FIG trader_

Why Kass Is Wrong About Berkshire Hathaway

He is specifically is quoted as saying it is the performance of the four stocks as well as other things. Is he referring to the credit default swap which are under water by 1.5 Billion? Big F'n deal. WEB hasn't taken a multi-billion loss ever, except for catastrophe losses. I wouldn't lose sleep over a markdown on a credit he has studied. Or the index put sold at par. A 15/20 year bet. Fuggedaboutit. Kass will be 6 feet under as will WEB, but the cash will be compounding

American Express: Watch the Dividend

You misunderstand Buffett and value investing, especially in regards to financials. In order to even make AXP's "dvd'd yield comparable with other "value" stocks, you would have to examine the past growth in the divdend as well as the total return (and/or capital appreciation) of AXP versus peers. There are plenty of stocks with 4% dvd's (most banks) that have not showed any where near the kind of appreciation experienced by AXP. Does that make them better value stocks????? (In fact, dvd is a small part of Total return for AXP) The reality is dividend payout ratios has more to do with capital management than anything else. If you really want to measure business performance, you would be better off looking at after tax ROE or return on total capital over many years. AXP has (pro forma for spinoff of AMP) ROE's in the 30%, probably double the average bank over the last ten years. Regardless of whether it pays 1% or 3% dvd, true measure will be the direction of (or sustainbility of the current level of its ROE). For what its worth, I don;t think it is sustainble and the stock is very richly priced. Cheers

Sharpest Drop in Consumer Credit in 15 Years

I would add; With this group you sell strength, buy weakness as long as whole Treasury curve is near or below 5%; the problems won't start in earnest until we move 150 basis points higher (a shift upwards in the whole curve). For now be content with mid to high single digit total return in 2008 (anyway you can get it, divd plus appreciation). If you buy at the high end of the range you won't get it. If you buy at the low end of trading range you MAY get it (operative word MAY)

Sharpest Drop in Consumer Credit in 15 Years

As far as I know, nobody has ever been able to make money trying to figure out aggregate credit statistics and how they play into stock-specific plays. A safe bet will be to short all of them when the fun starts. Higher interest rates will push many over the edge, but it could be two years away. One man's growth vehicle is another man's waste product. Credit is still being aggressivgely put onto off balance sheet structures, partly deflecting largest problems. Smart and stupid credit underwriters (consumer) have all been able to print money for years (ROEs in the 20%-plus range for over ten years for top three or four players. That is license to steal.)Smart ones have been shrinking loan book (domesticallly, or at least sharp deceleration) for some time COF, JPM (under Jamie) preparing for the credit deterioration which has yet to show its ugly face; Jamie Dimon insists its on the way; and I have no reason top doubt him. He emphasizes that they expect it to get worse (less worse for them of course). But it doesn't take a Phd to see the signs; At best ROEs will fall from the low 20s (for pure credit card buinsess) to the low teens by 2008. At worst, we go into single digits. AXP is high-end and somewhat more insulated, but is also the most expensive financial stock (except SLM and mo money-maker FMD) Think old KRB (now part of BAC) and C will get into trouble. Watch HSBC, expanding by leaps and bounds on the low end. But these are smart globakl investors Think they have something up their sleeves.