Ashish S

http://alphathesis.wordpress.com

16 Comments

    • ON: Thu Jul 31st 06:07 AM
      Commented on:
      Why Merrill's CDO Sale Doesn't Mean Big Writeoffs Elsewhere
      Absolutely agreed Tom. Saying every CDO needs to be written down to 22c (or 5c depending on how you view it) is like saying every stock needs to be marked down to $2 (or $10) because that's where BSC went. Ok, not the same .. but u get the idea ..
      View article »
    • ON: Thu Jul 31st 03:13 AM
      Commented on:
      Merrill CDO Deal: How Can It Book a 'Sale'?
      The option analysis is an interesting angle.

      For Lone Star, this deal is oddly similar to the deal the Fed gave to JPM for Bear Sterns .. The Fed took all the downside risk after a small sliver of risk taken by JPM and JPM retained all the upside equity.

      Additionally, a little noted consideration is that Lone Star is identified in ML's press release as an "affiliate", which usually means that ML has more than a 20% but less than a 50% stake in Lone Star. So a) this means it certainly wasn't an "arms length" price and b) ML may retain a small portion of the equity.
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    • ON: Wed Jul 30th 22:28 PM
      Commented on:
      The Mystery of Merrill's Asset Reduction
      Felix -- my best guess is that the $29bio number comes from the following ..

      CDO notional: $30.6bio
      CDO sale amount: $6.7bio
      ML's funding commitment on sale: 75%
      ML's funding commitment notional: $6.7bio x 75% = $5.025bio
      Lone Star's effective equity investment = $6.7bio - $5.025bio = $1.675bio

      ML's total loss if CDOs are marked to 0: $30.6bio - 1.675bio = approx. $29bio
      View article »
    • ON: Tue Jul 29th 05:41 AM
      Commented on:
      The Merrill Shell Game
      Hmm .. ML sells $6.7bio worth of super senior ABS CDOs to itself at 20c on the dollar. What on earth is anyone supposed to make out of this?
      View article »
    • ON: Tue Jul 29th 04:19 AM
      Commented on:
      It's Raining BRICs
      As short term investments, they have underperformed in the last year. With a five year time horizon as opposed to a one year time horizon ..

      India (Sensex) +265%
      China (Shanghai Comp) +92%
      Russia (Micex) +242%
      Brazil (Bovespa) +334%

      US (S&P) +25%

      Maybe it does pay to diversify ...
      View article »
    • ON: Mon Jul 28th 21:23 PM
      Commented on:
      Yes, Financial Companies Can Be Analyzed
      I think in a lot of the criticism for this article, you guys are missing the point. Tom Brown's thesis is that for someone willing to do the due diligence, long term bargains can be found in the financial industry NOT that financials have hit a bottom.

      Calling a bottom is not what Brown has done and is absolutely not what Graham would ever do. Value investing is long term and not about market timing.

      That being said, Brown claims that "investors willing to do the analysis can come up with range of loss estimates" for banks. As someone mentioned above, these level three assets like CDOs that ML has just written down again are exceedingly complex and require models put together by teams of PhDs. An individual investor will never be able to come up with this "range of loss estimates." If you can pick up Merrill's SEC filings from three months ago and estimate its $5b writedown, please give me the name of your hedge fund so I can invest!

      That being said, I do agree that financials as an industry are now undervalued. However, Brown's approach of doing due diligence and picking the "best" of the pack exposes the individual investor to too much idiosyncratic risk -- no individual investor can pick out the next Bear Sterns or even Freddie or Fannie.

      I think the best move for an investor with a three year horizon is to make a diversified bet on financials with 10 names in his portfolio. That way, even if one crashes and burns, he will still be able to benefit from the underlying valuations long term.
      View article »
    • ON: Sun Jul 27th 23:00 PM
      Commented on:
      What You Can - And Can't - Learn from Warren Buffett
      "Evidence of avoiding income taxes is evident throughout Berkshire's life, as the company and Buffett have always used the IRS Tax Code to their advantage. There is clearly nothing wrong with that but similarly, it is somewhat disingenuous to urge higher taxes after a career of avoiding them."

      >> I disagree. If tax is 20% and someone believes that the govt should raise taxes to 30% to pay for more social services, that doesn't mean that person needs to pay extra tax himself. There is nothing hypocritical about using the existing rules to benefit yourself while believing that the rules should be changed.
      View article »
    • ON: Tue Jul 1st 12:53 PM
      Commented on:
      A Month of Seeing Red
      What are the approximate weights you are using? How would you weigh assets like "cash"?
      View article »
    • ON: Mon Jun 30th 22:05 PM
      Commented on:
      Counterparty Risk Could Spread Beyond Credit Markets
      @helpless No major financial institution is going to fail -- the Fed won't let it. Meanwhile, though, CDS and other derivative contracts are going to have to move towards exchanges to greatly reduce the counterparty risk. This will also hopefully increase price transparency and prevent a liquidity crisis. Problem is banks are making too much money keeping them OTC.
      View article »
    • ON: Mon Jun 30th 00:56 AM
      Commented on:
      On Barclays' New Carbon Emissions ETN
      Nice primer on ETNs, but why should I invest in carbon emissions?
      View article »
    • ON: Mon Jun 30th 00:51 AM
      Commented on:
      Indian Inflation Continues to Accelerate
      Below is another post about the rupee as a very poor performer. It quotes Bloomberg pointing out that of the BRIC countries, Brazil, Russia and China have major exports while India is running a current account deficit. Together with higher inflation, this is pushing the rupee lower.

      maoxian.com/archive/as.../
      View article »
    • ON: Sun Jun 29th 11:43 AM
      Commented on:
      Are Airlines Stocks a Contrarian Opportunity?
      The trade as you present it is simply a leveraged bet on the decline of oil prices. If that is your view, I don't see why you wouldn't make a more direct bet on oil, like buying puts.

      Also, if you are most bullish on the airline that is "best managed" primarily on the basis of hedging its oil exposure, wouldn't this airline have the least to gain from a correction in oil prices? Airlines that have been punished because of insufficient hedging would gain much more. In fact, you might be best off shorting the hedger and going long another to really capture your view on oil prices declining.
      View article »
    • ON: Mon Jun 9th 16:48 PM
      Commented on:
      Biggest Winners and Losers Since the 5/19 Top
      Financials are still really volatile and risky because not many people know what is going on and there are not too many signs things are over. Meanwhile, the market decline has made growth stocks like technology and health care more attractive. I think a good play is to buy volatility during periods of rallies in the market -- especially for financials.
      View article »
    • ON: Wed May 21st 11:16 AM
      Commented on:
      The Case for Amazon.com
      Agree completely with Opportunist. The Kindle is an extremely bold move whose time horizon is 5 to 10 years. You can't judge the thing in its first year. Unlike the iPhone, for example, this is Amazon's first foray into consumer electronics, and it is delving into a space where there was no market previously.

      Also, Vijay doesn't mention this, but AWS (Amazon Web Services) is an extremely innovative cloud computing solution that Google is now trying to copy itself.
      View article »
    • ON: Tue Mar 18th 15:45 PM
      Commented on:
      Explaining Bear Stearns' Current $7 Price
      Shareholders will almost certainly reject this offer. On Monday morning, while all other financials hit the tank, JPM added $10b to its market cap, suggesting that BSC was worth AT LEAST $10b to JPM (and therefore likely other banks without liquidity problems). However, now that markets have somewhat stabilized, BSC is no longer today in the same position as it was on Sunday night. Therefore, BSC's counterparties are going to now be more comfortable with their risk and have had time to hedge. Shareholders reject the deal and bear is at least a $2b company by week's end.
      View article »
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