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Chris DeMuth Jr.
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"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
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  • Conversion On The I-270 Corridor

    OBA Finacial was established in 1861. Then not much happened until it announced plans to convert to a publicly traded thrift at the end of 2009. Investors were able to buy shares for $10 each at a cost of 59% of book value. After the conversion, there was a three year moratorium during which the thrift was not allowed to sell to a larger financial institution. After the end of the moratorium, shares had traded up from $10 to $18. We published our view that the company was worth around $22 to a buyer and advocated a sale of the company in writing to OBA's board of directors:

    OBA Financial Services as it is currently operating has taken on the costs and risks of being a public company without leveraging the benefits. While the stock price has appreciated from 60% of tangible book value to 100% of book value today, its valuation level remains significantly below that of its larger competitors. We do not think it is in the best interest of its stockholders to operate at this suboptimal size. The best solution for OBAF's owners would probably be to consolidate into a larger institution.

    The current Board of Directors has important duties to OBA Financial's owners. Since the moratorium on corporate actions has expired almost one year ago, OBA Financial's management has taken no substantive actions to move the company to the next level of valuation it deserves. As a significant owner of OBAF, I am asking the Board of Directors to seriously evaluate the shareholder value that is currently being forgone in an effort to stay independent as an undersized local bank. Even using conservative price estimates, a strategic buyer would likely pay a substantial premium to today's stock price.

    Earlier this year, FNB acquired OBAF for a stock deal valued around $23.56 per share. We were in regular communication with OBA's board and management, ultimately supporting the transaction:

    I am writing to express my support of the definitive merger agreement made between F.N.B. Corporation (NYSE: FNB) and OBA Financial Services (NASDAQ: OBAF). I would like to commend the Board of Directors of OBAF as I believe this transaction is in the best interest of shareholders of both companies as well as the customers of OBA Bank. This transaction will create the scale necessary for this institution to compete, grow and better serve customers in Maryland going forward.

    As a function of my support of this transaction my current intention is to vote in favor of the merger.

    The deal was successfully completed earlier this month. While we supported the deal for OBA, we did not hold onto our FNB shares as they are neither fundamental bargains nor likely to be the target of an acquisition in the foreseeable future. Now, onto the next one. These institutions can and often do sell after the third year and the holdouts are almost always sellers by the end of the fifth. There are worse places for conservative investors to put their money.

    Tags: FNB, OBAF
    Sep 29 5:34 PM | Link | 4 Comments
  • The FEC Market

    If you like my idea for Capitalists for Capitalism, I hope that you will consider supporting some of my investor-friendly candidates. American owners should have more of a say in our companies and we should have more of a say in our country. As Prof. Thomas Sowell said,

    It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.

    So people who own America's private property, the people who own the downside as well as the upside, might do well to protect it from the perverse consequences of bad public policy. If you dislike that last idea, then I hope you might consider participating in this one, my FEC Market.

    Politics is largely a zero sum game. With few exceptions, one or the other of two major parties are virtually certain to win elections. So, it is suboptimal for communities of rational people to pay for the time and expense of contributing to such zero sum games. Voting is problematic to coordinate because there are no records of how one votes.

    However, there are records of contributions. So, if anyone would like, they can use the public filings provided to the Federal Election Commission (FEC) to trade blank filings in $2,500 units as in "I will give zero to my candidate if you do the same but will otherwise give $2,500". This has the identical net impact on a given election but saves $5,000 between pairs of FEC market participants. As non-donating is not a regulated activity, this is unlikely to generate much scrutiny. Get ready to commit a dollar figure in donations, pair up with opposing donors, bilaterally disarm, verify via the FEC filings, and everyone is richer. You will have fewer ads to watch and less junk mail too.

    Sep 29 2:52 PM | Link | 1 Comment
  • Capitalists For Capitalism

    What is the ideal working environment for capitalists? It would include the rule of law so that we can know the rules ahead of time and plan accordingly. It would include a competitive mix of taxation and regulation so we are best able to go up against foreign rivals. It would include public fiscal prudence so that there is as little leakage as possible from the private sector.

    This is a very different question than asking what the ideal environment is for arbitrageurs. That would probably include public policy that maximizes uncertainty and disequilibrium; often bad public policy is good for arbs. Central planning and arbitrary economic interventions are perfect as they offer as constant flow of unintended consequences that can often be gamed for profit.

    As a capitalist who focuses on arbitrage opportunities, my narrow economic self-interest is conflicted. I still hold onto a quaint aesthetic preference for the former no matter how lucrative the latter can be on good days. I have many friends who benefit wildly from capitalism but who do not support it politically. But if you are a capitalist for capitalism, what are the political opportunities to weigh in?

    My criteria are agnostic about party and social policy. I look for candidates who favor rule of law, competitive fiscal and regulatory policy, and fiscal prudence relative to both their opponent and relative to their districts. Secondly, I look for fulcrum elections where contributions can go a long way to tip surmountable marginal differences between the probability of success and that of failure.

    I intend to add capitalist candidate endorsements to the initial ten on this page over time. Please comment below with anyone missing who fits this cause. But more importantly, please let me know if you disagree. Please let me know if you are active in opposing any of these candidates and if you are considering supporting their opponents. I have a deal for you… (see next post for details).

    US House of Representatives:

    Barbara Comstock

    Mia Love

    Elise Stefanik

    Marilinda Garcia

    US Senate:

    Tom Cotton

    Dan Sullivan

    Cory Gardner

    Bill Cassidy

    Joni Ernst


    Susana Martinez

    Sep 29 2:49 PM | Link | 4 Comments
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