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  • Aetna: 'Fat' Profits Nowhere to Be Found [View article]
    Just follow the link to view the income statement. Selling Expenses, G&A, and Health Care Costs are each separate line items on the income statement. Cost of Goods Sold refers to the cost paid for the merchandise etc., it does not encompass G&A and other operational costs incurred by the business.


    On Sep 27 11:56 AM skwestorange wrote:

    > There seems to be flaw in this argument. Usually the cost of paying
    > out the claims, i.e., the salaries and benefits and related office
    > costs should all be included in the claims cost. This is consistent
    > with the cost of good sold concept. What is not included in sales
    > and G&A. Could I request the author to review his numbers again.
    Sep 27, 2009. 04:17 PM | Likes Like |Link to Comment
  • 'Improved' Housing Starts May Impede Recovery [View article]
    Thanks for the clarification Michael.

    The article wasn't intended to forecast the future direction of housing starts, but rather to make the point that more isn't always better.

    To take my argument to the extreme, I'd say that the best thing that could possibly happen to the housing market would be an instant halt to any and all construction of new dwelling units. We don't need more inventory, even if it is being created at a historically low rate.


    On Sep 17 03:41 PM Michael Clark wrote:

    > I think what he may have meant (it's dangerous to try to think for
    > someone else) is that with millions of homes uninhabited (or in foreclosure),
    > we DO NOT need more homes being built. Adding to the supply is not
    > going to help the situation.
    >
    > The idea that more activity is always positive is not always true.
    Sep 18, 2009. 11:52 AM | Likes Like |Link to Comment
  • The FDIC's Deposit Insurance Fund: Adequately Capitalized [View article]
    That's an inaccurate statement. The FDIC is required, under GAAP, to set aside the amount it expects to lose in the coming four quarters. The amount of expected loss is set by the Financial Risk Committee, based upon the FDIC's internal calculations regarding each member bank's likelihood of failure. Some banks are given a 100% chance of failure by the FDIC; in that case, you raise a marginally valid point.

    Your statement would only be correct in the event that say, the DIF's balance sheet was prepared on June 30th, 2009, and a bank failure occurred on September 7th, 2009. In that instance, yes, you would be looking at old numbers that have already been used to fund depositor losses.


    On Sep 16 10:41 AM sanchezman wrote:

    > Contingent liabilities here are those of banks that have failed,
    > but for which the FDIC has not 'closed the books', so to speak. It
    > is not a reserve for future failed banks, as you indicate. The FDIC
    > contingent liabilities therefore exceed its assets. It does however
    > have borrowing power as granted by congress from the treasury, as
    > well as the authority to assess additional premia on its bank members.
    > The first two sentences have to do with liquidity, the latter solvency.
    Sep 16, 2009. 05:00 PM | Likes Like |Link to Comment
  • S&P 500's PE Ratio of 139 Isn't Sustainable [View article]
    CruJones has a reasonable point; it was an observation made in a WSJ op-ed by Jeremy Siegel (online.wsj.com/article...)

    S&P ignores market caps because of the way it aggregates the earnings of all members of the index. If Exxon earns $10B for the quarter, and Jones Apparel loses $10B, the aggregate earnings - using S&P's methodology - will be $0. The only time market cap comes into play is during the calculation of the actual index value; a rise in Exxon's stock will affect the index more than the same percentage movement in Jones Apparel's stock.

    I won't argue that finding the "perfect bargain" in today's market may be difficult; however, when is there ever such a thing?
    Sep 15, 2009. 04:41 PM | 3 Likes Like |Link to Comment
  • The FDIC's Deposit Insurance Fund: Adequately Capitalized [View article]
    The bank failure pipeline is certainly longer than 12 months, however, the FDIC adds to Contingent Liabilities on a quarterly basis. Also, the DIF isn't a stagnant pool of resources, it receives income from assessments on member banks; in other words, the $31B is the amount set aside at a single point in time, not a budget line item that can't be exceeded during a 12 month period.

    Finally, it's incorrect to say that the agency consistently under reserves for losses. For instance, the American Banker article cites the example of the Colonial Bank failure, in which the FDIC set aside more reserves than were actually needed. I'll change my mind if someone can present evidence to the contrary, but thus far everyone in the "FDIC is bankrupt" crowd has only managed to speculate based upon their personal perception of the situation.


    On Sep 15 09:51 AM investmentlb wrote:

    > Yes, but as of 6/30/09 $22 billion of the asset side of the balance
    > sheet is in illiquid securities taken from failed banks, mostly assets
    > that buyers of other banks refused to purchase. This is the toxic
    > of toxic. And, since the FDIC has been reticent to actually sell
    > many of these, that line item is growing rapidly as the pace of bank
    > failures has accelerated massively in Q3. Further, because the FDIC
    > is not in a position to manage these assets due to the scope of the
    > FDIC's competencies, the longer the FDIC owns them, the less valuable
    > they become. This $22 billion, until it is sold and converted into
    > cash, cannot be used to fund the costs associated with bank failures.
    > So while it clearly has some value (albeit likely well below the
    > reported number), it is not particularly helpful to paying depositors
    > at failed institutions.
    >
    > The trend has been that the FDIC has been under-forecasting losses
    > on the average failure and that the FDIC has been assuming very low
    > losses on their loss sharing agreements. I suspect this latter point
    > is also a hidden liability on their balance sheet.
    >
    > Every bank or insurance company that fails (other than from bank
    > runs) fails not because it actually ran out of assets but because
    > reserving was not adequate or, if reserving was adequate, shows insolvency.
    > To say the FDIC is in better shape than the DIF balance indicates
    > is to say that loss reserves don't matter. There are about 92 bank
    > failures this year that say loss reserves do matter. Finally, because
    > the reserving only covers the next 12 months, we can know with a
    > good deal of certainty it understates reality since the bank failure
    > pipeline is either a) much longer than 12 months or; b) if they choose
    > to do it all in 12 months, at much greater cost than $30 billion.
    >
    >
    > The FDIC is bankrupt and if they are not already using the equivalent
    > of DIP financing from the US Treasury, they soon will be.
    Sep 15, 2009. 11:56 AM | Likes Like |Link to Comment
  • Social Security: Here's How to Extend the Fund's Life [View article]
    Although reducing COLA isn't a knockout punch, it should be included in the combination of adjustments that we need to make in order to keep the Fund solvent. With a 0% COLA for 2010 though, SS advocacy groups are pushing for a "beneficiary bailout" that would consist of a one time payment to make up the difference between health care inflation and CPI. This is a horrible idea that will set a precedent for demanding additional benefits whenever a given year's COLA isn't substantial enough for SS beneficiaries.

    Great article though, we need to be talking about his problem and it's possible solutions more often.
    Sep 14, 2009. 09:31 AM | 4 Likes Like |Link to Comment
  • Blockbuster Could Collapse in 2010 [View article]
    Alright guys, I will quote straight from the Company's most recent 10Q (pg 11):
    "However, we expect cash on hand, cash from operations, and anticipated external liquidity generating events, such as divestitures of certain non-core international assets and the reduction of amounts committed under one or more outstanding letters of credit, will be sufficient to fund out anticipated cash requirements for working capital purposes including rental library purchases as well as commitments and payments of principal and interest on borrowings for at least the next twelve months. This expectation is subject to a number of assumptions, many of which are outside our control. Such assumptions include, among others, that we achieve our projected financial results for the remainder of 2009 and 2010, we compete the divestiture of certain of our international assets, we reduce our obligations under letters of credit or other external liquidity generating events and that there is no significant contraction in our trade terms"

    What that little excerpt tells me is that the next twelve months will be an extremely uncertain time for the Company. What I doubt Blockbuster is counting on is that kiosk market share will jump from 19 to 30% in the next year.
    Sep 9, 2009. 03:44 PM | 3 Likes Like |Link to Comment
  • Life Settlements: Still No Dice [View article]
    Why shouldn't it be tax-favored? It would make a lot more sense to pick on the ridiculous taxpayer subsidies that have fueled house buying and flipping over the past two decades.


    On Sep 06 02:28 PM Pragmatic wrote:

    > The Life Insurance could very easily kill the life settlement business
    > if they would offer to buy back these policies at a better price.
    > If they don't their loss. Life insurance shouldn't be tax favored.
    > Get rid of the tax benefit and more people will buy term insurance
    > which is simplier and less expensive.
    Sep 8, 2009. 05:12 PM | Likes Like |Link to Comment
  • Blockbuster Could Collapse in 2010 [View article]
    Actually, nothing has stabilized for Blockbuster. The underlying point of the article is that kiosk's share of the rental market is about to explode in the next year from 19% to 30%. The most extreme estimates put at most 20% of that growth as additive; that is, 80% of kiosk "growth" will be to brick and mortar's detriment. Also, where are you getting the >$100MM cash figure? My numbers come from the most recent SEC filing, perhaps you should try that source out.

    Slander? I assume you meant to use the word "libel", as this is a written form of communication. More importantly though, my article is 1) true , and 2) not malicious. I've already disclosed - as part of SA's policy - that I maintain no financial position in any of the companies mentioned. I imagine that the only purpose behind providing my real name would be so that you could engage in ad hominem attacks; but wait, you already have my bio, so what would your purpose be?

    I'm glad you commented though, as it underscores my point about the many people who still enjoy a good old trip to the store. The problem is, Blockbuster's liabilities can not be sustained via it's attrition-plagued base of brick and mortar renters.
    Sep 8, 2009. 04:29 PM | 1 Like Like |Link to Comment
  • David Merkel on Life Settlements [View article]
    I felt like the NY Times was a little late to this story; life settlements have been around for a long time now. They actually present a very compelling investment opportunity for older clients - the rate of return on taking out a policy, paying premiums for a couple years, and selling the policy can be over 500% in a lot of circumstances. Obviously, as life settlements become more widespread, their relative attractiveness will decline due to higher premiums for everyone.

    We definitely need to take a pause on this one and resist this post-housing/mortgage collapse tendency to want to over-regulate every sort of financial instrument under the sun. The SEC is already over-stepping it's boundaries and trying to regulate fixed-index annuity products; what sort of logic would make anyone conclude at this point that the SEC needs to be given more powers?

    User241885 - you just described the difference between regulated and un-regulated insurance, CDS falling under the latter category
    Sep 8, 2009. 02:12 PM | Likes Like |Link to Comment
  • Private Prisons: A Reliable American Growth Industry [View article]
    If you were to look at these charts 10 years ago, I bet you would have come to the same conclusion regarding the trend being "unsustainable". You likely would have been operating off of the same assumption about drug legalization being "imminent". The simple existence of an upwards trending chart is not evidence that the trend is bound to reverse course.

    I think you're also making some faulty assumptions about the political and ideological balance of the country in matters of criminal justice; specifically where you perceive an inevitable trend towards rehabilitation v. deterrence, incapacitation, and retribution.

    It's exactly that sort of misreading of the political tea leaves which caused the current Administration's health care reform attempt to backfire. I don't profess to know the answer either, I'd just say that it's a bit presumptuous to assert that any policy shift is certain.


    On Aug 25 10:32 AM Tesa wrote:

    > Sounds like the prison industry is trying to hand in their bags if
    > you asked me or they are lobbying to acquire more funding as they
    > know that the funding for this growth industry is going to dry up
    > soon. The data that the author has posted contradicts his conclusions
    > in fact. What it does show is the fact the growth of prison population
    > is not sustainable given that there isn't more cash to sustain
    > it. The fact the the fact growing percentage of population has been
    > imprisoned to fund this miserable growth industry will work against
    > it in fact.
    >
    > Another poster mentioned that minor drug crimes have imprisoned
    > a lot of people so it is obvious that with minor changes of the law,
    > the funding to house these people to fund prison expansion can end.
    > There is more prisons in USA that any industrial country, there is
    > no need for more.
    Aug 25, 2009. 11:44 AM | 2 Likes Like |Link to Comment
  • Private Prisons: A Reliable American Growth Industry [View article]
    1) Actually, I wish I had been alive to invest some money in say, Phillip Morris, prior to the worldwide embrace of the Marlboro brand.

    2) Investing alongside Cheney might be a very lucrative strategy. I should have started a Cheney ETF years ago.

    3) From your tone of moral superiority, I assume that you have thoroughly vetted every dollar you spend; assuring that at all times, you are only supporting products manufactured under the most humane conditions? Just out of interest, what sort of clothing do you wear? Filled up a gas tank recently?


    On Aug 24 04:17 PM Jeff Nielson wrote:

    > Totally agree, 381785.
    >
    > The author's choice to describe private prisons with a heinous euphemism
    > ("an efficient incarceration solution") completely ignores TWO of
    > the most-despicable aspects of the U.S. prison system.
    >
    > 1) Prisons are increasingly being used in the U.S. to "warehouse
    > the poor" - as demonstrated by the demographics of the inmate population.
    > Locking up the poor is much easier (if not cheaper) than creating
    > employment opportunities and rehabilitating America's massive, urban
    > slums. It is no coincidence that the explosion in the construction
    > of private prisons in the U.S. coincides with an explosion in POVERTY.
    >
    >
    > 2) Private prisons have an an even lower standard of "care" for their
    > inmates than even the inhumane hell-holes in California's grossly
    > over-crowded system. Furthermore, as was revealed in a Florida incarceration-scam,
    > they are a great source of SLAVE LABOUR.
    >
    > In Florida, several judges and private prison companies conspired
    > to lock up INNOCENT CHILDREN, use them for slave labour - and then
    > got fat on state stipends and their pool of exploited labourers (see
    > "U.S. judges caught locking-up innocent children" www.bullionbullscanada...;view=article&...
    >
    >
    > Private prisons are the new, favorite investments of Dick Cheney
    > and Alberto Gonzales. That should be all anyone needs to know about
    > the MORALITY of investing in a "business" which derives its profits
    > from exploiting human misery.
    >
    > What will be the next "great investment opportunity" presented by
    > this author? A tobacco company, perhaps?
    Aug 24, 2009. 05:32 PM | 2 Likes Like |Link to Comment
  • Marc Chandler's Compelling Perspective in 'Making Sense of the Dollar' [View article]
    New orders for US manufactured goods in the month of June alone were $349B, that's a rate of $4.188T/year, but of course that's only new orders. (www.census.gov/indicat.../)

    That was irrelevant to my initial point though, which was directed towards the US manufacturing sector, that is, the annual revenue generated by US manufacturing companies.

    Regardless, the problem with your calculation is that you're using numbers generated by outdated accounting techniques. For instance, when you talk about US GDP, you are netting out the $150 "import" of every iPod, not to mention the oil factor. Basically, you're calculating a percentage of a number that has already seen the export factor netted out through imports.

    Perhaps if you had performed some research that was more thorough than a visit to the CIA fact book website, you might have discovered some of these distinctions.


    On Aug 23 08:50 AM prudentinvestor wrote:

    > Please state the source of your information, because your 1st point
    > appears incorrect.
    >
    > The CIA factbook which you can access on-line states that China's
    > 2008 est. GDP is $4.2 tr @official XR, and $7.8 tr @PPP (purchasing
    > power parity, the more reasonable measure). It states that US GDP
    > is $14.33 tr. The US manufacturing sector is between 10% and 13%
    > of US GDP, depending on the source, so US manufacturing output is
    > about $1.7 tr, i.e. around 40% of China's GDP (@ official XR), and
    > 22% of China's GDP (@PPP).
    >
    > Thus, your statement that US manufacturing is larger than the entire
    > Chinese economy appears false, and based on hubris, not facts.<br/>
    Aug 24, 2009. 03:13 PM | Likes Like |Link to Comment
  • Marc Chandler's Compelling Perspective in 'Making Sense of the Dollar' [View article]
    1)The United States manufacturing sector is larger than the entire Chinese economy.
    2)The United States is the largest exporter of goods and services in the world.
    3)I'm not sure why some of you continue to confirm my point about iPods. There is an undue amount of focus devoted to where a product is actually being produced. A company from Cupertino, California designed that iPod, and profits each time one is sold. Technology will continue to advance, possibly at an exponential rate, which will inevitably reduce the number of humans employed in the manufacturing of that iPod. Eventually, a single person might be able to oversee an entire iPod manufacturing facility. This trend is extremely obvious; do we really want to decry our relative lack of dependence on manufacturing and exports?

    On Aug 22 01:35 PM Suncatcher wrote:

    > So, I guess, China and other "producing" countries are buying our
    > manufactured goods, cutting off our labels, putting on their own,
    > and reselling it to us? I don't know about anyone else, but it is
    > almost impossible to find products made in the USA. Now I know that
    > is anecdotal but is sure makes me wonder about the premise of your
    > book.
    > Also, the idea that someone living in China and buys something that
    > says Colegate on it proves that it is made in America. Anymore than
    > if I buy a BMW in the USA that it is made in Germany. I would love
    > to see statistics about the percent of franchise products that are
    > produced in the country of brand origination. Do McDonald's beef,
    > buns, coke, etc actually come from USA? And since the franchise owner
    > is probably from that country the bottom line doesn't automatically
    > end up in the USA.
    Aug 22, 2009. 02:15 PM | 2 Likes Like |Link to Comment
  • The Efficient Life Hypothesis [View instapost]
    Well said. I would add that, assuming the world was entirely efficient, wouldn't society be faced with a glut of petrochemical engineers, or whichever occupation offered the highest salary at that particular point in time?
    Aug 21, 2009. 11:10 PM | Likes Like |Link to Comment
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