given2invest

A levered company should only trade at a discount when comparing cash flow to market cap. It should actually trade at an EV/EBITDA premium to an unlevered company due to it's lower cost of blended capital. Depends on the industry. If it's a cyclical industry then the risk to a highly levered company overrides in my opinion, and it should trade at a discount. As always it depends on the type of debt, the covenants, the assets, so forth. I'd rather own a small bank levered 15 to 1 and currently earning less than a bank levered 8 to 1 and earning more, if the latter's loan book is 30% construction and land development loans and most of the deposits are brokered, for one example. Financials are a whole different beast. Also, it goes without saying a levered cyclical is extremely dangerous and probably not prudent. ;)

That is all intuitive. It's mostly because of the compounding, obviously.

I'm sure it must make her feel great the stock is up big in after hours on the announcement. ;D

A levered company should only trade at a discount when comparing cash flow to market cap. It should actually trade at an EV/EBITDA premium to an unlevered company due to it's lower cost of blended capital.

I think companies that deploy a more efficient capital structure should trade at a premium to an unlevered/overcapitalized company. EDIT: From a market cap valuation perspective, not from an EV perspective obviously. Also, in todays very low interest rate environment you can create your own capital structure using margin at very low rates which might even be superior to the company taking out debt.

Hey, if he pays well and promises to teach me all of life's secrets I'd be pretty interested in that! :D Especially after the beating I've taken the last month... ;)

shh, don't mention MNTG! he deleted that thread! also, i'm sure any day now management is going to increase their hold and the millions if not billions will pour in!

laugh out f'n loud

Tom Brown is a moron who basically got wiped out in 08. Nothing he says should be taken seriously.

lol AOL. not a chance

The primary difference, at least with respect to Worldcom, Tyco and Global Crossing, is that those were US companies where US laws applied. Their primary assets were also in the US and there was (presumably) a valid and perfected security interest in certain assets. So one could simply count up the liabilities, value the assets and voila. In the Sino case, you aren't sure what rights you have at all as it related to a security interest and you aren't sure exactly what the assets are even if you did know what your rights were. Completely different animals. That's the only difference? Shit. I should take a look at these!

LOL

that's a heck of a mea culpa :-\ what about the fact that tons of "major investors" blew out like paulson? someone was on the other side of the trade when those "major investors" bought in. "major investors" owned worldcom, enron, etc. anyway, didn't want to see you lose money. but you had a dozen people telling you to be careful.

no way this counts as Tier 1

I never wanted him (or anyone) to lose money here. I just thought the arrogance was absurd.

Yes, this isn't big news. The stock hasn't bounced at all.

I hope Dr. Patrick Byrne takes on this case!

Man those shorts were responsible for the company being a fraud! Short attack strikes again!

not halted on pink sheets. down 70% to $1.50

You might use an ATM here or there in a bind, no?

I'm not sure. It depends on the specific provisions of Berkshire's preferreds. Cumulative preferreds can't be used as Tier 1 capital, now, unless they meet certain standards, like the ability to defer payments for some period. But Basel III phases in some new test to determine how preferreds are counted as capital. It also takes away some of the seniority benefits. I'd be everything I own that BRK's preferreds are as senior/secure as TruPS and don't count towards Tier 1 after 1/1/13. This transaction did not add any capital. Why would warren buy a non-cumulative preferred? Those are sucker investments. Well, they might be sucker investment for most investors, but he got some good poison pill. If you haven't read the details of the transaction. If BAC can’t pay its 6% annual dividends to BRK, they will accrue at a rate of 8%, and BAC will be barred from share buybacks or dividends to other shareholders. Essentially, no other shareholders will receive dividends if BAC doesn’t pay Buffett his $300 million a year. Isn't that an incentive for him to hold the preferreds. (On a footnote: He had agreed not to increase his BAC common holding above the 14.9% mark, if he would ever want to purchase more common stock.) Um, I never called him a sucker. Man you guys can't read. I said he would never invest in a preferred w/o a cumulative feature. And sure enough, not only did he get a cumulative feature, but he got a higher interest rate if they defer! In short, his preferred won't count toward Tier 1 capital on 1/1/13 so this can't be looked at as a capital raising event - just a dilutive one that hopefully will keep a run from happening on the bank.

I'm not sure. It depends on the specific provisions of Berkshire's preferreds. Cumulative preferreds can't be used as Tier 1 capital, now, unless they meet certain standards, like the ability to defer payments for some period. But Basel III phases in some new test to determine how preferreds are counted as capital. It also takes away some of the seniority benefits. I'd be everything I own that BRK's preferreds are as senior/secure as TruPS and don't count towards Tier 1 after 1/1/13. This transaction did not add any capital. Why would warren buy a non-cumulative preferred? Those are sucker investments.

Learn how to read (or comprehend), I never said that and neither did Munger.

Because God himself just made an investment in BAC!