Kraven

Your analogy is flawed. In your example you are saying that something is left out, but not disclosed. EBITDA doesn't hide anything. It is what it says it is. If something isn't included, figure it out. If you want to say someone weighs 200lb, but arms and legs weren't included, how is that number incorrect? It is what it says it is. Now we all might say that number doesn't tell us anything. Fine. But what if we compared everyone's weight based on a number that didn't include arms and legs? That tells us something on a relative basis which may or may not be relevant.

This is a good point. I don't pretend to understand the issues involved here on a granular basis. However, while this indeed seems to be some kind of scandal, I am struggling to figure out exactly what the repurcussions are going to be. Damages are going to be immensely hard to prove given that any one bank doesn't control anything. So unless there is a conspiracy of the kind that Robert Ludlum (or back in the day, Paul Erdman) used to write about, I am not sure what is going to happen here. Clearly if "bad acts" were done, there will be a penalty for that. It will be more than a wrist slap, but given the difficulty in proving exactly what the "bad acts" caused, I fail to see how there can be anything more than substantial fines and a head or 2 from each bank at fault on a platter. It's kind of like the old Steven Wright joke about how his house got broken into and everything was replaced with exact replicas. So yes, there is a bad act, but what are the damages? Without a way to quantify it, and I don't see how there is, there will likely be a lot of noise, some fines, and this scandal will join the others in the history books.

Let me focus this thread a little bit. We know that EBITDA has its limitations. Given that, how appropriate is it to use the EV/EBITDA metric for valuation ? Why not use P/FCF instead? My question is about the ratios rather than EBITDA itself. I understand that FCF penalizes fast growing companies. Are there other scenarios where EV/EBITDA is more appropriate? No offense intended, but I think you're missing the point completely. You're asking the wrong question. Unfortunately there is no right question. You're looking for an answer that doesn't exist. You want someone to say use P/FCF in A, B and C situations, use EV/EBITDA in X, Y and Z situations, etc. Anyone who tells you that is either wrong or unclear about things. I know how you feel. You are so focused on figuring this out, but I think you need to step back a little and think about it differently. There is no right answer. No metric is right or wrong in any situation. As I said, a number just is. P/FCF will tell you one thing, EV/EBITDA will tell you something else. It's all in how you interpret the data. Don't let anyone tell you that a number is wrong. Assuming that it isn't fraudulent, every number has it uses. It's up to you to let the language of numbers speak to you.

Seems like to some extent you answered your own questions. However, I would add that stating matter of factly that WFC has less risk than JPM, looking at it holistically, demonstrates a lack of understanding about banking and pricing.

There is literally nothing wrong with EBITDA. It is a calculation that can tell you certain things. It's all in how you use it. Maybe it's useful, maybe it's not, but one needs to think for themselves as to it's possible uses or lack thereof. A number can't be wrong, it just is and all EBITDA is is a number. Think of it this way. What if I tell you that some guy weighs 200 lb. Is the number bullshit? Does it tell us something? The number itself can't be wrong, it just is. But we need more information. If I added that the guy is 5'1'' that tells us one thing and if the guy is 6'3'' and athletic, that tells us something else. Even with that, it may or may not be useful, but there is nothing wrong with the number itself. When Buffett and Munger talk about running from the use of EBITDA I think they overstate their actual feelings. I am not saying they don't say these things, but they are talking about obfuscation, not simply presentation of a number. There are different uses for different things. It tells you something whether or not you want to think about what it says.

Go easy with the hyperbole, no one is calling for his head. I don't think anyone in the thread said anything improper, and as long as no one does, the existence of the thread is good. It makes him think twice and it makes everyone else think about the implications of their behaviour. Today's version of the front page test :) Great! I'm glad the board is on the case. He'll think twice now. The board has spoken. You said to go easy on the hyperbole. Perhaps. But I think saying that now he'll think twice and this is the version of the front page test is equal parts hyperbole. Ok, I'm done. I don't know him and I've never met him. I just don't like some kid getting picked on by a bunch of virtual bullies. If he wants to stick up for himself, he can do it or someone else can step in. I'm sure he's read the thread by now or someone has alerted him to it.

Again, some of us are only saying that we think it is unethical and that we regret his decision to head this way, young guy with a family or not. If you don't care for opinions on a public forum, you can always leave. No one forces you to read this thread. Maybe I'm sounding harsher than I think, idk. Off to the gym to lose some stress! ;) Unethical? Maybe. I don't know. I think you've got it backwards. I am quite fine with the opinions and am posting my own. I'm not the one crying about how unethical it is. I just said to leave him alone. I think you should read your own text. You don't like what he wrote, then don't read him.

LOL. Off with the kid's head then. Let's take him to the gallows pole. Yes, he is a guy who posts here. Lots of people do. These aren't hallowed grounds we are talking about. Whatever. So he made a mistake. I doubt he was forced to post it or his family would starve, but obviously he wanted the money. At the end of the day, he disclosed what it was he was doing and people are required to do their own due dilly anyway. It just doesn't bother me. The uproar about it though is quite humorous.

I have no dog in the fight and couldn't give a crap about it other than the fact that I hate hypocrisy. I don't know the stock, I don't know the article he wrote. Is it a proven scam? This is a fact? Maybe it is, I don't know. I guess, sure, if it's a scam then he shouldn't have written it. But I would ask too, why is some random guy coming to a different message board to start a thread condemning some guy somewhere else? That strikes me as odd. And the the subject line about a "Value Investor" implies that Jacob Wolinsky is some superstar in the investing world instead of a young guy trying to support his family. The whole thing is very weird.

I haven't looked at his site in a long time for many of the reasons stated here and didn't see the article this thread refers to. That being said, give the kid a break. He's trying to make a buck. He disclosed what he was doing and while disclosure doesn't cleanse all sins, it certainly can cleanse an issue about motive. His motive was to make money, he was clear on that (it would seem from what people are saying). You don't like it, fine, don't go to his site. The hypocrisy on the board though is fairly thick. I guess when "Prem" or "Warren" talks their book, that is just good business. When a kid with a family is trying to make a buck and being upfront about it does it, it's wrong. Don't go to his site ever again if it offends your delicate sensibilites. But don't condemn him. Give me a f**king break.

That quote attributed to Einstein has not been verified from any source I'm aware of that was in existence during his lifetime. I think it was Thomas Edison who said it.

So everyone waits 2 years and they get an issue about CHK? That's like waiting forever for the Boss to tour again, but when you show up you find out he's sick and Tony Danza will take his place.

What about high-grade CDOs? What about muni CDOs? What about trust preferred CDOs? Granted, none of these are being done really anymore, but there's not much activity in the CDO market anyway. Plenty of CLOs as well weren't low grade through and through and they have more or less done fine. That's the little secret the financial media, regulators, etc don't share. CDOs in general performed exactly as they should have. That is, they performed the same way the underlying assets performed. Fill it with crap, get crap. No different from a mutual fund that owned technology stocks in 2000. The vehicle is only as good as its passengers.

Anacott Steel. You're getting a free ride on my tail, mate.

These types of threads seem to occur every few months or so. "Circle of competence" has to be one of the most misused and misunderstood concepts in investing. People have taken it to mean that if they need expertise in an industry in order to invest. I couldn't disagree more. In fact, I don't believe that is what Buffett ever meant when he said it. I believe he simply means a basic understanding of the business and what the numbers mean. One doesn't need to have a pilot's license to understand how an airline works. One doesn't need to be chemist to understand a chemical company and one doesn't need to be a doctor to understand a pharmaceutical company. I'm with some of the other posters like Oddball who said that reading annual reports is probably the better use of time. I would be willing to bet that between someone reading a company annual report and someone else reading that annual report and the 1500 pages of industry research, the first person is able to make a better investment. Their mind isn't clogged with a lot of information that gives a false sense of expertise and competence.

No worries. I understood what you were referring to about the second leg. My point was that Dewey going under doesn't support that theory. It has nothing to do with it one way or the other. Of course one could say if business was still the way it was in 2006 then this wouldn't have happened and that is true, but that applies to basically all businesses. The thing to always remember about law firms is that like investment banks the assets go down the elevator each night and leave the building (well, theoretically they leave). Firms like Dewey were considered top tier but the truth was they were just hanging in there. So how does a law firm hang in there? They need to attract and retain top people, i.e. rainmakers. How do they do that? Money. Sure, there is talk about culture and all that, but it comes down to money. Lots of it. Guaranteed money as these guys don't want to be subject to the vicissitudes of the law firm money wheel (money usually doesn't really come in until late in the year and often it's uncertain until the last few days of the year how the year will turn out). Sometimes performance is lumpy. So they want their cash guaranteed. But there is only so much business to go around and Dewey is not first in line for many plum assignments. They report big M&A numbers, but usually they were counsel to an advisor or something. In any case, this doesn't really mean anything. If Cravath, Sullivan & Cromwell, Cleary, Davis Polk or Wachtell went under, then that is a very bad sign.

Dewey, like many firms, had aspirations of bigger and better things. They got too big when they merged with LeBouef Lamb. The practices really didn't mesh well. Dewey was an old fashioned, white shoe NY corporate law firm and LeBouef was basically insurance based (insurance in the sense that they represented insurance companies, not that they were ambulance chasers, far from it). LeBouef had a storied history in the insurance world. Dewey also had a storied history that was much more past than present. They were a well respected firm who had seen better days back right around WWII and Thomas Dewey, after losing his presidential run, joined them, got top billing and was a huge rainmaker. In fact, it was part of the firm's agreement with his estate that if his name was to be used at any time, it must always be first. That put off some merger partners since of course order of names is the most important factor in any merger. Haven't thought about this in years, but there was one great, probably apocryphal story about Dewey. Back in the day when men wore hats, a man without a hat got on an elevator with Thomas Dewey. Supposedly Dewey said "what does a man without a top hat do nowadays?" The response, "he goes to the White House". In any case, Dewey hasn't been a really great firm for many years. In the press, of course it's a "top" firm. But I would put it like this. Dewey was a top firm like Jefferies is a top investment bank. To most people Jefferies is the best of the best, but if you know what it is, then you know otherwise. It's a fine place, sure, but not a "top" place. In any case, Dewey going down is bad for Dewey and it's people (and its creditors and, perhaps, clients). That's it.

Your post is misleading and inflammatory, although probably unintentionally. Dewey was never the largest law firm, at least not in recent history. They were ONE OF THE largest law firms in the country, but have had their issues for many years. This isn't indicative of anything other than a poorly run business. They gave guaranteed contracts at too high amounts to too many people. Cash flow isn't what it was during the boom years. The business was run the same way many other things are (governments, companies, etc.) That is, there was an assumption that peak earning years would last forever and reality was quite different. But this has nothing to do with a second wave of anything. You imply that it's something new for lawyers to be laid off? Not in the least. There were huge waves of layoffs in the late 1980s/early 90s, again after the tech meltdown and once again after 2008. Law firms have become just like any other business. There is always an implication that it's unusual for law firms to lay people off, but that's just an image law firms like to portray. They ALL lay people off now and have for at least 10-20 years. It's just the better ones will do it under the rubric of performance based exits or old fashioned pressure and bad working environment. I can't stress enough that this has nothing to do with anything other than a poorly run business. It isn't representative of anything other than that. Dewey isn't the first law firm to file, although it's pretty unusual. Most law firms in deep trouble end up jettisoning a bunch of people and getting "rescued" by some other firm who really just wants a few rainmakers, but will take on some extra baggage.

The tremendous overreaction by some members to what were benign and, in my view, completely appropriate comments really reflects very badly on the board. At the end of the day, Sanjeev, yes, this is your board. No one disputes that in the least. You can do whatever you want. Take your ball and go home if that's how you want to play. I didn't realize that friendship of public figures equated with a ban on criticism no matter how mild. People sure criticize people like Berkowitz and it often gets personal. But I guess that's different. This is all very disappointing.

I seriously doubt that WEB could raise a fraction of the money he got being Ben Graham's smartest disciple in today's environment. Massively more competition, and people that are as smart as him to compete against, makes today's situation far more difficult. Just ask any portfolio managers who operate on this board. He had the benefit of being in the right situation at the right time in history. I agree. The early years would have been more difficult. Especially if he tried the same approach of heavy concentration, illiquid stocks, yearly reporting of results, and no disclosure of holdings. Current auditors may have pushed for illiquidity mark downs too. He also had many investors that today would be deemed non-accredited. I also think that by the late 1960s he probably could have raised immense amounts of money. It's very hard to compare the two times. The environment is so incredibly different that it really isn't an apples to apples comparison. Graham was viewed in his day as being supremely knowledgeable about investing, just like Buffett is today. While it would be hard for a Buffett today recommended by some random person to get going, no matter how smart and good he was, I imagine that if Buffett retired and told people that if they didn't feel comfortable leaving their money in BRK to put it with [insert no name smart young investor] that that person could raise hundreds of millions if not billions in fairly short order.

Buy a house because you want to live there and think that the price is such so that you won't lose your shirt. Anything more than that is just conversation. There is so many unpredictable variables in owning a house that it's virtually impossible to speak about it in purely financial terms. Owning a house brings to mind O'Toole's Law, i.e. that Murphy was an optimist.

No, I don't believe a home is an investment. It's a money pit.

Unfortunately yes. It's really sad actually. The rating agencies used to perform valuable services and were an asset to the investing world. As with many things, the lure of easy money became too much to overcome. While in some respects they still do perform valuable services, their reputation has been tainted to such a degree that I don't believe they can ever actually get back what they once had.

Timber is pretty valuable and Johnny Appleseed really did a lot with just some seeds and walking around for 40 or 50 years. I don't know the value of it all, but I'm sure it's a lot and he didn't put much money into his venture.

This is very good advice. Over planning your career is a bad idea. You will have a much better chance of getting to where you should be if you do the best work you can at your current job. Pay attention to detail, commit yourself, and provide immediate follow-up to anyone you work with. ALWAYS take your work seriously, NEVER take yourself seriously. Do this, and other opportunities will open up. As is this. This fits in exactly with what I was saying perfectly. I think the tendency is to not only feel that one is wasting their time in a job they don't want, but to start showing it. "After all, if I'm not going to be doing MBS for my career, why bother?" Huge mistake. Kick ass and work as if MBS will be your life. On the side, keep looking. If you do this, one of the 2 things will happen. One, you get "stuck" in MBS in which case you will be glad you went balls out or two, you learn some things and somewhere along the way some other opportunity presents itself because you're the guy who is always working so hard, detail oriented, etc. Never forget too that as a junior guy the value you add right now is in being detail oriented. You're not being paid because the firm wants your input on macro economic factors as they affect the MBS market. It's because you put together a mean spreadsheet for 90-100 hours a week. Do it like it's a Picasso and someone will notice.