PlanMaestro

I am feeling in the same situation as Ragnar: analyzing a coal company (Powder River Basin) and understanding enough. Almost no net debt, very cash flow positive, most production contracted for next two years, large growing reserves, low cost producer ($9/ton), no union, surface mining, access to the Pacific BNSF, seems very cheap. That should tip which company . What should I be worrying about besides the natgas glut?

http://online.wsj.com/article/SB10001424052702303816504577319533721569146.html Hartford Financial Services Group Inc. HIG -2.99% agreed to pay $2.43 billion to buy back securities it sold to Allianz ALV.XE -0.45% SE in the depths of the financial crisis. The agreement allows Hartford to replace $1.75 billion of debt it owes to Allianz—which was yielding the German insurer 10% a year—with new debt at a lower cost. A number of insurance analysts predicted Monday that Hartford could save $40 million to $75 million in interest expenses annually. Hartford will also pay Allianz $300 million to buy back warrants that entitled the German insurer to purchase 69.4 million shares of Hartford's stock for $25.32 each. Hartford's stock rose 4.1% to $21.95. The agreement leaves Allianz with about 5% of Hartford's outstanding shares, but otherwise closes the book on an October 2008 investment that helped shore up Hartford's balance sheet when capital markets were frozen and investors were beginning to question the company's ability to survive the financial crisis. Hartford later needed a $3.4 billion bailout from the U.S. government, which it repaid in 2010. An Allianz spokesman said Allianz's average return on the Hartford investment had been 15% annually. The agreement disclosed Monday frees up about €1.5 billion ($2 billion) in capital that Allianz, Europe's largest insurer by premium income and market capitalization, had to set aside for the investment, which could be used for other things. The transaction should also ease market speculation that Allianz was interested in buying Hartford outright. Such rumors regularly surfaced in Europe even though Allianz executives had repeatedly said they considered the Hartford stake to be a financial investment, rather than a strategic one. Allianz also owns Pacific Investment Management Co., or Pimco, and Fireman's Fund, an insurance and risk-management company.

Paulson's letter regarding the restructuring plan. I think he is being too ST focused. We support today's actions, not as a conclusion of the strategic review, but as a first step in creating a clear delineation between The Hartford's P&C and non-P&C businesses. We are pleased that The Hartford is taking steps to focus on core operations and to divest or discontinue non-core and capital intensive businesses. We believe that putting the variable annuity business in runoff and selling the non-core individual life, retirement plans and broker dealer businesses will raise cash, free up capital, permit deleveraging and increase its financial flexibility. Successful execution of these plans will strengthen the Company's ability to separate the P&C and non-P&C businesses in the future, which we continue to believe would create the greatest short-term and long-term shareholder value and strengthen the company. While we appreciate the extensive work of The Hartford's board and management, we do not believe the positive actions announced today address the main problem with The Hartford's undervaluation: the lack of interest from P&C analysts and P&C investors in The Hartford's best-in-class P&C business due to its affiliation with unrelated, low-return and complex businesses. We do not believe today's actions will materially increase P&C investor interest in The Hartford.

This is getting even more bizarre. http://online.wsj.com/article/SB10001424052702303299604577327472813686432.html

What’s interesting in Japan is that every life insurance company is essentially insolvent because they promised to pay 3%. Who’d have thought that this could lead to insolvency, but interest rates went to zero and stayed there for years. They tried to invest in equities, but got negative returns. Can you imagine 13 years with negative equity returns and interest rates below 1%? - Munger Thanks for throwing the hat in the ring Merkhet. I did look at HIG at the end of last year but passed. I did not feel I understood enough to handicap the VA guarantees and specifically Japan. Also compared to AIG it seemed much more complex to analyze (imagine that). If someone could help in analyzing the guarantees it might be be interesting. Their P&C business has a good COR in a depressed environment. The other thing that put them in trouble in 2008 was an aggressive investment port full of 3 and 4 letter abbreviations. It seems to be performing OK. Regarding the whole spinoff thing, it may simplify the business but it looks like Mutual Fund is doing more than OK and provides a stable cash flow source for tough hits in the insurance business ... so why sell it. Just to provide a ST multiple expansion? Investor Day Presentation http://files.shareholder.com/downloads/HIG/1769918815x0x505817/d1445bff-64b8-43c4-aa49-2a996b13927e/Balance_Sheet_Presentation_10-6-11_-_FINAL-A.pdf Investment Port pages 13- 22 VA, Guarantees and Japan 35 - 54

Insights are important in investing. However, you do not need many. http://www.guardian.co.uk/music/2012/apr/06/neuroscience-bob-dylan-genius-creativity?cat=music&type=article

I think some of the arguments pro and against are a little off of what Dimon is saying. So let me quote the critical paragraphs. I do not think he is saying what others say he is saying: So buying back stock is a great option – you can do the math yourself. Haircut our earnings numbers that analysts project and forecast buying back, say, $10 billion a year for three years at tangible book value. With these assumptions, after four years, not only would earnings per share be 20% higher than they otherwise would have been, but tangible book value per share would be 15% higher than it otherwise would have been. If you like our businesses, buying back stock at tangible book value is a very good deal. So you can assume that we are a buyer in size around tangible book value. Unfortunately, we were restricted from buying back more stock when it was cheap – below tangible book value – and we did not get permission to buy back stock until it was selling at $45 a share. Our appetite for buying back stock is not as great (of course) at higher prices. If you run the same numbers as above, but at $45 per share, buybacks would be accretive to earnings and approximately break even to tangible book value – still attractive but far less so. Currently, above $45 a share, we plan to continue to buy back the amount of stock that we issue every year for employee compensation – we think this is just good discipline. As for the excess capital, we will either find good investments to make or simply use it to more quickly achieve our new Basel III targets. Rest assured, the Board will continuously reevaluate our capital plans and make changes as appropriate but will authorize a buyback of stock only when we think it is a great deal for you, our shareholders.

Finished reading Dimon's letter. It has some great parts but it is a little too long and unfocused. On the good, Dimon is doing a real effort on trying to find a middle ground on the issue of regulation acknowledging a lot of the good. Dimon is also very specific, and it is not a laundry list, on what he does not like and sometimes is just a question of degrees. I also liked very much Dimon's reasoning on why buyback its own stock is such a good deal for JPM and, I would argue, for all the banks.

My personal behavior model is Lord Keynes: I wanted to get rich so I could be independent, and so I could do other things like give talks on the intersection of psychology and economics. I didn’t want to turn it into a total obsession. - Charlie Munger http://media.wiley.com/product_data/excerpt/6X/04702849/047028496X.pdf From Keynes and the Market by Justyn Walsh: Some surprise has been expressed about the large fortune left by Lord Keynes.Yet Lord Keynes was one of the few economists with the practical ability to make money. —FINANCIAL TIMES, September 30, 1946 In September 1946, five months after his death, the bequest of John Maynard Keynes was made public. His net assets totaled just under £480,000, or around $30 million in today’s money. Although Keynes had secured a number of board positions at leading City institutions and had received considerable royalties from some of his better-selling books, general amazement greeted news of his fortune. He had, after all, spent most of the preceding six years as an unpaid Treasury adviser; his parents had outlived him and therefore provided no inheritance; and Keynes, a great arts patron, had funded many cultural ventures out of his own pocket. As suggested in the salmon-pink pages of the Financial Times, it was indeed Keynes’ skill in the art of moneymaking that contributed to the bulk of his riches. Keynes’ facility with money was not just limited to his own account, however. King’s College—Keynes’ spiritual, intellectual, and sometimes temporal home—was also a beneficiary of his financial acumen. In its obituary on Keynes, the Manchester Guardian reported that: As bursar of his own college in Cambridge . . . he was conspicuously successful, and by bold and unorthodox methods he increased very greatly the value of its endowments. Although little known to the wider world, in certain circles Keynes’ investment expertise was prized. There are stories of other college bursars making the pilgrimage to King’s College, where Keynes would lounge Buddha-like and regally impart investment wisdom to an eager audience. A colleague noted that “such was his influence in the City and his reputation abroad” that markets would move in response to his speeches delivered as Chairman of the National Mutual Life Assurance Society. He sat on the boards of numerous investment companies, from which he would, with the unwavering conviction of a papal nuncio, declaim his views on the stock market and government economic policy. This aspect of Keynes—the shrewd investor, the canny player of financial markets—is rather unexpected in light of the man’s early life and beliefs. Keynes was an aesthete, his first allegiance to philosophy and the art of living well. At school and university he displayed little interest in worldly matters, and for the remainder of his life exhibited an intensely ambivalent attitude to the pursuit of wealth. He believed in Francis Bacon’s dictum that money makes a good servant but a bad master—in Keynes’ formulation, money’s merit lay solely in its ability to secure and maintain the conditions allowing one to “live wisely and agreeably and well.” Like economics itself, money was a mere expedient, nothing other than “a means to the enjoyment and realities of life,” and moneymaking little more than an “amusement.”

Maybe these warrants will be available further down the line: http://online.wsj.com/article/SB10001424052702303299604577323761486741868.html Regions, in addition to the $3.5 billion repayment, has also paid Treasury $593 million in dividends. Treasury said it still holds warrants to purchase common stock in the bank, the sale of which will provide further returns.

Maybe he can delete it to keep the anonimity? 2010? Gretzky, skate, puck, MAYBE, going to be?

http://www.foreignpolicy.com/articles/2012/03/29/the_revenge_of_wen_jiabao?page=full

As I say in the intro,I am not the author. Kudos to the author.

More on Keynes the investor Track record and philosophy: http://www.maynardkeynes.org/keynes-the-investor.html Buffett on Keynes: http://www.berkshirehathaway.com/letters/1991.html

No one is a Keynesian now—at least not among money managers. And that is a shame. Great lead paragraph by Jason Zweig and the best birthday present I've had in a long time. I was preparing a series of articles on Keynes as an investor and was stuck in trying to find more quantitive information. Has anybody seen other sources? Please? There is a volume of his collected writings on his investment related letters, I think 12 or 13, but is out of print. Has anyone seen it? Zweig article and video: http://online.wsj.com/article/SB10001424052702304177104577313810084976558.html Keynes study: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2023011

Mexico City

I think it was more like 30,000, and when he was an officer he bought a couple of times below $6 per share. It also shows that he is not that constrained. www.insidercow.com

It hasn't stopped Donald Powell from buying on the open market. He's on the board. http://www.sec.gov/Archives/edgar/data/70858/000122520812006238/xslF345X03/doc4.xml And I think Moynihan bought before the dividend debacle at around $13 per share.

A LOT more. Loved the Twain quote:“A person who won't read has no advantage over one who can't read”. Mr B, what are your plans with that document? I offer a small audience.

It looks that at least a few (Berkowitz, Chou) read the fine print. It may be time to discuss it in the blog. Bank TARP warrants are complex, with terms and conditions that are unique to each bank. Thus we encourage you to research them for yourself and draw your own conclusions. The legalese is quite intimidating but there is some help on the way. Some banks have started to pay dividends that exceed a set price, and we are starting to see how anti-dilution clauses that were added to protect TARP warrant holders apply with regard to: a) the adjustment of the strike price. b) the number of shares you can purchase for each warrant you hold.

MadMen is one of the few shows that Mr and Mrs Maestro both like. It is not my favorite show, it is not her favorite show. But the marriage would not survive the torture of endless repeats of Sopranos and The Wire or Sex and the City for that matter. And Mad Men's slow rhythm gives it the opportunity to build jaw dropping moments like this: http://variantperceptions.wordpress.com/2012/01/20/the-carousel/ For the young members of this board: http://en.wikipedia.org/wiki/Carousel_slide_projector

Benmosche is showing capital allocation and negotiation skills that Moynihan still has to show. Both are great.

He is guessing it is Bank of America.

Nice chart. But I hate Taleb calling known things with known names by new names. This "anti-fragility" stuff ... what an awful invented word. Why not just call it resilient, elastic, redundant, adaptive or stable and these are just a few examples. The strategy of adapting instead of predicting is known from several fields (mechanics, biology, business strategy, military strategy, logistics) and each one provides ways to describe it. And calling "black swan" phenomena that are not examples of Hume's problem of induction. The anomalous orbit of Mercury, OK ... another real estate bubble, not OK.

We should invite "Munger" to the celebration party.