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Tom Armistead

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  • Aflac: What's The Story With Risk Management? [View article]
    Ray, as it turns out Daniels and Kirsch both presented at the 2014 Financial Analyst Briefing and the transcript is available on line...

    Daniels was more at a higher level, Kirsch got into information on what they have done and continue to do in order to diversify and de-risk, getting down to providing information in basis points of the total portfolio for various suspect classes.

    After reading the two presentations I believe the market is seriously over-estimating the risk on Aflac. My guess is that this will correct over time and the stock will increase accordingly. I'm planning to increase my position size and then wait patiently.
    Aug 12 09:41 AM | 1 Like Like |Link to Comment
  • The S&P 500 And The Russian Black Swan [View article]

    A search of "Russian middle class" took me here:

    70% of the middle class works for the government. Advancement is dependent on being in with the commissars, not on merit. There is no entrepreneurial class.

    Mingling with the middle class on a vacation junket doesn't give you a cross section of society there.

    The economy is dependent on exporting oil and gas. That will run out. So some territory needs to be taken over, and looted. Ukraine won't add much, for the fact its rulers have already looted it.
    Aug 10 05:03 AM | Likes Like |Link to Comment
  • The S&P 500 And The Russian Black Swan [View article]
    This article misses the point. Russia is struggling, no one is better off than they were at the end of the cold war except the privileged few who have been looting the country for years. The masses are dependent on state largesse which can't continue indefinitely.

    Putin controls the news and needs a war or some additional territory to make the masses think something is being done to better their lot. In times of war, countries rally behind their leaders.

    Meanwhile, Putin is crafty enough, but a couple of cards short of a full deck. He has done and said some really dopey things.

    Logical conflict resolution is beyond his capabilities and/or intentions.

    I'm pretty heavily invested in US equities, but defensively positioned, and moderately hedged. This isn't going to be a black swan event for the simple fact anybody can see there is trouble brewing.
    Aug 9 08:17 PM | 3 Likes Like |Link to Comment
  • Dodd-Frank: Unfinished And Unstarted Business [View article]
    The problem with the living wills varies depending where you look for commentary. Bloomberg et al basically say the banks didn't get enough direction from regulators and didn't have enough chance to talk to them about it.

    The NYT's sources suggest that the banks made very optimistic assumptions about the behavior of their customers and counterparties in the event of a new financial crisis. To whit, their customers and counterparties would stick with them. So the banks saw no reason to take out the features of derivatives that make them so destructive, such as the ability to terminate them on short notice or demand extra collateral.

    CDS and other derivatives are insurance, and should be regulated as such, with requirements of adequate capital for the seller and an insurable interest for the buyer. Otherwise you wind up with a giant zero sum game where all participants claim they are making money. Eventually the losses have to be exported to innocent third parties or one of the key players has to be voted off the island. Think AIG.

    The banks spent in the millions on lobbyists while Dodd-Frank was being written, and their apparent strategy was to make the law a travesty of regulation, totally unworkable, too complex to enforce. They enjoyed considerable success in this endeavor. Certainly there is room for them to stall and procrastinate and delay and obfuscate the rule-making process.

    The answers are simple enough: reinstate Glass-Steagall and regulate derivatives as insurance. From there, insist that the banks return to their proper function in the economy, which is to serve as financial intermediaries between those who
    work, save and invest and those who put capital to work.

    Instead, they continue to finagle in order to preserve their privileges as parasites on the real economy. Not good. I say break them up into ten pieces each and then make them serve the real economy.
    Aug 9 08:08 PM | 4 Likes Like |Link to Comment
  • Aflac: What's The Story With Risk Management? [View article]
    CR, there's been a heap of analysis directed at the situation in Japan. At 5% of my discretionay portfolio, and much of my assets in index funds, I'm willing to accept that i don't know how Japan works out in the end.

    AFL Japan, after hedging, holds yen assets to satisfy yen liabilities. Beyond that , it's management's job to control risk and that includes currency, interest, credit etc. I think AFL is priced for ineptitude as far as risk management. I'm looking for basic competence.
    Aug 4 12:03 PM | 6 Likes Like |Link to Comment
  • Aflac: What's The Story With Risk Management? [View article]
    Sneaker, insurance companies ideally match the duration of their bonds with the timing of their claims liabilities. As such, there is no need to sell bonds before maturity, so loss of market value is less of an issue.

    I'm one of those who stay away from bonds, but my reasoning is that equities pay better long term if you can stand the volatility.

    My thinking is, if returrns reflect risk and AFL is basically a bond portfolio, then risk/return is good, to get bond-like risk and equity returns. So risk management is the fly in the ointment.

    If the market won't pay up baubacks will create value.
    Aug 4 11:50 AM | 2 Likes Like |Link to Comment
  • How To Use The CAPE Ratio To Double The Return Of The S&P 500 [View article]
    Working with the S&P 1500, the requirements were 5 years of dividend increases, beta <.80, Quality > 40 (on a 0-100 scale), and forward PE5 >25. Finally selected the top 20 for yield.

    It's a very defensive posture, would have performed well in the tech bubble crash and again during the financial crisis. Doesn't compare well over the last 5 years.
    Aug 2 08:14 AM | 1 Like Like |Link to Comment
  • How To Use The CAPE Ratio To Double The Return Of The S&P 500 [View article]
    This is a type of deep value investing, you will get results that are very different from the index, sometimes better, sometimes worse.

    Graham suggested the use of PE5 or PE7 for individual stocks. I've experimented with it and it works based on backtesting at Portfolio123. Unfortunately one of my better screens selected stocks with a PE5 greater than 25, it seems like more expensive is better.

    I've also experimented with a forward version, by using analyst consensus and including the coming year in the computation of average earnings.
    Aug 2 07:15 AM | 2 Likes Like |Link to Comment
  • A Different Look At Neglect [View article]
    Looking at industries, there is P&C insurance at the top, nobody cares and nobody trades.

    There were several years there where Chubb (NYSE:CB) and Travelers (NYSE:TRV) traded at serious discounts to intrinsic value. There are other names, but as an investor I like to diversify...
    Aug 1 03:38 PM | 1 Like Like |Link to Comment
  • Short Sellers And Seeking Alpha [View article]
    Contributors disclose that they receive no compensation other than from SA. But the comparison to our legal system, where both attorneys are paid, would appear to make it legitimate for an author to be paid by outside parties to plug or disparage a stock in articles here at SA. Let the jury decide, so on and so forth.

    I get very uncomfortable when I read an article where the tone and style suggest it was written for promotional and/or attack purposes, without regard for factuality.

    I don't have any trouble with short-selling, per se, and do it myself and have on occasion made the short case here at SA.

    But I do have a problem with articles that are manipulative in their intent. I guess its like pornography, you know it when you see it.
    Aug 1 08:35 AM | 12 Likes Like |Link to Comment
  • Which Insurance Dividend Aristocrat Should You Own? [View article]
    The more I think about it, the main item has to do with the insurance holding company structure. Insurance laws regulate the capacity of insurance subsidiaries to pay dividends to the parent holding company.

    From the standpoint of solvency at the holding company, the investor should concern himself with coverage of fixed charges and the capacity of subsidiaries to upstream dividends. Is there a line of credit, and what are the terms?

    Most of this can be found in the 10-K filings, if you look for it. These companies are fine when viewed with these considerations in mind.
    Jul 30 08:28 AM | 1 Like Like |Link to Comment
  • Which Insurance Dividend Aristocrat Should You Own? [View article]
    I question your use of a proxy for the current ratio here. Unpaid policy claims are a long-term liability and are counterbalanced by investment assets. Warren Buffett has a long history of fascination with insurance company float. The point is, it will be years until the claims are paid, and in the meantime the company has the use of the funds and can invest them at a profit.

    Financial condition for insurance companies is more about the safety of the investments, and the accuracy of reserves. Aflac has a history of reaching for yield, which cost them dearly during the financial crisis. They have brought in management that has excellent fixed income credentials and can be expected to be more prudent going forward. Chubb has always done well on their investments, very safe and stable. CINF had a larger than usual allocation to equity investments at one time, that worked out poorly as they had way too much FITB and they never trimmed it in time to avoid losses. They too can be expected to do better going forward.

    Otherwise, a very informative article and I agree CB is an excellent buy here.
    Jul 30 07:28 AM | 3 Likes Like |Link to Comment
  • Housing Starts Plunge Due To Horrific Data From The South [View article]
    It could be just bad data. Or maybe it was Eric Cantor's defeat, creating uncertainty.
    Jul 17 12:57 PM | Likes Like |Link to Comment
  • Housing Starts Plunge Due To Horrific Data From The South [View article]
    SDNS, good point, economics could driving some of it.

    Just a thought, but it seems to me that when the pie diminishes in size, human beings seem to get much better at finding differences between each other, whether it be race, ethnic origin, religion, or politics and economic philosophy. And blaming the problems on some other group, and seldom if ever on the actual cause.

    Neo-liberal economics aka financialism is the root of the problem, so endless rhetoric directed at big government, equal opportunity, deficit spending, social safety nets, regulation, etc. won't help.

    Obama very courageously went to Wall Street and informed them that Financial Reform would be happening, very early in his first term. The big-wigs on Wall Street were conspicuous by their absence, and applause was perfunctory, to say the least. He's made considerable progress on straightening things out and starting the return to prosperity.
    Jul 17 11:01 AM | 3 Likes Like |Link to Comment
  • Housing Starts Plunge Due To Horrific Data From The South [View article]
    Is it a problem with the data, or with the South?

    They think differently than for example the NE, and do things differently, it's really a cultural sort of thing, and they are extraordinarily vehement and outspoken about it...
    Jul 17 09:58 AM | Likes Like |Link to Comment