Rabbitisrich

A UMass econometrician named Arinjadrit Dube looked at the timing of changes in debt/income and rate of changes in GDP growth: http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt

Good article.

The government is using a creepy justification in granting itself the right to establish "reasonable" levels of savings. If they wanted to ban Romney type abuses, they could have targeted valuation procedures or eligibility requirements.

Thank you, that looks reasonable. Although, perhaps Mephistopheles had a separate argument comparing instrument to instrument? The leaps rollover plan is better compared to a warrant plus ITM puts plan. The capital gains deferral is the other major benefit in exchange for more downside exposure.

It seems as if BAC management has been indulging in an evolving legal thesis. The 2011 AR conflated the "material and adverse" language with a burden of proof on MBI to demonstrate proximate causation. Then subsequent 10-Qs warned of higher reserves if their causation thesis imploded. But the language didn't change after damaging causation rulings in Syncora vs. EMC/Countrywide! Now BAC's argument has shifted to the calculation of damages, or a de facto proximate causation burden of proof. Is this part of the plan or improv?

How do you figure this? Can you paraphrase or direct me to the argument?

The semantics aren't so important so long as you understand what you get for what you paid. The scenario that you presented isn't really applicable because the idea of an opportunity cost requires a cost, by definition. If someone hands you warrants, then you have no opportunity cost unless you are obligated to waive your right to purchase common.

I'm not a fan of that feature as well. Particularly if you are sanguine enough about the banking industry to require something close to a market return, you may appreciate the dollar value of dividends. The warrants will not only return a lower dollar value, but they will return lower lower dollar values as the strike adjusts. This is mitigated by the reinvestment of your lower lower dollars at the adjusted strike, and by the fact that your whole inventory, not just the marginal shares "purchased", will adjust downwards. But you pay tax on that as well, because you have to report the fair value benefit to the IRS. I guess by that logic, warrant holders would have received a tax BENEFIT had we received larger dividends while the strike is above the current stock price. By the way, has anyone heard from holders of other warrants about whether these are qualified dividends? I have received a trustworthy opinion to the affirmative, but people should have received broker guidance by now.

That was far darker and more upsetting than your jolly description.

Keynes' activities in commodities markets: http://mpra.ub.uni-muenchen.de/44131/

This is a thought provoking discussion, but I found it confusing to refer to the 13% as a cost of borrowed funds. The conventional usage of the term relates cash flows to a net present value of zero, so that you have to beat the rate to make any money. The 13% in this thread refers to the rate at which the warrants do not receive excess return over the common, and below which the common outperforms the warrants, or cost of capital. Maybe this is obvious to everyone else, but some people get stuck on semantics.

As a very general rule, I try to avoid turnarounds that require gifted CEOs. Turnarounds that require competent CFOs, on the other hand, have been very fruitful.

The warnings against leverage are good and useful, but it's also good to avoid basing investment decisions on overly broad categories. Leverage isn't leverage isn't leverage. Particularly when it comes to leaps and some warrants, the ability to own underlying equity at a negative carry with NO RECOURSE can be very attractive. The no recourse feature of options is not to be underestimated. Investors might reasonably fear losing permanent money to irrational pricing, but those risks can be mitigated by position sizing, term management, and sticking with situations featuring deep discounts plus capable management.

Wow, interesting. She consistently brings well thought ideas to Barron's despite poor fund performance through the recession. I don't know how she gets her ideas, but she has introduced investments, like KALU and MHK, that more superficial screens overlook. It's worth keeping her roundtable interviews even years later because her analysis usually cuts to the core of the company.

"Perhaps the most significant is that it's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong ... Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig ... As far as Soros is concerned, when you're right on something, you can't own enough." - George Soros via Stanley Druckenmiller via The New Market Wizards via Market Folly.

There is a powerful scene where the wife is staring at the floorplans of her dream home while murmuring, "Isn't it wonderful?" Later, she puts her family's net worth into two stocks, the names of which she can't recall. Less explicit versions of that cautionary tale effect even experienced investors.

I'm a bit shocked at the size of today's move. Given court opinion in the dismissal motion on how the plaintiffs would have to show impairment, and the standard of proof against Dinallo, I thought that the market had largely priced in a victory on this front. Why on earth would investors have expected a state court to rule capriciousness or abuse on the part of an insurance commissioner? Crazy.

I'm under 3% cash before taxes, and not including funds set aside for 2012 taxes. I feel great about my portfolio operating results, but the recent Barron's cover is distressing.

LOS ANGELES, Jan 31, 2013 (BUSINESS WIRE) -- Wells Fargo & Company (NYSE: WFC) said today it has formed a Commercial Banking unit dedicated to the growing and dynamic base of Korean middle market companies in the U.S., many of them concentrated in Southern California. Sungsoo Han, a 22-year veteran of Hamni Bank and Wilshire State Bank, has been appointed senior vice president and senior regional director of Wells Fargo's Korean Division. Prior to joining Wells Fargo, Han served as executive vice president and chief lending officer of Wilshire State Bank, with responsibility for all lending, including commercial banking, Small Business Administration, home mortgage, commercial real estate, insurance, and wealth management departments. "Korean companies are more comfortable doing business with Korean-speaking bankers," said Han. "Taking a different approach than other major banks, Wells Fargo is investing in local Korean bankers who are fluent in their language but more importantly understand our culture. Fluent in Korean culture and language, Han and his team will make decisions on a broad array of loans and owner-occupied real estate loans. This new, L.A.-based unit focuses on developing long-term, professional business relationships with both Korean multinational subsidiaries and domestic Korean enterprises. Wells Fargo Commercial Banking lenders are empowered to make decisions regarding pricing and structure as it relates to the individual needs of each business. Wells Fargo offers a wide spectrum of products and services to meet the growing needs of the Korean companies. "Wells Fargo is very pleased to present Mr. Sungsoo Han and his unit to the Korean community and its key enterprises," said MaryLou Barreiro, head of Commercial Banking for Wells Fargo in Greater Los Angeles East. "His lending experience and diverse network of business contacts will serve the Korean community and Wells Fargo customers well." More than a quarter-million Koreans live in Los Angeles County, with nearly half in the three-mile radius of Koreatown, making it one of highest-density neighborhoods in the United States, according to the Korean American Chamber of Commerce of Los Angeles (KACCLA). California is South Korea's ninth-largest trading partner, while South Korea is the 11th-largest sources of foreign-owned and affiliated companies in Los Angeles County. "It is critical to understand and be able to speak the language when you reach out to the smaller communities," said Woo-sung Lim, president of the KACCLA. "Business becomes natural when you understand your customers and your customers understand you. And with Mr. Sungsoo Han on board at the Korean Division of Wells Fargo Commercial Banking, it will definitely help reaching out to huge number of Korean American Business owners."

I see, thanks.

Pfaelzer applied Delaware law to the Allstate dismissal, and reasoned that the plaintiff's inability to establish fraudulent conveyance effectively ended their successor liability argument. Bransten hasn't ruled on SL yet, but because MBIA is a New York company, I think that she would have the major word on successor liability under New York law, which doesn't seem, based upon her 2010 ruling to allow BAC to remain a defendant, to require evidence of fraudulent conveyance. Kapnick's final hearing is set for May of 2013 and pleadings are due in March, so there is still room for Bransten to throw a wrench in the works by removing the ring-fence. I'd love to hear one of the lawyers of the board comment on whether a negative SL ruling could really impact the settlement. As other commentators have noted, Grais and co. attacked Lin's default, breach, and repurchase assumptions, not his SL presumptions. The SL issue seems to have more to do with applying additional legal haircuts to reach $8.5, rather than the low end of Lin's settlement range. Is this much ado about nothing, or do the MBI fans have a good point?

Does anyone know why the stock moved 5%+ on Wednesday?

The Lin report didn't utilise any successor liability arguments, as far as I know, and the Walnut Place led counter-arguments focused on Lin's breach and repurchase assumptions. If the passage MyDemaray cited is later claimed to presume on SL, then it would be reasonable to ask why Grais and co. didn't attack the issue at the time. The SL stuff was employed to explain the discount between the $8.5 settlement, and the $8.8 low end of Lin's estimated settlement range. This Alison Frankel report links to Bransten's 2010 ruling that BAC could not dismiss MBIA's contention of "De Facto merger" under New York law: http://blogs.reuters.com/alison-frankel/2011/10/11/why-countrywide-bankruptcy-likely-wont-solve-bofa-mbs-problems/

Haaah, you really fooled me. I read it, then stepped away to make coffee in case I missed something.

It's sort of like the Chris Rock joke about how the line between flirting and harassment is a matter of looking like Denzel Washington or Bill Clinton. If a company offers a low performance record, then you have to wonder whether disclosures are really informative, or just mining for good news.