Rabbitisrich

WFC and, to a lesser extent, PNC are my major financial industry plays, along with a basket of community banks. You can benefit from the non-interest expense drawdown, loan performance improvement, and asset management and advisory fees. There are also plays like BK where the businesses warrant a higher multiple. Lots of places to make money in this sector.

That's a rather generous assessment of the investment banking model (which is still basically a catch all term). Everytime there is a financial shocker, from Credit Suisse FP in the 90s to Morgan Stanley in the 00s, we learn that executives don't really know the details of their own machine, and that it is very difficult to restrain risk taking behavior due to the incentive warping competition for talent. A well-hedged financial product offering today tends to become out and out speculation tomorrow, using the SAME instruments. But BAC longs are likely correct that this is a time where risk management is actually meaningful.

You are definiely right that the public likes their entitlements. They also like others to pay for them. Isn't that the whole problem? Washington is following what the voters tell them. Sadly the voters are grossly ignorant. Way too many think foreign aid is a large part of the budget and that trimming it would make a meaningful difference. If entitlements are sticky and they continue to comprise a large percentage of liabilities, then isn't a GDP spending target asking for trouble? Whole industries arise from government spending, which means that lobbyists and special interest parties emerge to resist irrelevance. I see such a plan heading down the path of the "debt limit", except with the same chart as the social security cost of living adjustment.

If this were true, then wouldn't we see a higher rate on excess reserves? The M1 multiplier is at .73, and excess reserves are up 54% YOY. This looks more like a liquidity trap than a pure monetary exercise.

That method still faces the problem of all technical analysis, which is that there are multiple pathways to every price action and no method to determine the relevant pathway. The price action is an indicator of a catalyst(s) but is not in itself a catalyst. In this age of Carson Blocks and Whitney Tilsons (referring to their promotion, not integrity or quality of research), wouldn't it be better to simply purchase the cheapest stock and then broadcast your thesis?

The ~20% of GDP mark would have a procyclical effect more than anything else. Increasing expenditures during the good times and then cutting back during the bad seems disruptive.

Interesting situation, thanks for the idea. PlanMaestro, do you run the Variant Perceptions and Above Average Odds Investing sites?

this is a press release. the stock will work if earnings per share rise. I repeat. this is PR. the playbook is simpy a BETA product and will never sell in serious numbers. even to the government. I'm not as wedded to the negative view, but I agree that being the first to receive the certificate is less important than if and when AAPL and Android are approved.

Paulson conceded that his research analysts were hearing rumblings about problems at Sino Forest for months and that his trading desk received requests to borrow the stock to short it. Indeed Paulson was trimming the position when the Muddy Waters research report alleging account problems hit. Hmm, that sounds like coincidence and nothing to do with shopping the research before shorting. To reposition the portfolio, Paulson said he diversified into financial companies with less exposure to mortgage loans, noting that he liked Capital One (NYSE:COF - News) and Wells Fargo (NYSE:WFC - News), two names he owned at the end of the first quarter. Wells Fargo and low mortgage exposure does not compute. Until the mortgage crisis, Paulson was known for making consistent and intelligent investments with an emphasis on event specific bets. Perhaps the type of money that flowed into his funds after '08 were hoping for more Sosa and less Ichiro?

In so far as the short arguments are concerned, isn't it more relevant news that Apple and Android tablets don't get the FIPS 140-2 certificate?

But direct operating expense growth in surety only accounts for a bit over 1/3 of the YOY growth in pre-provision operating expenses, despite producing over half of the growth in earned premiums. The 10q should provide more disclosure regarding the unusually high ratio of property net written to earned premiums, as well as the bump in the casualty expense ratio. Hopefully, management discussion will include the unusually large reserve release as well.

Mr. Market made a nice offer this morning. I'm less enchanted with 8-k but I'm reserving judgement until the 10-q comes out to elaborate on the loss performance ex. releases. and rising expenses.

Well, maybe something is lost in translation when the philosophy is executed. The reporter did note the asymmetric flow of chiding. Orson Welles said it already: "All animals are equal but some animals are more equal than others."

Mostly excess reserves: http://65.89.18.138/fred2/graph/fredgraph.png?&id=WSBASE,EXCRESNS&scale=Left,Left&range=5yrs,1yr&cosd=2006-07-13,2010-06-01&coed=2011-07-13,2011-06-01&line_color=%230000ff,%23ff0000&link_values=false,false&line_style=Solid,Solid&mark_type=NONE,NONE&mw=4,4&lw=1,1&ost=-99999,-99999&oet=99999,99999&mma=0,0&fml=a,a&fq=Weekly%2C+Ending+Wednesday,Monthly&fam=avg,avg&fgst=lin,lin&transformation=lin,lin&vintage_data-ipsquote-timestamp=2011-07-20,2011-07-20&revision_data-ipsquote-timestamp=2011-07-20,2011-07-20

Cwericb, what is your source regarding Sino-forest's cancellation of the analyst tour? I didn't even know that the company claimed that the analysts requested the postponement until your message, and then I couldn't find any supporting stories until I googled "Sino-forest tour postponement analyst request". That search yielded a Globe and Mail article that cited an anonymous analyst and Stephen Atkinson of BMO Nesbitt Burns, both of whom said that the trip would have yielded no new information without the PWC audit. And yet, on the June 14 call, Richard Kelertas of Dundee Capital Markets requested an introduction to one of the AIs, presumably for verification scuttlebutt. The tour would have been more significant than a stroll through some woods. Six days later, he stopped coverage. If you are correct, and the analysts requested the postponement, then it changes the character of the delay. Why wouldn't the analysts, especially those with a bullish price target, have come forward? Why did one of two analysts interviewed speak to the Globe and Mail under condition of anonymity? I admit to not fully understanding the company's response to the Globe and Mail expose. Apparently, Gengma Forestry's Chairman neglected to count sales of timberland in which his company acted as the selling agent. That seems like a huge communication mistake, if true. Also, I am not savvy with Chinese regulations concerning ownership verification. TRE claims that tree purchase agreements fall under local, rather than provincial, forestry bureaus and that the ownership transfer certificates are not communicated between local and provincial branches. What confuses me is that the master agreement provides for "pre-emptive" rights to lease the land, SUBJECT to governmental approval, which in this case includes the provincial forestry bureau. If, under such terms, the company can purchase trees without registering at the provincial level, then what does "pre-emptive" mean exactly? I have no position in TRE, but the Block supporters vs. rationalist argument is little more than a straw man. Can you quote anyone who is arguing the short position using Block's authority standing?

Yeah, also his allegations are not reliant upon his personal standing. Block questioned the authorized intermediary model, the TRE responded, and investors were able to consider the arguments. He also pointed to signs of asset exaggeration, which can be disputed through legal evidence of ownership or purchase. However, Globe and Mail uncovered supporting evidence of misrepresentation and TRE cancelled an investor meeting. This is not at all the same as an investment banking analyst, John Gwynn, claiming that FRFHF was hugely under-reserved and that the reinsurance didn't exist. In that case, there was no evidence, and the company could only prove its integrity over YEARS. One is an argument, and the other is a claim by someone who leveraged his soapbox to claim authority.

This article neatly summarizes the RIMM short thesis that built momentum after the last quarterly report [emphasis added]: http://www.bgr.com/2011/07/13/rims-inside-story-an-exclusive-look-at-the-rise-and-fall-of-the-company-that-made-smartphones-smart/ “They essentially just channel stuff,” a former exec said. For instance, when RIM wants to sell to a new market, it will go to two or three primary carriers and make those carriers purchase a set amount of devices up front to stock the channel for what is typically the remainder of the calendar year. Then RIM will sell those devices at full margin. It’s a great quick and easy profit from the channel. So RIM has now opened up three new carriers in a new country, let’s say, and it had them each purchase “X” thousand units each. Now, RIM can report to the Street that it shipped 700,000 devices at full market value. After multiple sequential quarters of opening up new countries, there’s obviously a lot of volume there. Though the consensus of many is that RIM is nearing capacity with this strategy. The company now has to rely on the old school model of growth within these existing channels, and just as we’re seeing in North America with the tide changing now that long-standing BlackBerry customers are moving to other platforms and devices, that will happen in countries outside of the U.S. and Canada that have been stuffed with BlackBerry phones. Growth will slow to a stall in these markets, one source told me, and the problems will be compounded by the fact that a lot of these devices are not being sold through to end users. “They’re selling a screen with a giant calculator attached to it. It’s not a cool device anymore.” As far as the PlayBook is concerned, RIM’s initial 500,000 shipments weren’t even sold at full margin. “RIM’s thought process was that they hoped if they put a product in a carrier’s hands that was less than full margin, it would entice the carriers to apply whatever number of discounts against that to bring it to market at an even lower price — a subsidy on the tablet. RIM isn’t making any money on the PlayBook.” To complicate matters, however, Jim Balsillie told the carriers at the 11th hour that the PlayBook wouldn’t have native email and would require the Bridge app in order to receive emails and provide calendar functions. “RIM is notorious for dropping these bombshells at the 11th hour on the carriers, and the PlayBook not having native email was a shock to the carriers.” They were all expecting a BlackBerry with a bigger screen. RIM was hoping to blow through the 500,000 units and have carriers take orders for millions of additional PlayBooks, but that has not happened yet. The article is largely negative on Mike Lazaridis and cites a bunch of "former employees", but the main arguments are supported by domestic vs. foreign market trends from the last 10-Q. EDIT: It's worth noting that the author, Jonathan Geller, wrote the BGR articles containing the claims of "anonymous employees". His recent authorship for BGR has been consistently negative with respect to RIMM.

"Ecosystem" is a term often used by programmers. It's jargon that has specific meaning in that technical context. I can understand how someone not used to that sphere could find it weird. if it were of true value in the context used by those using it here, Apple would not be alive today. Why did they survive the "ecosystem"? Val9000, yes, it seems to be the reporters and analysts latest pet phrase. simple Steve Jobs diversified away from computers and created a new ecosystem from scratch. now this is getting humorous... Ive made my points - I'll leave it at that... It looks like you are conflating moat and ecosystem. An environment doesn't have to be resilient versus all competitors to qualify as an ecosystem. It merely has to survive long enough to nurture "beings" whose existences are a function of every other element in the environment.

Compared to the Jackson Hole speech, Bernanke's recent comments were more restrained. The condition of increasing likelihood of deflation suggests that new voting members require higher hurdles for QE.

Bair was a critic of the Basel II proposals as far back as '06 or '07, and she took a fair bit of flack for being a "bureaucrat". I'm not a fan of the current capital adequacy focus since you need to move the needle a lot to counter regulatory arbitrage and other big bank responses to disintermediation, but Bair was doing her job, no doubt.

She provided an "exit interview" to the NY Times: http://www.nytimes.com/2011/07/10/magazine/sheila-bairs-exit-interview.html?_r=2&pagewanted=all Some juicy quotes: Geithner wanted the F.D.I.C. to guarantee literally all debt issued by the big bank-holding companies — an eye-popping request. No bank needed more federal assistance than Citi — it required three separate bailouts. And yet, in Bair’s view, no bank was treated as solicitously, especially by the New York Fed. She felt pressured by the Fed to allow Citi to buy a failing Wachovia — which she suspected was a kind of backdoor way to strengthen Citi by giving it access to Wachovia’s stable deposit base. To make the deal work, the New York Fed even agreed to absorb some of Wachovia’s losses. When the F.D.I.C. accepted the Citi offer, Geithner felt that a deal had been made. But before Citi could close the deal, Wells Fargo, a much stronger bank, made a better offer — one that didn’t require government assistance. Bair leapt at it. Geithner was furious, complaining that Bair’s action was sending the wrong signal at the wrong time: that the federal government couldn’t be trusted to stick to its word. During the crisis, however, Treasury and the Fed were adamant about protecting debt holders, fearing that if they had to absorb losses, the markets would be destabilized and a bad situation would get even worse. “What was it James Carville used to say?” Bair said. “ ‘When I die I want to come back as the bond market.’ Looks like Mrs. Bair indulged in a few well-deserved snipes at the people who took shots at her, off record of course, during the crisis.

If I could just buy depository lender I would snap it up in a heatbeat, litigation headaches and all. But, even though it may be the wrong environment to worry about this, I still can't get comfortable with $2 trillion + notional exposure, albeit hedged, and whatever is going on inside Merrill Lynch's day to day operations. It's easy to focus so much upon earnings power that you forget about losing power, and there is plenty to lose in a financial superstore model (which I still believe is the trend for these guys, management rhetoric aside). Again, I acknowledge that this is probably the wrong environment to be worrying about such things with household deleveraging, shadow finance breakdown, Basel II+, liquidity preference, etc... There just seem to be plenty of bargains in the plain jane world of boring lenders.

I'm a bit skeptical of the time monopoly theory simply because the costs of sneaking food are so low. Your maximum financial loss is capped at the ticket price. I couldn't find any estimates on the likelihood of getting caught, but it's not as if you have to hide Twix in your butt. I have eaten a panini in the theater and my lifetime hit rate is 100%. Another thing is that high traffic areas frequently have multiple theaters offering similar movies. If consumers are sensitive to the price of consumables, then wouldn't these theaters compete on that basis? Or do seats fill up so quickly that theaters can charge whatever they want during attendance peaks? In which case, wouldn't we expect more variable pricing throughout the year and time of day?

Sounds like a wonderful use of brokered deposits and FHLB advances. So great to see FDIC insurance properly applied! 35% equity to assets? Man, if only more banks ran like Beal's we wouldn't have had a recession.

Some more anecdotes from the development side: The developers are stepping back from BlackBerry because they say creating apps is too complex and costly for the size of the market. RIM’s devices have different screens sizes, varied operating systems and several ways to navigate, from a physical keyboard to touchscreen to a scroll button. “As soon as RIM brought in a touchscreen and mixed it with a thumbwheel, a keyboard and shortcut keys, it made it really difficult and expensive to develop across devices,” said Purple Forge CEO Brian Hurley. “What Apple scored big on is having a touch screen and a button and that’s it.” http://www.bloomberg.com/news/2011-06-27/rim-loses-miami-dolphins-fans-as-software-developers-defecting-to-iphone.html Steve Jobs on the 4Q10 earnings call (10-18-10): I think it's going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform after iOS and Android. With 300,000 apps on Apple's App Store, RIM has a high mountain ahead of them to climb. http://seekingalpha.com/article/230710-apple-s-ceo-discusses-f4q10-results-earnings-call-transcript