ERICOPOLY

Here is an article that tries to explain it: http://www.nakedcapitalism.com/2012/06/simon-johnson-jp-morgan-at-risk-if-euro-breaks-up.html JPMorgan’s total balance sheet is valued, under U.S. accounting standards, at about $2.3 trillion. But U.S. rules allow a more generous netting of derivatives — offsetting long with short positions between the same counterparties — than European banks are allowed. The problem is that the netting effect can be overstated because derivatives contracts often don’t offset each other precisely. ... According to my calculations with John Parsons, a senior lecturer at MIT and a derivatives expert, JPMorgan’s balance sheet using the European method isn’t $2.3 trillion but closer to $4 trillion. That would make it the largest bank in the world.

Unbelievable! They weren't very clear, but perhaps they meant it in the context of another line in the preceeding paragraph: The new method would increase the balance sheets of U.S. banks because of differences in how derivatives are treated.

Chanos is saying that Dell has plowed billions into acquisitions to end up with the same level of earnings where it was before (which looking back is basically true) - which implies that from an earnings standpoint its high M&A spend is almost equivalent to huge hidden maintenance capex rather than growth capex as its legacy business gets less and less profitable. If it needed the same level of M&A to maintain the same results forever he might have a point. I am inclined to take the other side of that view, but it's worth thinking about. Chanos has a complicated method of expressing that the PC business' contribution to earnings is declining.

(e.g. For Chanos, the bull case for Dell is, it's a cash flow rich company but if you include their acquisitions as R&D capex, it's burning money. His mental model of why it's a good short sounds correct, but given in opportunity to argue with a long investor who has done his analysis, Chanos would have to flesh out his argument even more. Unfortunately, that's not the ecosystem we live in I don't understand -- when Berkshire employs a strategy of acquisitions Chanos doesn't call it "R&D" or "capex". How is it different when DELL buys a business vs when Berkshire does it?

Eisenhower (Republican) raised the top income tax rate to 91% in the 1950s. Hoover (Republican) raised the top income tax rate from 24% to 63% in 1932. I wonder if the conservatives today would rather have an Eisenhower and his 91% tax, a Hoover with his 63% tax, or Obama who has never proposed any tax even remotely like that?

The bank seems to be deliberately underpromising and overdelivering, no doubt to rebuild credibility. They had a goal of 7.5% Basel III by end of year, and they get to 8.1% in just the first half of the year. Now they are accellerating the cost cuts.

The locals say this house is owned by Charlie: http://www.lotsafunmaps.com/view.php?id=2616 My son's preschool is located close enough that we walk the trail to the beach after dropping him off in the mornings. The trail runs behind the house, crosses a bridge, then turns 90 degrees to the beach. The bench seen in that photo is on the public trail. As mentioned here, the Sea Meadows community was developed by Charlie: http://santabarbaraestatehomes.com/beaches/montecito-real-estate/hammonds-beach-homes/

Now that I got me some Seagram's gin Every body got their cups, but they ain't chipped in Now this type of shit, happens all the time You gotta get yours before I get mine - Snoop Dogg. Obama supporter For you Southern conservatives, the full text has been interpreted to your drawl:

Kaletsky pushes his argument further, noting that while a German exit would hammer German insurance companies and banks "because of a mismatch between their euro assets and their new D-Mark liabilities", the German government would be able to bail them out since it would no longer have to spend huge amounts on bailing out peripheral EU states. Moreover, and this is a very telling point, unlike a threatened Greek exit, a German exit would not prompt a capital flight from German banks since the D-Mark would be expected to appreciate in value against the euro, not depreciate. ... The German government would gain since it could elect to repay existing German bunds in legacy euros rather than in appreciating D-Marks. German bond holders would get burned, but that's their problem. The alternative, as Kaletsky notes, would be the German government handing bund holders a windfall by repaying them in appreciating D-Marks. http://www.econmatters.com/2012/06/merkel-outflanked-in-summit-will.html

Why would they not just leave the common currency? Germany can leave if they don't want to help pay for the periphery debts.

They are certainly very good, however I'm not sure how much of a benefit they got from issuing their shares at a huge premium to book value (it was up to 3x at one point!) -- I think it was quite a bit.

No friggin idea.... They may well be onto something. The CAn. Auto Workers just took a 4 yr. 0% increase. The government of Ontario is freezing all public sector wages, either by legislation or through bargaining. You are right of course, they may be onto something. However it "only" takes an event like Germany leaving the Euro to significantly diminish the chances of deflation in Europe. That would devalue the Euro, there would be printing, and with competitive export prices (weak Euro) there would be a better employment picture.

I looked at the Q2 conference call transcript last night. They had $17b in non-interest expense in Q2. $1b of that expense was due to legal expenses. Any guesses on how much that (legal expense) will come down in a "normal" operating environment -- when the legacy issues are fully behind them? They had $2.5b quarterly expense from $300b of long term debt, and only $0.5b quarterly expense from $1T of deposits. Clearly shifting funding from LT debt to deposits is a huge opportunity. Any guesses on how low they can bring this long term debt over the next 5 years? I believe they have something like $100b or so of loans in runoff -- presumably as these run off they will wipe out $100b of LT debt. That would save $3.3b a year in interest expense, not to mention the losses those loans generate.

I was more than 100% net long in FFH most of the time from 2006 through 2009. The credit bubble was unsustainable -- it was nearly certain to collapse under the weight of defaults, thus the CDS bet had that going for it. The only question was when. Does the deflation bet bear the same characteristics? Are nominal price gains something that can go on in perpetuity with a fiat monetary system?

My HP Pavilion running Windows 7 blows Apple's product away for one simple reason: http://h20000.www2.hp.com/bizsupport/TechSupport/Document.jsp?objectID=c00958213 I just swipe my finger tip to logon when I open the laptop. Then when I go to a website like Ebay, I swipe it again and it enters my user name and password automatically. Then when I pay with PayPal, you guessed it, I just swipe my fingertip. Apple can't touch Windows in ease of use ;D

Yes, just look at Mike Mayo in March 2011: http://www.cnbc.com/id/41891291/Sell_Citigroup_Buy_Bank_of_America_Mayo "Bank of America — No. 1 — is you don't even need revenue growth for this company to earn to earn $2 dollars a share," he said, "No. 2, half of Bank of America is the old Merrill Lynch with a little bit more capital markets that's a very nice business fix. And No. 3, no question that expectations are low on Bank of America management team, but I think they can exceed what is already pretty low expectations," Mayo added. But then look at how he sticks to his convictions in Aug 2011 ;): http://www.streetinsider.com/Downgrades/CLSAs+Mike+Mayo+Cuts+BofA+%28BAC%29+from+Outperform+to+Underperform/6694359.html CLSA's Mike Mayo downgraded shares of Bank of America (NYSE: BAC) in a mid-day research note Monday amid a 14 percent decline in the stock. Mayo now rates BofA shares an Underperform, down two notches from Outperform. The analyst reduced his price target on the stock from $11 to $8. With BofA shares last trading around $7 even, Mayo's new price target still represents potential upside of nearly 13 percent.

Back in August 2010, it's a "value play" with a $16.50 price target: Guggenheim Securities analyst Marty Mosby calls Bank of America a "value play," and upgraded the shares to a buy rating on August 13, with a 12-month target of $16.50. http://www.cnbc.com/id/39068483/Bank_of_America_A_Play_for_the_Recovery Somewhere along the line he lowers it to $10. Then last October he says that it has one of the highest potential returns, so naturally he cuts his price target to $6.50 from $10 ;): Mosby dropped Bank of America to "neutral" from "buy" while lowering his price target to $6.50 from $10. Nonetheless he believes Bank of America "represents one of the highest potential long-term returns." http://www.thestreet.com/story/11272637/1/bank-of-america-downgraded-by-mosby.html Then he sees it cross $5 per share and recommends nothing, waits until it breaks $10 before gaining confidence in saying that it's a "buy" on April 10th after a small pullback and a new $11 target price: http://video.cnbc.com/gallery/?video=3000083572&play=1

Where was he when the stock was at $5? This was printed 5 days before BAC bottomed: "There's a group of high-quality banks that have bottomed, but Bank of America isn't one of them," said Marty Mosby, large-cap bank analyst at Guggenheim Partners in Memphis, Tennessee.

It sort of seems to me like he doesn't follow Bank of America very closely. Look at what he goes on to say: Guggenheim's "capital analysis suggests that BAC has enough capital to pass the Basel I stress test requirement but would be short of Basel III compliance at year-end 2013." The analyst "concluded from that analysis that BAC will not need to raise capital, although BAC still needs to accumulate capital as quickly as possible." Mosby added that "until short-term rates begin to rise, BAC's earnings power is between $10 billion and $12.5 billion a year," and that the company's after-tax mortgage losses ranges will range between $15 billion and $50 billion.

I'm not sure of the year in which the estate was settled, but let's say it was 1976 -- so that makes it a 28 year holding. 15% annualized if a 50 bagger 18% annualized if a 100 bagger

Was he still holding it when it became nearly worthless? I remember seeing an interview of Prem and somebody asked Prem if Ben still held the bag and Prem didn't know. Is there a public record of this?

Well, I'm sure they could come up with longer term numbers than what their funds show, but here is that data. TWEBX kinda sucks. Can't really compare it to an index since it's US and foreign stocks, so I'm looking how it did against its peers. Results don't look so hot. For the past 10 years it has ranked in the bottom 85% of its peers. 15 years - bottom 55%. Hey, they beat 15% and 45%, respectively. Better than....some! :P TBGVX is good. 10 years - top 19%; 15 years - top 1%. That's not what I mean by their historical results. I mean whether or not they are actually purchasing at a significant discount to intrinsic value and selling near intrinsic value, as they profess to be able to do. They surely have a record somewhere of what they bought in 1965, for example, and they can then see the price paid per share and how much intrinsic value those shares turned out to be worth (in hindsight). Then they could release that information to their fundholders saying "look, we are really capable of doing what we claim to be able to do".

Tweedy Browne for example has been around long enough to just release their historical results relative to actual intrinsic value. They should be able to factually state, without any doubt, whether or not their picks are consistently below intrinsic value by a wide margin, whether or not they sell near intrinsic value... And then shove it down the throats of the "efficient markets" academics.

The actually time held has nothing to do with it. My interest is to know whether or not he (and others) really picked stocks at a price that represented a discount to intrinsic value. Enough time has passed since his last purchase where a graduate student could look at each and every one of his purchases, the price paid, and see whether he indeed bought at a discount to intrinsic value. He has been dead more than thirty years -- surely the long term business results are known well enough to say if any one of his picks was actually purchased as a 50 cent dollar, or as a 90 cent dollar, or a 120 cent dollar, etc.... Then you can see how he did "on balance", by looking at all of them and then taking the average. What if on average he merely bought stocks near their intrinsic value and made money on volatility swings? Okay, that doesn't mean it's a losing strategy at all, but it would be interesting to know if the guy that wrote The Intelligent Investor was really able to accurately determine intrinsic value himself. We know that Warren Buffett can because Berkshire has grown mostly from keeping the holdings "forever" -- the long term weighing machine is producing results, not the volatility and skillful trading.

The household debt service ratio is at nearly the lowest point in 30 years. It's not low because the debt is low, it's low because the interest rates are low. Mostly due to refinancing.