merkhet

There's some disagreement as to when any oral arguments might be held for the stay in Sweeney's court. Joint status report attached. 2014-12-01_Joint_Status_Report_Regarding_December_3_Status_Conference.pdf

A compelling case that maximizing shareholder value is a bad idea. James_Montier_-_The_Worlds_Dumbest_Idea.pdf

Agreed. Opportunity cost is the most pervasive cost because it's the one you don't quite recognize at the start until it's a bit late. Think about Munger's quote on the worst investment. The worst investment is a wonderful company that never scales.

http://bankrupt.com/DI2014/ -- looks like there's a panel on GSEs. Also, nice chart of significant lawsuits for the sweep. (Attached.) gselitigationsummary201411.pdf

Anyone been following this company since the bankruptcy and the recent AWS-3 auction? From the WSJ: http://online.wsj.com/articles/dishs-ergen-to-control-lightsquared-in-newly-announced-deal-1415044754 Lightsquared has about 30Mhz of spectrum: http://www.fiercewireless.com/story/lightsquared-could-get-fcc-approval-use-spectrum-year-end-witness-says/2014-03-20 At some point, the Lightsquared spectrum might have been worth $14 billion: http://www.forbes.com/sites/danielfisher/2012/05/01/whats-falcones-3-billion-gamble-on-lightsquared-worth-now/ Does that mean the 30Mhz is therefore worth $9 billion? Is it worth even more given the pricing that's being thrown around in the AWS-3 auction? Could be an interesting bankruptcy equity investment. Mostly what caught my interest was Charlie Ergen's investment in the company...

Granovetter has an excellent model for riots.

My point of view is very simple and straightforward: in the last 100 years the Shiller PE of the S&P500 has reached 30 only twice, and both times with dreadful consequences… If you don’t play it safe with a S&P500 Shiller PE of 30, imo you will never play it safe… Nothing wrong with that, of course! It is just not a style I am comfortable with. Gio And herein lies the rub -- this is an experiment with no control group. Forward churn will be higher as they try to get a deeper penetration which will come from less affluent buyers. My point isn't debt service (I think they will be fine), my point/speculation is they will go down potentially faster than the market in a downturn. Maybe, but I'm assuming that's because you think of the Siri multiple as a function of growth, right? What if, instead, you look at the Siri cash flows as a function of yield? Assume you have a box you bought for $100 that spits out $10 a year like clockwork. That's a 10x multiple that you paid -- is it worth a 10x multiple even if I told you that there's no possible variation and/or change to the cash flows? I would think not. It's basically a U.S. Treasury at that point, and, thus, the box is worth maybe a 6% long-term Treasury yield or 16x the yearly free cash flow. If you then plot Siri somewhere on the continuum from unstable to stable free cash flows, figure out the yield on the free cash flow and then translate it into a FCF multiple, then Siri is not necessarily all the expensive -- and with the possible growth, could even be cheap. Of course, this says nothing about where the stock price will go if there's a downturn in the market, but I've found that anticipating stock prices is usually a fruitless endeavor. Newton once lamented that he couldn't chart "the madness of men," and if he can't do it, I haven't a shot at it.

Jay, for what I can see that $1 billion in fcf is growing quickly and steadily. EBITDA is higher: I think SIRI long term debt is circa 3 times EBITDA (maybe a bit more), which is not too aggressive imo. Furthermore, we are at a S&P500 Shiller PE of 27, while I said I would call a bubble when it reaches 29-30… I am not positioning my whole portfolio as if a crash would be just around the next corner!... I must be prepared to see a S&P500 Shiller PE of 32-33, because you never know when a bubble is going to finally burst, right? Another year… Maybe even two… Who really knows? And given how it is priced today, I think LMCA might perform very well during the next two years… If the bubble doesn’t burst! Later, LMCA might have become something completely different… Maybe SIRI will have been acquired and spun-off… And Malone might be onto something completely different! My point is this: if the S&P500 Shiller PE goes from 27 to 32, before the bubble finally burst, I need something to keep making money: cash won’t be useful, Fairfax might be, but with obvious limitations we all know… BH and LMCA must really do the job! ;) Gio Siri's churn rates are impressively low, so that even if they don't end up growing as fast as expected (unlikely, IMO) they will be perfectly fine to service the 4x FCF of debt that they have. That said -- I don't know how useful it is to try and predict bubbles. It's pretty easy to see that there's froth in certain parts of the technology industry, but it's less clear in other parts of the market.

Pershing wants to file an amicus brief in the Sweeney court. Attached. 2014-11-21_Pershing_Motion_for_Leave_to_File_Amicus_Brief_Regarding_Defendants_Motion_to_Stay.pdf

Haha, where did you see that? Was it at GameDay?

Yup, sounds about right. Once Watt shows that F&F are completely administratively revamped (via CSS, etc.), then they'll be able to play politics and say that it's a shame that Republicans couldn't get their act together to provide "comprehensive housing finance reform," but, given that "conservatorship cannot continue forever," it's time to recapitalize Fannie & Freddie to "bring stability back to the housing market while protecting taxpayers." The Democrats get to play this as Republicans being unable to govern despite holding a majority of both houses of Congress. Republicans get to play this as a complete overreach of executive action on the part of the President. Everyone's happy. ---- http://www.ft.com/intl/cms/s/0/9c7820f0-71cd-11e4-b178-00144feabdc0.html?siteedition=intl#axzz3JniYaEHO

http://online.wsj.com/articles/u-s-wont-change-fannie-and-freddie-control-without-legislation-1416613223?mg=id-wsj Interesting response from Treasury. Johnson asks FHFA to consider ending the conservatorship by entering into negotiations with Treasury. Watt says that the negotiations have to be initiated by Treasury. Treasury then says that they're waiting for Congress. Oh, politics.

As I mentioned to another poster here, it seems to me like the stars are aligning a bit on this one. President Obama taking executive action on immigration policy is making the GOP rather angry, so it looks like the likelihood of GSE reform is rather low now. Add that to the fact that Johnson (the Johnson of Crapo-Johnson) asked the FHFA to consider ending the conservatorship if there was no Congressional action, and I think you have a resolution to this story in the next year or two -- even if the legal route falls through (which I find unlikely). Picked up some more preferreds today.

So, there's "precedence" in terms of the GM bankruptcy where the bondholders took an immense haircut in order to satisfy the UAW. In this case, F&F need something on the order of $125 billion in capital -- possibly $250 billion in capital. The junior preferreds come out to about $34.6 billion @ par. If you convert that at a lower price than par, then that's just an addition $X amount that you have to come up with in some other way. Never say never, but I don't quite see the point. I think that if the government issues equity to make up for the capital shortfall w/o converting the preferred, then that's perfectly fine for the preferreds because we sit above the equity anyway. If the GSEs continue to draw down on the credit line, they actually trip a provision in the SPSAs that allows them the mechanism to unilaterally pay back the government preferreds.

Nothing about Miller

Old behavior?

[amazonsearch]The Success Equation[/amazonsearch] I'm almost done reading this book, and I found it pretty interesting. It's a pretty good introduction to various uses and fallacies of statistics.

My take is that plaintiff's response to defendants using the Lamberth opinion to push for a motion to dismiss and/or a motion to stay is to present evidence they've found during discovery that makes Lamberth's opinion irrelevant.

The plaintiff's response to the motion to stay was sealed. Let the speculation begin. :)

The problem with this, of course, is that it all comes down to timing. That paper was co-authored with a professor of mine, Barry Nalebuff, and there was a subsequent book -- if I remember correctly, in the book, they show that taking on leverage with bad timing will cause you to have a worse result than had you not taken leverage (an obvious result), but it would, on balance, decrease the standard deviation of your overall returns (a less obvious result). Or something along those lines -- I can't quite recall as it was a year or so ago.

I am neither great nor thoughtful -- occasionally, I am lucky, though. (In this particular investment, I have been somewhat unlucky on timing -- I really wish I had built the majority of my position post-Lamberth rather than pre-Lamberth. C'est la vie.)

Good point on the lack of volume -- we'll see if volume increases because people misconstrue the Bloomberg article next week. It's unclear to me whether the discovery process would be deemed material -- for instance, is the process itself deemed material? If he's 20% through the documents, and he hasn't found anything, does that count as having "material" information? Is non-information "material"? *shrug*

Yes, the judge will rule by the end of the year. The losing party at the lower level gets one appeal as of right. It's unclear whether they'll use it -- especially if the judge's ruling is airtight. Bloomberg might say it'll take years to get through appeals, but I figure it'll be two years on the outset -- though this might be a case that interests the Supreme Court. For the purposes of providing some guidance on Fannie & Freddie, the lower court ruling (Wheeler) is what matters. On another note, I was taking my morning walk, and a thought occurred to me. Could it be that Berkowitz has stopped disclosing because he wanted to do tax selling this year? I spoke to him briefly at the Graham & Dodd breakfast a few weeks ago, and I didn't get the sense that he felt defeated on the Fannie & Freddie investment. So I'm wondering what the possible motivations might be to stop disclosing.

If he did, I'm sure Carney would have been all over it by now & we could expect another article Sunday evening. We might get an article insinuating that he did anyway. :)

If the bloodbath comes on Monday, why buy today instead of on Monday? Timing. When I picked up more shares today, this news hadn't broken. I suspect I will be picking up more shares next week as well. Impressive! How did you end up in his office, if you don't mind me asking? Same question here. How did your interview end up? Did you get an offer from Paulson? It went fine, but it was very clear that they wanted an Excel monkey. Plus, I had a job at the time (same fund I run now), so I basically took the interview because I wanted to pick Paulson's brain some more.