finetrader

Thanks or the link. Some good advices he is sharing in this speech.

I have sold out of the money put(09 jul 7.50 few months ago and now 10 jan 7.50) on KHD. My goal is to lower my average price while waiting for a recovery. I have taken this strategy from Buffet's book when he sold puts on Burlington Northern Santa Fe. This can be considered low risk when in your mind you think that the underlying stock is a buy at the strike price of the option.

Wow, an intelligent mind in the world of finance http://www.gmo.com/websitecontent/JGLetter_1Q09.pdf

i really like SJ' point of view and was thinking that since there is a risk that the market go nowhere for the next 3-5 years, could the preferred shares be the best asset class to hold for this period? Scenario 1 (best case): NYSE is at 15000 in 5 years: A bunch of preferred you bought today in a RRSP with a yield of 12-13% is going to give you : 13X5 + capital gain = 2 bagger A bunch of common (ex: WFC)of those same preferred would probably result in a 3 bagger Scenario 2 ( medium case): NYSE is at 8000-10000 in 5 years: A bunch of prefferred you bought today in a RRSP with a yield of 12-13% is going to give you : 13X5 = 1.65 bagger A bunch of common (ex: WFC) of those same preferred would probably result in a 0 return Scenario 3 ( worst case): NYSE is at 5000-6000 in 5 years: A bunch of prefferred you bought today in a RRSP with a yield of 12-13% is going to give you : 13X5 - capital loss= return of 0 A bunch of common (ex: WFC) of those same preferred would probably result in a negative return This is really simple scenario that don't take into account reinvestment risk ,the risk of preferred dividend being stopped, and risk of common share dilution..., but can give some kind of guidance

Does this concern you? I also like when management incentives are aligned with the shareholders. You're are right that management get compensation mostly in cash (don't see much incentives pay). i don't think that their salaries are too high if we compare to other firms. I guess the good thing is that they are not diluting existing shareholders with lots of stock options granting. I've been following this company for about four years now, and I consider they made good decisions (Smith hiring an operational man with experience in J.Busches, focus on bottom line growth, efforts to diversified business(though it will not be possible now)), good execution (I've never heard of a project being out of schedule or not respecting budget). What I have seen is cash accumulation on the balance sheet.

Would like to give my impression on this company's latest financial filing. -The environment have changed dramatically. This a company that was achieving g=20%+ the past 5 years. Now it wants to cut staff by 50%. -Stock price have follow... from about 30$ down to 7$. -They are now in a cash preservation mode. -from the conference call: Excluding reorganization cost that is going to be about 30M$, they think they can break even or have positive operational cash flow in 2009. -no debt with lots of cash -The Wabush iron ore royalty revenues are falling substantially At this price It still looks like a good investment to me: -I estimate 6$/share liquidation value (after reorganization cost) and this is already in cash on the balance sheet, so at this price you almost get the company for free. -Good business model: engineering company have little fixed cost, and almost no capital expenditure. This world recession has not erased the need for new infrastructure in emerging countries and growth should come back. -Good management: In my opinion they are taking the right approach by downsizing the firm. Like a good boxer they seems to be able to roll with the punches. During the boom times and even right now, management objectives are aligned with the shareholders. Before they were focusing on the bottom line, not on the revenue line. Now their focus are on being free cash flow break even. -For sure the royalty from the Wabush iron mine has fallen substantially but it is still a source of revenue with no expenses associated with it. -This present environment seems to be the worst case scenario. Can only get better (I know...many things are like that right now)

Overestimate the decoupling between emerging countries and the US economy. ??? nowhere close !

On the Canadian side, the preferreds of split share corps are beginning to look very interesting again. Many of them are trading at significant discounts to underlying NAV and redemption values in 3-5 years in addition to paying healthy yields. Added plus is that many of them have retraction features that should provide some short term arbitrage opps. How do you use the retraction features? You just tell your broker?