Sebrock

The Convertibles Collapse Offers Investment Lessons for All Investors

Great article, thank you. I've come to one obvious conclusion and that is that leverage can not substitute for good returns. Wall Street has become mediocre because easy leverage has given funds the appearance of good returns and let's face it not everyone can be on the positive tail. If they are then you can surely bet that the market is either not very efficient or that the system is levered.

When an arbitrage strategy is not self funding and truly hedged (by means of cash flows where if you are in an illiquid position, the cash flows will still keep you earning a return) and the non-levered returns are the same as yields on much simpler instruments, then you get out, not leverage up.

Will Housing Bottom in 2010 or 2012?

Everyone here is missing one factor - which I see in the sub-market I am in, which consequently is not much lower than in 2006 - that is that as construction prices go up, supply will start to drop, less houses will sell and they will sell for cost +. At that point the market will go back to normal - the market and sales numbers of the last few years were not normal and the numbers were unsustainable. The number to watch is not predicted futures but starts, when starts stabilize after declining, the market has bottomed.

Monsanto: Turn Rising Food Prices Into Profits

first, I'll say that I really like Monsanto (right now I have an Iron Condor on since I think the stock is going to trade in a range between 100-135 for the next month or so) but how could you in all seriousness call 37% a long term growth rate. 3 years is not long term.

Survey of Banking Industry Intangible Assets

All true but it looks like book value is also not recoverable during a liquidation - Bear Stearns is on the top of the low ratio list and JPM is on the high ratio list.

Why the U.S Dollar Won't Die

Funny you wrote this, I was thinking the same thing this morning on a walk to clear my head of all this madness. People are completely disregarding the markets equilibrium mechanisms. I suppose the first effects of the slowing European economies will be seen soon and as soon as the ECB lowers rates, the correction cycle will begin. If I had balls of steel, I would buy dollars, sell oil and gold. I would take that money in dollars and then buy what I deemed to be the most solid financial companies out there. The type of company a Buffet would buy with a sustainable future business at an affordable price.

Two Explanations for Surging Oil Prices

5)Salad Al-Huseni (Former Head of Production Saudi Aramco)

I'm pretty sure I read an editorial by him in the NY Times or WSJ that said the exact opposite. Are you sure this list is right?

We're Range-Bound, But It Doesn't Feel Like It

that's a great strategy on behalf of corporations doing buy-backs. Dont fight the market and buy the stock when it's selling off and often times at a great value (who would know better than the company itself). No, it's much better to buy when everyone is buying and the buyback makes no economic sense other than to keep the momentum guys happy. Good going guys. How are people so smart individually and so utterly retarded when put aggregated into a group?

Thoughts on Ambac Bailout, MBIA, Berkshire's Muni Bond Backing

Anyone working at Moody's or S&P on the monolines should have their CFA designations taken away.

The Monolines Need $200 Billion? No Way

Tom - Firstly, it's nice to see not everyone is hysterical. I tried to contact you through your site but there is something wrong with your contact form.

I would love your insight on Advanta. By my calculations, the stock is worth somewhere near the $20 mark. On an adjusted book value without any future revenues the company is easily worth $11. If you start with their balance sheet and assume that their CDO investments are completely written off and then assume that 9% of their receivables are charge offs (in the 00-01 recession they reached as high as 7.5%) the $13 book value becomes $11. Off balance sheet their securitization portfolio has an average net yield of 4.5% (if charge offs approach 9%, then there are still no losses - only a drop in the total income from securitizations of 0 (which is reflected on the income statement). So now we are left with $11, now lets assume that their net income stays at $70m after 2 tough years and you capitalize that income at a 15% cost of capital - you get an additional $9 a share. So back of the envelope this company is worth way more than the current market price. It basically comes down to this, if you dont like Advanta at current levels then you pretty much are making a bet that the economy is going to completely fall off a cliff which would make the S&P drop a lot more than this already depressed stock (I'm actually long Advanta @ 6.80 and short @ 50 delta the S&P - so far it's working out great). Another thing to consider is that Advanta lends to small businesses - we run several small businesses and can tell you that any purchase we make on a credit cards (Advanta of course) we do to manage the receivables cycle or as investment (we arent buying useless electronics like the consumer card customers) and our credit card expenditures are part of our debt calculations so we dont spend what we shouldnt. I think a lot of businesses are this way. So you could definitely see a rise in delinquencies past 30 days (as you did see in December) but it is also possible that the small businesses slow down and pay down their debt burden on their cards as they receive payment. It is also possible that Advanta's spread increases as Libor spreads come down and credit card rates increase. Am I absolutely crazy about this or are people so hysterical about financial stocks that they are crapping on everything? I mean if I had all the money in the world, I would buy the entire business and be a very happy man. There are very few stocks I can say that about and it's been quite some time that the environment has looked so good for those who like to invest based on intrinsic value and not relative value. I guess everyone will keep on second guessing and mistrusting financial institutions until the whole monoline issue is further understood even if it doesnt affect every financial stock.

The 'Big Rollover' is Officially Here

While I do believe we could be in for a lot more pain, the assessment that we are going into a financial abyss does not take into consideration the human evolution/survival factor. We are programmed to evolve and improve and fight when we are up against the wall. We have gotten through worse over the last 50,000 years and we will get through this as well. The worst case scenario is that stocks and investments finally get priced based intrinsic value. And yes, CNBC is absolute garbage.