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Blackbeard

Blackbeard
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  • Egan Jones says Jefferies (JEF) needs to raise $1B in equity (market cap is just $2B) and unload $5B in assets if it wants to avoid getting downgraded to junk territory. The 90% debt/capital ratio is more along the lines of Goldman Sachs (GS) and Morgan Stanley (MS). The difference is Jefferies does not have implicit government backing.  [View news story]
    Yields on JEF debt have improved (fallen) in the last day or so.
    Nov 22 04:04 PM | Likes Like |Link to Comment
  • Though 30 years ago Ted Benna took advantage of an IRS loophole to develop a retirement-planning phenom that become known as a 401K plan, today he would like to scrap the system altogether. He says the plans offer too many investing options and too many opportunities for investors to makes a mistake as they follow the herd mentality. The godfather of IRAs on his creation: "Blowing up the existing structures is the only way we can simplify them." [View news story]
    One potential solution: Allow 401(k) contributions to go to a very simplified 401(k) retirement account with very few options or have the option of going directly to a participant's personal IRA. Allow the plan rules to be changed so that matching contributions can flow to either account. The "pain in the butt" participants mentioned in the article will be pleased with the increased choices available in their personal accounts, and those that want a simple, handheld solution would get what they want.
    Nov 22 01:25 PM | Likes Like |Link to Comment
  • It's an interesting question...who owns the Fed? And who better to answer it and try to dispel rumors than the Fed itself: "Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year."  [View news story]
    There exists the ability of the Fed to issue stock to non-members, but only if there is not enough money provided by members to ge the Fed to a specific capital level (this power was never used - the Fed's initial funding more than covered this level).

    The Fed's capital structure includes another oddity - member banks get one vote each. A concentration of share ownership such as what takes place in a merger of two member banks does not increase the combined entity's voting power any more than it increases that of the other banks.
    Nov 4 12:04 PM | 1 Like Like |Link to Comment
  • It's an interesting question...who owns the Fed? And who better to answer it and try to dispel rumors than the Fed itself: "Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year."  [View news story]
    1) Who are the member bank shareholders? The member banks include a wide range of publicly traded, privately-owned, and mutually owned institutions. Most are publicly traded, and ownership is represented by common stock that can be purchased on the open market (example: Bank of America). The privately owned members tend to be small community banks with a tiny number of branches. Some mutual banks exist within the fed system as well.

    2) The number of Fed shares outstanding changes on a regular basis. Member banks are required to purchase shares of stock at a subscription price of $100/share in relation to their capital and accumulated surplus. These figures are reported on a regular basis. Newly-issued shares are purchased from the Fed when these balances rise, and shares are sold back to the Fed for cancellation when they fall. The Federal Reserve Act, Section V covers a good portion of this.
    Nov 4 11:31 AM | 2 Likes Like |Link to Comment
  • Medivation's (MDVN +111.1%) blockbuster announcement on the results for testing of its prostate cancer treatment hits shares of rival Dendreon (DNDN -35.9%) hard - after the company was already torched by a forecast for only modest growth of its own prostate cancer therapy. [View news story]
    I believe their market caps passed each other today.
    Nov 3 12:04 PM | Likes Like |Link to Comment
  • Of note concerning Jefferies (JEF -11.9%) is a downgrade by Egan-Jones noting $2.7B of "sovereign obligations" - equal to 77% of shareholders equity. The agency would prefer a lower leverage ratio than the current 12.9:1, though noting it's not in the same ballpark as MF Global's (MF) 40:1.  [View news story]
    Leucadia (LUK) is moving alongside Jeffries as it owns a substantial amoung of Jeffries shares.
    Nov 3 10:22 AM | Likes Like |Link to Comment
  • The rich get richer: An analysis of the net worth of members of Congress by Roll Call shows a 25% jump in wealth in just two years, led by the 50 richest members who account for nearly 80% of the institution's cumulative wealth. The bigger question: Are voters electing richer people to Congress or are members just outperforming the populace with their money?  [View news story]
    A 25% jump in two years? The S&P 500 total return is roughly that figure for the past two years (Oct 2009 - Oct 2011). This is just people riding the market's ups and downs and staying invested.
    Nov 1 11:09 AM | Likes Like |Link to Comment
  • Bank of China will issue American Express (AXP +1.6%) branded credit cards to its private clients. Transaction processors Visa (V) and MasterCard (MA) also have tried to tap China's fast-growing payments industry with some difficulty, but AXP - both a credit card lender and a transaction processor - may do better.  [View news story]
    Visa is not allowed in China. Mastercard has a co-branding deal with Unionpay that gives revenue generated inside China to Unionpay and overseas revenue to Mastercard.
    Oct 26 02:30 PM | Likes Like |Link to Comment
  • A quarter of U.S. millionaires pay lower taxes than some in the middle class, the Congressional Research Service reports. The average tax rate for households earning $1M-plus was 30.5%, vs. 24.6% paid on average by families earning less than $250K, but several paid close to 24% - at times lower than taxes paid by middle-income families that didn't benefit from deductions.  [View news story]
    I think that is the case with many of the $1MM income households. Very few people actually pull a straight paycheck of that level in a given year. Many are cashing out of a long-held investment and receive the preferential capital gains rate. The tax code includes many deductions for behaviors the government wishes to encourage (charitable donations, environmentally friendly upgrades, etc...). The $1MM households that paid less than 24.6% likely had a large portion of income attributed to capital gains or utilized a large number of deductions. Those that were in the $250k households that paid at the high end of their tax bracket likely took advantage of very little of these two items.
    Oct 13 11:00 AM | 1 Like Like |Link to Comment
  • Why Exxon Mobil Should Pay Attention To Warren Buffett's Strategy [View article]
    One roadblock to effectively buying back XOM shares when they are low priced is the sheer size of the purchases involved. Perhaps a more volatile but higher dividend during high-priced times and share buybacks in low-priced times would be effective.

    From the end of 1999 to the end of 2010, Exxon reduced its share count by approximately 2 billion shares (split adjusted). With about 255 trading days in a normal year, that is a rate of more than 700 thousand shares per day. Adjusted for normal trading hours of the NYSE, that is 100 shares every 4 seconds of the trading day for more than 10 years. Exxon averaged 19 million shares traded every day during this period. This means Exxon's own repurchases accounted for nearly 1 in 25 shares traded during this entire period.
    Oct 6 04:43 PM | 1 Like Like |Link to Comment
  • Following the trifecta of Moody's (Buffett) downgrades, Bank of America (Buffett) BAC -3.0%, Wells Fargo (Buffett) WFC +0.9%, Citigroup (not yet Buffett) C -0.2%. Unmentioned by the ratings agency is JPMorgan JPM -1.3%, Goldman (formerly Buffett) GS -2.3%, and Morgan Stanley MS -4.8%.  [View news story]
    The mention of Buffett was done as a bit of a joke (like saying the Rockefellars where being downgraded because of a rating change in both Exxon and Chevron).

    Moody's, along with other ratings agencies, cut some ratings on the major banks back in 2008/2009 to reflect the financial distress shown in the industry. At the time of the downgrades, they mentioned that the cuts would have been more severe had not there been the expectation of government support to protect bondholders of these organizations. Now that some time has passed, and the political climate grown more willing to see an example made of a bank, the odds of another bank bailout have dropped. The downgrade is reflecting only the lower expectation of a bailout if a bank were to need it.
    Sep 26 11:55 AM | Likes Like |Link to Comment
  • Following the trifecta of Moody's (Buffett) downgrades, Bank of America (Buffett) BAC -3.0%, Wells Fargo (Buffett) WFC +0.9%, Citigroup (not yet Buffett) C -0.2%. Unmentioned by the ratings agency is JPMorgan JPM -1.3%, Goldman (formerly Buffett) GS -2.3%, and Morgan Stanley MS -4.8%.  [View news story]
    Berkshire Hathaway has been a long time investor in Moody's. Berkshire has been reducing its Moody's position in recent years but still owns about 12% of the company.
    Sep 21 01:48 PM | 1 Like Like |Link to Comment
  • Berkshire Hathaway (BRK.A, BRK.B) announces it's hiring fund manager Ted Weschler to join the company as an investment manager. Weschler will join existing manager Todd Combs in overseeing a portion of Berkshire's equity holdings, though Warren Buffett will continue managing most of Berkshire's funds until he retires.  [View news story]
    Todd Combs, Buffett's previous hire, introduced Mastercard to Berkshire's portfolio. Weschler's three biggest positions are WR Grace, Davita, and Directv. Let's see if Berkshire starts buying shares of these companies when he starts work in a few months.
    Sep 12 09:38 AM | 1 Like Like |Link to Comment
  • SuperMedia: The Fixed Cost That Won't Go Away [View article]
    Supermedia is the post-bankruptcy reincarnation of Idearc (Verizon's old directory business). The company has been out of bankruptcy for nearly two years, but has already used a below-par debt exchange to reduce it's debt. There are debt covenants that require excess cash flow to be used solely for the bondholders' benefit until it is paid off.
    Sep 8 09:39 AM | Likes Like |Link to Comment
  • Are Dividend Investors Benefiting From Stock Buybacks? [View article]
    "The Walton family stake in Wal-Mart has increased to above 50%..."

    That's awesome. Wal-Mart is now a Mom and Pop family business.
    Aug 31 08:38 AM | 4 Likes Like |Link to Comment
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