ERICOPOLY

I'll probably go with the Tesla "D" if this crappy stock gets to $42+. We can drive our new cars head-on into each other and see who gets out and walks away from it :D

The warrants are 13.89 at last tick and the common is 30.95. So if you have 30.95 in cash, you can: A) buy one common share or B) synthetically leverage into 2.23 shares of common via investing it all in the warrants So the warrant gives you exposure to 2.23 shares of common stock upside. To to replicate the same upside as the warrant (but with a different strike put and a different cost of leverage), you could do the following: step 1) pay cash for the first share of common step 2) purchase 1.23 additional shares of common using margin. step 3) hedge the 1.23 shares using puts This way, you have 2.23 underlying shares of upside (same as the warrants) but you get to pick the strike price of the put that protects your margin loan. And the costs are different. If you are hedging with puts, that adds to the cost no? So you're buying a share and borrowing to buy 1.23 more. In order to hedge the 1.23, you'd also have to buy 1.23 puts, so you need to put up additional capital on top of the 30.95 for this insurance (or borrow more on margin to buy the put). What am I getting wrong? You have it correct, but it's pretty minor. Rough math, it puts me off by about 10% of the margin rate. So if your margin rate is 60 bps, you add 6 bps to account for it. Or if your margin rate is 100 bps, you add 10 bps to account for it. Well, I suppose you could argue that the loan itself used to finance the put is unhedged. So in order to buy yet more puts to hedge that, it really raises the entire cost of everything by 10%. So instead of 12% cost of leverage, it becomes 13.2%. I'm just doing mental math, not with a calculator. EDIT: Actually, I was up late last night and I'll need more time to think about it. Specifically, all non-recourse loans have interest that needs to be paid (presumably out of more borrowed money or other cash-flow). Whereas in this case the interest is pre-paid upfront. So fully hedging the money used to buy the puts could work as long as you unhedge it steadily at the pace that interest would be accruing on an ordinary loan. In which case it wouldn't cost as much as 13.2% -- it would be somewhere in between that and the original estimate of 12%.

To clarify, I said "now" "next year" "and the year after that" So that does not include 2017.

The warrants are 13.89 at last tick and the common is 30.95. So if you have 30.95 in cash, you can: A) buy one common share or B) synthetically leverage into 2.23 shares of common via investing it all in the warrants So the warrant gives you exposure to 2.23 shares of common stock upside. To to replicate the same upside as the warrant (but with a different strike put and a different cost of leverage), you could do the following: step 1) pay cash for the first share of common step 2) purchase 1.23 additional shares of common using margin. step 3) hedge the 1.23 shares using puts This way, you have 2.23 underlying shares of upside (same as the warrants) but you get to pick the strike price of the put that protects your margin loan. And the costs are different.

I wouldn't be using any leverage at all if that were the case. But given that I am using leverage, I'm capping the maximum losses at something reasonable.

There is an $18.33 "loan" synthetically embedded in the warrant. The cost of that $18.33 is the $1.10 warrant premium in addition to the lost dividend of (at least) $1.20 annually. $18.33 - $1.10 = $17.23 $17.23 grows to $18.33 at what annualized rate by 2019 expiry? That's rate is the annualized cost of the warrant premium. I get roughly 1.5% annually. You take that annualized cost, and then you add the annualized cost of missing the $1.20 dividend. So you add 6.5% ($1.20 divided by $18.33). 1.5% + 6.5% = 8%. And for what? What's so important about insuring that the stock won't be lower than $18.33 in 2019? I don't think worrying about $18.33 in 2019 is a realistic fear that worth paying 8% annually for. More realistic is $30 by 2016. It costs about 12% annually. At least you are getting some real insurance for your buck. However the cost of rolling that $30 put along will drop dramatically if the stock rises as expected by 2016, 2017, 2018. So the blended average cost of that $30 put will likely be 8% or less. But it's a $30 strike put, not an $18.33 strike. I expect the interest rate on my margin loan to rise at some point (a knock on my strategy), but I expect the GM dividend to rise as well (a knock on the warrant). Eric, Are you buying the common in your roth? and selling the puts in a taxable account? Also are you selling puts in other companies to cover the cost of the put? (If so, curious what companies you've picked) Thanks. No, this is strictly just buying the common on margin (portfolio margin) and hedging with the puts. Not writing anything else to cover the cost of the premiums.

There is an $18.33 "loan" synthetically embedded in the warrant. The cost of that $18.33 is the $1.10 warrant premium in addition to the lost dividend of (at least) $1.20 annually. $18.33 - $1.10 = $17.23 $17.23 grows to $18.33 at what annualized rate by 2019 expiry? That's rate is the annualized cost of the warrant premium. I get roughly 1.5% annually. You take that annualized cost, and then you add the annualized cost of missing the $1.20 dividend. So you add 6.5% ($1.20 divided by $18.33). 1.5% + 6.5% = 8%. And for what? What's so important about insuring that the stock won't be lower than $18.33 in 2019? I don't think worrying about $18.33 in 2019 is a realistic fear that worth paying 8% annually for. More realistic is $30 by 2016. It costs about 12% annually. At least you are getting some real insurance for your buck. However the cost of rolling that $30 put along will drop dramatically if the stock rises as expected by 2016, 2017, 2018. So the blended average cost of that $30 put will likely be 8% or less. But it's a $30 strike put, not an $18.33 strike. I expect the interest rate on my margin loan to rise at some point (a knock on my strategy), but I expect the GM dividend to rise as well (a knock on the warrant).

I bet that Tesla will be selling more pure EVs than GM does right now, next year, and the year after that ;) Any car that has a gasoline tank, I expect GM to sell more than Tesla which will sell zero.

I will bet that Tesla sells more model S next year than GM sells Volt. Every single quarter.

Don t get what he is talking about. He says that GM is selling for $28 or $29b?? With free cash flow expected of $6B. This made me have a look Today sells for $31.31 per share x ~1.7million shares plus $60B+ in debt. Cash of ~ $30B That works out to EV ~ $82 B vs FCF ~ $6b. --->7% FCF yield. Looks fairly valued,no? Although impressive list of investors including WEB and Tepper to clone...My calculation above may be wrong. I get lost in the EV talk myself. I just like the laundry list of top-shelf names owning the stock, as well as the longer term earnings consensus amongst the wall street analysts. 2015 EPS: 4.44 2016 EPS: 4.83 2017 EPS: 5.8 The lowest estimate given amongst any of the 12 analysts is 3.62 for 2015 EPS. So if you put a 10x multiple on any of those earnings, this is not bad today at this price.

Expressed differently, I prefer the zero-money-down terms better (hedging at-the-money). The GM warrants give you protection of a price drop below $18.33 -> but the drop from these levels down to $18.33 would be painful if leveraged, and these warrants are of course leveraged. You have a lot more skin in the game with the warrants. Compare to real estate non-recourse example: good: 30% down payment with 70% LTV best: 0% down payment with 100% LTV So when the 0% down financing is available without too much additional financing cost, I like it.

Well, there's about $1.10 premium in the B warrants in addition to the lost dividend of $1.20 annually. So the warrants give you a synthetic non-recourse loan with these aforementioned expenses in lieu of interest payments and explicit hedging costs. So I don't know, that's somewhere in the ballpark of 8% annually. Okay, but that's roughly the same annualized cost as hedging the common with the $30 strike put. The only extra expense is interest, and my portfolio margin rates at IB are really low. So instead of being a cheapskate and going with the warrants with their $18.33 strike embedded put, I'd rather pay a wee bit extra annualized and go with a near-the-money put. That was the only reason. I just like the non-recourse loan terms better (much more favorable strike price but not much more expensive). Other opinions are free to vary on this subject.

I bought the common.

He had a good point about the recalls. I think we're at the apex of Recallmageddon. So I actually decided to make my first-ever GM purchase today. The CEO is just cleaning up the old issues that they've known about and buried. It's a nice refreshing management change and the storm will soon pass.

The 10 year chart looks like KO is crushing the S&P 500. http://finance.yahoo.com/echarts?s=KO+Interactive#%7B%22range%22%3A%2210y%22%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22SPY%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%7D%7D But the 5 year chart shows the opposite. http://finance.yahoo.com/echarts?s=KO+Interactive#%7B%22range%22%3A%225y%22%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22SPY%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%7D%7D I know it does. I was merely correcting an error made in the post that claimed it had underperformed the S&P500 over 10 years.

Volt outsells Tesla? Where did you read that? Here is a reference from June 2014 that says Volt had only sold 8,615 YTD (in June). http://insideevs.com/chevrolet-volt-sales-june-2014/ That seems low compared to the Tesla sales. Guys, here are the data as of September 30th in the US: http://insideevs.com/september-2014-plug-electric-vehicle-sales-report-card/ Tesla sales are estimated, but insideEVs does a good estimate. or http://insideevs.com/cumulative-us-plug-electric-vehicle-sales-model-model-breakdown-market-share-data/ And a World top ten as of August 31th: http://ev-sales.blogspot.ca/search/label/World That makes more sense. The Volt entered production in 2010, literally years ahead of Tesla's Model S. Hence the higher cumulative global sales to date, which is the only category in which it leads Tesla. How about $100 bet that Tesla sells 50%-100% more Model S than GM sells Volts in Q4 '14? Global sales. Loser donates it to Sanjeev's board charity arrangement.

Volt outsells Tesla? Where did you read that? Here is a reference from June 2014 that says Volt had only sold 8,615 YTD (in June). http://insideevs.com/chevrolet-volt-sales-june-2014/ That seems low compared to the Tesla sales.

True, but UCLA under John Wooden is not UCLA under Steve Alford. Different players, different coach, different administrators, different fans. But same uniform!

I sat down with the appraiser in the dining room and he asked me a lot of questions. We talked for about an hour. He asked me how I arrived at the purchase price. I explained how I calculated the value in my offering price. I also asked him if he'd noticed a few of the recent transactions that I cherry picked (the ones that seemed both high transaction price as well as inferior comps). My angle is that I want the appraisal to match the price in our lease/option agreement -- if it comes in low, I'll have to dig up more funds of my own at closing as the loan is based on 70% of appraised value.

The 10 year chart looks like KO is crushing the S&P 500. http://finance.yahoo.com/echarts?s=KO+Interactive#%7B%22range%22%3A%2210y%22%2C%22scale%22%3A%22linear%22%2C%22comparisons%22%3A%7B%22SPY%22%3A%7B%22color%22%3A%22%23cc0000%22%2C%22weight%22%3A1%7D%7D%7D

Shilling feels that in 4 more years, deleveraging will be complete and real GDP growth will return to 3.5% or more. "Sure, productivity (output per hour worked) grew by only 1.5 percent from 2009 to 2012, but that’s normal after a severe recession. I expect it to return to a 2.5 percent annual growth rate -- or more -- after deleveraging is completed in another four years or so. Even in the 1930s, productivity averaged 2.4 percent a year, higher than in the Roaring '20s. In the 1930s, much of the new technology from the 1920s -- electrification and mass production -- was adopted despite the Great Depression. Shilling expects that once private sector deleveraging is finished, real GDP growth will return to about 3.5% or more. He also thinks "the slow-growth-forever crowd will need to find a new theory." http://www.businessinsider.com/gary-shilling-optimistic-on-us-economy-2014-7#ixzz3GnebzoN8

I'm more partial to the idea of Sears locations redeveloped as ebola quarantine centers. Where else can you ensure that risk of person-to-person contact is this low?

Slow-growth forecasts are wrong: http://www.bloombergview.com/articles/2014-07-16/slow-growth-forecasts-are-wrong The Boom is Coming and Sooner Than You Think: http://www.bloombergview.com/articles/2014-07-18/the-boom-is-coming-and-sooner-than-you-think

I had a mortgage approval, but now a fresh wrinkle. State Farm is now backing away from the insurance policy they quoted to the lender. They won't write any new policies in the 93108 zip code due to our water rationing, dry landscaping, and consequent fire risk. Now, if all insurers follow them out the door, it would freeze the local real estate market.

Yeah! But in my experience (and I already have another apartment in the same town!) it is just like MrB has said: Gio MrB's reply was great -- thanks for pointing me to it. I'm familiar with exceptional real estate being priced like a good bottle of Scotch. Or a fine cigar. Neither are valued on their cash flow, as they don't produce any.