ERICOPOLY

Yes, larger sums make investing far less stressful. Suppose you have $10,000,000 saved for your retirement. It's invested in blue chips yielding 3%. You've got a $300,000 dividend income stream that doesn't fluctuate with market ups and downs. You don't have to ever worry about whether the stocks are up or down, you only have to think about your income stream. The reason why the stock market scares most people is that they invest their retirement savings in the stock market but they don't have nearly enough money to live on the dividend stream alone. They are held hostage by the market prices of their securities because they must sell off the shares in order to spend down their accumulated savings. So market crashes are especially painful because it has a direct impact on their "income" stream.

Their tangible book went up by 7% over the past year. I think this was driven by lower interest rates which created large gains in their portfolio of debt securities. The gains flowed through to OCI quarterly. However the yield from their bonds remain the same. So you tend to get a lower ROTCE from this -- same yield (same earnings) but, expressed as a smaller percentage of a larger tangible book value per share. So while it looks like Moynihan is changing his % targets, it's sort of out of his control because he can't will the interest rates to go back to the level of a year or so ago when he last said the targets were higher. It's the same amount of earnings either way.

I think he backed down expectations to only 12% ROTE when he realized that the CCAR process makes them hold a lot more tangible equity. It's the same $1.80 in earnings, but with nearly 10% more retained tangible equity the return is lower expressed as a percentage of tangible equity.

Suppose they make the 12% ROTE by end of 2016 (and forever after -- although that's quite pessimistic isn't it???). That's about $1.80 per share since today's TE is roughly $15 per share. So it's worth $18 today at a 10x multiple less the earnings shortfall between now and then. Let's say they earn only $1.20 this year and $1.50 next year. That's a 60 cent shortfall for 2015 and a 30 cent shortfall for 2016. 90 cents total shortfall. So it's worth $17.10 today using that basic logic. I regard 12% forever after as a very pessimistic assumption.

Alexander Hamilton: http://www.amazon.com/Alexander-Hamilton-Ron-Chernow/dp/0143034758 A Dawn Like Thunder: http://www.barnesandnoble.com/w/dawn-like-thunder-robert-j-mrazek/1100367042?ean=9780316056533 Johnstown Flood: http://books.simonandschuster.com/Johnstown-Flood/David-McCullough/9780671207144

They have 16% of their total capital allocated to LAS. What a resource pig for a segment that loses money.

That's what you would expect, why is this surprising? It's surprising because they still have $1b a quarter expenses (excluding litigation). What are they spending this money on?

Back in 2003 he predicted 10 years of deflation and he got that wrong given that we haven't yet had any after 12 years. However the interest rate portion of his forecast was correct. Now he is predicting a return to normal GDP growth.

I understand it to be the case that "Rollover IRAs" are ERISA accounts (because they originated from an employer-sponsored plan), but a "Traditional IRA" or "ROTH IRA" are not ERISA. http://finance.zacks.com/ira-accounts-erisa-qualified-6814.html

Ohhhh, in that case the easiest remedy is to take up poker to get the rush. Actually I don't know if playing poker tames risk taking or fuels it, but it definitely trains our mind on evaluating risk. http://www.cnn.com/2012/11/21/health/cnnheroes-exercise-addiction/ One of his first preclinical studies on the subject showed lab rats that had access to an exercise wheel in their cage were much less likely to self-administer cocaine than their sedentary counterparts. Other addictions, like gambling (probably the driver of indiscriminate leverage for many people), are perhaps managed similarly.

It's very concentrated -- just a tablespoon (diluted in larger volume of water) is needed to treat my citrus trees which are being devoured by aphids. It's cheaper than ladybugs which just fly away to the neighboring yards. It's the same stuff that is used on children's heads to treat lice. Also used in over-the-counter flea treatment for cats and dogs. Organic and poisonous: we have oleander growing in the garden. Don't eat that stuff!

Yes, I imagine that many of us have been hit by cars too. But the goal isn't to minimize mortal risk, but to minimize financial risk given that we live. There are investors who are self-proclaimed "naturally risk averse". They are wired to avoid risk they say. But looking into their lives, this is not true. There are places where their natural wiring is failing them. So I wonder if people who have an addiction to investment risk could be made more "naturally risk-averse" if they were introduced to road biking, or skiing, or hang gliding. Some sort of non-financial outlet for their adrenaline. My option trading was risk-averse to a degree. There are times when I'm terrified to use leverage, and there are times when I use it. I don't rely on it for adrenaline all the time. I have other places in my life where I get that. So perhaps when looking at people who blew up their portfolios, they disproportionately lack outdoor pursuits in their lives.

I went out to my garage and took this photo. See the label: "For Use in Organic Gardening"

However. Despite risking our lives, we as investors can congratulate ourselves as being naturally risk averse if we put our money in the lifeboat before our bodies.

I was just thinking about ERICOPOLY as an example of asymmetric risk-reward payoffs. This, to me, is the way to proceed. Now, I have no fuckin' clue about the bike riding reference - can you elaborate on what you are getting at? Do you mean that many on this thread are too risk averse in various areas of life but not risk averse enough in others - like biking? Or something else? The bike riding reference is an allusion to our troubles as humans. We worry the most about exotic risk. You'll find people who are afraid to swim at the beach because of sharks, but they don't plan their daily life around driving fewer miles on highways. They would feel safer driving across the country and fell more relaxed in the face of that greater risk. Personally I'm terrified of riding a bike on the road. I focus too much on the downside. But I go in the water at the beach, I drive on the road, ski, skateboard. I used to hike alone in the wilderness. And I used options for leverage.

I imagine that many of you ride bikes on the road (as does Mohnish), where your margin of safety is the thickness of your lycra. Mortal risk.

I'm concerned the stock price will increase before they will be able to reduce the share count significantly. That's probably just the reality of things. The stock is depressed during the rebuilding phase, and then the price jumps up when the coast is clear and earnings are strong. Similarly, the Fed holds them back and makes them retain capital during the rebuilding phase, and then let's them buy shares back in large quantity once their earnings power is restored. In other words, you can expect the stock price to be high when their buybacks occur in force.

But today, these buybacks drain trillions of dollars of windfall profits out of the real economy and into a paper-asset bubble, inflating share prices while producing nothing of tangible value. Where is his proof that the shareholders have done nothing with this cash that was returned to them? They might have taken the money and invested it in nascent companies. He seems to assume that it is not invested in anything at all. It reminds me of a child that asked "and then what happened", only this author never even went through the first iteration of that.

This stuff is insanely good -- and no sugar or fat: Scott's Spicy Carolina Barbecue Sauce http://tinyurl.com/qyed9h6 I smoked a couple of brined chickens in the Big Green Egg -- with this sauce it's heaven. Apparently a no-sugar vinegar based BBQ sauce is North Carolina style. First time I tried it -- so divine.

This doesn't really matter. Retaining $1 of earnings for an extra year only bears time value of money cost. The thing that is going to drive the stock up is like a 13%, 14% or 15% return on tangible equity. Until they deliver on that, I don't expect much.

The Fed said it identified "weaknesses in certain aspects of Bank of America's loss and revenue modeling practices and in some aspects of... internal controls." Well, it was barely over a year ago that Bruce Thompson sounded amazed that Mike Mayo didn't think BAC would be earning $2 a share a year from today. So maybe there's some teeth to the criticism that BAC struggles to model it's loss/revenues.

I thought the flag in your profile meant that you are in Canada.

The social skills I learned the most in school were to follow rules and to try to emulate the popular people and the people in positions of authority. I wish I hadn't learned them. AI would guess that behavior existed before schools. It sounds a lot like social instincts. Popular people (celebrities) exist outside of schools, and the masses want to know them and copy what they wear, etc...

The CBO forecasts that deficits will rise from here. AKA: stimulus. In other words, people currently working will retire and be replaced by other workers. The government will borrow at low rates to pay the retired people their promised benefits -- 100% of which will be spent. It's kind of like the expected net increase in retirees is like a net increase of people getting a paycheck (only retirees get their checks for staying home).

I found this screen capture amusing (attached) -- I saw this bit of bragging when I went to the "lighting" link on the BYD website. Hey, they are very modest about their achievements! So modest in fact, that if you choose the "products" list on that page they are too embarrassed to list even a single one of their wonderful offerings! Yes, that's right. A website dedicated to telling you that they don't have any lighting products whatsoever and, put together, they've saved a total of 000,000,000,000.00 Kg of CO2. What precision to take zero to that many place holders! bydlighting.tiff