ronh

22 Comments

    • ON: Thu Oct 2nd 10:52 AM
      Commented on:
      Some True Safe Havens Are Still (Surprisingly) Undervalued
      Note that it takes many years to bring a mine into production, and a lot of capital. Shutting down a mine in light of a fall in commodity prices is a very expensive decision. A company would not typically take such a decision, unless it comes to the conclusion that the commodity price has fallen below its cost of production, and the pricing for that commodity will remain suppressed for a long period of time (the losses from continued operation will be greater than the cost of shut down and subsequent start up when prices recover)
      There have been a few mining closures during the last few months, and many more will follow if the commodity pricing complex remains suppressed. Naturally, these decision will result in reduced supply, which will lead to increased pricing, and so on. These cyles play out over many years however, and you may need to wait a few years for your thesis to pay off.
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    • ON: Wed Sep 10th 17:07 PM
      Commented on:
      Chewing on the FDIC List of 'Problem' Banks
      Greg, I was not aware that FED had signed an agreement of some kind with OTS (although it doesn't surprise me). Can you provide a link?

      thanks
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    • ON: Sun Sep 7th 12:26 PM
      Commented on:
      A First Look Inside the Fannie / Freddie Bailout Plan
      the usd will significantly weaken. The national debt just effectively doubled. Although it was always previously "implied", the debt was never explicitly acknowledgd before now. Paulson admitted in his speech this morning that the ambiguity was a big problem. The guarantee is now explicit, and as a percentage of gdp, the us nominal debt just doubled.....
      The greenback will likely descend, and commodities should strengthen, over the next few weeks as this becomes better understood.
      View article »
    • ON: Fri Aug 29th 09:25 AM
      Commented on:
      Short Thesis Still Intact at FirstFed
      I don't think that is accurate. Deposits in excess of 100K are uninsured and at risk. The 500M in wholesale deposit is very suspicious, and may in fact have been a "deposit" for only a day or two. No sane person would leave 500M on deposit and at risk at FED. it may have been put in on July 31st, and withdrawn on August 1st. It would serve the purpose of providing some window dressing to the July 31st statement.


      On Aug 28 07:22 PM Kinabalu wrote:

      > Just a comment on uninsured deposits. These deposits are usually
      > demand deposits and are the most attractive deposits a bank can have.
      > As a result when the FDIC takes over a failed bank they can sell
      > the demand deposits to other banks for more than the face value.
      > So the depositor doesn't have to take a loss as the new bank is happy
      > to take over their business. There really isn't any more incentive
      > for the uninsured depositor to participate in a run on the bank than
      > for an insured depositor.
      View article »
    • ON: Wed Aug 27th 09:50 AM
      Commented on:
      Short Thesis Still Intact at FirstFed
      great article, a couple of points worth adding:

      1. FED does not voluntarily provide the monthly report. It is required by one of their regulators. Note that Downey provides essentially the same information monthly as well. Perhaps someone could clarify which regulator requires that filing?
      2. While the dollar value of 30-59 day late non accrual loans was fairly steady at 123M vs. 126M one month ago, the 60-89 day bucket increased to 101M to 81M. Total Non Accrual loans in the pipeline went up 17M in the month.
      3. Cash was 562M at the end of July, but wholesale deposits spiked during the month by 556M. This spike in wholesale deposits was unprecdented in the history of FED and seems very susupicious. During the month, as you point out, ordinary retail depositors withdrew 257M. There is no further detail about the source(s) or this "wholesale" deposit. Note that is may have been only on deposit for a short time. We are also not given any information as to the terms provided to the depositor(s). It seems hard to beleive that anyone would put their capital at risk with an uninsured deposit at FED given its precarious balance sheet. Note that in the absence of this miracle deposit, the bank would have been out of cash, and needed to tap the FHLB, which would, of course have attracted still more regulatory attention.
      4. Very important to always remember with respect to FED that almost all of its loans are in California (a few in Arizona as well), and primarily in the absolute worst hit part of California, LA, the inland empire, and San Diego. The loss severities for them will be very significant.

      This bank is in very big trouble....
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    • ON: Tue Aug 5th 15:39 PM
      Commented on:
      Auto Sales Are Cause for Optimism
      www.bloomberg.com/apps...

      further to this discussion, some of you may want to take a look at this chart to see what the cost of insuring GM debt is today. The debt market clearly expects insolvency.
      View article »
    • ON: Tue Aug 5th 12:23 PM
      Commented on:
      Auto Sales Are Cause for Optimism
      elroy, I agree that the chap 11 would hurt all the retirees as well as the shareholders and some debt holders. These are macro issues that go to the question of globalization/ unionized work forces/ moral and legal obligations to retirees etc. That debate is far to much for a forum such as this. In fact, the problems at GM go to the root of the problems with globalized trade and the reduction of all forms of trade hurdles.
      The only issue here is....are GM shares a buy at these levels?

      In my view, they are not. GM simply has to many anchors to succeed going forward. Absent huge changes in US trade policy, they will have no choice, in my view, but to eventually file. The longer they wait, the lesser will be their cash available to 'reorganize' with.

      As an aside, I am not sure if the readers here have seen the promotional pieces being touted on CNBC relating to their upcoming piece on GM. Much is being made of the GM success in China, to bad nobody is mentioning that they actually lost money in China last quarter, even thought they sold a lot of cars. In addition, much of their reported "growth" in China is relating to their SAIC joint venture, in which they have a 34% interest, but report 100% of the sales as if they were their own. GM has done very well overseas and particularly in China, and they will continue to do so, but while they make and sell a lot of cars overseas, they do not make a lot of money there, and they will never be able to make up their domestic losses with foreign profits, unless they go through that chap 11 filing.
      View article »
    • ON: Tue Aug 5th 08:05 AM
      Commented on:
      Auto Sales Are Cause for Optimism
      while it is true that car sales will return, it does not follow that GM is a buy at these levels. GM will one day be a force to be reckoned with, but not until it goes through a chap 11 to shed all of the legacy obligations that it carries. It will never be competitive until it does so.
      GM is in a sense, a victim of its own success. It has lasted long enough to become responsible for the health care of a million retirees and their families. GM has not funded that obligation, and cannot pay for it over a smaller number of vehicles, and still be profitable. In addition to the health care costs, they have the Delphi obligations, and huge "restructuring&qu... costs which seem to grow monthly. GM should just file chap 11 and move on. They will emerge a strong company once again.
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    • ON: Sat Jul 26th 12:45 PM
      Commented on:
      Setting a New High Mark for the Next Housing Bubble
      I agree with your premise regarding what you refer to as the "parity effect" however, one would expect that there is some "option" value to the possibility of real estate appreciation.
      In my view, a buyer would be prepared to pay something more to "carry" an owned home (total cost of ownership including opportunity cost on the down payment) over the cost of rental to enjoy the possibilty of capital appreciation. My sense is that premium would be somewhere between 10-25% over the equivalent cost of rental. When the total cost to carry a home approaches 125% of the cost of rental, I would think we will see prices stabilize.
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    • ON: Fri Jul 25th 18:05 PM
      Commented on:
      WaMu and More: Uninsured Depositors Begging for Trouble
      seems to be a whole lot of 'shoot the messenger" here.

      I, for one, appreciate the article. We need more people raising the red flag about poorly run financial institutions, and we all need to be aware that not every bank is safe. Far to many people are at risk, and do not know that they are. There is no reason to take any risk at all for the paltry amount of interest these banks will give you on checking account or CD. Leaving your cash in any institution with even a hint of a problem, is absolutely foolish.

      The article is important, and trying to ignore the facts is idiotic.
      View article »
    • ON: Mon Jul 21st 14:27 PM
      Commented on:
      Harley's Beat: Was High Crude the Buffer?
      David, thanks for posting that link. It was indeed an interesting read. Although I can see the prestige value of a Harley in India and elsewhere, I doubt India will ever be a significant market for HOG. My guess is that Harley will always have a certain cache, both in the US and elsewhere, the real issue, as I see it, is whether the current stock price is sustainable. I think not, expensive gas consuming toys are all going to be under pressure for the near future. That includes, RVs, SUVs, Boats, and Harleys.
      View article »
    • ON: Fri Jul 18th 16:45 PM
      Commented on:
      Harley's Beat: Was High Crude the Buffer?
      also worth noting with respect to the overseas sales, that currency exchange added about 40M to their earnings this quarter. I am not sure that is sustainable. The dollar has strengthened somewhat recently, and the European market has shown weakness in the auto business..
      View article »
    • ON: Fri Jul 18th 11:31 AM
      Commented on:
      Harley's Beat: Was High Crude the Buffer?
      while the results certainly appear to be good at first glance, a closer look reveals some much bigger issues.
      1. their inability to sell the financing paper has meant that they are financing the majority of their bikes and taking back the paper on to their balance sheet. They are holding 3.8B of finance receivables on their balance sheet, and increase of 600M qoq.
      2. The default rate on that paper, according to the cc was about 5%, and the ltv is very high (quite a bit of no down payment financing). They are at risk for large write offs down the road if the resale value of the bikes doesn't hold up and if their default rate spike at all. Big bikes are a luxury item for most people, and the default rates and resale value of the boat market would indicate that their are major risks in this regard for HOG.

      HOG's balance sheet now has 3.8B of total financing receivables for bikes, not including their inventory financing to dealers, on total assets of 6.8B.

      Investors in HOG need to appreciate that they are buying a finance company as well as a motorcycle company.
      View article »
    • ON: Fri Jul 11th 15:27 PM
      Commented on:
      Big Three Automakers: Recapitalization or Bankruptcy?
      while I agree with the premise, I believe it is naive to think that you can get negotiated agreeements with the creditors outside of the bankruptcy courts. I have been involved in these types of discussions, and they are simply not practical. Each stakeholder believes the other ones should take the bigger haircuts. It simply never works.
      Chap 11 is almost inevitable for GM, in my view.
      View article »
    • ON: Wed Jun 25th 18:29 PM
      Commented on:
      Jim Chanos: A Short Seller Speaks
      very interesting article. Confirmation of the point about CFOs being asked to falsify reports can be seen currently in the reports of the testimony of the former CFO of Livent. His evidence was essentially that only the naive believe that the numbers are real.
      View article »
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