Alex Sebastian's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/233804/comments http://seekingalpha.com/article/110969-goldman-starts-getting-smaller?source=feed#comment-331422 331422
On Dec 16 11:48 AM bodysurf wrote:

> We can put aside the idea that "compensation and benefits fell to
> a negative $490 million". Unless Goldman managed to force people
> to work, not only for free, but to pay GS for the privilege of showing
> up there every day, it's not possible for an expense to be a negative
> number. Perhaps they meant to say the expense GROWTH was negative,
> but I suppose that's what passes for research at Moody's these days.
> Quelle surprise.
>
> And there is absolutely zero chance that Goldman made a profit this
> year. We can fully expect that future quarters will wipe away whatever
> phantom profits GS claimed to have earned in 2008. One of the great
> short sell candidates of 2009, considering it's one of the few with
> some meat still on the bone.]]> Tue, 16 Dec 2008 18:14:48 -0500
On Dec 16 11:48 AM bodysurf wrote:

> We can put aside the idea that "compensation and benefits fell to
> a negative $490 million". Unless Goldman managed to force people
> to work, not only for free, but to pay GS for the privilege of showing
> up there every day, it's not possible for an expense to be a negative
> number. Perhaps they meant to say the expense GROWTH was negative,
> but I suppose that's what passes for research at Moody's these days.
> Quelle surprise.
>
> And there is absolutely zero chance that Goldman made a profit this
> year. We can fully expect that future quarters will wipe away whatever
> phantom profits GS claimed to have earned in 2008. One of the great
> short sell candidates of 2009, considering it's one of the few with
> some meat still on the bone.]]> http://seekingalpha.com/article/108397-three-financial-stocks-worth-holding?source=feed#comment-318599 318599
Overall I think that the financial stocks are still too risky. When Lehman collapsed, the valuation of its senior debt implied a $110B hole in its balance sheet. Also note that when Wachovia was forced to actually value its assets by Wells, it took a $28B hit. The situations at Freddie and Fannie were similar. What is hiding on the books of these institutions? I for one don't want to be a shareholder when we find out.]]> Tue, 02 Dec 2008 01:29:21 -0500
Overall I think that the financial stocks are still too risky. When Lehman collapsed, the valuation of its senior debt implied a $110B hole in its balance sheet. Also note that when Wachovia was forced to actually value its assets by Wells, it took a $28B hit. The situations at Freddie and Fannie were similar. What is hiding on the books of these institutions? I for one don't want to be a shareholder when we find out.]]> http://seekingalpha.com/article/107364-citigroup-the-end-draws-near?source=feed#comment-312226 312226
I really can't see why the uptick rule can't be reinstated. That would really help the situation. Also, CDS swaps aren't trading nearly as high as other large financial institutions' were before they folded. As of yesterday, they were trading at 360 basis points, compared to over 3000 for the other doomed banks. I think Citi may be a buy here, but only with true MAD Money.]]> Fri, 21 Nov 2008 22:00:56 -0500
I really can't see why the uptick rule can't be reinstated. That would really help the situation. Also, CDS swaps aren't trading nearly as high as other large financial institutions' were before they folded. As of yesterday, they were trading at 360 basis points, compared to over 3000 for the other doomed banks. I think Citi may be a buy here, but only with true MAD Money.]]> http://seekingalpha.com/article/103202-the-shallowest-generation?source=feed#comment-297708 297708
A few points I would like to add:
1) The war in Iraq is going to cost in excess of $2 trillion, not the $700B quoted in the article
2) As far as banks making bad loans and granting mortgages they should not have, it was not as simple as poor decision making. What occurred was the original lender was able to securitize the loans and sell them to a third party, earning a commission on the loans, so the incentive structure of the industry changed dramatically.

Before the era of securitization, a mortgage lender would have to do due diligence to ensure that people would be able to repay their loan. Once securitization began, they simply earned a commission on each mortgage, which they subsequently unloaded to Investment Bankers, who subsequently did a million optimization equations and got AAA ratings and sold them off. The bad banks were the banks which were caught with billions of these loans. Look at Goldman Sachs, they securitized billions of these loans and were a market maker fro CDOs MBSs etc, but foresaw the problems and got net short, evading the problems, while still making a killing during the securitization binge. A similar process occurred with consumer loans.

A great video that is in the same vein as this article is "In Debt We Trust". Google it.]]> Mon, 03 Nov 2008 21:41:40 -0500
A few points I would like to add:
1) The war in Iraq is going to cost in excess of $2 trillion, not the $700B quoted in the article
2) As far as banks making bad loans and granting mortgages they should not have, it was not as simple as poor decision making. What occurred was the original lender was able to securitize the loans and sell them to a third party, earning a commission on the loans, so the incentive structure of the industry changed dramatically.

Before the era of securitization, a mortgage lender would have to do due diligence to ensure that people would be able to repay their loan. Once securitization began, they simply earned a commission on each mortgage, which they subsequently unloaded to Investment Bankers, who subsequently did a million optimization equations and got AAA ratings and sold them off. The bad banks were the banks which were caught with billions of these loans. Look at Goldman Sachs, they securitized billions of these loans and were a market maker fro CDOs MBSs etc, but foresaw the problems and got net short, evading the problems, while still making a killing during the securitization binge. A similar process occurred with consumer loans.

A great video that is in the same vein as this article is "In Debt We Trust". Google it.]]> http://seekingalpha.com/article/103279-11-stocks-selling-below-cash?source=feed#comment-297698 297698 Mon, 03 Nov 2008 21:18:54 -0500 http://seekingalpha.com/article/98704-cramer-dow-could-drop-another-14-oil-s-going-to-50?source=feed#comment-278253 278253
This time I believe him a little more though, we HAVE to be getting close. How long can the VIX stay above 50? I actually see the Dow above 9,000 this time next year. I mean the stockmarket is down 40% on a fears of a recession. Isn't the cost of a recession already priced in? 40% is A LOT. Are companies earnings going to be beat worse than that? I doubt it. That's global depression-like numbers. I am going long this tomorrow at close if we see another big dive..

If MS makes it to the 14th, there is going to be one hell of a short squeeze (that's when the deal closes for their Japanese financing)...]]> Thu, 09 Oct 2008 19:12:13 -0400
This time I believe him a little more though, we HAVE to be getting close. How long can the VIX stay above 50? I actually see the Dow above 9,000 this time next year. I mean the stockmarket is down 40% on a fears of a recession. Isn't the cost of a recession already priced in? 40% is A LOT. Are companies earnings going to be beat worse than that? I doubt it. That's global depression-like numbers. I am going long this tomorrow at close if we see another big dive..

If MS makes it to the 14th, there is going to be one hell of a short squeeze (that's when the deal closes for their Japanese financing)...]]> http://seekingalpha.com/article/96425-if-you-think-the-dow-did-well-today-you-re-wrong?source=feed#comment-260029 260029 Sat, 20 Sep 2008 12:16:37 -0400 http://seekingalpha.com/article/95031-options-trader-9-11-redux?source=feed#comment-252164 252164 Thu, 11 Sep 2008 20:33:53 -0400 http://seekingalpha.com/article/94844-lehman-brothers-on-sale?source=feed#comment-250966 250966
Also, there haven't been any rumours since July, when the SEC targeted rumour-mongering short sellers. Goldman, Morgan Stanley, Citi and others were all very well behaved yesterday after hours when their spokesmen said that they all continue to trade with Lehman.]]> Wed, 10 Sep 2008 17:23:25 -0400
Also, there haven't been any rumours since July, when the SEC targeted rumour-mongering short sellers. Goldman, Morgan Stanley, Citi and others were all very well behaved yesterday after hours when their spokesmen said that they all continue to trade with Lehman.]]> http://seekingalpha.com/article/94805-expect-the-real-rally-by-mid-2009?source=feed#comment-250955 250955
Oh and I don't think forward earnings expectations are in any way reliable...]]> Wed, 10 Sep 2008 17:16:10 -0400
Oh and I don't think forward earnings expectations are in any way reliable...]]> http://seekingalpha.com/article/93871-equities-in-the-eye-of-the-storm?source=feed#comment-245359 245359 Thu, 04 Sep 2008 10:16:18 -0400 http://seekingalpha.com/article/91295-time-to-pull-the-trigger-on-four-oil-service-stocks?source=feed#comment-232407 232407 Sun, 17 Aug 2008 12:33:06 -0400 http://seekingalpha.com/article/91295-time-to-pull-the-trigger-on-four-oil-service-stocks?source=feed#comment-232324 232324 Sun, 17 Aug 2008 10:36:08 -0400 http://seekingalpha.com/article/91139-wal-mart-continues-to-impress?source=feed#comment-232016 232016 Sat, 16 Aug 2008 15:30:02 -0400 http://seekingalpha.com/article/91100-forget-100-a-barrel-oil-will-plummet-to-30?source=feed#comment-232003 232003
After reading this piece I honestly think Mr. Schwartz should be removed from the Seeking Alpha list of authors. This piece was so poorly researched and thought out that it is an insult to the entire site, and it's readers. I am only going to point out the most glaring flaw in Mr. Schwartz' argument.

New oil is NOT plentiful. If you had any knowledge of the off-shore rig market, you would know that many of the rigs are being commissioned by big oil companies for EXPLORATION purposes, not production. This is a direct result of high oil prices (big oil is looking in places where it is very expensive to extract oil). Beyond this, while there have been some large new fields discovered, but they lie in harsh environments which result in very technically challenging drilling conditions. As a result oil is prohibitively expensive to extract from these areas. Many of these fields come online only with oil over $100 per barrel. With oil at $30 a barrel, there is almost no new oil coming into the market. With the megafields in significant decline, there will be a net loss in oil production, resulting in a higher oil price.

No matter how you cut it, $30 oil is an impossibility which will never be realized. I feel sorry for the investors in your fund if that piece is what you guys consider "due diligence".

My advice: stick to options trading. You seem to be excellent at that.]]> Sat, 16 Aug 2008 15:07:48 -0400
After reading this piece I honestly think Mr. Schwartz should be removed from the Seeking Alpha list of authors. This piece was so poorly researched and thought out that it is an insult to the entire site, and it's readers. I am only going to point out the most glaring flaw in Mr. Schwartz' argument.

New oil is NOT plentiful. If you had any knowledge of the off-shore rig market, you would know that many of the rigs are being commissioned by big oil companies for EXPLORATION purposes, not production. This is a direct result of high oil prices (big oil is looking in places where it is very expensive to extract oil). Beyond this, while there have been some large new fields discovered, but they lie in harsh environments which result in very technically challenging drilling conditions. As a result oil is prohibitively expensive to extract from these areas. Many of these fields come online only with oil over $100 per barrel. With oil at $30 a barrel, there is almost no new oil coming into the market. With the megafields in significant decline, there will be a net loss in oil production, resulting in a higher oil price.

No matter how you cut it, $30 oil is an impossibility which will never be realized. I feel sorry for the investors in your fund if that piece is what you guys consider "due diligence".

My advice: stick to options trading. You seem to be excellent at that.]]> http://seekingalpha.com/article/89749-transocean-reports-solid-earnings-time-to-short?source=feed#comment-228989 228989
Does anyone have any ideas on this?]]> Tue, 12 Aug 2008 20:17:12 -0400
Does anyone have any ideas on this?]]> http://seekingalpha.com/article/88860-the-fright-of-the-chameleon-wsj-8217-s-8216-intelligent-investor-8217-and-etf-paranoia?source=feed#comment-222717 222717 Mon, 04 Aug 2008 18:30:43 -0400 http://seekingalpha.com/article/88976-how-merrill-lynch-moved-its-microwave-ovens?source=feed#comment-222709 222709
What surprises me is that anyone thinks that a lawsuit will actually change Merrill or anyone else's behavior. Yeah a few mil will be doled out, but nothing will change...]]> Mon, 04 Aug 2008 18:21:47 -0400
What surprises me is that anyone thinks that a lawsuit will actually change Merrill or anyone else's behavior. Yeah a few mil will be doled out, but nothing will change...]]> http://seekingalpha.com/article/88984-lehman-delevering-risk-high-and-growing?source=feed#comment-222694 222694 Mon, 04 Aug 2008 17:37:41 -0400 http://seekingalpha.com/article/88695-p-e-ratios-and-inflation?source=feed#comment-221855 221855 Sun, 03 Aug 2008 21:18:33 -0400 http://seekingalpha.com/article/88725-is-the-u-s-banking-system-safe?source=feed#comment-221743 221743 Sun, 03 Aug 2008 17:34:30 -0400 http://seekingalpha.com/article/88682-rant-anniversary-cramer-s-mad-money-8-1-08?source=feed#comment-221583 221583
I used to listen to Cramer, now for the most part I feel he is a rambling idiot. I definitely did not like his bottom call last week...]]> Sun, 03 Aug 2008 13:03:31 -0400
I used to listen to Cramer, now for the most part I feel he is a rambling idiot. I definitely did not like his bottom call last week...]]> http://seekingalpha.com/article/88580-inside-the-labor-report?source=feed#comment-221179 221179
As far as the article goes, the author seems to be forgetting an enormous part of the "simple equation". Well run businesses do discounted cash flow analyses of investment opportunities. When their cost of capital decreases (the goal of the Fed cutting rates), more investments become profitable and they are made, which leads to more employment, jump starting your cycle. Once the credit crisis ends and banks begin lending to businesses at reasonable rates, the cycle will start again.]]> Sat, 02 Aug 2008 16:49:16 -0400
As far as the article goes, the author seems to be forgetting an enormous part of the "simple equation". Well run businesses do discounted cash flow analyses of investment opportunities. When their cost of capital decreases (the goal of the Fed cutting rates), more investments become profitable and they are made, which leads to more employment, jump starting your cycle. Once the credit crisis ends and banks begin lending to businesses at reasonable rates, the cycle will start again.]]> http://seekingalpha.com/article/88539-three-stocks-that-look-cheap-here?source=feed#comment-221174 221174 Sat, 02 Aug 2008 16:38:48 -0400 http://seekingalpha.com/article/88289-july-payroll-playbook?source=feed#comment-219811 219811 Thu, 31 Jul 2008 22:46:33 -0400 http://seekingalpha.com/article/88368-bottoming-stocks-cramer-s-stop-trading-7-31-08?source=feed#comment-219777 219777 Thu, 31 Jul 2008 21:10:34 -0400 http://seekingalpha.com/article/87925-on-ben-graham-bank-stocks-jason-zweig-and-tom-brown?source=feed#comment-218820 218820
You said:

"Graham saw every investment as a black box – and that didn’t trouble him. A lot of investors spend a lot of their time worrying about the inner workings of the companies they own – Graham never did. He didn’t look inside the “system”, i.e. the company itself; instead he looked only at the outputs – the financial statements. He spent almost no time worrying about a business’s management, corporate culture, or future prospects." (Note especially the last item on the list of things Benjamin Graham would barely consider)

Benjamin Graham said in the last few pages of Chapter 11 of The Intelligent Investor:

"We suggest that analysts work out first what we call the 'past-performance value' which is based solely on the past record...The second part of the analysis should consider to what extent the value based solely on past performance should be modified because of new conditions expected in the future"

Although I have found other articles written by Mr. Gannon to contain good analysis, I feel that the above seriously comprises his authority to speak on Benjamin Graham and value investing until he goes back to the books.

]]> Wed, 30 Jul 2008 18:29:49 -0400
You said:

"Graham saw every investment as a black box – and that didn’t trouble him. A lot of investors spend a lot of their time worrying about the inner workings of the companies they own – Graham never did. He didn’t look inside the “system”, i.e. the company itself; instead he looked only at the outputs – the financial statements. He spent almost no time worrying about a business’s management, corporate culture, or future prospects." (Note especially the last item on the list of things Benjamin Graham would barely consider)

Benjamin Graham said in the last few pages of Chapter 11 of The Intelligent Investor:

"We suggest that analysts work out first what we call the 'past-performance value' which is based solely on the past record...The second part of the analysis should consider to what extent the value based solely on past performance should be modified because of new conditions expected in the future"

Although I have found other articles written by Mr. Gannon to contain good analysis, I feel that the above seriously comprises his authority to speak on Benjamin Graham and value investing until he goes back to the books.

]]> http://seekingalpha.com/article/87331-jason-zweig-on-graham-and-bank-stocks-the-un-intelligent-investor?source=feed#comment-216970 216970 Mon, 28 Jul 2008 20:30:30 -0400 http://seekingalpha.com/article/87473-yes-financial-companies-can-be-analyzed?source=feed#comment-216947 216947
Second, I am currently reading "The Intelligent Investor" by Benjamin Graham with updated commentary by Jason Zweig and I have to say that thus far I have found Mr. Zweig to be very self-important (putting his contributions in capitals in the index of the book) and his contributions to be exhibiting an incomplete understanding of Mr. Graham's techniques and arguments (for a prime example, see his embarrassingly incomplete Michael Jordan analogy at the end of the third chapter).

I must admit that I have not had a lot of exposure to Mr. Zweig's work, and his resume is very impressive, so he must be worth his salt, but based on what I have seen I really do not feel that his analysis carries much weight.

Additionally I would tend to agree with the author of this article, to a limited extent. There are a very few financial institutions that I would be interested in investing in if I had a longer investment horizon (Goldman Sachs is the only one I would definitely invest in and sleep soundly holding), but also agree with Zweig. I feel that it really isn't possible to analyze how far the housing market is going to fall and how many credit-worthy people are going to be affected by this slump. As a result, it is very hard to tell how low various grades of investment securities will fall before they recover. With mark to market accounting, even if they will ultimately be written back up, a precipitous decline may force a financial institution to raise capital where it would not be necessary without such accounting practices. I was surprised by Amex saying that the current crisis was even affecting some of their "super-prime" customers. To be perfectly honest, I don't feel that even sophisticated investors have the time nor the ability to value financial institutions. I feel that only the very best analysts can get a rough estimation of the true value of financial stocks, and oftentimes their compensation structure is such that we may not even get the true result of their analysis...]]> Mon, 28 Jul 2008 19:45:06 -0400
Second, I am currently reading "The Intelligent Investor" by Benjamin Graham with updated commentary by Jason Zweig and I have to say that thus far I have found Mr. Zweig to be very self-important (putting his contributions in capitals in the index of the book) and his contributions to be exhibiting an incomplete understanding of Mr. Graham's techniques and arguments (for a prime example, see his embarrassingly incomplete Michael Jordan analogy at the end of the third chapter).

I must admit that I have not had a lot of exposure to Mr. Zweig's work, and his resume is very impressive, so he must be worth his salt, but based on what I have seen I really do not feel that his analysis carries much weight.

Additionally I would tend to agree with the author of this article, to a limited extent. There are a very few financial institutions that I would be interested in investing in if I had a longer investment horizon (Goldman Sachs is the only one I would definitely invest in and sleep soundly holding), but also agree with Zweig. I feel that it really isn't possible to analyze how far the housing market is going to fall and how many credit-worthy people are going to be affected by this slump. As a result, it is very hard to tell how low various grades of investment securities will fall before they recover. With mark to market accounting, even if they will ultimately be written back up, a precipitous decline may force a financial institution to raise capital where it would not be necessary without such accounting practices. I was surprised by Amex saying that the current crisis was even affecting some of their "super-prime" customers. To be perfectly honest, I don't feel that even sophisticated investors have the time nor the ability to value financial institutions. I feel that only the very best analysts can get a rough estimation of the true value of financial stocks, and oftentimes their compensation structure is such that we may not even get the true result of their analysis...]]>