PlanMaestro

Careful with the macro tourists. There is a right side of the balance sheet too. Japan has been running a current account superavit for decades so it has accumulated trillions of USD in a very large net positive international asset position. $4 trillion USD, around 70% of GDP, AFTER ALL THEIR LIABILITIES. In percentage one of the largest among developed nations, I think only Switzerland beats it. http://www.boj.or.jp/en/research/brp/ron_2010/ron1009a.htm/ http://www.boj.or.jp/en/research/brp/ron_2010/data/ron1009a.pdf 1.3 trillion USD, larger that TARP and around 20% of Japan's GDP, just in international liquid reserves. Second only to China. http://en.wikipedia.org/wiki/Foreign-exchange_reserves

One thing I like about LYG's new management team is its Banco Santander pedigree. But a two month medical leave for exhaustion? http://www.ft.com/cms/s/0/af5b1cf6-9dca-11e1-9a9e-00144feabdc0.html#ixzz1usOjgytn Mr Horta-Osório has favoured external candidates, however, as he has sought to cut ties with Lloyds’ past and rebuild the bank following its ill-timed acquisition of HBOS during the financial crisis. Another piece of the management jigsaw will be in place later this week when George Culmer is due to start as finance director. Mr Culmer is set to join Lloyds on Wednesday, a day ahead of its annual shareholder meeting in Edinburgh. He was appointed last November but was not able to leave his post at insurance group RSA until this week. Other hires by Mr Horta-Osório include Alison Brittain, who joined Lloyds in September to lead the retail business, Antonio Lorenzo, who is in charge of group strategy, and Juan Colombas, chief risk officer. The chief executive reduced the number of group executive committee members from 14 to 11 after he returned in January from a two-month period of medical leave, triggered by exhaustion.

Ready to bat.

The thing is that the thesis for natgas is still that it will eventually recover to $4 and eventually to $6. At those prices coal is still cheaper. Therefore if you believe the natgas price recovery thesis, there will be substitution but (1) the lowest cost coal producer should keep intact its production quota. (2) margins and production will be be more protected than natgas companies, because the substitution will take time (3) coal price should eventually recover to historical price/marginal cost alongside natgas. So its a way to play the natgas price recovery with more downside protection.

Interesting. I was also thinking CLD Cloud Peak Energy that is the lowest cost thermal coal miner. It is not like coal is going to disappear, there are huge legacy costs.

How?

Avoiding the Next Big Bailout FDIC Would Seize Parent, Allow Units to Operate While Mess Is Cleaned Up http://online.wsj.com/article/SB10001424052702304543904577394362191974098.html As part of that effort, acting FDIC Chairman Martin Gruenberg will outline the agency's strategy in a speech in Chicago Thursday, his first public remarks on the dismantlement plans for banks. In recent weeks, FDIC officials discussed the plans with The Wall Street Journal. If several federal agencies and the Treasury Department agree to seize a firm, the FDIC will unwind the parent bank holding company of the faltering firm, placing it in receivership and revoking its charter. The firm's subsidiaries around the world would continue to operate, supported with liquidity the FDIC-held parent company can borrow from the government under the Dodd-Frank financial overhaul. Next, the FDIC would transfer most of the firm's assets and some of its liabilities into what's known as a "bridge company," according to FDIC officials. There, regulators would oversee a debt-for-equity swap akin to what occurs under a Chapter 11 restructuring: Equity holders would be wiped out, but creditors would get equity in exchange for the claims they held. The company eventually would emerge from the process as a new, recapitalized private entity.

Toxic paper continues to move. Maybe it was not that toxic just opaque. There is a little for everyone in this article (AIG, MBI, GKK, CT, MS, BCS). Just listened the Northstar conference call (NRF) and they mentioned how European banks are being more aggressive in selling CDO bonds at very discounted prices. Barclays and Morgan Stanley snap up debt http://www.ft.com/cms/s/0/862751d8-9a0a-11e1-aa6d-00144feabdc0.html#ixzz1uPr5sAkk Barclays and Morgan Stanley on Tuesday won an auction of $1.5bn of packaged commercial mortgage debt sold by UBS, people familiar with the deal said, in the latest test of investor demand for assets once dismissed as “toxic”. The Swiss bank sold slices of collateralised debt obligations amid a burst of renewed demand this year for securities that were at the heart of the financial crisis. As central bankers keep interest rates low, investors have flocked to the highest yielding assets, including boom-era mortgage debt. The Federal Reserve Bank of New York is also benefiting from the risk appetite of investors and selling securities from Maiden Lane III, a debt portfolio acquired as part of the government bailout of AIG, the insurer, in 2008. .... UBS sold securities in CDOs called “Wave” that were created in 2007 by Wachovia, the US bank that Wells Fargo acquired in 2008 as the former buckled under mortgage-related losses. The CDOs contain commercial mortgage bonds arranged in 2006 and 2007 at the height of the US property boom. People familiar with the transactions said that Morgan Stanley bought the riskier securities and paid more than 48 cents on the dollar, while Barclays paid more than 66 cents on the dollar. .... The sale will enable UBS to reduce assets that under new Basel III banking rules the bank would be required to hold large amounts of capital against, a person familiar with the bank’s thinking said. The CDOs were freed up for sale after UBS and MBIA, the monoline insurer, in March agreed to settle a lawsuit over credit default swaps that MBIA had sold UBS on this and other mortgage debt.

Someone at the Economist just posted a very good article on the consequences of a Greek Devaluation http://www.economist.com/blogs/freeexchange/2012/05/euro-crisis-1 Yes, a depreciation would boost the competitiveness of Greek exports, but I'm not sure that would matter much in the chaos following on an exit. Both people and capital would make a mad rush for the exits once it became clear that Greece would be leaving. In such circumstances, currencies typically overshoot on the way down. A plunging drachma would create intense inflationary pressure. That would no doubt be exacerbated by Greek funding needs; despite deep austerity it continues to run a large deficit and the temptation to fund it through printing will be strong. Hyperinflation would be a real possibility. The political dynamics of such turmoil are difficult to foresee, but one suspects that fringe parties would only benefit from chaos. As The Economist has warned, Greece might well become a failed state upon leaving the euro zone. It might not, of course, but I'd put more money on disaster than salvation.

Debt hit is one big risk. I have not looked at OTE, but I have followed TEF and PT. They have lots of debt euro denominated and in case of a devaluation they would take a big hit. So big, that despite both having very large profitable and growing operations in Latin America I think it is still risky to buy them just yet. There is a second big risk, price controls. As anyone that has lived through a massive devaluation, like Greece will probably have w/o support, the exchange rate will overshoot, inflation will go through the roof, banks will cut credit if not collapse entirely, foreign capital will run, unemployment will go even higher than now, and there will be massive public unrest. Eventually the very undervalued exchange rate will export the country out of unemployment. Most banks will be nationalized and deposits convert into drachmas with people taking a big one time hit, but that will take care of the credit issue eventually, and some type of capital controls might be instituted to stop the massive capital outflows. But inflation will be persistent and difficult to control especially with the large incentives for the government to run a expansionary fiscal program without foreign credit. That is how Brazil and Argentina in the 1980s got into hyperinflation with continuing civil unrest despite the return to democracy. What did Argentina did on the social front the second time they devalued in 2001? Price controls of basic needs. Food prices are very difficult to control, but utilities and gas prices are much easier.

Canada did not have a massively overvalued fixed exchange rate and Germany grew out of it exporting to the periphery that was in a boom thanks to cheap credit. If Germany does the same thing in reverse today ... Still surprised that people do not learn from others experience. There is no such thing as an expansionary fiscal contraction. Not even General Augusto Pinochet Ugarte could do it. Here is the recent Chilean Finance Minister talking precisely about this, stealing the show from Richard Koo And this guy is not precisely a spender. Another good talk fromhim last year where he stole the show from Niall Ferguson: Greece does not have an option. I am sorry for the Greeks but be prepared for a great investing opportunity.

http://www.ft.com/cms/s/0/ca4cd9de-9927-11e1-9a57-00144feabdc0.html#ixzz1uIrNDhMi Ally Financial, the lender 74 per cent owned by the US government after a 2009 bailout, is considering placing its mortgage subsidiary into bankruptcy to escape nagging liabilities. The US Treasury gave the green light for the move on Monday and the subsidiary, known as Residential Capital, faces a wave of maturing debt next week. Some stakeholders, government officials and bankruptcy lawyers warn that a clean break might not be possible and investors in ResCap’s bad mortgage loans might successfully pursue the parent company. If Ally Financial does successfully shed ResCap it will reawaken speculation that Bank of America could try to place into bankruptcy Countrywide, its troubled mortgage subsidiary, which has cost it billions of dollars since it was bought in a disastrous 2008 acquisition.

I imagine many of you are thinking of ways to get some margin of safety. It seems that a healthy balance sheet, that may be worth nothing when forced to drill, or good hedges that will eventually run out is not going to be enough. These are some of the picks that I have been reading here and there: - Lowest Cost (MMR, UPL, MCF) - Liquids or oil (CHK, SD, BBEP) - Sugar daddy, most probably private equity (XCO maybe, PSTR maybe) Others?

Thank you all.

Kauffman Foundation comes open. http://www.kauffman.org/uploadedFiles/vc-enemy-is-us-report.pdf

IRSA too that also has some assets in the US. If they maintain the dividends the yields are attractive. Acquired 49% of a company which main asset is Lipstick Building located in 83rd at 3rd in NYC. Also owns 49% of the company owner of the building in 183 Madison Ave in the same city. Through subsidiaries, owns 10.5% of Hersha Hospitality Trust (NASDAQ:HT) and 3 million preferred shares of Supertel Hospitality Inc (NASDAQ:SPPR).

Agree that is an important factor to consider in the specifics.

Some Korean stocks also starting to look cheap consequence of the military exercises of their neighbor. The ones I am following are Posco, KT, Gravity, and some banks but I wonder if there others (specially if they do not have ADRs).

`cos everybody hates a tourist Especially one who thinks it's all such a laugh Yeah and the chip stain and grease will come out in the bath Common People - Pulp Hedge fund managers are very bad in macro in general, even the ones that disclose their strategy as "Macro". Most of these funds are about the asymmetric structure of the event payoff, looking for extreme events, and not about the probability of the payoff. They just need a few to pay but they talk as if all will pay. And if one of these bets pay off they go full broadcast, while bloggers go along exaggerating their macro wins and track record. Fooled by randomness indeed. Soros has been the only one that had any macro sense (and maybe Dalio ... but there are not enough concrete details on his trades). Since he did not have CDSs he had to be much more careful with the probabilities and not just count on the multiple of the payoff. Now all these newcomers that were lucky in one of their several CDS bets think they know macro when they are just macro tourists. And Einhorn, what has he done that makes him a macro expert? And don't get me started on how many of these tourists are just pandering to the ideological biases of their investor base or inventing issues to try to create ST movements for their CDSs. I took her to a supermarket I don't know why, but I had to start it somewhere So it started .... there I said "Pretend you've got no money." But she just laughed and said "Oh you're so funny." I said "Yeah? Well I can't see anyone else smiling in here." "We have two classes of forecasters: Those who don’t know—and those who don’t know they don’t know." - Galbraith "The worst are those that know that they do not know and still end up making forecasts based on ideology or self-interest" - PlanMaestro

One interesting company to keep in the radar: Arcos Dorados (ARCO). Not cheap enough yet, but interesting cash flow ratios with room for growth. McDonald's operations all across Latin America but its biggest exposure by far is Brazil for the ones with concerns about its economy. http://www.arcosdorados.com/attached/investors/1641_att_Credit%20Suisse%20Conference%20-%20London.pdf

How I am going to miss this man. Not just smart and wise but also a representative of a once large virtuous conservative bend that is close to extinction.

I thought American Express was only 30-40% of his fund at one time. Invest in equities slowly over time. And invest in yourself. Enhance your own talents and weaknesses. Specifically oral and written communication skills. And look to buy companies that will go on forever, like CocaCola. But the key is to buy equities slowly over time, and don’t try to time the market. For the more serious investor, buy equities strategically, opportunistically. And go all in when you can, and when there is a good deal. I had a limit in my fund on the amount I could put in to one investment. There was a fantastic opportunity so I approached my investors and told them I wanted to increase that amount. I ended up putting 75% of the fund in that investment and it worked out well. And I’m sure I will do it again. Don’t use leverage, and sit on cash if there are no good investment opportunities. PS: I continued reading and he mentions AMEX later. Maybe a question of notes or is there another big Buffett bet? When I started my partnership, I chose not to have constraints, but I did inform the partners that I won’t invest more than 25% in a single security. In 1961, I wanted to overrule this constraint to invest heavily on American Express and communicated this to the partners, without informing them about which security. I invested almost 40% of the entire portfolio.

Part of history of HIG current troubles http://bobmaconbusiness.com/?p=1394 This is all well and good, but now the management of Hartford has taken an action that demonstrates clearly that they are still more than capable of taking actions that are not in the best interests of the company. According to InvestmentNews.com (9/1/10 & 9/3/10) Hartford on August 23 sent a letter to customers who had purchased the older variable annuities – the ones with the high guarantees. The letter offered the policyholder a “Personal Retirement Manager Exchange Program Opportunity” (some bureaucrat won bonus points for that title) that would “allow” them to trade their old contracts for the newly priced variable annuity. Obviously Hartford management has good reason to try to get out from under these older policies that clearly benefited the customer rather than the company. But clearly they are being (to be nice) less than transparent with the customers. While the letter says the new products offer “new features,” it is silent as to what those features might be. And, there is no warning to the policyholders as to the benefits and guarantees they will be forfeiting. This is akin to a bank offering you a new credit card with “new features” which turn out to be higher interest and fees for the bank. To say that this approach taken by Hartford management designed to rid themselves of these customer friendly policies is patently unethical is clearly understatement. To compound their wooden-headedness, this letter was sent to policyholders without informing the agents who sold the policies, until after it had been sent. The objective was obvious: management wanted to circumvent the distribution system and go directly to the policyholder with this “offer.” The Hartford was rightly concerned that the agents would explain to their clients that the “offer” being made by Hartford was not in their best interests and encourage them to ignore it. What makes the action of Hartford management so dim-witted was their apparent belief that they could accomplish this clumsy sleight-of-hand without the policyholders or the agents getting wind of it and react negatively toward the company. It was another of Hartford’s clumsy actions clearly counterproductive to its own interests. Or to use Tuchman’s poetry: “acting according to wish . . . not facts.”

Sure not, and it took me to this other video ... I could not stop smiling :)

Net promoter score is just another measure of customer satisfaction that is being promoted by Bain Company as the "Ultimate Question" (Will your clients recommend you enthusiastically?). http://www.amazon.com/The-Ultimate-Question-Driving-Profits/dp/1591397839 They just put a list that according to them: "Our latest study of 140 US consumer products and consumer services companies measured relative growth and profitability along with brand equity, Net Promoter scores and other gauges of customer satisfaction." Any one that triggers value investors' spider-sense? MetroPCS has been killed lately but I do not know much about the business. Kohl's has an interesting model and owns several of their stores. Some seem weird for this foreigner while others are private. http://www.bain.com/publications/articles/what-it-takes-to-win-with-customer-experience.aspx American Express Apple AT&T Chick-fil-A Costco JetBlue Kohl’s LG Electronics USA MetroPCS New York Life Nordstrom TD Bank Trader Joe’s USAA Verizon