2 CEF Yield 'Baskets' To Boost Income Streams [View article]
Ira, Appreciate your comments and feedback. FIF expense ratio data on CEFConnect is indeed different than that on FT overview; perhaps pro-rated. Thank you for pointing this out and I will contact CEFConnect to inform them of discrepancy.
Also, I did see the EMLP offering and it looks quite timely coming to market. JM
Green Mountain Coffee Roasters Butchered Its Acquisitions [View article]
Ben, Great article. Serial acquirers such as GMCR who have a history of buying out their competition (for the sake of "growth") usually end up with bloated goodwill and intangibles.
Disgraced Stiller claims to be poor, yet his company's buying binge likely fueled his massive stock option awards which he of course exercised, and then some, at windfall prices.
Stiller isn't stupid, but he is an idiot. In my book that puts motive closer to the intent of fraud because a stupid person wouldn't have enjoyed such a financial windfall nor the perfect timing to dump shares before, during and following well-orchestrated and timed secondary offerings.
It's not so much the competition GMCR should be afraid of. Asset impairment would be a greater threat. Terrible management ultimately manifests as terrible results.
Chesapeake Energy: Desperate Asset Sales And The Language Of Letting Go [View article]
Constructive comments here and thanks to all for sharing. There are also the legacy issues to consider. You can't help but think everyone who has made a deal with CHK might be looking a bit deeper at how their deals were priced.
Icahn is an activist who uses a sawed-off shotgun when he goes hunting. He can be excused for that. Any body else though will likely be more careful before aiming and firing. Too many unknowns.
Chesapeake: 'Third Scenario' Could Be Huge For Investors [View article]
Interesting perspective and the author makes some plausible "scenarios". That said, the positive "spin" from CHK on Hogshooter reeks of pig-with-lipstick desperation and its timing should not come as any surprise.
The Icahn angle as one commenter mentioned bears notice, but his agenda should not be viewed as salvation to the rest of shareholders. His presence and activism certainly help in the butt kicking process needed to clean house, but his view of a "future" CHK may be different to that of an average shareholder.
Unfortunately, CEO McClendan's pants are now firmly wrapped around his ankles. The only big discovery we see playing out near-term is the likelihood of more dirty diapers buried in the sand-box.
Will there be any value left at the end of the day? Maybe, but it won't resemble anything like its former self.
The Eurogroup statement on Spain: "The loan will be scaled to provide an effective backstop covering for all possible capital requirements ... with an additional margin of safety up to €100B in total ... the Fund for Orderly Restructuring (FROB), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned." [View news story]
Cautious, The Spanish may be too proud for their own good, but a crummy deal is likely better than no deal. As for sovereign issues, the bond market will the judge of that.
Realizing that bad loan issues in the banking system (there) are still in the early innings of writedown mode, let's at least hope the back-stop contains language and enough bite to, as Herr Hansa suggested earlier, either consolidate some of the mess or at least put a fence around the more toxic stuff.
As for Greece, denial will only get them so far. If they haven't figured it out by now, at least show the world that they can come to consensus with what is the lesser of (all) the evils.
They said no to austerity, they said no to two party majority in its legislature. If they think throwing 50% of the votes into a handful of disparate minority parties is the best they can do then it might be better to dust off the drachma presses and start printing away.
Just as Karl Marx failed to grasp economics, the Greeks seemingly fail to grasp risk. This is the downside of what happens when you run out of other people's money to spend.
Read your article with interest. Some additional thoughts. One aspect of XEC which I believe investors might be missing is the reasonable financial discipline exercised by management.
Although management is authorized to hedge up to 50% of both oil and gas production, they have historically tended to be on the conservative side of their collar exposures. And, I like the fact they do not elect to consider them as cash-flow hedges.
I have owned this name on several occasions over the years and am hoping to pick some up eventually. Will wait for analyst revisions to be more in line with management guidance before dipping my toe in.
Also, XEC has historically been conservative with their valuations of proven and unproven reserves, thus mitigating somewhat (in my view) concerns about impairment risk being painful.
As dog-and-pony shows go, FB certainly gets kudos for its effort to build suspense. On the other hand, it revealed the futility of disappointment after such a theatrical production. On Broadway this would be called a flop.
As for underwriters, they still have plenty of tickets available. Getting a seat shouldn't be difficult.
Fed Regulation Of Non-Bank Financials Developing Very Poorly [View article]
Tom, I enjoyed reading your article very much. To me, the insurance business is "the bond market in drag". Premiums are invested and as you point out with AIG, their recklessness with CDS was monumental.
I agree that the premium of risk needs careful consideration and as we know, AIG failed miserably. JP Morgan is no hero either, but taxpayers thus far are not on the hook for their screw-up.
JPMorgan And Politics: Trail Of Tears Returns Home...To Washington [View article]
Jack, Indeed, Sen. Dorgan was only one of eight to vote no. He was around thirty years also, but at least his no vote was consistant with his position.
Like the austerity comment. My Fench teacher was Austrian and he told me once that the french referred to Austrians as the autre chien "other dog"
The Impact Of JPMorgan's Trading Losses On The Investment Thesis [View article]
Martin, I enjoyed your perspective. In the last cycle, duration is what caught everybody with their pants down. In addition, we saw "convexity" screw-ups with carry-trade flops (i.e. cheap yen / Treasuries) .
I understand the aspiration to hedge "risk", but it's all relative to who is bearing it. Certainly, the sheer size of the bet (and protection sold) raises eyebrows. I also understand the need to have oversight. There has to be a happy medium between effective regulation and not over regulating.
Transparency is obviously needed, but clearinghouses are no guarantee of preventing a future meltdown either. Capital markets need some risk to function and like it or not, risk is important to the capital formation process.
But, dropping $2 billion (or more) within two months makes a losing day at the track seem almost fun. I would agree with you that JPM has "overall" exhibited good management and this episode should bring Dimon down off his high horse.
As you mentioned, we don't know the full extent of the losses involved, but it sheds light on the unpredictable nature of notional value.
Models will fail and JPM is not the first. Yet, the concentration of this particular "bet" does suggest serious flaws in operations analysis, monitoring processes, failure to ensure valid mark-to -market valuations, etc.
Perhaps the evolution of synthetic instruments has gotten a bit ahead of itself. I too think they will come out of this okay, but events like this are disruptive. Maybe someday the capital markets will figure out a way to take the "ass" out of assumptions.
JPMorgan: Cracks In The House Of Dimon Or Holes In The System? [View article]
remurraymd, Sounds like you are making the right moves defensively. Yes, CDS risk was the primary suspect in the credit crisis.
But, this gets us to your final point. Of all the complicated hubris delivered in the form of a 2,300 page manifesto called "Dodd-Frank", Title VII is clear as mud!
Instead of too-big-to-fail it might be a case of too-big-to-govern.
JPMorgan: Cracks In The House Of Dimon Or Holes In The System? [View article]
indianamark, I agree; too many questions and not enough answers. A concentration of credit protection in a particular trade is one thing. It won't take long to attract interest of those wanting to bet against you.
We know the VaR model was flawed; this suggests issues with JPM's operations analysts as one place to start. Other questions I have would be: -collateral management, trade settlement, resets, credit events -failure by pricing team to ensure valid mark-to-market valuations -poor reconciliation of portfolios to "solve" cash and position trade breaks (that arise from valuation and accrual differences) -database administration errors -breakdown in monitoring process and counterparty/client communications related to OTC derivative positions
A commentor on another JPM related story suggested (I'm paraphrasing here):
" Perhaps an end-of-cycle yield "grab" in an accrual book? Maybe the model switch revealed that they got caught with bad entry on credit?"
How about the folks running the London trading and/or "exotic" desk? Are they a bunch of hot-shot punks just out of college and what is their experience, etc., etc. ???
Who the hell knows, but Dimon is captain of the ship and he's got a lot of explaining to do! If there is a hand grenade in the egg basket, there's going be a problem.
2 CEF Yield 'Baskets' To Boost Income Streams [View article]
Appreciate your comments and feedback. FIF expense ratio data on CEFConnect is indeed different than that on FT overview; perhaps pro-rated. Thank you for pointing this out and I will contact CEFConnect to inform them of discrepancy.
Also, I did see the EMLP offering and it looks quite timely coming to market. JM
Green Mountain Coffee Roasters Butchered Its Acquisitions [View article]
Great article. Serial acquirers such as GMCR who have a history of buying out their competition (for the sake of "growth") usually end up with bloated goodwill and intangibles.
Disgraced Stiller claims to be poor, yet his company's buying binge likely fueled his massive stock option awards which he of course exercised, and then some, at windfall prices.
Stiller isn't stupid, but he is an idiot. In my book that puts motive closer to the intent of fraud because a stupid person wouldn't have enjoyed such a financial windfall nor the perfect timing to dump shares before, during and following well-orchestrated and timed secondary offerings.
It's not so much the competition GMCR should be afraid of. Asset impairment would be a greater threat. Terrible management ultimately manifests as terrible results.
Chesapeake Energy: Desperate Asset Sales And The Language Of Letting Go [View article]
Icahn is an activist who uses a sawed-off shotgun when he goes hunting. He can be excused for that. Any body else though will likely be more careful before aiming and firing. Too many unknowns.
Chesapeake: 'Third Scenario' Could Be Huge For Investors [View article]
The Icahn angle as one commenter mentioned bears notice, but his agenda should not be viewed as salvation to the rest of shareholders. His presence and activism certainly help in the butt kicking process needed to clean house, but his view of a "future" CHK may be different to that of an average shareholder.
Unfortunately, CEO McClendan's pants are now firmly wrapped around his ankles. The only big discovery we see playing out near-term is the likelihood of more dirty diapers buried in the sand-box.
Will there be any value left at the end of the day? Maybe, but it won't resemble anything like its former self.
The Eurogroup statement on Spain: "The loan will be scaled to provide an effective backstop covering for all possible capital requirements ... with an additional margin of safety up to €100B in total ... the Fund for Orderly Restructuring (FROB), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned." [View news story]
The Spanish may be too proud for their own good, but a crummy deal is likely better than no deal. As for sovereign issues, the bond market will the judge of that.
Realizing that bad loan issues in the banking system (there) are still in the early innings of writedown mode, let's at least hope the back-stop contains language and enough bite to, as Herr Hansa suggested earlier, either consolidate some of the mess or at least put a fence around the more toxic stuff.
As for Greece, denial will only get them so far. If they haven't figured it out by now, at least show the world that they can come to consensus with what is the lesser of (all) the evils.
They said no to austerity, they said no to two party majority in its legislature. If they think throwing 50% of the votes into a handful of disparate minority parties is the best they can do then it might be better to dust off the drachma presses and start printing away.
Just as Karl Marx failed to grasp economics, the Greeks seemingly fail to grasp risk. This is the downside of what happens when you run out of other people's money to spend.
Cimarex Energy Is Heading South [View article]
Although management is authorized to hedge up to 50% of both oil and gas production, they have historically tended to be on the conservative side of their collar exposures. And, I like the fact they do not elect to consider them as cash-flow hedges.
I have owned this name on several occasions over the years and am hoping to pick some up eventually. Will wait for analyst revisions to be more in line with management guidance before dipping my toe in.
Also, XEC has historically been conservative with their valuations of proven and unproven reserves, thus mitigating somewhat (in my view) concerns about impairment risk being painful.
http://1.usa.gov/LN5zt0#
Much Ado About Nothing [View article]
As for underwriters, they still have plenty of tickets available. Getting a seat shouldn't be difficult.
Fed Regulation Of Non-Bank Financials Developing Very Poorly [View article]
I enjoyed reading your article very much. To me, the insurance business is "the bond market in drag". Premiums are invested and as you point out with AIG, their recklessness with CDS was monumental.
I agree that the premium of risk needs careful consideration and as we know, AIG failed miserably. JP Morgan is no hero either, but taxpayers thus far are not on the hook for their screw-up.
JPMorgan And Politics: Trail Of Tears Returns Home...To Washington [View article]
C'est le vie!
JM
JPMorgan And Politics: Trail Of Tears Returns Home...To Washington [View article]
Indeed, Sen. Dorgan was only one of eight to vote no. He was around thirty years also, but at least his no vote was consistant with his position.
Like the austerity comment. My Fench teacher was Austrian and he told me once that the french referred to Austrians as the autre chien "other dog"
JPMorgan: Cracks In The House Of Dimon Or Holes In The System? [View article]
Thanks for your comments. You make excellent points and I think you nailed it on the head with "Tactical reaction with no strategic vision".
JPMorgan: Cracks In The House Of Dimon Or Holes In The System? [View article]
Thanks much for the kind words. The derivative guide seemed fitting as JPM was an early architect to its evolution.
As to function of the CIO? That's the $2 billion question. One thing is certain; it failed as either. JM
The Impact Of JPMorgan's Trading Losses On The Investment Thesis [View article]
I enjoyed your perspective. In the last cycle, duration is what caught everybody with their pants down. In addition, we saw "convexity" screw-ups with carry-trade flops (i.e. cheap yen / Treasuries) .
I understand the aspiration to hedge "risk", but it's all relative to who is bearing it. Certainly, the sheer size of the bet (and protection sold) raises eyebrows. I also understand the need to have oversight. There has to be a happy medium between effective regulation and not over regulating.
Transparency is obviously needed, but clearinghouses are no guarantee of preventing a future meltdown either. Capital markets need some risk to function and like it or not, risk is important to the capital formation process.
But, dropping $2 billion (or more) within two months makes a losing day at the track seem almost fun. I would agree with you that JPM has "overall" exhibited good management and this episode should bring Dimon down off his high horse.
As you mentioned, we don't know the full extent of the losses involved, but it sheds light on the unpredictable nature of notional value.
Models will fail and JPM is not the first. Yet, the concentration of this particular "bet" does suggest serious flaws in operations analysis, monitoring processes, failure to ensure valid mark-to -market valuations, etc.
Perhaps the evolution of synthetic instruments has gotten a bit ahead of itself. I too think they will come out of this okay, but events like this are disruptive. Maybe someday the capital markets will figure out a way to take the "ass" out of assumptions.
JPMorgan: Cracks In The House Of Dimon Or Holes In The System? [View article]
Sounds like you are making the right moves defensively. Yes, CDS risk was the primary suspect in the credit crisis.
But, this gets us to your final point. Of all the complicated hubris delivered in the form of a 2,300 page manifesto called "Dodd-Frank", Title VII is clear as mud!
Instead of too-big-to-fail it might be a case of too-big-to-govern.
JPMorgan: Cracks In The House Of Dimon Or Holes In The System? [View article]
I agree; too many questions and not enough answers. A concentration of credit protection in a particular trade is one thing. It won't take long to attract interest of those wanting to bet against you.
We know the VaR model was flawed; this suggests issues with JPM's operations analysts as one place to start. Other questions I have would be:
-collateral management, trade settlement, resets, credit events
-failure by pricing team to ensure valid mark-to-market valuations
-poor reconciliation of portfolios to "solve" cash and position trade breaks (that arise from valuation and accrual differences)
-database administration errors
-breakdown in monitoring process and counterparty/client communications related to OTC derivative positions
A commentor on another JPM related story suggested (I'm paraphrasing here):
" Perhaps an end-of-cycle yield "grab" in an accrual book? Maybe the model switch revealed that they got caught with bad entry on credit?"
How about the folks running the London trading and/or "exotic" desk? Are they a bunch of hot-shot punks just out of college and what is their experience, etc., etc. ???
Who the hell knows, but Dimon is captain of the ship and he's got a lot of explaining to do! If there is a hand grenade in the egg basket, there's going be a problem.