices are the ones recovering, and that might match the AIG story because that is where AIG has been cutting business. http://www.towerswatson.com/research/2888 http://www.towerswatson.com/assets/pdf/mailings/January-2012-PC-Insights.pdf

BAC is cheaper but turning around while AIG already did. That AIG has more tentacles? Actually I would say the reverse since BAC is taking much more of my time. Both in size wishing they don't recover together .... to pile on the laggard.

John Reed, break up the big banks (interview starts at 5:00 mark) http://billmoyers.com/segment/john-reed-on-big-banks-power-and-influence/ “I’m quite surprised the political establishment would listen to groups that have been so discredited. It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did… And then the whole system came down.”

From Wikipedia: Although Wenger has made some big-money signings for Arsenal, his net transfer record is far superior to other leading Premier League clubs. A survey in 2007 found he was the only Premier League manager to have made a profit on transfers, and between 2004 and 2009, Wenger made an average profit of £4.4 million per season on transfers, far more than any other club. A notable example of his shrewdness in the transfer market was the purchase of Anelka from Paris Saint-Germain in 1997, for only £500,000 and the player's subsequent sale to Real Madrid just two years later for £23.5 million. This enabled Wenger to buy three players: Henry, Pirès, and Wiltord, who all played significant roles for the first team in the early 2000s. The sale helped the club fund its new training centre at London Colney, which Wenger campaigned for. The Arsenal defence, which set a new record after going 10 consecutive games without conceding a goal in the Champions League, cost the club less than £5 million to assemble. Wenger's reluctance to spend more money on transfers is often remarked as being the principal reason for Arsenal's failure to win trophies and contest in the Premier League, since moving to the Emirates Stadium. The current youth system has not had its desired effects, with footballer Patrice Evra branding Arsenal a "football training centre" who are incapable of winning trophies. Regardless, Wenger has been able to sell his players at a higher cost; in February 2012, Arsenal announced a £46.1m profit, largely due to the departures of Fábregas, Nasri and Gaël Clichy. The growing trend of player departures, beginning with Ashley Cole in 2006 has meant Arsenal are now considered a feeder club to bigger teams. Wenger is a stern advocate of financial fair play in football. He has criticised the long term approach of other clubs, namely Chelsea, Manchester City and Real Madrid for spending more than they take from revenue – something he refers to as 'financial doping'. The ongoing European sovereign debt crisis has coincided with Wenger forecasting that it will put football into "perspective," comments concurred by the Financial Times writer Gideon Rachman.

Thx Txlaw. I've been following it, but the volatility of earnings (including services!) keeps me in the wait and see camp. Also, Meg Whitman made some comments about the turnaround taking several years ... lack of sense of urgency. And Whitman's eBay gig does not nudge me into thinking she is the right woman for the job. She should know better having worked at Bain & Co. and should read articles from Stan Pace ... even better contact him. (Fast, focused, and simultaneous) http://www.bain.com/Images/SL_The_strategic_leader.pdf http://www.bain.com/bainweb/PDFs/cms/Public/SL_Rip_band-aid_off_quickly.pdf It's the same thing that stops me from investing in RIMM and Yahoo. Companies with turnaround potential, cash flow and assets that give them time, but lack of urgency and execution. On those dimensions Dell seems to be doing a much better job (maybe the Bain DNA). I've been happy adding more AIG and BAC the last few days.

Thanks for the link Matt ... and if you could tell us what you think of the book...