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prunes

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    Insurance company question

    in General Discussion

    Posted

    I know that a lot of you here are pretty savvy when it comes to analyzing insurance companies. I don't know too much about the industry but am trying to learn. I was taking a look at 21st Century (TCHC), which is heavily weighted towards homeowners insurance in Florida and which trades at 0.39 of tangible book.

     

    As of late the company has really struggled with a combined ratio in 2010, 2009, and 2008 of 135.7%, 135.1%, and 102.5% respectively. But if you go back to prior to 2008, the ratio was at or below 100%, excepting a catastrophic loss in 2004.

     

    And, for example, if you look at the comments of people on the CAPS community of Motley Fool, expectations generally were very hopeful for the company up until 2008 at which point people stopped tracking it.

     

    My question is, what happens to an insurance company that appears to be performing all right, but then falls off a cliff. TCHC currently trades at $2.78, but in 2007 it was above $25. Was there any way to predict this in 2007?

     

    Is this simply due to rate regulations by the State of Florida, preventing companies from setting rates where they should be? Recently the company announced that it was approved for a 20% rate increase; is there any way to handicap when the company's prospects might improve?

    For those believers in MSFT

    in General Discussion

    Posted

    A few observations:

     

    1) If Apple is going to kill windows it's going to need to conquer the lower priced end of the market. Many people just aren't willing to buy a $1,000 - $2,000 laptop.

     

    2) Someone on this board suggested buying dropbox. I think that actually is a great idea, and could see its functionality being integrated directly into Windows 8.

     

    3) That article presupposes that congress would *let* Apple/Google maintain a stronghold on one's data and give them permanently sticky customer bases. I could easily see congress legislating some sort of "open access" policy.

    We’re Halfway to a Lost Decade

    in General Discussion

    Posted

    http://www.freakonomics.com/2011/06/08/were-halfway-to-a-lost-decade/

     

    Our current slump began a lot earlier than you think. Which means that we’re half way to a lost decade.

     

    Many people date the financial crisis as beginning when Lehman collapsed in September 2008.  But the economy was already in recession. The NBER reckons the recession began in December 2007. But look closely, and you’ll see that it may have begun a year earlier.

     

    That’s the case I made in my latest my latest Marketplace commentary, which you can listen to here. The point is more easily made with a simple graph:

     

    The blue line is the usual measure of GDP, which is obtained by adding up total spending. When you read the newspapers, this is the number they report. But the Fed’s Jeremy Nailewaik has convincingly shown that red line—which is the sum of all income—is the more reliable measure.  In theory the two lines should be identical—one person’s spending is another’s income—but in practice, the measurements differ. I’ve also plotted the peak, trough, and latest reading of each measure.

     

    Focus on the red line, and you’ll see that the recession began in the final quarter of 2006, not the end of 2007. The red line also fell by more, and over a longer period. And today, GDP remains below its levels nearly five years ago. The economy had already run out of steam halfway through Bush’s second term. That’s why I say we are halfway to a lost decade.

     

    Even this isn’t a fair comparison, as the population has continued to grow. So let’s transform these into per capita numbers:

     

    The red line now shows five things much more clearly:

     

    1.      The slump began in late 2006. And indeed, we were hardly enjoying good times through early 2006.

     

    2.      It’s a big slump, and GDP per capita fell by over 7 percent.

     

    3.      We remain a long way below the previous peak.

     

    4.      It’s going to take a long while to return to where we were back in 2006. Most forecasters are expecting GDP to grow by around 3 percent, implying per-capita growth closer to two percent. At those rates, average incomes in 2013 will (finally!) be back around the levels of 2006.

     

    Finally, it’s worth emphasizing another key statistical finding from Nalewaik’s research: Over the next few years the Bureau of Economic Analysis will continue to revise their estimates of what has happened, and if history is any guide, their revised estimates of the blue line will look a lot more like the red line.

    Europe's problems

    in General Discussion

    Posted

    The trend seems to be towards increased austerity. The way the European Monetary Union is set up--from this layperson's perspective--they will not easily be able to print money to bail out defaulters like the US would. But this augers in my mind images of the Great Depression. If every government is trying to right its finances by slashing expenditures and raising taxes, you're going to have a large decrease in overall demand, leading to a vicious circle of increased unemployment, additional pain for overlevered consumers, declining tax revenues, etc. I think the optimal solution is kick Greece and any other freerider out of the union, let them default, and then have whatever banks own Greek government debt raise additional equity or face nationalization to stem a banking panic.

     

    I am skeptical that countries would be able to "stay the course" of austerity if this kind of pain results.

    New FBK

    in Fairfax Financial

    Posted

    I realize how late to the party I am on this but I had a few questions I was hoping someone could help me with.

     

    I've read Kuppy's post on the fundamentals of pulp and he is very convincing. However, a business like this reminds me of Buffett's experiences with Berkshire and also his comments about investing in the airlines business. Ultimately are dealing with a commodity business. Further, the competition is cutthroat enough that it doesn't make sense to upgrade your mills because all your competitors are able to do so also (unless you hold a patent or something), eliminating any benefit you might get from capital spending.

     

    Now, granted there is something to be said for being the low cost provider, and emerging from BK helps with this. I remember being intrigued by Abitibi as well. But I think this only goes so far. Is this just an asset play on FFH's part, hoping that by buying assets at 40 cents on the dollar that everything should work out OK?

    OID

    in General Discussion

    Posted

    Anyone know why the OID website has been down for the past few days?

     

    No. I've been meaning to ask the same question..

    A while back I had filled out the form on the website requesting a free issue prior to potentially subscribing and never received anything.

    Once bullish, contrarian Jim Grant likes cash now

    in General Discussion

    Posted

    Relevant to the topic at hand:

     

    What happens when Greece defaults

     

    What happens when Greece defaults. Here are a few things:

     

    - Every bank in Greece will instantly go insolvent.

     

    - The Greek government will nationalise every bank in Greece.

     

    - The Greek government will forbid withdrawals from Greek banks.

     

    - To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.

     

    - Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)

     

    - The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.

     

    - The Irish will, within a few days, walk away from the debts of its banking system.

     

    - The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.

     

    - A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.

     

    - The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.

     

    - The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter.  On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening, so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)

     

    - They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.

     

    - There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.

     

    - This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalising a number of banks via debt-equity swaps.

     

    - Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won’t be heard for years. By the time they are finally heard, no-one will care.

     

    - Attention will turn to the British banks. Then we shall see…

     

    http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/

    Nortel Accounting All Over Again!

    in General Discussion

    Posted

    Parsad, do you ever sell puts as a way to enter a stock?

     

    John Templeton allegedly would keep outstanding limit orders on the stock market at very low prices, knowing that if the market ever did tank that he might not have the courage to execute what would be a very favorable trade. Taking Intel as an example, I can sell the $17.50 Jan 2013 put for $137. If the put is called, I get an effective purchase price of nearly $16. Otherwise, I get a guaranteed 5 percent annualized return on my money. I would only contemplate this for a bedrock company like Intel, however.

    America, the world's sweatshop

    in General Discussion

    Posted

    Very poorly written and biased article IMO. Filled with cherry picked examples. For some reason it cites Deutsche Bank as an example even though that example has nothing to do with labor. And in case the author of the article didn't notice, the South has a bit of an unemployment problem right now. Unions are anathema to employment. I could have just as easily written an article lauding the free market for allowing firms the opportunity to provide employment to the south due to its low labor costs and right to work laws.

    MSFT

    in General Discussion

    Posted

    Microsoft Corp. said it will further tailor its Bing search results with data gleaned from users of Facebook Inc., as Microsoft and the social network deepen their ties.

     

    Beginning Monday night, people who conduct searches on Bing will see results that are influenced by the "likes" of people within a searcher's Facebook network. Those likes—endorsements that are increasingly popular on the social network—can highlight everything from news stories to bands to movies. Those and other new features are part of a partnership Microsoft inked with Facebook in October, which was slated to help make Bing results smarter.

     

    In an interview, Lisa Gurry, a director of Bing at Microsoft, said the Facebook data Bing is tapping into to improve its results isn't accessible to Microsoft rival Google Inc. because of the exclusivity of the relationship between Facebook and Bing.

     

    "We view this as a competitive advantage over Google," Ms. Gurry said. "They can't have the same partnership with Facebook."

     

    The Redmond, Wash., company said it will seek to improve travel-related searches by displaying Facebook friends on Bing who live in a city for which a Bing user has just searched. Bing users will be able to also seek input from Facebook friends on shopping decisions by sharing lists of cars, computers and other products they're considering buying.

     

    http://online.wsj.com/article/SB10001424052748703421204576327600877796140.html#ixzz1MYSDiM5a

     

    MSFT

    in General Discussion

    Posted

    Under what circumstances is Dell a better long-term buy than MSFT?

     

    Dell is cheap from a cash flow standpoint. I also like it more than MSFT but dont own either DELL or MSFT. MSFT would be great if it is in run-off but it is not. The bleeding investments in search, skype and other areas are done to protect the windows franchise.

     

    If you think of Microsoft as primarily the "windows" business, Dell is key for this business. You can't be long on MSFT by being short on Dell. It is growing quite nicely in emerging markets but it doesnt have  the "build to order" thing going on for it like it had in the U.S.

    How does Dell distinguish itself from HP at the business level? Speaking from the consumer level, my family will never by a Dell machine again due to quality issues with several of the machines we bought. How does Dell's moat prevent it from competition from cheaper Chinese upstarts?

    MSFT

    in General Discussion

    Posted

    I'd like to go back to the topic of Google vs. Microsoft. With the increasing talk of anticompetitive practices at Google, Microsoft in my opinion stands to be the primary beneficiary of any action taken by the US or European governments. Additionally, someone in this thread had likened Google to Coke. I don't think there is any comparison between the durable competitive advantage of the Coca-Cola brand to Google. I'm sure many of you have read Munger's speech where he dissects the key factors that have made Coke such a success, the most important of which IMO are the ideas that Coke conjures in the minds of consumers. Google doesn't have this. At the end of the day, search is a commodity, and the traffic is going to travel along the path of least resistance. Sure, Google has tried to take the Coke approach in certain regards--think about why Google has its Google doodles, etc. But think about this: What does Coca-Cola mean to you? What does McDonalds mean to you? What does Google mean to you?

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