What are you buying today?

[boilermaker75]

more WFC, BRKB, BAC, and cowbell

[Picasso]

CLMS.  I'll probably do a thread on it.

[Ballinvarosig Investors]

Bought some Bank of Ireland at 18c. Tangible book value will be about 25c, it will earn about 2.5c for 2016, a price/earnings multiple of just over 7x.

Bought some Barclays at £1.31, the Brexit will provide a short-term shock and probably hit H1 results. Selling at less than 1/2 tangible book, expecting about 15p of earnings for 2016. As the Brexit fears get shrugged off, those earnings are going one way.

Bought some Aviva at about £3.60 and kicking myself I didn't have a limit order as this one went as low as £3. Trading at a forward nice multiple going into what looks like a slightly harder market.

[DTEJD1997]

I bought some NICK today.  I've owned it many times in the past.

 

They currently have depressed earnings due to HUGE provisions for credit losses.  However, even with that, they are trading for about 6.4X P/E and .76 of book.

 

Of course ROE is also down, it is currently only 12.5%.

 

The "street" just doesn't understand NICK, the company has been mis-priced for years & years & years. 

 

I made a lot of money off them in the past...

[Guest roark33]

I have followed CRMT and NICK for some time.  The passage below is from their last earnings release.  I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders.  Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically.  In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control.  That is one major point to consider with NICK and CRMT.  Just my two cents.  CRMT mgmt is very happy to talk with anyone who calls them.  They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns.  This year they slowed/stopped new store openings after this realization. 

 

 

During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

[Guest Schwab711]

I have followed CRMT and NICK for some time.  The passage below is from their last earnings release.  I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders.  Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically.  In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control.  That is one major point to consider with NICK and CRMT.  Just my two cents.  CRMT mgmt is very happy to talk with anyone who calls them.  They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns.  This year they slowed/stopped new store openings after this realization. 

 

 

During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

 

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.

[AccentricInv]

I have followed CRMT and NICK for some time.  The passage below is from their last earnings release.  I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders.  Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically.  In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control.  That is one major point to consider with NICK and CRMT.  Just my two cents.  CRMT mgmt is very happy to talk with anyone who calls them.  They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns.  This year they slowed/stopped new store openings after this realization. 

 

 

During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

 

I feel like we're already starting to see the turn in the cycle.  Santander is already pullling out of the deep subprime space, cost of ABS funding has gone up ~100bps over the last year (to ~3.5% today), many of the small lenders (many started by PE in the last 4 years to chase yield) are shutting down or slowing.  Go Financial, Dealer Funding, and a few others have closed in the last month.  Also channel checks with dealers are suggesting the same as well.

 

I'd highly suggest taking a look at CACC and their shareholder letters if you're interested in this space.  I think they're well positioned to take share as this cycle turns.

[Guest notorious546]

EMP.A-TSE

 

[John Hjorth]

I have followed CRMT and NICK for some time.  The passage below is from their last earnings release.  I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders.  Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically.  In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control.  That is one major point to consider with NICK and CRMT.  Just my two cents.  CRMT mgmt is very happy to talk with anyone who calls them.  They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns.  This year they slowed/stopped new store openings after this realization. 

 

 

During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

 

I feel like we're already starting to see the turn in the cycle.  Santander is already pullling out of the deep subprime space, cost of ABS funding has gone up ~100bps over the last year (to ~3.5% today), many of the small lenders (many started by PE in the last 4 years to chase yield) are shutting down or slowing.  Go Financial, Dealer Funding, and a few others have closed in the last month.  Also channel checks with dealers are suggesting the same as well.

 

I'd highly suggest taking a look at CACC and their shareholder letters if you're interested in this space.  I think they're well positioned to take share as this cycle turns.

 

AccentricInv,

 

Please elaborate your comments on SAN at a specific level [in this topic, or in the SAN topic in the investment ideas forum].

 

Thank you.

[AccentricInv]

I have followed CRMT and NICK for some time.  The passage below is from their last earnings release.  I hate to say this time might be different, but I do wonder if the game has permanently changed for subprime auto lenders.  Lenders in that space have been able to point to 2007-09 loan vintages with very low credit losses and thus have lowered their cost of capital dramatically.  In other words, the easy lending the auto space could go on for quite some time and I am not sure it will ever end, unless it gets completely out of control.  That is one major point to consider with NICK and CRMT.  Just my two cents.  CRMT mgmt is very happy to talk with anyone who calls them.  They sound very frustrated but almost resigned to the fact that it may be years, if ever, before the "cycle" turns.  This year they slowed/stopped new store openings after this realization. 

 

 

During the three months ended March 31, 2016, the Company refined its allowance for credit loss model to incorporate recent trends that include the acquisition of longer term contracts and increased delinquencies. We feel that these improvements to our current model better reflect the current trends of incurred losses within our portfolio and better align our allowance for credit losses with the portfolio’s performance indicators. Our per share diluted net earnings for the three months ended March 31, 2016, were positively impacted by the Company’s purchase of 4.7 million of the Company’s common shares by its principal operating subsidiary on March 19, 2015.

 

I feel like we're already starting to see the turn in the cycle.  Santander is already pullling out of the deep subprime space, cost of ABS funding has gone up ~100bps over the last year (to ~3.5% today), many of the small lenders (many started by PE in the last 4 years to chase yield) are shutting down or slowing.  Go Financial, Dealer Funding, and a few others have closed in the last month.  Also channel checks with dealers are suggesting the same as well.

 

I'd highly suggest taking a look at CACC and their shareholder letters if you're interested in this space.  I think they're well positioned to take share as this cycle turns.

 

AccentricInv,

 

Please elaborate your comments on SAN at a specific level [in this topic, or in the SAN topic in the investment ideas forum].

 

Thank you.

 

Santander has been retreating for a while now.  I believe they first started in Q1 of 2015, but I don't have the exact commentary on hand right now.  However, here are a couple quotes that illustrate the point just as well:

 

SC 2Q 2015 Earnings Call

"The biggest risk for us is more of an opportunity cost because what happens when things get really competitive in deeper subprime is what we find is that the people are willing to do things for margins and returns that we don't think are sustainable through cycles. So we just tend to pull back. And so we go through a period where we are not able to book as many loans as we would like to book. But we know that -- we sort of know how that story ends and we wait it out and it comes back to us."

 

 

Recent American Banker Article: "What the Subprime Auto Pullback at Santander Consumer Means for All"

http://www.americanbanker.com/news/national-regional/what-the-subprime-auto-pullback-at-santander-consumer-means-for-all-1080715-1.html

 

KMX 1Q 2017 Earnings Call

In the quarter though we did see one line in particular a pullback and it was Santander I mean you have seen them out in the public domain, talking about how they are pulling back in sub-prime auto, letting other business to other folks. So it’s not inconsistent with what they have been saying in the public domain. So as far as what they will do going forward, I could say we saw a couple of different things happened during the quarter. And I feel like it stabilized during the quarter. But looking forward, it’s their business, they are going to manage their portfolio as they see fit.

 

Hope this helps.  Let me know if you have any other questions.

[BargainValueHunter]

EUFN and GREK calls. FXY puts.

[John Hjorth]

Bought more BRK.B and NVO [uS ADR, I bought the Danish share listed on Copenhagen Stock Exchange] on 1^st July. I'm now very near 20% in BRK in all accounts for the family, and I won't go above 20% for now, and NVO is now about 14%, maybe I will go above 15%, but not sure at the moment.

 

Still adding cash every month for stock investments, and still at 20% cash. I will continue buying month by month unless we hit a recession.

[longlake95]

Transalta Prefs Series G (TA-PJ.TO)

[Lance]

VXX (iPath S&P 500 VIX ST Futures ETN)

 

Thanks

Lance

[benhacker]

VXX (iPath S&P 500 VIX ST Futures ETN)

 

Thanks

Lance

 

Lance, what view are you trying to express with this bet?

 

You betting that vol is going to rise faster than 12-14% in the coming month?  Something else?

[StevieV]

VXX (iPath S&P 500 VIX ST Futures ETN)

 

Thanks

Lance

 

Lance, what view are you trying to express with this bet?

 

You betting that vol is going to rise faster than 12-14% in the coming month?  Something else?

 

Seems like an unusual position to me as well.  The VIX is relatively low, but huge contango now.

 

Full disclosure - I have a very small short position in VXX

[Lance]

Hi Ben and Stevie - I'm using this as a hedge against positions I feel are overvalued (reits, telcos and utilities), but dont want to sell.  Normally I'd buy TLT or short or buy puts on indexes, but everything feels out of whack.  I suspect volatility may pick up later this summer or early fall.  I've had some luck shorting volatility and likely will short it again after selling VXX.

 

Thanks

Lance

[benhacker]

Hey Lance, I just hope you understand that buying "VXX" isn't even remotely close to buying "VIX".  There is extreme contango which costs you as a holder of VXX roughly 8-12% / month... more currently.  This is because the futures curve of VIX is currently already predicting a large rise in VIX over time.

 

You can't buy VIX since it's synthetic... so the futures curve is what you care about, not spot VIX.

 

My 2 cents, also short.

[Sunrider]

For the shorts

 

Why not go long svxy- should give you the same exposure to the roll loss / convergence to spot phenomenon, unless there's something in the construction of that etf that I'm missing ... And saves you borrow costs?

 

EDIT: I've only had a few minutes to scan through the SVXY prospectus and it says it's geared by -1x, which I read as its daily performance is -1xVIX ... Which in turn should imply that there is no difference in performance over longer timeframes as is the case with >1 multiples. Thus, my above argument should hold that this would be an equivalent/advantaged way of shorting the VIX. Am I missing something here?

 

Thanks

C

 

 

Hey Lance, I just hope you understand that buying "VXX" isn't even remotely close to buying "VIX".  There is extreme contango which costs you as a holder of VXX roughly 8-12% / month... more currently.  This is because the futures curve of VIX is currently already predicting a large rise in VIX over time.

 

You can't buy VIX since it's synthetic... so the futures curve is what you care about, not spot VIX.

 

My 2 cents, also short.

[StevieV]

"Am I missing something here?"

 

Yes, I think so.  A daily resetting short product isn't equivalent to shorting the underlying.  The daily reset makes the positions different.

 

This may not be the best Let's say you are short $1K of VXX and it goes up 10%.  Now you are short $1.1K.  You have greater short exposure (same number of shares, greater dollar number).  If you are long SVXY, the 10% move means you have $900, so lower exposure to the short.  If VXX goes back to even, the VXX short will go back to even.  The SVXY long won't.  Looking at actuals, VXX and SVXY are both down over 30% in the last year.

 

SVXY can be wiped out in a 100% daily move.  VXX short won't be (though would be very painful).  SVXY loss can only be 100%.  VXX short is not so limited.  SVXY can have a lollapalooza effect.  Up close to 400% since inception.

 

In at least some instances, SVXY may be a better position.  Other times worse.  Either way, they are different.

[AccentricInv]

So if one did want to go long volatility, what do you think would be the best way to express this?

[randomep]

So if one did want to go long volatility, what do you think would be the best way to express this?

 

Buy VIX, that's the standard way right?

[AccentricInv]

Right.  But i meant given you can't buy the VIX directly, and the VIX options are already pricing large volatility in the coming months (you're paying a large premium), and VXX isn't a good option as previous discussed, what would be the best option to express this view?

[benhacker]

AI,

 

Right.  But i meant given you can't buy the VIX directly, and the VIX options are already pricing large volatility in the coming months (you're paying a large premium), and VXX isn't a good option as previous discussed, what would be the best option to express this view?

 

Do you disagree with the future path of VIX as predicted by the VIX futures?

 

If yes, you can buy / sell at will.

 

If no, move along.

 

Because "VIX" is this thing that has a number associated with it, many smart folks get involved "how do I make money money off of it going up?"... but you can't.  Simple.  It doesn't exist.

 

It's like if I created an "index" of whether today was Thanksgiving or not.  The index is 1 today.  But futures for a specific date in late November suggest the index will be 2.  How can I exploit the change from 1 to 2, I'll be  zillionaire?

 

VIX is like this.  You can't buy a synthetic thing, you can only buy cash settled futures / derivatives, and thus you only care about what those derivative markets are pricing; you can only profit from a divergent view.  VIX rising is not divergent (of course, if you thought it was going to 25 tomorrow, that would be divergent).

 

If you believe vol is specifically cheap, you can buy options directly of course... but again, options (generally) are going to be pricing their vol off other derivative markets (not just today's vol) + the underlying...

 

VXX is an amazing ETF, despite mind-blowingly bad under performance in all markets over even fairly short periods of time, much worse than any concept of the underlying, it continues to attract big $$ which encourages added friction for the roll costs.

 

It's stunning.  These volatility products should have never been approved by the SEC if they are intent on regulating these, these were obvious "do not pass" securities...

 

</rant>

[AccentricInv]

AI,

 

Right.  But i meant given you can't buy the VIX directly, and the VIX options are already pricing large volatility in the coming months (you're paying a large premium), and VXX isn't a good option as previous discussed, what would be the best option to express this view?

 

Do you disagree with the future path of VIX as predicted by the VIX futures?

 

If yes, you can buy / sell at will.

 

If no, move along.

 

Because "VIX" is this thing that has a number associated with it, many smart folks get involved "how do I make money money off of it going up?"... but you can't.  Simple.  It doesn't exist.

 

It's like if I created an "index" of whether today was Thanksgiving or not.  The index is 1 today.  But futures for a specific date in late November suggest the index will be 2.  How can I exploit the change from 1 to 2, I'll be  zillionaire?

 

VIX is like this.  You can't buy a synthetic thing, you can only buy cash settled futures / derivatives, and thus you only care about what those derivative markets are pricing; you can only profit from a divergent view.  VIX rising is not divergent (of course, if you thought it was going to 25 tomorrow, that would be divergent).

 

If you believe vol is specifically cheap, you can buy options directly of course... but again, options (generally) are going to be pricing their vol off other derivative markets (not just today's vol) + the underlying...

 

VXX is an amazing ETF, despite mind-blowingly bad under performance in all markets over even fairly short periods of time, much worse than any concept of the underlying, it continues to attract big $$ which encourages added friction for the roll costs.

 

It's stunning.  These volatility products should have never been approved by the SEC if they are intent on regulating these, these were obvious "do not pass" securities...

 

</rant>

 

Thanks for the response Ben.  I've never had a good understanding of how the VIX was structured (nor cared to look), so this is perfect.  I didn't know there was a VIX futures curve, so that definitely makes sense now.