Rabbitisrich

You are ignoring the important aspects of this skerfuffle. Sokol claimed to have purchased Lubrizol following independent research. He stood by this claim in a live interview on CNBC. Citi provided a different account in which Sokol contracted their services to provide a list of potential merger candidates while acting in his capacity as a Berkshire officer. He then directed Citi bankers to contact Lubrizol's CEO, James Hambrick, to discuss the merits of a merger. Without disclosing any of these facts, Sokol reported the idea to Buffett, and arranged a fact finding dinner with Hambrick, which ultimately sealed the buyout. So you have the difference between a guy who likes a company, and is bringing the idea to you on its merits, versus a senior officer who has abused his position to appropriate the corporation's research, initiate dealmaking proceedings behind your back, and report information from an influential meeting without clarifying his conflicts. Why would you make someone like that CEO?

Warrant holders, did anyone receive tax guidance regarding adjustments? How are you calculating your 2012 tax liability for these warrants?

http://www.voxeu.org/article/implementation-basel-iii-us-will-bring-back-regulatory-arbitrage-problems-under-basel-i You already see the liquidity oriented rules biasing banks towards GSE securities, which allows for shadow financing to adopt dealer roles traditionally held by banks.

I'm not sure that it impairs the investment case. As you said, and the article implies, these are existing problems (although I haven't had problems with other grocers, including Whole Foods). Subjectively, my poor experience resulted in less frequent visits, but my area contains several grocers. If Safeway is geographically convenient, you would probably just check the receipt at the store.

Start with the 3 star reviews. They tend to run through the pros and cons in a relatively dispassionate manner.

http://www.huffingtonpost.com/2012/12/21/safeway-supermarkets-overcharging_n_2345875.html?utm_hp_ref=business Has anyone experienced similar? I visited Safeway on a weekly basis when Just4U debuted, but every other receipt showed a missing discount.

Did you eventually open an account with Wells Fargo? Any opinions on their service and execution?

I once opened Fidelity account, and without my permission they assigned me to a "Private Banking" representative who was very gracious over the phone, and then immediately raised margin requirements for all of my levered positions and written puts. When I tried to close the account, they kept coming up with delays so that it took almost a month to complete the transfers. A form that I signed would be misplaced (with critical information), or I would get a call on Friday saying that I had to resubmit information. I'm pretty sure that Fidelity outsources their asset transfer process to the same team that handles Sirius radio cancellations.

http://www.dan-dare.org/Dan%20Mario/SMBMovie-MarioLuigi2.jpg

I think that you are right. On the BAC Warrants thread, I thought that Buffett had copy and pasted the A warrant language, but it seems like ordinary cash dividends actually means ordinary cash dividends. Good catch.

I try to think in terms of business results relative to purchase price over time. It's easy to get knocked into mainstream financial thinking when the blood starts moving. In the case of BAC, this helped a lot as much of the exciting news came and went with nary a market move.

If you broadly apply the reasoning from the NY appellate court in 2011, you simply have to supply enough funds to a subsidiary to pay debts for two years to runout the timeline for bringing a fraudulent transfer claim. I thought that you would have to pull an Allied Capital and at least claim that some appreciating asset would cover future claims, but rereading the decision, that is unnecessary. You just have to show that the potential claimant has not experienced monetary damages, and therefore has no cause of action. http://www.mbia.com/investor/publications/011111_mbiadecision.pdf

In terms of fraudulent conveyance, there is already a 2 year limit on litigation from the time of conveyance, probably for the reason you describe. But I would wager that the negative effect of uncertainty due to potential clawback litigation is smaller than the downside of improving the ability of firms of shuffle assets pre-bankruptcy petition. The NY Supreme Court ruling in favor of transformation, from Jan. 2011, used a liquidity test to determine the inability to show insolvency, but this bankruptcy ruling employed different methods: http://www.kccllc.net/documents/0810928/0810928091014000000000003.pdf In the "Findings of Law..." section, the judge laid out an extensive narration to show that the conveyor was left with "unreasonably small capital". He covers everything from public housing market information, to internal discussions between operating and financing parties, to the behavior of creditors during the bargaining process. He assesses the "ability to pay debt as they come due" test by looking at internal communications, and debt prices and ratings. And then he accepts expert testimony reliant upon FMV definitions of insolvency.

The insolvency definition confused me as well. But there was a favorable decision in early 2011 regarding transformation, where the majority refused to perceive insolvency without an actual delinquency, or what investors might think of as a liquidity test. BAC's argument at the time seemed to refer to a FMV of net worth at a point in time, like in the aborted BCE - Teacher's Union merger.

I didn't read the article, so I may be off base, but the writer may have referred to the '93 budget under a Democrat majority.

http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=1&_r=1 "More than half of Inditex’s manufacturing takes place either in the factories it owns or within proximity to company headquarters, which is to say in Europe or Northern Africa. Inditex owns factories in Spain and outsources production to factories in Portugal, Morocco and Turkey — considered costly labor markets, typically. The rest of its clothes are produced in China, Bangladesh, Vietnam and Brazil, among other countries. The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks. Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed."

The argument over whether AIG and BAC are bargains or not could go on forever without reaching a conclusion. The point the article was trying to get across was that financial companies (AIG and BAC included) are difficult to analyse because of insufficient information, they are levered and therefore the variability of outcomes is quite wide. Would you disagree? Is this something that Berkowitz openly acknowledges? No. I think that granularity is somewhat overrated. I'm reminded of Mike Mayo on Bloomberg dismissing David Einhorn's broad arguments against Lehman, the substance of which sourced from SEC filings. Mayo essentially pitched granularity to portray Einhorn's arguments as lacking nuance. Conversely, sophisticated investors like Tom Brown and David Merkel experienced mixed performance despite deep knowledge and statutory level analysis. It's more fair to say that with financials, it's difficult to specify where problems will emerge, and in what order, than it is to say that you can't tell whether they will emerge. Berkowitz does acknowledge BAC and AIG's opaqueness, if only obliquely, when he emphasizes that those companies have passed through several years of economic stress and regulatory attention. It's the skeletons in the closet, or the picture of tide going out. You don't use these metaphors for easily tracked business operations.

The first link directs to a conference transcript from 2000 in which Lewis makes all the mouth noises of a sober bank CEO. That's recession bank CEO talk. The second link refers to actions undertaken in 2003 and 2005 that reflected boom bank CEO actions. As the rest of the market appreciates the balance sheet and liquidity story, and we start to hear more about the earnings story, it's important to remember that we've seen Moynihan in a depressed environment. There was another Moynihan who overpromised on dividends and issuances, before copy and pasting TARP warrant terms onto a large private issuance. It's a minor event with respect to the current price. Still, the seeds of failure are sown today, and other figures of speech.

I'm a Moynihan fan as well, but let's remember that he has shown great leadership in the current environment. http://www.sec.gov/Archives/edgar/data/70858/000095010900500135/dex992.htm "As we have told you before, we are changing the basic thrust of the company from an acquisition and thus expense-driven model to a customer-focused, revenue-driven organization." - Ken Lewis, 2000. http://www.nytimes.com/2005/07/01/business/01lewis.html "Once again, Mr. Lewis shrugged off his critics. "Let me dissuade you of your view that this is a high price," he told reporters yesterday. "Think about it: you are getting a card portfolio and marketing expertise for the price of a card portfolio." - Ken Lewis, 2005.

That's a real clever goat. Remember Mark McGoldrick, the guy who left Goldman Sachs because of his offensively low eight digit salary? He started Mount Kellett with a couple of other clever goats from his GS team.

Not long ago, some jerk went on CNBC and said to avoid Berkshire Hathaway because Charlie Munger was the only successor (this is NOT an oversimplication of his argument). Not surprisingly, his 10 year record hugged the S & P. Unfortunately, it was a 10 year record. I think that he even managed a little over $2 B with a large cap equity focus. The business of investing is not the same as investing.

It was a ~$3.7 B response to a $570 MM claim. Did BAC settle their false claims charge before they were charged? Perhaps the market fears the discovery process.

Maybe, though I guess it depends on which investors you are talking about. One guy with a major stake in WFC was shocked when he saw their distribution of home loans in 2005, lol. But these products are commodities. To the extent that you have capital and distribution, ANYONE can compete. Saying that major bank X couldn't get traction in XYZ financial products is equivalent to saying that they wouldn't " ". If all banks did the same thing, then they would have shown equivalent results within some luck determined range.

There is nothing new about these linked products. They've been doing them for well over a decade. It wouldn't surprise me if WFC was a little late to the game on them, but they are typically very straightforward instruments. I don't know anything about these specific ones, but on the surface there is nothing to be concerned about. The problem is that you can track changing quality for many of WFC's products, but their structured offerings are a mystery. I'm relying on past history + behavior in other areas to feel comfortable, but that's a relatively sorry best-efforts strategy.

Does anyone have thoughts on the knockon effects of this lawsuit? The market is clearly discounting something beyond the penalties sought by the AG (6,320 loans from '02 to '10, $190+ MM damages alleged, $570+ MM penalties), given that the stock is down by $3.7 B. Does this suit open up new legal vulnerabilities?