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  • Finding Bank Of America's True Value: Legacy Assets And Legal Risks Continue To Weigh Heavily On Its Market Price [View article]
    If the economy is as strong as you claim then why is youth unemployment at over 57%, total unemployment at around 25%. Why are Spaniards leaving Spain in record numbers to seek work in other parts of the EU and even Latin America? I also want to ask if the economy is so strong and Spaniards are able to afford to enter the property market why has the government amended the law to award foreigners residency if they purchase new properties over a certain value? These are certainly not the indicators of a booming healthy economy.

    The Spanish government itself has openly admitted the economy is in dire straights. if the economy was as strong as you claim then why are all the social, economic and demographic indicators showing otherwise, why has the government of Spain sought a bailout package, why has the ECB and the IMF intervened in Spain and why is unemployment so high? Why are Spanish sovereign bond rates so high? Why has the government had to bailout or intervene to prevent the collapse of the Spanish banking system (with the exception of Caixa, BBVA and Santander). Why are default rates on loans so high? While I appreciate your on the ground insight your observations don't correlate with the overall economic or social picture nor the observations of people who live and work in Spain.
    Nov 22, 2012. 04:59 PM | Likes Like |Link to Comment
  • Finding Bank Of America's True Value: Legacy Assets And Legal Risks Continue To Weigh Heavily On Its Market Price [View article]
    CostaBrava the government has introduced a program to inject needed hard currency into the economy, reduce surplus housing stocks and reduce the amount of hosing stock held by banks as a result of property developers going bankrupt. In exchange for purchasing a property over a certain price and meeting particular criteria foreigners are granted a residency permit.

    The key reason is because there is a tremendous oversupply of new housing stock that no one locally can afford to buy http://nbcnews.to/R1a0rp. By account of all social, economic and demographic indicators the Spanish economy is seriously damaged at the moment and it is going to take decades for it to recover. There was a good article on SA from a contributor who works and lives in Spain available here http://bit.ly/10i6qux.
    Nov 22, 2012. 04:31 AM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    John

    Thank you for the feedback. Overall I was quite impressed with Wells Fargo and the quality of their operation, which is not something I was expecting despite Buffett adding to his holdings. For a U.S bank they are particularly efficient and that is reflect in their efficiency ratio, NIM and profitability.

    As for the strategy for choosing an entry point, if I like the stock and believe it is undervalued I normally just take a long position at the market price or put in a fixed price order at a marginal discount to the market price, usually within its average daily trading range.

    However, if there are negative market making events at play such as the issues surrounding the Greek bailout or the fiscal cliff I try to get a feel for how these will impact the market on a given day and then submit a buy order at a set price.

    Normally I don't use protection on buy orders other than to have an upper limit in place, although in the deep dark past I have set up options strategies for HNW clients who are going significantly overweight in a particular stock.

    In the case of Wells Fargo I don't think the additional cost or complexity is warranted. Given it has been sometime since I have used short-term trading strategies it might be better to seek the counsel of either readers or other contributors who regularly utilize those strategies if you are considering that.

    Obviously how you decide to invest will also depend upon your personal circumstances, your investment goals, your investment time horizon and the structure of your portfolio. So you would need to take all of these factors into account when making a decision as to what price you wish to establish a position as well. 
    Nov 21, 2012. 09:42 PM | 1 Like Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    rcpartick thank you for the feedback. I agree with your thoughts and it is important to recognize where a business has performed even if that performance is some what unspectacular.

    The problem we have particularly in the world of funds management, banking and finance is that everyone has become a short-termist and they are only focused on making every quarter or half year spectacular in terms of performance. It is this outlook which leads to the behavior that created the subprime crisis and the GFC and has also in the past and I am certain in the future business decisions that cause companies to collapse.

    I always like to look for companies with clean simple business models in which to invest, that are focused on building a sustainable long-term business. In my view Wells Fargo even with a few hiccups caused by its behavior during the halcyon subprime days has achieved that and I am certain that is the view taken by Mr Buffett as well.
    Nov 21, 2012. 04:50 PM | 1 Like Like |Link to Comment
  • Boston Beer Company Brewing A Better Return On Investment [View article]
    Great article Col, very enjoyable.
    Nov 21, 2012. 04:15 PM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    Tax murder can you clarify what you are referring to? Do you mean provision to total assets ratio, the provisions to total loan value ratio or the NPL coverage ratio? I admit that I haven't covered those aspects off in the article and that is an oversight on my part.

    I am somewhat perplexed by your claim that Wells Fargo has over-provisioned. This is typically measured by the NPL coverage ratio and the provision to total loans ratio. As these ratios show all of the major U.S banks have over provisioned. This has come about through the lower risk tolerance towards leverage that emerged from the GFC and Europe's financial crisis along with pressure from the Fed on banks to ensure that they are more than adequately provisioned.

    You will also find that major commercial banks from a wide range of countries including Canada, U.S and Colombia have over-provisioned, due to regulatory pressure and because they have taken a pessimistic view of the direction of the global economy over the short-term. However, they are then able to unwind these provisions, at a later date which will enhance profitability for that quarter.

    Typically the banks that I have worked for will over-provision in the 2nd and 3rd quarters and then unwind the excess provisions in the 4th to boost EoY profitability. I also don't see a big issue with a bank being over-provisioned in the current economic climate, because despite the accounting and economic costs associated with provisions it shows a conservative approach to risk management in an uncertain economy, which is a plus for investors. It also indicates that the bank is capable of dealing with any further loan-losses and indicates a stronger balance sheet.

    Finally, even if Wells Fargo are over provisioned they are still delivering solid profitability by way of a high NIM and RoE, with a low level of leverage. Which is a tremendous achievement when they are taking a conservative approach to risk in a low growth economic environment.
    Nov 21, 2012. 04:11 PM | 1 Like Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    Ray your comments are appreciated and you have certainly added considerable value to the conversation. Thank you and looking forward to your input on future articles.
    Nov 21, 2012. 03:46 PM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    Col thank you for the feedback. I am going to take a look at U.S Bancorp prior to taking a closer look at JP Morgan, because I do have a preference for simpler commercial banks. They are easier to analyze and understand.

    In all honesty analyzing JP Morgan is a daunting thought. It is a large institution with a wide range of moving parts and it is particularly complex, probably the most complex of the U.S banks because it is a mix of commercial banking, investment banking and wealth management. It has a tremendous amount of derivatives on its balance sheet and just working through those and the mark to market valuation and CVA/DVA adjustments is a daunting task.
    Nov 21, 2012. 03:45 PM | 2 Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    Ray thank you, I couldn't have said it any better myself and the financials, risk metrics and performance ratios support everything you have said. Out of all of the U.S banks I have analyzed so far Wells Fargo was the easiest and I have to say the most enjoyable to review.
    Nov 21, 2012. 03:38 PM | Likes Like |Link to Comment
  • Looking Past U.S. Banks For Better Returns: Why I Like Canada's Scotia Bank [View article]
    win bully thank you for the feedback. I am currently working on some other investment ideas and analysis of other stocks, but happy to do a comparison of the big 5 Canadian banks after that.
    Nov 21, 2012. 03:28 PM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    smurf thank you the comment is appreciate. I am certain Buffett and et al undertook a far deeper review, but what makes Wells Fargo an easy bank to analyze and understand particular in comparison to Citi, JP Morgan or Bank of America is that it is a traditional commercial bank. That means there are less issues associated with valuing assets and determining the quality if its balance sheet and operations. It is easy to see why Buffett likes the bank, it is a simple high quality business that has a strong focus on cost control while maintaining market share and profitability.
    Nov 21, 2012. 11:42 AM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    pishon thank you for the feedback it is appreciated.
    Nov 21, 2012. 11:38 AM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    P. Dennis thank you for the feedback. This is analysis I have been wanting to undertake for some time and I was pleasantly surprised by the results.
    Nov 21, 2012. 11:37 AM | 1 Like Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    Ray I would agree and that is very clear from the information presented in its reports and corporate profile. It struck me as being a traditional commercial bank that does primarily what commercial banks are meant to to do, take deposits and make loans. The quality of the management team is also very apparent given its ability to generate a solid NIM and consistently generate the highest RoE of the major banks.
    Nov 21, 2012. 11:36 AM | Likes Like |Link to Comment
  • Does Wells Fargo Deserve The Attention It Is Receiving From Warren Buffett? [View article]
    Fountainhead thank you for the feedback. Having analyzed and written on Citigroup and Bank of America it seemed only natural to continue with Wells Fargo and then next JP Morgan. My preference is for investing in banks but typically Latin American, European or Australian banks. I didn't expect to find any particularly compelling reasons to invest in U.S banks at this time, but I was pleasantly surprised by Wells Fargo. While it certainly has its own issues to deal with and is not operation as profitably as some of the Latin American banks I analyze, it is certainly a solid, low cost, highly profitable operation and should continue to be so.
    Nov 21, 2012. 08:14 AM | 1 Like Like |Link to Comment
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