Olmsted

I am happy to eat something not regulated by the FDA if I can look the producer/distributor/etc. (every step of the value chain) in the eyes, develop trust, and know who is accountable if there is a quality issue. Obviously aside from farmers' markets/locavore movements that is not possible. I think this is the point - if you have good information and accountability, no regulation is ever needed, ever. In many cases it is difficult to obtain good information and difficult to directly enact accountability as a consumer. Not everyone is peaceful and honest, rkbabang. In these cases there can be market failures, and regulation is one way to attempt to develop trust in the face of anonymity/disaggregated responsibility. Now, a very fair question is whether the cure is worse than the disease. I think that in the US the answer is often, "yes."

-Imperfect information -Incomplete and/or poorly-defined property rights (externalities, free-riding) -Principle-agent issues -Moral hazard I think most market failures boil down to one of these phenomena at some level.

Wow nice call on ITMN.

Yeah, I agree. Actually going to trial indicates a failure somewhere. Arbitration failed on the big ones (would have liked to been a fly on the wall there) - so we have a window now where the lawyers will be moving things along. The trial is the forcing function. It looks like most of the upside is already baked in. They have been really flying high lately. For ITMN: http://www.bloomberg.com/news/2013-02-19/intermune-sale-looms-as-lung-drug-nears-fda-nod-real-m-a.html basically their drug Esbriet is approved in the EU and Canada. They have done 2 phase III studies already but the FDA made them do another one after rejecting approval in 2010. The outside FDA advisory Panel actually recommended they approve the drug and they went against that. Wall Street analysts are pegging chances of approval at 50-80%. "The companys revenue may more than double this year and next to about $130 million in 2014, analysts estimates compiled by Bloomberg show." "The pressure will be on the FDA to clear the drug because no other treatments have been approved specifically for IPF in the U.S. yet, said Liisa Bayko, an analyst for JMP in San Francisco. At least 132,000 Americans have the disease and 40,000 die from it each year, according to the Pulmonary Fibrosis Foundation." The stock price is down from over $18 on this news: http://www.bloomberg.com/news/2014-01-31/intermune-sinks-on-competition-from-boehringer-lung-drug.html However, I find that these stocks always run up before Phase III study results which are coming out in Q2. Thanks for the overwiew, Josh! This would fit the bill. A lot of biotechs seem to have attributes that would make them perfect candidates for a contest or an uncorrelated risk basket. The more it is a pure-play on one drug or one FDA decision the better!

I could probably sneak a warrant through since they trade like stocks, but it wouldn't be in the spirit of things. Familiar with most of these ideas. Haven't heard the theses on EXEL and ITMN. Care to point me somewhere? Lottery tickets stocks like we're targeting here may also be good candidates for that "cheap option" portion of the portfolio. A basket of non-correlated, binary risk is not bad to have around. I'll toss another one out: UNTK. No margin of safety, but if revenues stabilize and they refi their usurious term and revolver, could be worth much more. Catalyst should be within a year. Downside, of course, is a wipeout.

I was solicited to participate in a private stock-picking contest today. Essentially, 1-3 ideas, 1 year holding period, no trading, top performer wins. Stocks or bonds, no derivatives. It got me thinking about how the strategy to win a contest is so different from putting one's own money to work. Whereas in life you do not have to outperform all others, in this contest if someone else makes 105% in a year, you lose if you only make 100%. And there is no differentiation between the #2 (with, say 100% profit) and the last place guy (with, say, a 99% loss). The strategy here, then, is to pick just one security. Make it one with a ridiculously high upside, and of course with a concomitant high likelihood of going to zero or close to it. Ensure that the catalyst for it to go - either 1) to the moon or 2) to zero - happens within the time frame of the contest. Obviously not the way to invest in real life, but I cannot think of better ways to increase one's odds at winning such a contest. Thoughts? And, while we're on the topic, anyone have ideas that fit the profile I described? I only have one in my portfolio that fits the mold, the TMST senior unsecured notes. Bunch of trials later this year will either make them worth $83 or whatever is left in the trust (less than $10). They trade around $10-$12 now.

Military. Then consulting.

His first disclosure, maybe, MAYBE, could be described as whistle blowing. However: -Whistle-blowers make the necessary disclosure to effect change, then move on. They do not secret away a hard drive or a few full of secrets to use as blackmail. They do not continue leaking national security secrets after the impact has been made. -A whistle-blower concerned about American citizens' rights does not need to concern himself with, or leak state secrets about, foreign espionage. That is not whistle-blowing, that is treason. -Whistle-blowers do not run away to their country's 'best pals' China, then Russia for protection. (I can only imagine what the FSB has gotten out of him.) Real national security whistle blowers have the courage to stick around and face the music. Contrast Snowden with Daniel Ellsberg: Even if one has a difference of opinion with Mr. Ellsberg as to whether his Pentagon Papers leak was justified, one cannot help respecting his conviction. He put himself on the line. Mr Snowden did not, and lacks any moral credibility. As an aside, had he stuck around I expect he would have gotten a slap-on-the-wrist sentence and then settled down to a nice sinecure or tenured professorship somewhere.

MMAB. I've been meaning to start a thread on this, but no time. I'll add some actual numbers to this when I start the thread. For now, a teaser. The asset base is very complicated and the balance sheet needs numerous adjustments to arrive at a real net asset value. I believe this results in a lot of hidden value. Further, management is incentivized to start realizing this hidden value, having been very aggressively buying shares over the last year, sometimes at prices as high as $1.30(ish). An incomplete list of the hidden value: -Fair value of the muni bond portfolio (most of the company's assets) is above carrying value on the balance sheet. -Some of the debt is collateralized only by bonds on the balance sheet. In essence, these bonds were sold, but didn't qualify for sales treatment. The bonds that collateralize the debt are carried at less than the face of the debt - which means you can make an upward adjustment to net assets. -There is owned real estate carried at what may be a lowball value. -The company owns a stake in an African housing company, the value of which is not immediately apparent on the balance sheet. -Tax credits. At least $20m, from low-income housing deals -NOLs! A lot. Like $1bn+ Just valuing the cash and bond portfolio (including the non-recourse debt), I get to an asset value net of debt around $2.30. Everything else is upside. By the way, thanks to @ErditCokaj for bringing this one back to my attention and discussing his analysis with me. Any errors, of course, are my own.

Knew who this was as soon as I read it. Nice!

You can be a libertarian and think that something needs to be done without any cognitive dissonance whatsoever: get the government out of the student loan business, put it in private hands. Private lenders would do a much better job than the government about giving loans to good risks - and that would be the best way to keep people from getting buried in debt pursuing dumb degrees at subpar schools that don't lead to a job. But would that make loans harder to get for [insert disaffected Democrat voting bloc here]? Of course it would. But that is the point. The unlimited availability of stupid credit hurts many of those who receive it, and hurts everyone paying for college. It hurts many of those who receive it because many of them will bury themselves in debt pursuing suboptimal ends. (And if you want to pursue social mobility goals, there are better ways.) It hurts everyone paying for college because colleges, knowing that they have a captive audience who will tap the government to pay whatever tuition is demanded, can raise prices to whatever level they feel like, really. The only group government student loans unequivocally helps are those who benefit from the educational largesse. Think college administration, professors, etc. (Oh, another ultra-left voting bloc, what a coincidence...).

http://www.bloomberg.com/article/2013-07-24/a.LjnAV8KZBM.html

I have followed his ideas for a while. His CLWR spectrum value call was a very good one. I thought his "no sale" scenario was a bit rosy, but of course that turned out to be moot. I got impatient on that one - should've stuck around. Kudos to those like Cale that had the conviction.

There are lots of maritime museums in the Hampton Roads area. The one you mention is run by the US Navy. They wouldn't be buying Titanic assets, sequester or no sequester.

classic