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Everything posted by Spekulatius
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I don’t like current setup with BHF, where the seller (MET) knows much more than we do. Then there is Einhorn owning a position, which is basically a leper touch. I have done well with NN.AS, which was a spinoff from ING, but forced from the Dutch government. That was a much better setup, since it means that very likely the book were clean. My contrary experience was Delta Lloyd (also owned by Einhorn), which was IPO’d from AV, similar to the BHF spinoff from MET.
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I believe that from a consumer perspective, BAC and JPM are the strongest franchises. WFC branches were better managed IMO (not sure now, since it has been 3 years since I was in one), but their online presence feels really dated.
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Aren't traditional motorcycle dealers a better comp to the Carmax model than this is? I say this because the first step in the Carmax model requires you to take your car to one of their dealerships (I think?). That's different than what these guys are doing. Anyone ever tried to sell a motorcycle? Is the market really as illiquid as RMBL wants us to think? If so, why haven't others (aka traditional dealers and entrepreneurial gear heads) stepped in to profit via providing liquidity to the market? Presumably some motorcycle dealers will make lowball cash offers for bikes just like these guys do, right? I bought and sold a motorcycle ( Kawasaki 500, very common model) via Craigslist and it was very easy and quick. I could see that rare or heavily customized Motorcycles are more difficult to sell. I do think there is a fairly liquid market for Harley’s.
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Wouldn’t the main competition be ebaymotors?
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^ You always have a choice, Peter.
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Citi is half US and half foreign bank. I think they actually lack scale in thr HS, where they aren9nky reperesented in major cities. I don’t know of any particular operation within Citi that is best in class or at least neck to neck with top competitors. The performance is at best middling and in some cases, they are shown to be the chumps on the table. Ther best franchise may actually be Banamex in Mexico, bt even there, they seem to have lost market share. I do think that Citi would be worth more broken apart.
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I think Ferrari should consider building a unique off road vehicle if anything. The risk of brand dilution is quite real however. Ferrari could also consider buying another luxury brand to venture into different markets segments without the risk of diluting their brand.
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Buffett/Berkshire - general news
Spekulatius replied to fareastwarriors's topic in Berkshire Hathaway
A billion here, a billion there, and soon we are talking about a serious amount of money. -
I don’t think an economic downturn is needed for OZRK to get into trouble. I think a downturn in demand for RE in specific areas where OZRK loans are concentrated is sufficient for OZRK to get into trouble.
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A lot of countries see agriculture like a strategic asset to ensure a safe domestic supply. I know that Germany sees it that way. Where some countries and the EU goe wrong is that they subside exports of agricultural goods.There, the argument of a strategic assets does not hold any more. FWIW, the US has a lot of subsidies for farmers, both direct and indirect as well.
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Why 5 years sunset clause is a show stopper?
Spekulatius replied to alertmeipp's topic in General Discussion
^ RB, you are correct. My writing was inconsistent. Of course thr US needs to negotiate with the US, but I think they need to avoid negotiating with Trump himself, but rather with the folks that run the machinery. I think over time, most leaders in the world will find out they negotiating with Trump himself is a waste of time. -
Isn't that a mith created to build the brand? Basically they meant the recipe is so unique and tasty that it must be locked away so nobody would steal it... I believe I read that somewhere... Yes, the coke formula is just for the mystique. Coke isn’t that complicated. I am fairly sure competitors have gotten it reverse engineered chemically using mass spectroscopy and other methods. The brand would be much harder to reverse engineer than the ingredients and that’s where the value lies.
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Why 5 years sunset clause is a show stopper?
Spekulatius replied to alertmeipp's topic in General Discussion
I think it does not make sense to negotiate with Trump at all, about anything. He changes his opinion by the spur of the moment, and most of what he does is irrational. I think most have figured out that it’s best just to let this blow over and isolate and ignore him, as hard as it might be, since he does preside over the US right now. It is highly likely that Trump either self destructs, or does not get re-elected. It will be interesting so see how that meeting with Kim Jong Un turns out. Kim himself is a bit like a Trump in a sense that he is unpredictable and tends react emotionally with apparent anger an management issues. Maybe these two will cozy up, which will look even more awkward. -
You always have to guess about the loan books with banks. The FDIC provides perhaps the best public data, since it is standardized. A bank can‘t legally fake a bad loan into a good loan. A loan is either current or it isn‘t and when it osmotic, it willkommen NPV after 90 days believe. I have also seen banks fail very fast, even though they looked well capitalized. BFSB was one I remember.
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Citi has shown in an uncanny ability over time to hit any pothole a bank can hit anywhere in the world.
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That probably applies to all US stocks, except the tech stocks they onrnjust needs to own like Apple, Google and perhaps Facebook. Home bias is very real in investing.
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I am with Jurgis and others here - people stick with their bank due to laziness and switching costs (or effort necessary to switch) , not due to branding. The product is fairly standardized. I think that other financial products like brokerage/ wealth management or even credit cards have more differentiation and more brand awareness, IMO. The above is one reason why the cost reduction from digitization will be competed away, IMO. I could see that large banks could potential gain an advantage by making now complex processes (like refinancing etc) more streamlined and more convenient, but I don’t see any evidence that this is actually happening. I believe that outsiders and tech companies have a chance to leapfrog the banks here, but the business is heavily regulated, making it probably unattractive, despite a huge addressable market.
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In my opinion, raising funds above NAV is a good idea. It does not really matter that Buffet never did so. Raising funds above NAV is a rational decision, just as buying back shares below NAV is.
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My point is not that his track record is a substitute for analysis. My point is that his track record and his point in his career are not consistent with the thesis that the bank has "categorically changed" (your quote) from the last recession. My point is questioning that - why would a successful banker at this point in his career categorically change his bank taking substantially more risk in new/different ways than he has in the past? He is 63 and at the later stages of his career. There is no need for "hail mary" risk, and doing so in the midst of a long expansion (following successfully navigating your company through one of greatest recessions), just doesnt make sense to me, and isn't consistent with his past successes. If you're at a casino, and you've already had an incredible run and turned $1000 into $100,000, and you've been gambling all night and its now 6am, you don't take your entire bank roll and put it on another bet, risking losing everything. Have you ever been at a casino? The people who turn $1000 into $100,000 would exactly be the kind of people who would want to risk it all again! Why do you think they didn't stop when they turned that $1000 into $10,000 for example? Anyway, not sure how useful that comparison is. I sort of agree with you that it wouldn't make sense for someone like that to start taking massive risks, but at the same time I can see plenty of reasons why it could happen. For example, he wouldn't be the first person to start believing in it's own genius and invincibility after doing a couple of good deals. A gambler wouldn’t stop because he likes to gamble. There are a lot of companies where the managers or owners had no real reason to gamble, but they still did. I think part of the reason is that they do what they do, because they like the game, or because they are full of themselves and believe they are better than anyone else. I think Lehman Brothers is one example of a company that below up, despite fairly high insider ownership. There are countless others.
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Bingo Owning a passive stake in a business does not mean one knows how to run it.
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What about thr risk of competition from online banks, since branches are less and less important. I don’t think I visit a bank branch more than once a year now. Online competition could crimp the margins over time, same than what is happening to retail. at least I think that most cost savings from digital transformation should be competed away. Also, the online banking makes it easier to bank with credit unions, which have fewer branches. This is what I am doing. Then we have the risk of much higher credit losses when interest rates rise. I see reports that junk bonds are shakier than ever, does the same negligence bleed into bank loans. I don’t think that banks have really moats. Maybe convenience is a moat, but once I have an app on my smartphone, how much more convenient can it get.
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The returns are great if the business is done right. Which maybe it will be, maybe it won't. I guess the argument is that with 85% still being held by original owners, they should have motivation not to screw the business. These business attract managers that are as scummy than their customers. In addition, you probably have to deal with bribery, corrupt police, mafia of sorts etc., which makes it difficult for a public company to keep the books straight. Or you can invest in countries like Russia, where all the above is more or less legal. Stocks there are cheap too.
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That is a great question, and one I have been thinking about myself. I would love to hear Oddball's comments on this. A few of my thoughts are that the same issue that has been discussed on here about Bank OZK making loans that no other bank would make relates to this point as well, in the sense that - other banks could lend to these projects at the same LTV but pass. But, the counter-point, again, is that Bank OZK is just a better lender/credit analyst on these projects then their competitors. Some of my other initial thoughts about this are that since they are doing ground-up projects - I think that makes the V or C part of the ratio more tentative. If one of these projects goes sideways, before it it completed - the value of the collateral could be ephemeral. I believe some lenders who have had blowups in the past also had low-ish LTVs and LTCs but the Vs and Cs changed very quickly in the midst of a crisis. I would love to hear others thoughts about this point. I doubt that they do LTV loans with 50% of equity. Or if they do, they have an unconventional way of calculating value. Other lender are not stupid. Also, the evidence shows, that they seem to rack up thrift lan books in certain areas very quickly. I agree there could be something that the bears have missed and that they are really much better than anyone else. That’s Ok, the bet is on the tail risk anyways.
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FNMA and FMCC preferreds. In search of the elusive 10 bagger.
Spekulatius replied to twacowfca's topic in General Discussion
I don’t get what Freddie/Fannie receivership and affordable housing have to do with each either. They are two separate issues. -
'Why Your Mentors Seem Less Impressive Over Time'
Spekulatius replied to Liberty's topic in General Discussion
Some the things in management just seem to be fads that over time lose their shine. I feel that way about Jim Collins books (Good to great, Build to last) as well as the more recent “Outsider” fad. in both cases, I feel like findings from interesting cases studies have been generalized too much..