PlanMaestro

Sorry for being harsh but I have lived through this a couple of times. The German and French banks and governments are as guilty as the Greeks. It is the responsibility of the lender to make sure that the borrower has capacity to pay.

Page 9 and 10, Citigroup's international retail consumer banking revenue per country and net promoter score http://www.citigroup.com/citi/fin/data/p111115a.pdf?ieNocache=166

It will be forgotten. Mexico needed help in 1976, 1982, 1988, and still got the Clinton/Greenspan/Summers/Rubin help in 1994.

Anything in particular that worries you Parsad? South Korea, Japan, Taiwan, Singapore, Australia, Hong Kong, India and Indonesia does not sound so bad and is well diversified. Australia I understand but is small and, with the exception of Hong Kong, my understanding is that the rest have flexible exchange rates, positive current accounts and large reserves. Also Citibank's capital ratios are not only by far the best of the Big 4 but also one of the best worldwide. Maybe because I am a Chilean living in Mexico I have a positive opinion of Citi's international exposure. I have even consider Santander as a potential future opportunity (not yet though) because of their large Latam presence.

Do they have a credible threat?

Household formation is everything. A month or two back I counted the number of housing units built since 2000 and subtracted out 250,000 per year for the amount (estimated) destroyed annually. It turns out that we have not added more homes to national supply than needed -- if you assume 1.3m annual trend new household formation (this was the trend up until the financial crisis hit). We built too many for a few years and now we've built too few. We're at even. The problem isn't too many homes anymore, it's the fact that this jobless rate has driven new household formation way below trend line. It's the jobs stupid, just the jobs. They reinforce each other, jobs <-> construction. There is job growth in most other sectors of the economy. Instead construction jobs are well below average. In a normal recession construction usually leads us out of it and that obviously has not been the case. If construction starts to pick up, and it can be multifamily not necessarily housing, they can help each other. Multifamily vacancy is around 3% at all time lows (usually around 5-6%) and there are no apartment buildings coming up. Rents starting to get hot, that is what Dimon says that is cheaper to buy that to rent in a lot of places.

It looks like there are several people looking at this. First chart is inventory ;) Household formation has been a problem though. http://soberlook.com/2012/01/five-reasons-2012-will-be-start-of-us.html?utm_source=BP_recent http://soberlook.com/2012/01/story-of-household-formation-is-about.html And Jamie Dimon's: http://variantperceptions.wordpress.com/2012/01/14/dimon-on-housing/

and mortgages is still the most important stress ahead. I have both but Citi seems to be on the fast lane and also very cheap. Thanks Eric, love your comments.

Good point. At the same time, what that says about Citigroup that was authorized to pay a small dividend and has reversed their intention to sell some of their businesses?

So many things to like. I liked that net interest income, that has been decreasing the last few Qs, is stabilizing at around $11B per Q.

But nothing on Real Estate right?

Biaggio, is there any disclosure on this?

I think many did see it. I remember this site that had a virtual rollercoster based on historic housing prices ... it was fun to ride it. http://video.google.com/videoplay?docid=-2757699799528285056 What was difficult was finding a way to profit from the bubble. That was the genius of Paulson, Burry and others.

I want one Dell! Price? http://venturebeat.com/2012/01/10/dell-unveils-its-ultra-thin-xps-13-ultrabook/

I do not get it, Francis Chou mentions explicitly the buy of the decade but then goes and buys some dying retailers with all their complications. Why not burn the boats and just buy those damn banks instead of diworsifying into a sector that would suffer a lot, maybe even more so, if the economy tumbles? Why? Not that banks are not retailers (retail banking, duh) but they have higher switching costs and barriers to entry. And it is not easy for a pure play internet bank.

No banks? And so many distressed retailers.

I was checking the puts/calls for SHLD and I am getting 2 prices, one says it is adjusted. What it is adjusted for? The merger was long time ago.

http://www.businessweek.com/news/2012-01-03/sears-turnaround-means-using-tech-with-store-upgrades.html This does not look good. Technology turnaround ... I do not know many of those. This quote is good though “Borders had great bathrooms but that didn’t help them because they missed the e-book revolution in their industry.” JC Penney talking about Sears, Sears talking about Borders. Bottom line, retail turnarounds are not easy.

The link to the warrant spreadsheet is not working. Can somebody post it again?

Really short interview. The only interesting part was actually about another Fairfax holding hehehe: The growth, we see mostly in Latin America and Asia. … [where] they don’t have the fast network to accommodate the iPad [or computers, and] the population doesn’t have the money to buy them. When we look at Brazil, for example, it’s one of the good markets that we have. Latin America, in general, is growing.

Feliz navidad y prospero año a todos ... damn, I am getting cheesier as I get older

TreasureHunt, I do not know what will be, I think we can only discuss what should be. Also what should be today does not mean it is the answer forever. We do not want to suffer man-with-a-hammer syndrome. Today I agree. Most large banks should be valued on earnings. Not only that, they should be valued based on their pre-provision earnings. And they are not: they are being value on TBV and TCE ratios. However, it is important to remember that earnings multiples are leverage agnostic, while the banking business model is founded on leverage. So much that some value investors NEVER invest in banks: levered black box and all that. There is no equivalent to EBIT/EV or EBITDA/EV multiples that I know of and DCFs analysis needs some specific adjustments for banks (only industry with its own chapter in Copeland's Valuation). Not easy to value banks. Just when they start to be valued on earnings it is the moment you should start worrying about the balance sheet. Incentives do matter. PD: Regarding Buffett's view on TBV, once in a blue moon he makes mistakes you know. Irish banks one that he himself acknowledged in his letters. In this interview he splits "doing dumb things" from "making money of TBV", but both are interrelated. Sorry I cannot sit back and just let them lever just because they have a low cost deposit franchise, like the Irish banks. That is a potential sign of risk taking (ie: Bank of America, Wachovia and Fifth Third 2008) and Well's team is not going to be great forever. http://variantperceptions.wordpress.com/2011/09/15/thinking-about-investing-in-us-banks-a-short-answer-to-david-merkel/

I guess the indirect mention of Ireland to avoid a direct discussion against the master was lost (he had Bank or Ireland and Allied Irish Banks). If you invest in banks, the big risk is a financial collapse and the very real possibility of nationalization or at least large scale government intervention. It has happened a lot (Chile, Mexico, Argentina, Scandinavia, IRELAND...) and remember that the master was heavy in financials at the time and nationalization of some financials was a real possibility. Bankers risk taking is expressed both in high leverage and bad loans. But leverage is easier to detect and confirm. Those that have fallen shall be restored. Now is the time to focus on earnings, but do not forget TBV (and loans-to-deposits). http://variantperceptions.wordpress.com/2010/09/08/charting-banking-xvi-loans-to-deposits/ http://variantperceptions.wordpress.com/2010/09/08/charting-banking-xvii-loan-to-deposits-history/

We agree on that one.

Well 1940s, 1950s, 1960s was kind of banking Utopia (3-6-3). And there are several countries that have controlled those animal spirits. I do not invest based on finding a greater fool and actually hope that a good capital and regulatory balance is achieved, because banking is a great LT investment w/o banking crisis. One of my great errors was not investing in Chilean banks when they were reprivatized after the 1982 crisis and the really strong banking regulation reform. But I was young.