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JSArbitrage

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Everything posted by JSArbitrage

  1. I couldn't disagree more. Maybe as a young person under 30, my impression of the past is different than those who actually lived it but I see a complete failure of leadership in this country. I was watching the Right Stuff the other day and it made me think: what if the Space Race happened today? There would be no chance we'd win. It makes me laugh that we literally poured hundreds of billions (maybe trillions in total) into what was essentially a pissing contest between world powers. There was no real practical purpose to sending a man into space or the moon. Some might argue the externalities (technology) made it worth it but we probably could have had twice as much innovation if we had just directly invested in innovation instead of just capturing externalities. But when it comes to things like solar, God forbid the government invests a dime. Republicans only support government spending if it makes us better at killing foreigners and Democrats only support it if it benefits unions or the poor. Republicans say billionaires paying 17% income taxes rates are still overtaxed; Democrats claim the unemployed need more than 99 weeks to pick themselves up and the poor need free cellphones. We need leadership that wants to do more to confront our two biggest welfare classes: the poor and the super-rich. Our most notable government-subsidized banker said if he wasn't allowed to take hundreds of trillions in derivative risks, he'd just go to Singapore. Our Treasury Secretary believes that homeowners should be pushed aside for the benefit of the money-center banks. The leader of our Teachers Union once said that he'd put students first as soon as students started paying union dues. A PhD friend of mine who worked for Google was deported because she couldn't renew her work visa but the President wants us to consider amnesty for poor, uneducated illegal immigrants. Republicans tried their best to get America to default, only to then claim the resulting market fear was a message on Obama's economic policies. Our leadership absolutely sucks right now. But only right now. People say our future is a dismal "new normal." That the American Dream is just that: a dream. I say America is massive turnaround situation waiting for the right management. If we, as a country, woke up tomorrow and said we are going to put as much effort into education or alternative energy as we do laser guided bombs, we'd leave everyone in the dust. We have so many levers to pull it's crazy. Just my person opinion.
  2. I cancelled my entire account out of principle. There are too many cheap/free substitutes and it really irks me to get nickel and dimed by people/entities. Let's face it: the CEO thought he could shave a few more bucks from loyal customers and it blew up in his face. Good.
  3. First, defining "systems" as being "95% systematic" is in no way a helpful or clarifying definition. But I didn't mean what did Barclay's define as a system, I meant to ask what do WE (the board) define as a system? Was Graham/Schloss "systemic?" It seems like they just did what a computer could do before computers existed. So is it fair to call it a system? That's just an example.
  4. One point and one question: 1) If that Barclay's data only lists funds that voluntarily disclose their results, then it's pretty clear that there is huge danger of selective reporting (i.e., only successful funds will openly announce their results.) I find it hard to believe that systemic funds, in aggregate, were up 18% in 2008. Sorry, just not believable for me. 2) What do we mean by "systems?" How much computer involvement constitutes a system? For example, from what I have seen with Graham and Schloss, they pretty much did a sort of "quant" work before computers existed (i.e., if a stock passed their strict ratio criteria, they invested regardless of the qualitative factors. They felt that a very diversified portfolio of stocks that passed these criteria didn't require qualitative analysis.) Personally, I think they simply stumbled on something that academics are now starting to admit: small cap low P/B stocks outperform the market as a whole. They just didn't know it at the time. So, what constitutes a system?
  5. I am not willing to net out non-operating cash unless I am confident that management will do something smart with that cash. You can net out a MSFT because management has a good history of giving money back to shareholders (buybacks, dividends and special dividends.) I don't feel as confident about DELL\CSCO\HPQ.
  6. This is what it is to me. There are many ways to find 50c dollars (special situations, net-nets, GARP, forced selling of debt and illiquid securities) but that's all it is at the end of the day. This applies to everything: stocks, bonds, derivatives, cars, coins, antiques, currencies, etc. You try to figure out what a reasonable value is for something and then pay only half of that value as to include a margin of safety. You then resell that something at the original reasonable value.
  7. This was my understanding as well. I haven't looked at the amount of TRUPS BAC has outstanding but I wonder if this capital isn't going to be used as a "refi" of the TRUPS by BoA. They have to buy them pretty soon; might as well do it now at 6%...
  8. LOL. As soon as I read the headline, I was like, "Eric did it again..."
  9. I always enjoy people calling SHLD Lampert's mistake. The guy paid like ~$650M for what is now a $3.5B stake in SHLD 8 years later. I hope I make those kinds of mistakes in my investing life!
  10. I've bought some WFC, MSFT and LUK. All three are 66c dollars IMO and I'd rather buy high quality, shareholder friendly 66c dollars than rummage some low-quality 50c dollars. I am currently looking at The Gap but haven't bought. I think they have a high quality portfolio of brands and are selling at about 9 times earnings. They are also very shareholder friendly: they've returned almost every dime of FCF over the last 6-7 years to shareholders in the form of either dividends or buybacks. The only problem is that I am asking myself why not just buy more WFC, MSFT or LUK at these valuations? Other than that, I am very heavy in cash due to an upcoming special situation and a possibility of buying a home within the next 1-2 years.
  11. I don't distrust his writing because he is dumb; I distrust his writing because he is vested. You know who is really smart and made a fortune too? The structure finance salesmen at Goldman. It's one thing to say software will have a bigger presence in the future; it's another to say, therefore, valuation is secondary. You know what I guarantee will have a big presence many years in the future? Solar (in some form.) But that doesn't mean I'd put a penny into a solar stock. VC guys and PE guys are salesman. Their job is to incubate and flip. And be very suspicious of the person who makes money on the flip.
  12. Is it really worth the risk climbing out on the limb for the extra yield? My view is that cash is cash. WMT isn't cash. BRK isn't cash. KO isn't cash. Nor is commercial paper or money markets. The financial crisis proved that only cash is cash. Everything else tends to vaporize if everyone stampedes at once.
  13. While I consider myself a conservative politically, the Republican Party's defense of certain tax loopholes exposes them for who they are really are: the guardians of the wealthy class. How any rational, fair person can justify taxing a scientist or plumber at 30% and a private equity principal at 15% is beyond me. How any rational, fair person can justify the same marginal tax rates applying to a household of two working professionals making six figures each and a hedge fund manager who makes $200M is also beyond me. We haven't seen this kind of wealth concentration for almost a century in this country and our tax system needs to reflect that IMO. Any refusal to accept this fact is childish and destructive.
  14. I am a Texas lawyer but I work in finance and don't practice. But I will say I've never heard of this happening in a modern home in a normal neighborhood. Most adverse possession cases tend to be mere accidents (for example, someone gets confused by property lines and builds something over it) or secluded country land. This is a funny case though. Someone will step forward to get him out. If I were clever, I'd buy the property's unpaid tax lien (assuming no one is paying the property taxes.) In Texas, that means someone has 6 months to cough up taxes plus 25% interest to me or I can sue to take the property. I could take it out from under him! Loophole versus loophole!
  15. I think that's normal for Klarman. He is a very diversified investor; in fact, he said he'd only go up to 10% of AUM on an equity if he had control.
  16. Interesting relationship. You can actually sell a $40 put for $10 and use that $10 to buy a $60 call. Not my thing but certainly interesting.
  17. The Thursday/Friday sell off was probably insiders who got wind of the S&P downgrade before hand (Goldmanites in the Treasury tipping their old firm, Fed officials tipping their friends in expert networks, S&P employees tipping hedgies for cash, etc.) The insiders dumped first. Then the actually downgrade Friday night caused retail investors to pull mutual funds, money market money, etc today. While I certainly didn't predict this, it didn't surprise me. I read an article a month or so ago that hedge fund and retail leverage were at pre-2007 highs. I just scratched my head. How could be have gone from a GD2 kind of market to pre-2007 leverage so quickly? It's like the punch bowl was back immediately and Uncle Ben had poured in a little more everclear from his coat pocket to get the party hopping again.
  18. I just nibbled on some ATM Jan 13 LEAPS for WFC, MSFT and GS in case they run up quickly from here. I want to keep some cash around for anything really crazy on the high quality blue chips. My lesson from the financial crisis was to grab the high quality stocks when you can. I don't care what market it is, you will always find undervalued small/microcaps in the bargain bin. And there will always be a special situation pipeline of some kind. Or an undervalued sector. But only in very rare situations do you find high quality on sale. So I am taking them.
  19. If BAC goes down and the deposits have to be moved, they will probably be going to WFC (with JPM a strong second.) Or maybe Wells takes Merrill to let JPM have the banking assets. So maybe Warren doesn't want to help BAC...
  20. The blue chips are holding up really well. No 10% drop on WFC, KO, XOM, BRK etc.
  21. I understand the appeal of BAC but what about WFC at these levels? Why buy second hand when the fur coats are on sale? I wouldn't be surprised to see Wells throw out $4/share earnings in 2013.
  22. Not to digress but I'd like to share a personal note. My long-time girlfriend and I met out of extraordinary circumstances. What I mean by that is we both had quite a few things go wrong in our lives such that we were at that exact time and place when we met each other. We often joke that we'd never change all those things in the past because it led us to become who we are. A part of me feels like this is where modern civilization is today. Our society is a result of surviving Two Great Wars and a Great Depression. But now we act like a world that has "learned" from those events and we try to make sure they never happen again. To avoid Great Depression Two, we've instead chosen Great Debt Experiment One. To avoid World War 3, we've given multiple nations the firepower to end this world forever. I'm not the smartest man in the room (according to Larry Summers that title belongs to himself) but I don't see how this goes right. I've never understood how it's supposed to be better than the alternative. Why tie half of Europe to Greece, a country that has had the historical fiscal discipline of MC Hammer? How does that help the average European? I don't get it. But TPTB claim it's better than the alternative...and the House of Cards continues.
  23. ROA and leverage were my assumptions - ROE derived from that. I don't think the leverage assumptions can be too far out. ROA however is more of a dart toss. IF BAC can quickly achieve ROA's rivaling that of WFC then it will significantly outperform WFC and be a HUGE winner. But to put that in perspective -- just to match WFC's current under-performance (1.27% ROA in last Q) BAC would currently need to be generating close to $30 billion in net income. Obviously, it will take time -- just throwing the ROA/leverage thing out there as food for thought.... it seems really critical in evaluating this in my opinion. Just to throw some data in here, from 1990-2011(LTM), BoA average 1.03% ROA. Take out 2007,2008,2009,2010,2011LTM for perhaps a glimpse of normalized ROA, you get 1.31%. Again, Taking out 2007,2008,2009,2010,2011LTM, you'd have to go back to 1991 to find a year where BOA did less than .9% ROA.
  24. I don't think you quite appreciate the viewpoint of the Tea Party. They don't think the Federal Government is too big; they think it's evil. So, to them, it's like saying we should continue operating the Death Star because, after all, the Death Star employs and supports most of the Empire! Doesn't matter to them. They're Luke Skywalker and they are going to blow up the Death Star, even if your random foot solider that works on it is just working 9-5 to put food on his family's table. They are a huge X Factor here. If we don't raise the ceiling and it's because the Tea Partier's reject a plan to do so, they will go down in history as perhaps the most powerful non-mainstream political force in the last 30 years. More powerful than Perot's Reform Party or Nader's Green Party.
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