Mephistopheles

The terms of the conservatorship are that the conservator has to protect the assets of the company, with the goal of becoming profitable and returning the company to the shareholders once that happens. Sweeping most of the assets to Treasury is the opposite of that. Furthermore, they claim the net worth sweep was in fact in the best interest of the shareholders because the company was in a state of perpetual borrowing to pay back the dividend, due to continuous losses. However, the sweep was enacted right after the GSEs started reporting profits again, which makes it hard to prove that it was necessary (not that it makes sense anyway), particularly given the huge valuation allowance for the DTA that was present on the balance sheet at the time.

Thanks all for the replies, these are all good points. Actually, with the money thing it doesn't affect me as much as it might have seemed like considering I listed it in my post. I am not afraid to spend when it adds value, though I try to be wise about it. But when it comes to unwise purchases, that's when it really bothers me because of with Future value/present value concept. Perhaps I am just unforgiving of myself when it comes to mistakes. The bigger problem for me, though, is my 2nd listed point - and that is "always thinking of the downside and letting the upside take care of itself." With stocks, I am constantly playing devil's advocate against my own investments and it's proven to be a great security (no pun intended) measure. But this can be depressing in life when making semi-major or major decisions. Although I've had a natural inclination towards frugality, this obsessing over the downside is something I trained myself to do in order to become a better investor. But then I keep doing it for non-investing related decisions. Of course, you shouldn't be a blind optimist either, but you need more of a balance between optimism and pessimism in life, more so than in investing. Does this happen to anybody else?

We are all aware of good things that value investing has done for us outside of the investing world. The ability to think independently, think long term, be patient, learn from our mistakes etc. We have also learned many great values from Warren Buffett to apply to both business and our personal lives, such as integrity and honesty. Having said all of that, there are definitely some value investing principles that I'd rather be free from in my personal life. For example, whenever I spend or lose money where I shouldn't have, it bothers me because I wired to think about the future value or use of capital of every dollar I have now. A much more bothersome issue that I often face is always thinking about the downside when it comes to making decisions, and not nearly enough about the upside. Again, this is great when applying to stocks, but it can get depressing in real life. I'm not sure if anybody else has had such issues. Would love to hear all of your thoughts. :)

(1) I suspect that destroying documents puts you in hotter water than losing the case, but, yes, they could do that. (2) The Protective Order is there to protect the defendants. Again, I suspect that getting away with this would be difficult and would put you in hotter water than losing the case. Makes sense, but I'm thinking that this is the Government we are dealing with - they have the capacity to do some pretty shady things. How would the court even know if certain documents were destroyed, if they don't even know of their existence? It's pretty obvious to me that the investors have legal precedent. But the Government is in control of the evidence - and that's what scares me.

Thanks for the update merkhet. I'm looking forward to the transcript. These are probably some naive questions - but, 1) Can the government just destroy the documents so that they can't possibly be used as evidence? 2) Didn't the Judge say that leaked documents won't be allowed to be admissible as evidence, in order to protect the integrity of the Protective Order? So what is stopping from someone on the Defense's side from just releasing something incriminating to the public, anonymously, therefore nulling it's use in court?

Apparently he suffered from drug and alcohol problems throughout his life. Very sad. :'(

Not sure if I'd ever want to buy insurance from Warren Buffett, because most likely I'm getting ripped off. :P

Hahahaha Perhaps I should sell my shares, I can see another $17 billion settlement coming. Hopefully relief for CC borrowers is a large portion.

Does anyone know why Ackman's common stock holdings never show up in the Pershing Square 13F? http://www.sec.gov/Archives/edgar/data/1336528/000117266114001128/xslForm13F_X01/infotable.xml

I imagine it's very hard to not succumb shareholder and Wall St. pressure to pay a dividend. Even Jamie Dimon said in his annual letter this year that he'd prefer no dividend at all but that's not what his shareholders want.

I once owned shares in Aeropostale. I liked the balance sheet, it had a good amount of cash and no debt (though I didn't account for operating leases). Based on the earnings, net of cash, it was pretty cheap. Luckily, I broke even. I think I sold to get into BAC in 2011 or something. What I learned is that the customers are very fickle, there is a lot of competition, and they need to update their offerings very frequently. This makes for a very tough business to be in.

Not my least favorite, in that I'm very entertained by them, but definitely some of the worst investing quotes ever: "It is hard for us, and without being flippant, to even see a scenario within any realm of reason that would see us losing $1 in any of those (CDS) transactions." - Joseph Cassano, AIG Financial Products, 2007 “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,” - Chuck Prince, Citigroup, 2007

I didn't buy or sell anything today, but only read my daily 500 pages.

I just watched the first panel (The Reorganization of Fannie and Freddie) discussion of the NYU conference on the future of Fannie and Freddie. http://www.nyujlb.org/2013/08/1184/ The two panelists sitting on the right talked about some ways in which the shareholders could lose the case, or not make much money even if we win. One of them talked about how the third amendment can be seen as the FHFA following their fiduciary duty by protecting the bond holders under the assumption that the equity holders would be wiped out with or without the third amendment. He said this idea would be based on the GSEs having to borrow money from Treasury to pay the dividend in all but the last quarter before the third amendment signed. This "borrowing to pay the dividend" would keep increasing the liquidation preference well into the future, putting the bond holders at risk, whom the FHFA does have an obligation to protect. This argument that the FHFA was acting to protect the capital structure and therefore was allowed to do this as a conservator, would work against us obviously. The other one of the two panelists stated that the Court might reward the plaintiffs only the IV of the common and preferred shares on the day of the 3rd amendment. He demonstrated that a simple DCF projecting 2Q-2012 profits into the future wouldn't amount to much value after subtracting out the $189 billion liquidation preference. That DCF would be flawed because it wouldn't include the massive write downs of the valuation allowance and release of loan loss reserves that happened in 2013. Would love to hear the board's opinion on these risks. The two panelists I am referring to start talking at 35:30.

Happy birthday Sanjeev!

Guys, let's stick to investing related topics please. Some that I've been thinking of: 13. What is your YTD return? 14. What is your net worth? 15. Do you read only the minimum 500 pages/day or do you frequently go over? 16. Have you ever found that 500 hours isn't enough for researching a stock?

My question for the experts on the board is this. Is it always necessary to read the 10-k/q cover to cover, no matter what? Or can it be dependent on the situation. For example, I'm invested in the GSEs. I've read hundreds of pages of court filings and transcripts. I feel like it's not necessary to tear up two 300 pg. 10ks in this case because everything depends on the court rulings, but I feel guilty for not doing so. Am I wrong to approach it like this?

Was already posted a couple of posts up by Luke.

Yeah but he made up for it by stealing Dell at a good price. :P

Was that really the price he paid after the salad oil collapse??

What about the issue of carried interest? The article that GregS posted points this out. It might be worth it to dish out the extra money for a fund just to take advantage of carried interest. Thoughts?

Depending on how well your initial investors trust you and the legal requirements of your state, it might be okay to skip the audit for say, the first year or two. After two years you will hopefully have a good track record, and people outside of immediate family/friends may become interested, but not without an audit. So you can do a retroactive audit of the previous years at that point to show these potential clients. Just an idea. I've spoken with an audit firm about this and they said it's possible.

Can you point to where in the Ackman slides it says preferred could swap for common? On slide 109 he talks about the Treasury converting their preferred, but I don't see anything about the publicly trade ones. Also, from looking at some of the prospectuses I can see they are non-convertible. So am just curious to see how the preferred can be converted, absent Fairholme's plan not being implemented.

Ah! Of course. Thanks! http://www.marketfolly.com/2009/02/warren-buffett-buys-tiffanys-and-harley.html Thanks. I knew about the HOG deal, I was just thrown off by the shorthand "HD" which is also the ticker for Home Depot.

Let's say the GSEs have a similar outcome, and it takes 12 years as well. It wouldn't be that great of a return for the preferreds. And the dividends I believe are non-cumulative so those wouldn't be paid either, right?